Herding,anti-herding behaviour in metal commodities futures: a novel portfolio-based approach

The purpose of this article is twofold. Motivated by the heated debate on the financialization of commodities, we examine the existence of herding behaviour in metal commodities futures. In order to identify any time-dependent properties reflected in time-varying parameters, we employ the overlapping rolling window regression technique. The empirical evidence confirms a time-varying anti-herding behaviour before the global financial crisis and the absence of herding or anti-herding behaviour during the crisis. Next we attempt to formally establish the link between the documented anti-herding behaviour and portfolio management with the use of dynamic conditional correlations via the DCC-GARCH family multivariate modelling. After specifying the correlations, an in-sample recursive dynamic Markowitz portfolio is constructed and monitored. By doing so, we attribute the anti-herding behaviour to different portfolio positioning and rebalancing. On the other hand, in the absence of herding or anti-herding behaviour, we document a shift in the correlations and covariances of the commodity futures especially during the crisis, resulting in a decrease of the portfolio weights together with a substantial cash flow towards the risk-free asset.     

International market segmentation and Eurodebt issues

Implications of capital market segmentation for international capital structure (ICS)—capital structure consisting of equity issued in one country and debt issued in another—are examined. Necessary conditions for the emergence of ICS are analyzed under two options for debt issues (foreign debt and Eurodebt) and comparisons are made. It is shown that in cases where the project cannot support an ICS including foreign debt Eurobonds can be issued and would be profitable.     

Loan underpricing and the provision of merger advisory services

This paper investigates the primary and secondary syndicated bank loan market to analyze the effect on pricing when the financial institution commingles syndicated lending with merger advisory services. In particular, we investigate the connection between the acquirer’s choice of financial advisor in a merger and future financing commitments. We find evidence of underpricing of syndicated bank loans in both the primary and secondary market. In the primary market, we show that non-acquisition loans granted by merger advisors to acquiring firms after the merger announcement date are charged a lower all-in-spread relative to acquisition loans if there has been a prior lending relationship. Consistent with this finding, we find that syndicated bank loans for non-acquisition purposes arranged by the acquirer’s advisor after the merger announcement date trade in the secondary market at a significant discount. Since the terms on these non-acquisition loans are not set upon merger announcement, they are most subject to risk shifting and underpricing agency problems. These findings offer evidence consistent with the existence of loss leader and potentially conflicted loans (priced at below-market terms) that are offered by the acquirer’s relationship bank advisor in order to win merger advisory business.     

Is the Cyprus Pound Real Effective Exchange Rate Misaligned? A BEER Approach

Abstract

This paper investigates whether the real effective exchange rate of the Cyprus pound is misaligned by generating measures of the equilibrium rate using the Behavioral Equilibrium Exchange Rate (BEER) approach. Several measures of the equilibrium exchange rate were derived and used to check for the existence of exchange rate misalignment. The results suggest that, during the 1990s, the actual real effective exchange rate and the various equilibrium measures generated move closely together and there is no evidence of any significant and persistent misalignment. However, the empirical evidence suggests persistent overvaluation during the 1980s.     

Research Joint Ventures

Abstract.  Inter-firm collaboration is not new. What is new is that such collaboration has exploded during the past couple of decades, in parallel to the intensification of international competition. Moreover, the nature of collaboration has changed, shifting from peripheral interests to the very core functions of the corporation, and from equity to non-equity forms of collaboration. Importantly, cooperation focusing on the generation, exchange, and/or adaptation of new technologies has risen at very fast rates. Research joint ventures, the focus of this paper, belong in the latter category.
The proliferation of RJVs has created extensive interest among economists, business analysts, and policy decision-makers and led to the profusion of literature on the topic. This paper critically reviews the literature in industrial economics and strategic management that deals with RJV partner motives and RJV outcomes. The paper categorizes the different streams of this literature and indicates the state-of-the-art, synthesizes important understandings, and suggests key nodes of a future research agenda.     

Long‐term Performance of Greek IPOs

We analyse the long‐run performance of 254 Greek IPOs that were listed during the period 1994–2002, computing buy‐and‐hold abnormal returns (BHAR) and cumulative abnormal returns (CAR) over 36 months of secondary market performance. The empirical results differ from international evidence and reveal long‐term overperformance that continues for a substantial interval after listing. Measuring these returns in calendar time, we find statistical significance with several of the benchmarks employed. We also find that long‐term overperformance is a feature of the mass of IPOs conducted during a pronounced IPO wave. Cross‐sectional regressions of long‐run performance disclose several significant factors. The study demonstrates that although Greek IPOs overperform the market for a longer period, underperformance eventually emerges, in line with much international evidence. Our interpretation is that the persistence of overperformance over a significant interval is due to excessive supply of issues during the ‘hot IPO period’. Results associated with pricing during the ‘hot IPO period’ indicate positive short‐ (1‐year), medium‐ (2‐year) and negative long‐term (3‐year) performance.     

The risk of the sovereign debt default: the Eurozone crisis 2008–2013

We investigate the relationship of the market pricing of sovereign risk to default, through credit default swap (CDS) spreads for 16 Eurozone countries during 2008q1–2013q3. We take into account, through appropriate non-linear generalized method of moments (GMM) estimations the endogeneity problem. We focus on ‘fiscal space’ (DEBT or FISCAL), and the downgrade announcements (DOWN). We find DEBT (FISCAL) to have significant (insignificant) effects on the CDS concave function, as well as, DOWN in a linear one. It has also been confirmed significant pricing discrimination between South and West Euro Area Periphery (SWEAP) and the core Eurozone, highlighting asymmetries discovered either by the respective size of estimated DEBT coefficients or by the significant effects of DOWN that have only on CDS of SWEAP countries. The current account balance or the inflation rate, as well as, relevant interaction terms seem not to affect the spreads of the EMU. These findings, together with the estimated structural change on CDS pattern in early 2011, coinciding with significant either the DOWN in the pre-crisis period (2008–2010) or the DEBT in the post-crisis one (2011–2013) on the CDS, seem to be consistent with self-fulfilling crises literature and the inherent vulnerability of EMU, on other words, the ‘fragility hypothesis of the Eurozone’.     

Foreign Currency Translation and FRS 1

The recently issued UK Financial Reporting Standard 1 (FRS 1) requires the replacement of the Statement of Source and Application of Funds by a Cash Flow Statement. A significant issue, disregarded in the past and specifically addressed by the new standard, is the reporting of foreign cash flows in a consolidated cash flow statement involving foreign subsidiaries. This paper evaluates the provisions of FRS 1 in relation to this issue. It is argued that the new requirements will not entirely resolve existing comparability problems and will not necessarily result in a cash flow statement which reflects the sterling equivalent of cash flows as they occur in a foreign currency.