Long-term reactions to large stock price declines and increases in the European stock market: a note on market efficiency

This study tests for underreaction and overreaction in European large cap markets by examining the abnormal returns of those stocks in the EuroStoxx 50 Index following large price increases and decreases. We find that large price increases and declines tend to be followed by average market returns. Thus, our results support the efficient market theory, rather than any of the behaviour finance hypotheses. This insight is contrary to price patterns found in various national markets.     

Prices vs. Quantities with fiscal cushioning

Enforcement of international environmental quantity regulations (e.g. tradable pollution permits) is often expected to be stricter than that of price regulations (e.g. emission taxes). While both instruments provide opportunities for misrepresenting actual pollution, enforcement of international price-based instruments is additionally hampered by potential fiscal cushioning, i.e. an adjustment of domestic fiscal policies offsetting the tax incentive to reduce emission reductions. The present paper extends the formal debate on Prices vs. Quantities by including the risk of fiscal cushioning. We find the level of the marginal benefit curve and the variance of costs become key elements for instrument choice and can render quantity regulations strictly preferable. Remarkably, in the latter case, the slopes of the marginal curves do not affect optimal instrument choice. Numerical calculations, using data taken from the international climate policy context, support the potential dominance of quantity regulations found in our formal analysis.     

The Effect of Conference Calls on Analysts' Forecasts – German Evidence

This study examines whether conference calls provide additional information to analysts. For a large sample of conference calls, hosted by German firms between 2004 and 2007, our results show that conference calls improve analysts' ability to forecast future earnings accurately. This suggests that additional information is released during conference calls. The reduction in forecast error is economically significant and larger in magnitude when compared to results for the US (Bowen et al., 2002). These findings are consistent with the notion that committing to additional disclosures is likely to yield greater effects in a less stringent disclosure system (Verrecchia, 2001). Since the majority of our sample firms conduct conference calls as closed calls, the evidence of this paper suggests that conference calls may contribute to an information gap between call participants and non-invited parties. Our findings should be of substantial interest to European regulators seeking to level the informational playing field for all investors.     

Expectations, the business cycle and the Mexican peso crisis

The 1994–95 ‘peso’ crisis did not displaycharacteristics which allow it to be easily captured by traditionalcrisis models. Models based on Minsky's financial fragilityhypothesis offer more persuasive accounts but have been supportedby relatively little direct empirical evidence. This paper providessuch evidence, with particular attention being paid to the roleof domestic financial liberalisation in the process. Minsky'shypotheses about the evolution of expectations over the businesscycle are tracked using business survey data. In addition, crisisindicators are constructed, reflecting the changing vulnerabilityof the economy to shocks. The findings support a Minskyian interpretationof the crisis.     

eCCIq: The quality of electronic customer-to-customer interaction

Electronic customer-to-customer interaction (eCCI) becomes crucial in innovative business models (e.g., Ebay, Facebook) that are either intentionally built on such eCCI occurring completely on purpose or for providers that are embedding web 2.0 and social media techniques in their service offering. To enable a more active application and purposeful management of eCCI, it is essential to conceptualize its quality (eCCIq) as a start. In doing so we identify seven factors that constitute the domain of eCCIq: ‘Content’, ‘Security’, ‘Hedonic’, ‘Quantity’, ‘Atmosphere’, ‘Convenience’ and ‘Social’. Construct development is based on existing literature on CCI and various closely-related constructs as well as on an empirical study assessing eCCIq in a qualitative and quantitative manner. Our results enable firms to more selectively influence and control eCCIq and provide the basis to conduct any further research on the impact of eCCI and its quality.     

Two scenarios for Europe: “Europe confronted with high energy prices” or “Europe after oil peaking”

A significant change in trends regarding energy prices (in particular oil) has taken place in 2003 at the beginning of the Iraq War. It has revealed a very strong tension between oil prices on the one hand and the relationship between global oil supply and demand on the other. The strong growth rates of emerging economies up to 2008 have generated a very sharp increase in oil prices. The temporary economic recession of 2008-2009 has resulted in turn into a significant decrease of oil prices, down to a level which remained, however, twice as high as that of early 2003. With the economy recovering from the recession, it is highly probable that energy prices will continue to increase and that Europe will be confronted with high energy prices in the coming decades. Against this general background, two scenarios have been elaborated which differ mainly by the time of occurrence of oil peaking.¹ The differences between the scenario hypotheses are therefore differences of context in relation to exogenous factors. Policies are also considered in the scenarios, but they are not at the forefront and their impact is considered as limited in relation to that of exogenous factors.The first scenario “Europe in a context of high energy price” assumes that the process of oil peaking will not take place before 2030, but that oil price increase will nevertheless be sustained and substantial until then. Numerous adjustments will have to be made in the economy and their territorial impacts will be significant (less polycentricity, more compact cities, decline of the importance of road and air transport). The second scenario “Europe after oil production peaking” assumes that oil production will peak around the mid-2010s (followed by gas production peaking around 2025), despite significant investments to increase production. In a context of steadily growing oil and gas demand, Europe will be confronted with serious economic difficulties. The territorial impacts will be different from those suggested by the first scenario, with stronger pressure put on rural areas and a loss of attractiveness of large cities related to increasing unemployment and social tensions. In both scenarios, the countries of central and eastern Europe will be more severely hit by the new energy context.The scenarios were elaborated in 2005 and slightly reviewed in 2009 in order to take account of the impacts of the economic recession in Europe and of the growing concerns about climate change.