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Sample records for financial market integration

  1. Essays on Financial Market Integration

    OpenAIRE

    Pungulescu, C.

    2009-01-01

    The four essays in this dissertation address these main questions and alternate a general perspective with focused analysis on specific measures of integration and regions, providing several novel answers. First, new relevant proxies are proposed to measure financial market integration. They give evidence that barriers to integration still take a toll even in developed markets, and important costs of segmentation are estimated for emerging as well as developed markets. Moreover, it is shown t...

  2. Towards a European integrated financial markets

    Directory of Open Access Journals (Sweden)

    L. DINI

    2013-12-01

    Full Text Available Financial markets around the world are undergoing similar experiences of innovation and conglomeration. This paper reviews those trends and considers the policy implications and the movement towards the integration of the world's capital markets. In particular, the risks and how they can be contained are examined. This leads to an examination of the issues raised by the liberalisation of capital transactions and the implications for the prospects of greater integration of financial markets in Europe.

  3. Financial integration and emerging markets capital structure

    OpenAIRE

    LUCEY, BRIAN MICHAEL

    2011-01-01

    This paper investigates the impact of country-level financial integration on corporate financing choices in emerging economies. Examining 4477 public firms from 24 countries, we find that corporate leverage is positively related to credit market integration and negatively related to equity market integration. As integration proceeds to higher levels, high-growth firms seem to obtain more debt than low-growth firms; large firms seem to obtain more debt – especially long-term debt – and iss...

  4. FEATURES AND EFFECTS OF INTERNATIONAL INTEGRATION OF THE FINANCIAL MARKETS/ ??????????? ? ??????????? ????????????? ?????????? ?? ?????????? ??????

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    A.A. Kotova

    2013-04-01

    Full Text Available The article presents a model of international financial integration, shows the advantages and disadvantages of integration of financial markets, identified the benefits and potential risks of the penetration of foreign banks in the financial markets.

  5. Make or Buy? Approaches to Financial Market Integration

    OpenAIRE

    Gavin, Michael; Hausmann, Ricardo

    1997-01-01

    The sharp differences between financial markets as they exist in Latin America and how we might expect them to look under full integration suggest that the financial constraints on Latin American economic development have much to do with the region`s financial markets` incomplete integration in the world financial system. This paper suggests that the underlying cause of Latin America`s limited integration with world financial markets is not explicit barriers to international financial transac...

  6. Regulatory Conflict: Market Integrity Vs. Financial Stability

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    Chester S. Spatt

    2009-04-01

    Full Text Available The market crisis has highlighted the design of our financial regulatory system and to a degree identified some tensions within our current system. In turn, this provides a natural opportunity to reflect upon the underlying objectives of regulation and how various regulatory goals can clash.

  7. Financial Liberalization and Stock Markets Integration for Asean-5 Countries

    OpenAIRE

    Sew-Ming Phuan; Kian-Ping Lim; Ai-Yee Ooi

    2009-01-01

    This paper examines the relationship of financial liberalization and stock markets integration among ASEAN-5 (Note 1) stock markets: Indonesia, Malaysia, the Philippines, Singapore and Thailand. Three sample periods are covered based on the progress of financial liberalization. By using Johansen and Juselius multivariate cointegration procedures, Granger-causality tests and variances decomposition analysis, the results indicate no long-run relationship during Singapore stock market liberaliza...

  8. Financial Market Integration of South Asian Countries: Panel Data Analysis

    OpenAIRE

    Hasan Muhammad Mohsin; Rivers, Patrick A.

    2011-01-01

    In order to attain financial integration using the Feldstein Horoika (FH) model, the real interest rates differentials must be short lived. This paper estimates the degree of financial market integration in South Asian countries (i.e., Pakistan, India, Bangladesh, Sri Lanka and Nepal) utilizing both techniques i.e. FH model and Real Interest Rates Differentials (RIDs). This study shows some degree of integration with the FH model which has increased in post liberalization period since the 199...

  9. Financial Market Integration in the US: Lessons for Europe?

    OpenAIRE

    Buch, Claudia M.

    2000-01-01

    The introduction of the euro is expected to increase capital mobility in Euroland. While, as in the US, a common monetary policy is now performed, institutional structures are inherently more heterogenous. This paper argues that experience of the US with financial market integration can potentially serve as a benchmark for the integration effects. The paper finds that, despite the restrictions to the regional expansion of banks that have prevailed, the degree of financial integration within t...

  10. Economic and financial integration in emerging markets: A European policy

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    Theodoropoulos Theodore E.

    2005-01-01

    Full Text Available This paper extends to test if the same short-run increase in cyclical volatility arising from financial integration is observed in this specific sample of "emerging markets". This work finds signs that, contrary to other emerging markets, this does not happen: for the future member states financial integration, similarly to the outcome observed in mature market economies, reduces cyclical volatility both in the short and in the long run. Weak indications are found that this may happen partially due to the anchoring of expectations provided by the EU Accession, and to the more robust institutional framework imposed by this process onto the countries in question.

  11. Financial Liberalization and Stock Markets Integration for Asean-5 Countries

    Directory of Open Access Journals (Sweden)

    Sew-Ming Phuan

    2009-02-01

    Full Text Available This paper examines the relationship of financial liberalization and stock markets integration among ASEAN-5 (Note 1 stock markets: Indonesia, Malaysia, the Philippines, Singapore and Thailand. Three sample periods are covered based on the progress of financial liberalization. By using Johansen and Juselius multivariate cointegration procedures, Granger-causality tests and variances decomposition analysis, the results indicate no long-run relationship during Singapore stock market liberalization in the first period. However, long-run relationship established between ASEAN-5 stock markets in the second period when Thailand, Malaysia and Indonesia have liberalized their stock markets and the third period following the Philippines liberalization. The long run integration relationships and the short-run causality relationships among ASEAN-5 markets have both increased after the financial liberalization. Thailand, Malaysia, Indonesia and the Philippines markets have received increased influences from other stock markets in the progress of financial liberalization whereas Singapore remains unaffected by the others. Stock markets that liberalize earlier will have greater influence on other stock markets.

  12. TRENDS IN THE RUSSIAN FINANCIAL MARKET CONDITIONS AND INTEGRATION INTO THE GLOBAL FINANCIAL SYSTEM/????????? ??????????? ??????????? ????? ? ??????? ?????????? ? ??????? ?????????? ???????

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    A.A. Kotova

    2013-07-01

    Full Text Available The article presents the trends in the Russian financial market and the conditions for integration into the global financial system. Main directions of integration of the financial market of Russia into the global financial system, such as: reform of the existing model of the financial market in Russia with respect to evade speculative model integration and development with developing countries, countries of CIS and BRIC. Stimulation of real investment in the Russian economy. Regular monitoring of investment imbalances in the framework of the state investment policy with regard to determine the excess or deficit of the necessary investment capital by comparing the maximum amount of available internal resources and investment needs within the planned period.

  13. Protecting Financial Market Integrity: Roles and Responsibilities of Auditors

    OpenAIRE

    Diekman, P.A.M.

    2008-01-01

    Waarom heeft u nog vertrouwen in een bank? En waarom vertrouwt u uw geld nog toe aan banken? Deze vragen staan centraal in de oratie ‘Protecting Financial Market Integrity. Roles and Responsibilities of Auditors' van prof.dr. Peter A.M. Diekman RA. Hij stelt dat zowel de intern als de openbare accountant een belangrijke taak hebben bij de bewaking van de financiële markt. Diekman aanvaardt op donderdag 15 mei 2008 het ambt van bijzonder hoogleraar Compliance & Risicobeheersing vanwege de Stic...

  14. Virtual Integration of Financial Markets: A Dynamic Correlation Analysis of the Creation of the Latin American Integrated Market

    OpenAIRE

    Mellado, Cristhian; Escobari, Diego

    2014-01-01

    This paper investigates the role of virtual integration of financial markets on stock market return co-movements. In May of 2011 the Chilean, Colombian, and Peruvian stock markets virtually integrated their stock exchanges and central securities depositories to form the Latin American Integrated Market (MILA). We utilize the dynamic conditional correlation model propose by Engle (2002) to identify a statistically significant positive correlation between these markets. Moreover, we find strong...

  15. International Financial Integration of the Indian Money Market

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    Steven Buigut

    2011-08-01

    Full Text Available The study investigates whether the financial liberalization undertaken in India has resulted in integration of Indian markets with global markets. First, we investigate covered interest rate parity (CIP between India and the US using 3 month interbank interest rates and 1 year swap rates. The results show little evidence of a long term equilibrium relationship between the domestic interest rate and the covered interest rate. The mostly negative results indicate the presence of a country risk premium and/or binding regulations on capital movements and/or binding restrictions on interbank borrowing and lending. Next, we use a Vector Error Correction Model (VECM to study the dynamics between the Indian interest rate, the covered interest rate and the US interest rate. The results show some degree of cointegration among Indian and US interest rates, suggesting that linkages less direct than covered interest arbitrage may exist between US and Indian money markets.

  16. Financial development and investment market integration: An approach of underlying financial variables & indicators for corporate governance growth empirical approach

    OpenAIRE

    Vojinovi? Borut; Theodoropoulos Theodore E.

    2005-01-01

    Financial development is correlated with several underlying regulatory variables (such as indicators of investor protection, market transparency variables for corporate governance growth and rules for capital market development), which are under the control of national legislators and EU directives. This paper provides estimates of the relationship between financial market development and corporate growth and assesses the impact of financial market integration on this relationship with refere...

  17. On the integration of financial markets: How strong is the evidence from five international stock markets?

    Science.gov (United States)

    Bentes, Sónia R.

    2015-07-01

    This paper examines the integration of financial markets using data from five international stock markets in the context of globalization. The theoretical basis of this study relies on the price theory and the Law of One Price, which was adjusted to the framework of financial markets. When price levels are nonstationary, cointegration and the error correction model constitute a powerful tool for the empirical examination of market integration. The error correction model provides a fully dynamic framework that allows to separating the long and the short run effects of the integration process. A dataset encompassing the daily stock price series of the PSI 20 (Portugal), IBEX 35 (Spain), FTSE 100 (UK), NIKKEI 225 (Japan) and SP 500 (US) indices from January 4th 1999 to September 19th 2014 is employed. The results highlight that these five stock markets are linked together by just one long-run relationship, although short-run movements are also present, which causes distinct deviations from the long-run equilibrium relationship. Endogeneity prevails in the system as a whole. While market integration in the sense of the Law of One Price holds, pairwise full price transmission has limited evidence. The results therefore show that stock market price movements are highly nonlinear and complex.

  18. Financial development and investment market integration: An approach of underlying financial variables & indicators for corporate governance growth empirical approach

    Directory of Open Access Journals (Sweden)

    Vojinovi? Borut

    2005-01-01

    Full Text Available Financial development is correlated with several underlying regulatory variables (such as indicators of investor protection, market transparency variables for corporate governance growth and rules for capital market development, which are under the control of national legislators and EU directives. This paper provides estimates of the relationship between financial market development and corporate growth and assesses the impact of financial market integration on this relationship with reference to European Union (EU countries. The regression results obtained using this panel support the hypothesis that financial development promotes growth particularly in industries that are more financially dependent on external finance. For policy purposes, analyzing changes in these regulatory variables may be a more interesting exercise than analyzing integration of the financial systems themselves. Since assuming that EU countries will raise its regulatory and legal standards to the U.S. standards appears unrealistic, in this case we examine a scenario where EU countries raise their standards to the highest current EU standard.

  19. Regional Financial Integration in Sub-Saharan Africa - An Empirical Examination of its Effects on Financial Market Development

    OpenAIRE

    Frey, Leo; Volz, Ulrich

    2011-01-01

    This paper examines the effects of political agreements on regional financial integration (RFI) on financial market development and access to and cost of finance in Sub-Saharan Africa. Our results suggest that RFI positively affects financial development - measured very broadly as the size of the financial sector, including the liabilities of the central banks - when combined with a sufficient level of institutional quality. If institutional quality is below a threshold level, RFI apparently ...

  20. Stock Market Capitalization and Financial Integration in the Asia Pacific Region

    OpenAIRE

    Tan, Hui-boon; Cheah, Eng Tuck; Johnson, Johnnie; Sung, Ming-chien; Chuah, Chong Hin

    2011-01-01

    Abstract The stock market capitalization (SMC) of a country, defined as the aggregated market value equity of companies in the respective equity market, is commonly used to measure the widening and deepening of stock market activity. SMC also influences economic growth predictions and public consensus concerning the value of the stock market. However, no previous work has examined the role this variable plays in the process of financial integration. This paper provides an argument ...

  1. Labour market rigidities, financial integration and international risk sharing in the OECD

    OpenAIRE

    Fidrmuc, Jarko; Foster, Neil; Scharler, Johann

    2007-01-01

    Economic theory predicts that consumption growth rates should be highly correlated across countries. Empirical evidence overwhelmingly rejects this prediction. We examine whether increased financial integration and labour market rigidities can help explain this apparent contradiction between theory and empirics. Using data for OECD countries we show that although financial integration has a limited impact upon cross-country consumption correlations, labour market rigidities significantly incr...

  2. Research network on capital markets and financial integration in Europe : results and experience after two years

    OpenAIRE

    European Central Bank ; Center for Financial Studies (CFS)

    2008-01-01

    In April 2002 the European Central Bank (ECB) and the Center for Financial Studies (CFS) launched the ECB-CFS Research Network to promote research on “Capital Markets and Financial Integration in Europe”. The ECB-CFS research network aims at stimulating top-level and policy-relevant research, significantly contributing to the understanding of the current and future structure and integration of the financial system in Europe and its international linkages with the United States and Japan. ...

  3. Global Financial Crisis and Stock Market Integration between Northeast Asia and Europe

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    Geesun Lee

    2014-01-01

    Full Text Available This study examines the effect of financial crisis on the level of stock market integration. In particular, we investigated the dynamic movements of two regional stock markets, Northeast Asia and Europe during the period between January 1st, 2000 and December 31st, 2012, with particular attention placed on the global financial crisis (GFC. For this purpose, the paper employs various approaches including DCC-MGARCH, Risk Decomposition, GVAR, and CCOR models to ensure the robustness of empirical findings. The findings of this study are as follows. First, the Northeast Asian stock market remains independent from the European and global stock market movements during the sample period. Second, the European stock market shows an increasing trend of joint integration with Northeast Asian stock market. However, the level of integration is not economically significant. Third, the level of market integration between European and global stock markets had temporally increased during the GFC. However, the level returned to its pre-crisis level in the post-crisis era. The overall empirical evidence suggests that, for either European or global stock market portfolio, constructing a portfolio with Northeast Asian stock market would result in a more efficient portfolio. The results in this paper do not support the view of previous empirical studies which suggested the increased level of integration since the GFC. An increased integration is found to be only unique to the crisis period. In sum, the market integration is a dynamic process, and the financial crisis did not uniformly affect the level of stock market integration.

  4. Financial market crisis and financial market channel

    OpenAIRE

    Braasch, Bernd

    2010-01-01

    Before a new financial architecture can be established in the wake of the financial crisis, the increasing importance of the global financial market channel must be fully understood. This importance was illustrated by the unexpectedly strong dampening effects of the financial crisis on the real economy and by the worldwide contagion of the crisis, including its spreading to emerging market economies that were macroeconomically stable. This article argues that the financial sphere is gaining i...

  5. Financial Integration at Times of Financial Instability

    OpenAIRE

    Koma?rek, Lubos?; Koma?rkova?, Zlatus?e

    2014-01-01

    This article analyzes the phenomenon of financial integration on both the theoretical and empirical levels, focusing primarily on assessing the impacts of the current financial crisis. In the theoretical section writers look at the definition of financial integration and summarize the benefits and costs associated with this process. The subsequent empirical section provides an analysis of the speed and level of integration of the Czech financial market and the markets of selected inflation-ta...

  6. CONSIDERATIONS ON THE PROSPECTS OF THE INTEGRATION OF THE EUROPEAN FINANCIAL MARKETS IN THE CONTEXT OF THE GLOBAL CRISIS

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    Morosan Danila Lucia

    2010-12-01

    Full Text Available In recent years, as the efforts linked to the elimination of the capital movements control between countries have intensified, the preoccupations concerning the explanation of the financial integration concept have multiplied, in their turn. An integrated financial market is necessary particularly to the distribution of liquidity between the institutions in the euro zone, and, implicitly, for the enforcement of a common monetary policy. Thus, the problem of the integration of the financial market, respectively of the monetary one, appears as a premise for a homogenous transmission of the financial policy impulses all throughout the euro zone. The financial integration is defined in conformity with the law of a single price. According to this definition, in case the markets are integrated, the financial assets bearing identical characteristics should have the same price, regardless of their geographic origin.

  7. Time series analysis of the developed financial markets' integration using visibility graphs

    Science.gov (United States)

    Zhuang, Enyu; Small, Michael; Feng, Gang

    2014-09-01

    A time series representing the developed financial markets' segmentation from 1973 to 2012 is studied. The time series reveals an obvious market integration trend. To further uncover the features of this time series, we divide it into seven windows and generate seven visibility graphs. The measuring capabilities of the visibility graphs provide means to quantitatively analyze the original time series. It is found that the important historical incidents that influenced market integration coincide with variations in the measured graphical node degree. Through the measure of neighborhood span, the frequencies of the historical incidents are disclosed. Moreover, it is also found that large "cycles" and significant noise in the time series are linked to large and small communities in the generated visibility graphs. For large cycles, how historical incidents significantly affected market integration is distinguished by density and compactness of the corresponding communities.

  8. Market integration through data protection : An analysis of the insurance and financial industries in the EU

    OpenAIRE

    Viola Azevedo Cunha, Mario

    2013-01-01

    In the context of the continuous advance of information technologies and biomedicine, and of the creation of economic blocs, this book is devoted to the analysis of the role data protection plays in the integration of markets, with a special emphasis on financial and insurance services.Moreover, it is also concerned with the identification of differences in the data protection systems of EU member states and with the development of common standards and principles of data protection, keeping i...

  9. ANALYSIS OF FINANCIAL MARKETS INTEGRATION OF IRAN WITHIN THE MIDDLE EAST AND WITH THE REST OF THE WORLD

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    Parinaz Ezzati

    2013-01-01

    Full Text Available It is universally argued that Iranâ??s financial markets are effectively isolated from the rest of the world. However, in the last three years, privatization increased in Iranian financial markets as well as capitalization, Foreign Direct Investment (FDI and equity prices, albeit with suspicion of reaching the bubble level. Questions are raised whether Iran is still isolated from the rest of the world. To see whether argument in relation to isolation of Iranian financial markets is true and to better understand Iranâ??s financial development, we estimate financial interdependencies of Iran within the Middle East and with the rest of the world based on the important recycling of petrodollars. For this analysis monthly financial data from equity, money and foreign exchange markets are applied over 12 years. Integration of each of these markets are analysed in turn for Iran within the region and with the rest of the world. Auto-Regressive Distributed Lag (ARDL cointegration method is conducted to analyse the interdependencies among the financial markets after the application of unit root test in presence of structural breaks. We found that Iran has fairly independent and isolated foreign exchange market. However, its equity and money markets are integrated within the Middle East and with the rest of the world. Iran is neither completely segregated nor fully integrated with the rest of the world; it is still controversial whether Iran should be considered as a good choice for international portfolio diversification based on its segregated nature.

  10. The Impact of the Global Financial Crisis on the Integration of the Chinese and Indonesian Stock Markets

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    James Manuel Kenani

    2013-08-01

    Full Text Available 800x600 The study investigates the integration of Chinese stock market with Indonesian stock market after the 2008 global financial crisis, by considering volatility spillover between the two countries. The study also considers the volatility spillovers effects of Japan and the U.S on Indonesian and Chinese stock markets. Exponential generalized autoregressive conditional heteroskedasticity model is employed for analyzing data series covering January 4, 2002 to December 20, 2011. The results indicate that Indonesian and Chinese stock markets have bidirectional return spillover effects before and after the 2008 global financial crisis. The results of volatility spillover effects provide evidence that Chinese stock market has unidirectional effect on Indonesia stock market after the financial crisis. We also found evidence of volatility spillover effect of the Japanese stock market on Indonesian stock market before and after the crisis, but we do not find volatility spillover evidence from the U.S to Indonesian stock market after the financial crisis. This finding indicates that besides Japan, China has increased its influence on Indonesian stock market after the global financial crisis, whereas the U.S has become less influential than before the crisis. This strong integration of the Chinese stock market in Indonesia market implies limited gains for portfolio diversification from the international portfolio investors.  Normal 0 false false false EN-US X-NONE X-NONE

  11. Welfare effects of financial integration

    OpenAIRE

    Hartmann, Philipp; Gru?ner, Hans Peter; Fecht, Falko

    2007-01-01

    This paper compares four forms of inter-regional financial risk sharing: (i) segmentation, (ii) integration trough the secured interbank market, (iii) integration trough the unsecured interbank market, (iv) integration of retail markets. The secured interbank market is an optimal risk-sharing device when banks report liquidity needs truthfully. It allows diversification without the risk of cross-regional financial contagion. However, free-riding on the liquidity provision in this market restr...

  12. The Integration of Financial Markets: Empirical Evidence from South Asian Countries

    OpenAIRE

    Qayyum, Abdul; Mohsin, H.

    2005-01-01

    The study analyzed financial market integration in the five countries of South Asia, Pakistan, India, Bangladesh, Sri Lanka and Nepal. All the variables are found to be integrated of the same order in the case of Pakistan, India and Nepal. But for Bangladesh and Sri Lanka they are of different order. The study used Engle Granger (1987) two step methods to check the long run relationship in the case of three countries. There is no evidence of long run relationship between domestic savings and...

  13. Financial Integration and the Cost of Capital: A Study of the Brazilian Equity Market

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    Tiago Loncan

    2015-02-01

    Full Text Available This study analyzes the effect of financial integration on the cost of equity capital of Brazilian listed firms. According to the relevant literature, foreign capital flows are expected to increase stock returns, the so-called revaluation effect. For standard valuation models, higher stock prices imply a lower cost of equity capital, as expected returns fall as stock prices rise. Two analyses are conducted: first, a statistical analysis based on a partial general equilibrium model as suggested by Henry (2003 and Stulz (1999 provides insights that the cost of equity capital in Brazil reduced following the integration with the Global equity market in the period between 1996 and 2013, as expected returns decreased over time. In the second part of the study, a regression analysis is conducted, by estimating the effect of foreign portfolio capital flows on the Brazilian stock market returns using a Global CAPM with an additional parameter for foreign portfolio capital flows. The results of the regression analysis provide evidence that foreign portfolio capital flows are associated to an increase in excess returns on the Brazilian stock market (after controlling for systematic risk. Also, in a second regression estimated between the dividend yield (a direct measure of the cost of equity and net foreign portfolio capitals, the partial effect of net foreign capitals on the Dividend Yield was negative. These findings are in line with the revaluation effect hypothesis and also support the argument that financial globalization reduces the cost of capital for a previously segmented equity market.

  14. European financial integration and the 1992 challenge: is the market approach sufficient?

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    M. SARCINELLI

    2013-12-01

    Full Text Available The new phase of European integration is being developed in parallel with a gradual strengthening of international cooperation in the field of macroeconomics. This has coincided with the rejection of positions that reflected the belief that markets were self-regulating and an over-confidence in the rationality of expectations. Indeed, the emergence and worsening of fiscal, trade and payments imbalances with foreign countries has led to a reconsideration of the approach to the problems of international economic policy. The present article looks at the financial aspects of integration in the prospect of the 1992 objectives, and Italy’s role within this context. After recalling the main features of the process of European integration, the implications of the liberalisation of capital movements and financial services for banks and for Italian agents are analysed. The author argues that although markets may determine productivity gains and efficiency, it would be imprudent to entrust them with distributing them fairly and compensating those who are disadvantaged.  

  15. Communication impacting financial markets

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    Andersen, Jorgen Vitting; Dellaportas, Petros; Galam, Serge

    2014-01-01

    Behavioral finance has become an increasingly important subfield of finance. However the main parts of behavioral finance, prospect theory included, understand financial markets through individual investment behavior. Behavioral finance thereby ignores any interaction between participants. We introduce a socio-financial model that studies the impact of communication on the pricing in financial markets. Considering the simplest possible case where each market participant has either a positive (bullish) or negative (bearish) sentiment with respect to the market, we model the evolution of the sentiment in the population due to communication in subgroups of different sizes. Nonlinear feedback effects between the market performance and changes in sentiments are taking into account by assuming that the market performance is dependent on changes in sentiments (e.g. a large sudden positive change in bullishness would lead to more buying). The market performance in turn has an impact on the sentiment through the trans...

  16. Communication impacting financial markets

    Science.gov (United States)

    Vitting Andersen, Jørgen; Vrontos, Ioannis; Dellaportas, Petros; Galam, Serge

    2014-10-01

    Since the attribution of the Nobel prize in 2002 to Kahneman for prospect theory, behavioral finance has become an increasingly important subfield of finance. However the main parts of behavioral finance, prospect theory included, understand financial markets through individual investment behavior. Behavioral finance thereby ignores any interaction between participants. We introduce a socio-financial model (Vitting Andersen J. and Nowak A., An Introduction to Socio-Finance (Springer, Berlin) 2013) that studies the impact of communication on the pricing in financial markets. Considering the simplest possible case where each market participant has either a positive (bullish) or negative (bearish) sentiment with respect to the market, we model the evolution of the sentiment in the population due to communication in subgroups of different sizes. Nonlinear feedback effects between the market performance and changes in sentiments are taken into account by assuming that the market performance is dependent on changes in sentiments (e.g., a large sudden positive change in bullishness would lead to more buying). The market performance in turn has an impact on the sentiment through the transition probabilities to change an opinion in a group of a given size. The idea is that if for example the market has observed a recent downturn, it will be easier for even a bearish minority to convince a bullish majority to change opinion compared to the case where the meeting takes place in a bullish upturn of the market. Within the framework of our proposed model, financial markets stylized facts such as volatility clustering and extreme events may be perceived as arising due to abrupt sentiment changes via ongoing communication of the market participants. The model introduces a new volatility measure which is apt of capturing volatility clustering and from maximum-likelihood analysis we are able to apply the model to real data and give additional long term insight into where a market is heading.

  17. Financial Integration and Economic Growth

    OpenAIRE

    Juraev, Nosirjon

    2013-01-01

    The following paper studies possible impacts of financial integration under different economic conditions, such as financial and equity market development and trade openness. It applies mixture of models, namely General Methods of Moments (GMM), Ordinary Least Squares (OLS), two-staged OLS, transformed OLS, and Panel data approach with 14 financial integration measures, including three new ones over 217 countries between 1970 and 2012. The results confirm that coun...

  18. Financial market contagion

    OpenAIRE

    Kelly, Morgan

    2008-01-01

    The power of the metaphor of contagion—that beliefs, actions, and strategies spread among economic agents like pathogens among biological organisms— causes it to recur in disparate areas of economics. This article focusses on four applications of contagion to economics: social influence or memoryless learning; Bayesian social learning; strategy choice in coordination games; and the spread of crises in international financial markets.

  19. Financial Market Stabilization Package

    Science.gov (United States)

    1997-01-01

    The Korean Ministry of Finance and Economy site contains details of The Financial Market Stabilization Package aimed at solving the financial crisis announced on November 19, 1997. The beginning of the financial crisis in South Korea can be traced to the collapse of Hanbo Steel Corp., the first in a string of large corporate failures in South Korea. This was followed by the decline in the value of the Korean won against the dollar in October 1997, which persisted until November when the Central Bank of Korea stopped intervening to support the won. The continued decline in won forced the Korean government to seek financial assistance from the International Monetary Fund (IMF). On December 3, the IMF announced a $55 billion aid package for South Korea.

  20. Banking Crises and Financial Integration

    OpenAIRE

    Caballero, Julian

    2012-01-01

    This paper explores whether the level of financial integration of banks in a country increases the incidence of systemic banking crises. The paper uses a de facto proxy for financial integration based on network statistics of banks participating in the global market of interbank syndicated loans. Specifically, the network statistics degree and betweenness are used to proxy for the de facto integration of the average bank in a country. The paper fits a count data model in the cross-section for...

  1. Financial Services and Emerging Markets

    OpenAIRE

    Karreman, B.

    2011-01-01

    This study addresses the organization and strategy of firms in emerging markets with an explicit application to financial services. Given the relevance of a well-functioning financial system for economic growth, understanding the organization and strategy of firms contributing to the development of sound financial services appears of utmost importance for emerging markets. Throughout the study, two main providers of financial services are distinguished, namely banks and stock markets, which a...

  2. Essays on financial markets

    OpenAIRE

    Bystro?m, Hans

    2013-01-01

    This thesis consists of five empirical essays dealing with different issues related to financial markets. Chapter 2 studies a new multivariate technique, Orthogonal GARCH, of forecasting large covariance matrices based on GARCH models. Orthogonal GARCH is built on principal component analysis and makes the creation of positive definite covariance matrices of arbitrary size possible. An important drawback with Orthogonal GARCH is that it builds on assumptions that sometimes break down when som...

  3. Markets for financial transmission rights

    International Nuclear Information System (INIS)

    Results of a survey of markets for financial transmission rights that facilitate competitive, open and non-discriminatory electricity market design are discussed. Specifically, the survey covered Pennsylvania, New Jersey, Maryland (PJM), New York, California, New England, Texas and New Zealand. The main emphasis was on the PJM and the New York markets, since they are the most mature. Interwowen with the results is a thorough discussion of the properties, features and the design of financial transaction rights in the various jurisdictions, the advantages, disadvantages and market performance of financial transmission rights, market performance criteria, and the mechanism for acquiring financial transmission rights. 49 refs., 14 tabs., 6 figs

  4. Reconfiguring the Financial Markets

    Directory of Open Access Journals (Sweden)

    Ion Bucur

    2009-12-01

    Full Text Available The debut of the new millennium is marked by the increased economic and social imbalances. An important task of economic science is to identify the causes and factors that contributed to the radical transformation of the unfolding conditions of economic activity. The existence of different perspectives to approach the new realities may offer greater opportunities for decrypting the conditions that generated so far unknown developments, as well as for shaping solutions to promote new paths of progress and civilization. The defining with profound implications on the economy and society is represented by the globalization. From this perspective, we have analysed the new dimensions of capital accumulation and economic growth in the context of deregulation and liberalization of the international capital movements. In this context, we have noticed the increasing influence of the financial markets on the economy, the tendency to remove the finances from the real economy requirements, the growing role of external financing using more volatile capital goods, increased competition regarding the access to financing, the significant increase of power of the international capital markets whose characteristic is represented by the increased instability, the implications of the investors’ obsession with an excessive profitableness of their own funds and the expansion of using sophisticated financial products. Realities of today’s financial markets, which are the subject of numerous studies and analysis, have contributed to the association of the arguments that are contesting the thesis on the virtues of self-regulation markets and promoting a new paradigm, within which finances should subordinate the requirements of a balanced and sustained economic growth.

  5. Asian Capital Market Integration: Theory and Evidence

    OpenAIRE

    Park, Cyn-Young

    2013-01-01

    Financial integration is a multidimensional process through which allocation of financial assets becomes increasingly borderless. This paper assesses the progress achieved thus far in capital market integration in Asia, and compares regional capital market integration with global financial integration. The results of the analysis on which the paper is based indicate that while the pace of regional integration of financial markets in Asia's emerging economies has accelerated in recent years, t...

  6. 77 FR 45907 - Financial Market Utilities

    Science.gov (United States)

    2012-08-02

    ...transfers, Financial market utilities, Securities...DESIGNATED FINANCIAL MARKET UTILITIES (REGULATION HH) Sec. 234.1...designated financial market utilities. The risk-management...market utility that is a derivatives clearing...

  7. 78 FR 14024 - Financial Market Utilities

    Science.gov (United States)

    2013-03-04

    ...transfers, Financial market utilities, Securities...DESIGNATED FINANCIAL MARKET UTILITIES (REGULATION HH) 0 1. The authority...designated financial market utilities. In addition...market utility that is a derivatives clearing...

  8. 78 FR 76973 - Financial Market Utilities

    Science.gov (United States)

    2013-12-20

    ...transfers, Financial market utilities, Securities...DESIGNATED FINANCIAL MARKET UTILITIES (REGULATION HH) 0 1. The authority...designated financial market utilities. In addition...market utility that is a derivatives clearing...

  9. The Nordic financial electricity market

    Energy Technology Data Exchange (ETDEWEB)

    2010-11-15

    NordREG is a cooperation of the Nordic energy regulators. The mission is to actively promote legal and institutional framework and conditions necessary for developing the Nordic and European electricity markets. The financial market is an important market for market participants to mitigate their risks. By providing tools for risk management, the financial market contributes to the efficient functioning of both wholesale and end-user markets. NordREG decided during 2009 to undertake a study on the Nordic financial electricity market. The aim of the report is to consider whether any improvements can be made to further increase the efficiency of the Nordic financial electricity market in order to secure an optimal price setting in the wholesale and the end-user markets

  10. POLISH MARKET OF FINANCIAL DERIVATIVES

    OpenAIRE

    Sobol, Iwona

    2014-01-01

    The market of financial derivatives is the biggest market in the world. The tremendous growth of this market in recent years is the result of the increase of financial risks caused by volatilities of interest rates, share prices and the adoption of floating exchange rates by most of the developed countries. The most effective way of hedging financial risks is using of derivatives. The derivatives are the instruments which are derived from more basic ones which are called underlying instrument...

  11. Tax havens and financial markets

    OpenAIRE

    Solvoll, Sigurd Rognmo

    2012-01-01

    This thesis is about some of the effects and implications that tax havens have on our financial markets. It focuses on giving the reader a better understanding of the consequences that tax havens impose to our financial markets using the financial crisis that started in 2007 as an example. The first chapter has a brief introduction that lays the foundation of the thesis. The second chapter defines and explains many different types of tax havens that exist worldwide. The third part considers t...

  12. Does Basel II destabilize financial markets? An agent-based financial market perspective

    Science.gov (United States)

    Hermsen, O.

    2010-01-01

    We use a financial market model that is able to replicate stylized facts of financial markets quite successfully. We adjust this model by integrating regulations of Basel II concerning market risk. The result is a considerable destabilization of the regulated financial market with a significant increase of extreme events (extraordinary profits and losses). Since the intention of Basel II regulations is to ensure banks have enough regulatory capital to withstand periods involving extraordinary losses, it is alarming that - on the contrary - these regulations may provoke an increase in precisely such extraordinary events.

  13. Financial markets as adaptative ecosystems

    OpenAIRE

    Potters, Marc; Cont, Rama; Bouchaud, Jean-Philippe

    1996-01-01

    We show, by studying in detail the market prices of options on liquid markets, that the market has empirically corrected the simple, but inadequate Black-Scholes formula to account for two important statistical features of asset fluctuations: `fat tails' and correlations in the scale of fluctuations. These aspects, although not included in the pricing models, are very precisely reflected in the price fixed by the market as a whole. Financial markets thus behave as rather eff...

  14. Banks, Markets, and Financial Stability

    OpenAIRE

    Fecht, Falko; Eder, Armin; Pausch, Thilo

    2013-01-01

    In a theoretical model of the Diamond-Dybvig style, in which deposit-taking banks and financial markets coexist, bank behavior is analyzed taking into account a positive ex-ante probability of a future financial crisis. We focus on the role of the interaction of market liquidity and banks' funding liquidity in the propagation of shocks in the financial system. Our findings suggest that in particular bank-dominated financial systems are prone to contagious bank runs due to asset price deterior...

  15. Measuring the integration of credit markets

    OpenAIRE

    Pavla, Vodová

    2009-01-01

    The need for adequate integration of financial markets is increasingly emphasized in the eurozone countries. The aim of this paper is to describe how to measure credit market integration. The financial and credit market integration are defined in second chapter. Three methods of measuring credit market integration are described in third chapter. Price indicators are based on law of one price. Moreover, they enable us to measure the speed of integration (with beta convergence measure) and the ...

  16. Social Knowledge for Financial Markets

    Directory of Open Access Journals (Sweden)

    Gertraude Mikl-Horke

    2010-08-01

    Full Text Available Financial literacy is an important issue today, but it is directed/limited to improve the practical skills of people taking financial markets and their present working for granted. However, financial markets are social institutions and social processes involving network relations as well as rules and norms. Globalization has resulted in a dominating role of financial markets over the economy with importance for the transformation of capitalistic society. The sociological perspectives on financial markets have relevance also for the present crisis for which several explanations have been suggested. Most explanations overlook, however, the process of disembedding of the financial markets from the societal context, which is represented by the reliance on a specific kind of knowledge. To illustrate the need for reintegrating financial markets in the economy and making them more responsive to societal concerns, financial knowledge requires to be embedded into social knowledge about the function of financial markets for society, the importance of norms and the social character of markets.Finanzerziehung ist ein wichtiges Anliegen in der Gegenwart, aber die „finanzielle Alphabetisierung“ beschränkt sich auf die Vermittlung praktischen Wissens, ohne die Finanzmärkte und ihr Funktionieren zu hinterfragen. Aber Finanzmärkte sind soziale Institutionen und soziale Prozesse, die Netzwerkbeziehungen sowie Regeln und Normen umfassen. Die Globalisierung resultierte in einer dominierenden Rolle des Finanzsystems im Verhältnis zur Wirtschaft und mit Implikationen für die Transformation der kapitalistischen Gesellschaft. Die soziologischen Perspektiven auf Finanzmärkte sind auch für die gegenwärtige Krise relevant, die verschieden zu erklären versucht wird. Diese Erklärungen übersehen jedoch vielfach den Prozess der Entbettung der Finanzmärkte aus den gesellschaftlichen Kontexten, der sich auch durch die Betonung einer spezifischen Art von Wissen darstellt. Um die Notwendigkeit für die Reintegration der Finanzmärkte in die Wirtschaft und für ihre Verantwortlichkeit für gesellschaftliche Belange verständlich zu machen, bedarf es der Einbettung des finanztechnischen Wissens in soziales Wissen über die Funktion der Finanzmärkte in der Gesellschaft, die Bedeutung von Normen und den sozialen Charakter von Märkten.

  17. Financial Integration of GCC Capital Markets:Evidence of Nonlinear Cointegration

    OpenAIRE

    Onour, Ibrahim

    2008-01-01

    This paper employs a nonparametric test to investigate nonlinearity in the long-run equilibrium relationship between GCC stock markets returns. The results in the paper show strong evidence of bivariate and multivariate cointegration between five of GCC stock markets. However, Bahrain stock market is evidenced segmented from the group of GCC markets. It is indicated that there is bivariate nonlinear cointegrating relationship linking Kuwait stock market with each of Saudi, and Dubai markets....

  18. Essays on Financial Market Volatility

    OpenAIRE

    Hou, Ai Jun

    2011-01-01

    This thesis examines the volatility in the equity and short-term interest-rate markets, and the spillover from the short term interest rate market to the equity market. It consists of three papers and focuses on adapting and proposing models for the estimation and forecasting of financial market volatility. Chapter 1 gives a brief introduction to the parametric and nonparametric volatility models, as well as the estimation methods used in this thesis. Chapter 2 applies a nonparametric sm...

  19. Time Varying International Market Integration

    Directory of Open Access Journals (Sweden)

    Dhouha Hadidane Chkioua

    2013-10-01

    Full Text Available The objective of this paper is to test financial integration for a sample of 15 developed financial markets and 7 emerging markets between December 1987 and December 2004 by using Conditional International CAPM. The results of the test of International CAPM with time-varying moments provide evidence that the world portfolio is conditionally mean–variance efficient for the group of G7 countries. For emerging markets, we reject the hypothesis of integrated capital markets and we find evidence of time-varying segmentation.  

  20. Financial Intermediation, Markets, and Alternative Financial Sectors

    OpenAIRE

    Allen, Franklin; Carletti, Elena; Qian, Jun Qj; Valenzuela, Patricio

    2012-01-01

    We provide a comprehensive review of firms’ financing channels (internal and external, domestic and international) around the globe, with the focus on alternative finance—financing from all the nonmarket, non-bank external sources. We argue that while traditional financing channels, including financial markets and banks, provide significant sources of funds for firms in developed countries, alternative financing channels provide an equally important source of funds in both developed and d...

  1. The Asean Stock Market Integration: The Effect of the 2007 Financial Crisis on the Asean Stock Indices’ Movements

    Directory of Open Access Journals (Sweden)

    Adwin Surja Atmadja

    2009-01-01

    Full Text Available This study attempts to examine the existence of cointegration relationship and the short run dynamic interaction among the five ASEAN stock market indices in the period of before and during the 2007 financial crisis. The multivariate time series analysis frameworks are employed to the series in both sub-sample periods in order to answer the hypotheses.The study finds two cointegrating vectors in the series before the financial crisis period, however it fails to detect any cointegrating vector in the period of financial crisis. Granger causality tests applied to the series reveal that number of significant causal linkages between two variables increase during the crisis period. Moreover, the accounting innovation analysis shows an increase in the explanatory power of an endogenous variable to another within the system during the crisis period, indicating that the contagious effect of the 2007-US financial crisis has entered into the ASEAN capital market, and significantly influenced the regional indices’ movements.

  2. The role of the European Union for the financial integration of Eastern Europe

    OpenAIRE

    Tomfort, André

    2006-01-01

    The objective of this paper was to investigate the integration of Eastern European financial markets into the EU and world markets. Financial integration has been measured by international investment positions and financial liberalisation measures.

  3. Dynamics of financial markets in the context of globalization

    OpenAIRE

    Pirtea, Marilen; Iovu, Laura Raisa; Milos, Marius Cristian

    2008-01-01

    The transformation of national segmented financial markets into integrated parts of the global financial market- the globalization process - involves cross-border and cross-sector integration in which capital movements and financial services are key determinants. Growth in trade and investments, important changes in production and technology, meaningful innovations in telecommunications and computer applications, and a generalized trend towards liberalization and deregulation of domestic and ...

  4. Collective behavior in financial markets

    Science.gov (United States)

    Dal'Maso Peron, T. K.; Rodrigues, F. A.

    2011-11-01

    The financial market is an example of a complex system characterized by a highly intricate organization and the emergence of collective behavior. In this paper, this emergent dynamics in the financial market is quantified by using concepts of network synchronization. We consider networks constructed by the correlation matrix of asset returns and study the time evolution of the phase coherence among stock prices. It is verified that during a financial crisis a synchronous state emerges in the system, defining the market's direction. Furthermore, the paper proposes a statistical regression model able to identify the topological features that mostly influence such an emergence. The coefficients of the proposed model indicate that the average shortest path length is the measurement most related to network synchronization. Therefore, during an economic crisis, the stock prices present a similar evolution, which tends to shorten the distances between stocks indicating a collective dynamics.

  5. Investment, financial markets, and uncertainty

    OpenAIRE

    Arestis, Philip; Gonza?lez, Ana Rosa; Dejua?n, O?scar

    2012-01-01

    This paper provides a theoretical explanation of the accumulation process, which accounts for the developments in the financial markets over the recent past. Specifically, our approach is focused on the presence of correlations between physical and financial investment, and how the latter could affect the former. In order to achieve this objective, two assets are considered: equities and bonds. This choice permits us to account for two extreme alternative possibilities: taking risk in the sho...

  6. Financial market integration and loan competition : when is entry deregulation socially beneficial?

    OpenAIRE

    Kaas, Leo

    2004-01-01

    The paper analyzes how the removal of barriers to entry in banking affect loan competition, bank stability and economic welfare. We consider a model of spatial loan competition where a market that is served by less efficient banks is opened to entry by banks that are more efficient in screening borrowers. It is shown that there is typically too little entry and that market shares of entrant banks are too small relative to their socially optimal level. This is because efficient banks internali...

  7. Practical .NET for financial markets

    CERN Document Server

    Shetty, Vivek

    2006-01-01

    This book provides fascinating insight into the nature and operation of Financial (Equity) markets and the singular demands and challenges placed on technology solutions in this environment. It then takes an in-depth look at how these challenges can be addressed using Microsoft .NET technology. Each chapter starts with a detailed explanation of a specific and ubiquitous business requirement in Equity market applications, and then the particular features of the.NET framework that can be used to meet that requirement

  8. Financial Market Regulation

    OpenAIRE

    Nabor, Andreas

    2001-01-01

    Das Ziel der umfassenden Finanzmarktreform "Financial Big Bang" in Japan war die Bildung eines international wettbewerbsfähigen Finanzsektors unter den drei Prinzipien frei, fair und global bis 2001. Politiker standen dabei zwei Herausforderungen gegenüber: die Wettbewerbsfähigkeit langfristig zu stärken und kurzfristig strukturelle Probleme zu lösen. Fünf Jahre nach dem Start der Reform scheint das Land mehr Fortschritte in Bezug auf die langfristige Zielsetzung denn auf die kurzfristige gem...

  9. Communication impacting financial markets

    OpenAIRE

    Andersen, Jørgen Vitting; Vrontos, Ioannis; Dellaportas, Petros; Galam, Serge

    2014-01-01

    Contexte : Depuis l'attribution du prix Nobel en 2002 pour Kahneman pour la théorie de la perspective, la finance comportementale est devenue un sous-champ de plus en plus importante. Toutefois, les parties principales de la finance comportementale, la théorie des perspectives inclus, essaie de comprendre les marchés financiers grâce à un comportement d'investissement individuel. La finance comportementale ne tient pas compte de ce fait toute interaction entre les participants. Méthodol...

  10. Financing Asia's infrastructure: modes of development and integration of Asian financial markets

    OpenAIRE

    Bhattacharyay, Biswa

    2010-01-01

    Asia faces very large infrastructure funding demands, estimated at around US$750 billion per year for energy, transport, telecommunications, water, and sanitation during 2010-2020 (ADB/ADBI 2009). Asia has large savings, significant international reserves, and rapid accumulations of funds that could be utilized for meeting these infrastructure investment needs, but Asian markets have failed to use available resources to channel funding into highly needed infrastructure projects. This paper ex...

  11. Path integrals in quantum mechanics, statistics, polymer physics, and financial markets

    CERN Document Server

    Kleinert, Hagen

    2009-01-01

    This is the fifth, expanded edition of the comprehensive textbook published in 1990 on the theory and applications of path integrals. It is the first book to explicitly solve path integrals of a wide variety of nontrivial quantum-mechanical systems, in particular the hydrogen atom. The solutions have been made possible by two major advances. The first is a new euclidean path integral formula which increases the restricted range of applicability of Feynman's time-sliced formula to include singular attractive 1/r- and 1/r2-potentials. The second is a new nonholonomic mapping principle carrying p

  12. Fractal properties of financial markets

    Science.gov (United States)

    Budinski-Petkovi?, Lj.; Lon?arevi?, I.; Jakši?, Z. M.; Vrhovac, S. B.

    2014-09-01

    We present an analysis of the USA stock market using a simple fractal function. Financial bubbles preceding the 1987, 2000 and 2007 crashes are investigated using the Besicovitch-Ursell fractal function. Fits show a good agreement with the S&P 500 data when a complete financial growth is considered, starting at the threshold of the abrupt growth and ending at the peak. Moving the final time of the fitting interval towards earlier dates causes growing discrepancy between two curves. On the basis of a detailed analysis of the financial index behavior we propose a method for identifying the stage of the current financial growth and estimating the time in which the index value is going to reach the maximum.

  13. Mesoscopic Modelling of Financial Markets

    Science.gov (United States)

    Cordier, Stephane; Pareschi, Lorenzo; Piatecki, Cyrille

    2009-01-01

    We derive a mesoscopic description of the behavior of a simple financial market where the agents can create their own portfolio between two investment alternatives: a stock and a bond. The model is derived starting from the Levy-Levy-Solomon microscopic model (Levy et al. in Econ. Lett. 45:103-111, 1994; Levy et al. in Microscopic Simulation of Financial Markets: From Investor Behavior to Market Phenomena, Academic Press, San Diego, 2000) using the methods of kinetic theory and consists of a linear Boltzmann equation for the wealth distribution of the agents coupled with an equation for the price of the stock. From this model, under a suitable scaling, we derive a Fokker-Planck equation and show that the equation admits a self-similar lognormal behavior. Several numerical examples are also reported to validate our analysis.

  14. Sovereign credit ratings, emerging market risk and financial market volatility

    OpenAIRE

    Reisen, Helmut; Von Maltzan, Julia

    1998-01-01

    This study has investigated to which extent rating events influence sovereign bond yield spreads and overall financial market volatility. While rating agencies are part and parcel of today?s financial markets, the study succeeds in tracing some independent effect that ratings exert on financial market prices. First, our Granger causality test cautions against overestimating the independent longrun impact that sovereign credit ratings exert on the financial-market assessment of sovereign risk,...

  15. Detecting anchoring in financial markets

    CERN Document Server

    Andersen, Jorgen Vitting

    2007-01-01

    Anchoring is a term used in psychology to describe the common human tendency to rely too heavily (anchor) on one piece of information when making decisions. A trading algorithm inspired by biological motors, introduced by L. Gil\\cite{Gil}, is suggested as a testing ground for anchoring in financial markets. An exact solution of the algorithm is presented for arbitrary price distributions. Furthermore the algorithm is extended to cover the case of a market neutral portfolio, revealing additional evidence that anchoring is involved in the decision making of market participants. The exposure of arbitrage possibilities created by anchoring gives yet another illustration on the difficulty proving market efficiency by only considering lower order correlations in past price time series

  16. Financial integration, specialization and systemic risk

    OpenAIRE

    Fecht, Falko; Grüner, Hans Peter; Hartmann, Philipp

    2008-01-01

    This paper studies the implications of cross-border financial integration for financial stability when banks' loan portfolios adjust endogenously. Banks can be subject to sectoral and aggregate domestic shocks. After integration they can share these risks in a complete interbank market. When banks have a comparative advantage in providing credit to certain industries, they will exploit the enhanced risk sharing opportunities through more specialization in lending. The enhanced concentration i...

  17. International financial markets and development

    Directory of Open Access Journals (Sweden)

    Peter Wahl

    2009-11-01

    Full Text Available The current financial crisis has not come about by chance. It is the result of a system that has emerged over the last 30 years and which Keynes may well have called the ‘casino economy’. The dominance of finance over real economy characterises the financial crisis, while finance itself is dominated by the all-encompassing target of maximum profit at all times. Other aims of economic activity such as job creation, social welfare and development have fallen by the wayside. In response, new actors are surfacing, e.g. the institutional investor (hedge funds, private equity funds, etc., while new instruments are leading to highly leveraged and destabilising derivatives. The casino system has been promoted by governments and intergovernmental institutions to liberalise and deregulate financial markets. Although developing countries have not participated in the casino system, they have been suffering most from the spill-over into the real economy. The main lesson learnt is that the casino has to be closed.

    How to cite this article: Wahl, P., 2009, ‘International financial markets and development’, HTS Teologiese Studies/Theological Studies 65(1, Art. #284, 4 pages. DOI: 10.4102/hts.v65i1.284

  18. Financial Integration in Emerging Asia: Challenges and Prospects

    OpenAIRE

    Park, Cyn-Young; Lee, Jong-wha

    2011-01-01

    Using both quantity- and price-based measures of financial integration, this paper shows an increasing degree of financial openness and integration in emerging Asian markets. This paper also assesses the impact of a regional shock relative to a global shock on local equity and bond markets. The findings of this paper suggest that the region’s equity markets are integrated more globally than regionally, although the degrees of both regional and global integration have increased significantly...

  19. Globalization, financial crisis and contagion: time-dynamic evidence from financial markets of developing countries

    OpenAIRE

    Simplice A, Asongu

    2011-01-01

    Financial integration among economies has the benefit of improving allocation efficiency and diversifying risk. However the recent global financial crisis, considered as the worst since the Great Depression has re-ignited the fierce debate about the merits of financial globalization and its implications for growth especially in developing countries. This paper examines whether equity markets in emerging countries were vulnerable to contagion during the recent financial meltdown. Findings show...

  20. Switching processes in financial markets.

    Science.gov (United States)

    Preis, Tobias; Schneider, Johannes J; Stanley, H Eugene

    2011-05-10

    For an intriguing variety of switching processes in nature, the underlying complex system abruptly changes from one state to another in a highly discontinuous fashion. Financial market fluctuations are characterized by many abrupt switchings creating upward trends and downward trends, on time scales ranging from macroscopic trends persisting for hundreds of days to microscopic trends persisting for a few minutes. The question arises whether these ubiquitous switching processes have quantifiable features independent of the time horizon studied. We find striking scale-free behavior of the transaction volume after each switching. Our findings can be interpreted as being consistent with time-dependent collective behavior of financial market participants. We test the possible universality of our result by performing a parallel analysis of fluctuations in time intervals between transactions. We suggest that the well known catastrophic bubbles that occur on large time scales--such as the most recent financial crisis--may not be outliers but single dramatic representatives caused by the formation of increasing and decreasing trends on time scales varying over nine orders of magnitude from very large down to very small. PMID:21521789

  1. Relationship Service Marketing and Investment in Financial Market of Iran

    Directory of Open Access Journals (Sweden)

    Mehrdad Alipour

    2012-08-01

    Full Text Available In competitive world, having expertise, knowledge and marketing experience for financial market activities, especially brokerage firms has proven inevitable. This should be accompanied by performing marketing operations along with intermediary roles and carrying on the daily transactions of shares in the Tehran stock exchange market. The current study aims investigating the level of marketing knowledge used in stock exchange market, identifying the reasons behind deficient use of the marketing knowledge by the financial institutions (financial intermediaries, brokerage firms and etc, matching the marketing activities with the financial activities of the brokerage firms in the Tehran stock exchange and finally improving the investment in Tehran stock exchange market. Independent variables were selected based on services marketing mix such as product, price, place, promotion, physical facilities, people and process. The method used is survey-based and the universe has been drawn from among the financial institutions active in Tehran stock exchange and the regional branches of the country. The results obtained from the research show that, during the period reviewed, the dynamic marketing system in the financial market was the traditional system without attending to the modern criteria of financial service marketing in the areas relating communication and determination of the shares prices, services of conduct transactions of the financial analyses and encouragement the big companies to enter the Tehran Stock Exchange.

  2. Endogenous market structures and financial development

    OpenAIRE

    Becsi, Zsolt; Wang, Ping; Wynne, Mark A.

    1998-01-01

    Existing theories that emphasize the significance of financial intermediation for economic development have not addressed two important empirical facts: (i) the relationship between financial and real activities depends crucially on the stage of development, and (ii) financial and industrial market structures vary widely across otherwise similar countries. To explain these observations, we develop a dynamic general equilibrium model allowing for endogenous market structures in which financial...

  3. The natural instability of financial markets

    OpenAIRE

    Kregel, Jan

    2007-01-01

    This paper contrasts the economic incentives implicit in the Keynes-Minsky approach to inherent financial market instability with the incentives behind the traditional equilibrium approach leading to market stability to provide a framework for analyzing the stability induced by the recent changes in bank regulation to modernize financial services and the evolution of financial engineering innovations in the U.S. financial system. It suggests that the changes that have occurred in the profit i...

  4. Real financial market exchange rates and capital flows

    OpenAIRE

    Gelman, Maria; Jochem, Axel; Reitz, Stefan

    2014-01-01

    Foreign exchange rates, asset prices and capital movements are expected to be closely related to each other as international capital markets become more and more integrated. This paper provides new empirical evidence from an index of exchange-rate adjusted cross-country asset price ratios, which may be interpreted as a real effective financial exchange rate. The integrated stock-flow approach reveals that a county's real effective financial exchange rate is co-integrated with international in...

  5. Financial transaction tax contributes to more sustainability in financial markets

    OpenAIRE

    Schäfer, Dorothea

    2012-01-01

    We argue that a financial transaction tax complements financial market regulation. With the tax, governments have an additional instrument at hand to influence trading activity. FTT aims to reduce regulatory arbitrage, flash trading, overactive portfolio management, excessive leverage and speculative transactions of financial institutions. The focus clearly addresses these classes of activities that have contributed to the financial crisis. However, if contrary to expectations harmful transac...

  6. International financial markets and development

    Scientific Electronic Library Online (English)

    Peter, Wahl.

    Full Text Available The current financial crisis has not come about by chance. It is the result of a system that has emerged over the last 30 years and which Keynes may well have called the ‘casino economy’. The dominance of finance over real economy characterises the financial crisis, while finance itself is dominated [...] by the all-encompassing target of maximum profit at all times. Other aims of economic activity such as job creation, social welfare and development have fallen by the wayside. In response, new actors are surfacing, e.g. the institutional investor (hedge funds, private equity funds, etc.), while new instruments are leading to highly leveraged and destabilising derivatives. The casino system has been promoted by governments and intergovernmental institutions to liberalise and deregulate financial markets. Although developing countries have not participated in the casino system, they have been suffering most from the spill-over into the real economy. The main lesson learnt is that the casino has to be closed.

  7. European financial integration and corporate governance

    OpenAIRE

    Buch, Claudia M.; Heinrich, Ralph P.

    2002-01-01

    The paper studies the link between the integration of European financial markets and corporate governance in Europe. The focus of the paper is on how integration affects the interplay of ownership structures, capital structures, and monitoring, all of which can be used to govern agency problems at the firm level. Integration is a process which comprises the abolition of capital controls, the harmonization of institutions, and the creation of a common currency area. These elements, in turn, af...

  8. Financial Repression To Financial Liberalisation Of Indian Banking And Capital Market Sectors (pre &post 1991 Reforms

    Directory of Open Access Journals (Sweden)

    Raghavendra Rao Rentala

    2012-10-01

    Full Text Available Financial sector of any Economy is multi-faceted term. It refers to legal and institutional arrangements, financial intermediaries, markets and instruments with both domestic and external dimensions. The Economic Development of a nation is reflected by the progress of the various economic units, broadly classified into Corporate sector, Government and Household sector. While performing their activities these units will be placed in a surplus/deficit/balanced budgetary situations.Financial system comprises a set of sub-systems of Financial Institutions, Financial Markets, Financial Instruments and services which help arranging this mechanism. A financial system or financial sector functions as an intermediary and facilitates the flow of funds from the areas of surplus to the areas of deficit. The Financial System is characterized by the presence of integrated financial markets, and institutions that meet the short term and long term financial needs of both the household and corporate sector. The role and importance of financial sector in the process of economic growth has evolved over a time along with the changing paradigms especially in Banking and the Financial (Capital Markets for pooling up of long term sources. The growth of Banks and Capital Markets can be studied in three phases. Firstly, to overview these sectors during Pre Reforms Development (1947-1991 . Secondly, reasons for Indian Economic Crisis in 1991 which had led to “Financial Repression”. Thirdly, reforms in 1991 and its contribution to the development of sectors mentioned which can be named as “ Financial Liberalisation” . The study has revealed that these sectors had flourished with a very positive growth especially after 1991 due to various developments and sectoral reforms under taken in these segments.

  9. The effect of the EMU on short and long-run stock market dynamics: New evidence on financial integration

    OpenAIRE

    Lafuente Luengo, Juan Ángel; Ordóñez Monfort, Javier

    2009-01-01

    This paper deals with the time evolution of stock market integra- tion around the introduction of the euro. In particular we test whether the degree of integration between the main eurozone countries increased after European monetary union. The contribution of the paper to the extant literature is twofold: a) first, we take into account the poten- tial long-run equilibrium relationship between stock indices allowing for structural changes in the cointegration space that might capture the ef- ...

  10. Time series analysis for financial market meltdowns

    OpenAIRE

    Young Shin Kim; Rachev, Svetlozar T.; BIANCHI, MICHELE LEONARDO; Mitov, Ivan; Fabozzi, Frank J.

    2010-01-01

    There appears to be a consensus that the recent instability in global financial markets may be attributable in part to the failure of financial modeling. More specifically, current risk models have failed to properly assess the risks associated with large adverse stock price behavior. In this paper, we first discuss the limitations of classical time series models for forecasting financial market meltdowns. Then we set forth a framework capable of forecasting both extreme events and highly vol...

  11. Mesoscopic modelling of financial markets

    CERN Document Server

    Cordier, S; Piatecki, C

    2010-01-01

    We derive a mesoscopic description of the behavior of a simple financial market where the agents can create their own portfolio between two investment alternatives: a stock and a bond. The model is derived starting from the Levy-Levy-Solomon microscopic model (Econ. Lett., 45, (1994), 103--111) using the methods of kinetic theory and consists of a linear Boltzmann equation for the wealth distribution of the agents coupled with an equation for the price of the stock. From this model, under a suitable scaling, we derive a Fokker-Planck equation and show that the equation admits a self-similar lognormal behavior. Several numerical examples are also reported to validate our analysis.

  12. Telegraph models of financial markets

    Scientific Electronic Library Online (English)

    NIKITA, RATANOV.

    2007-10-29

    Full Text Available En este artículo introducimos un modelo de mercado financiero basado en movimientos aleatorios con la alternancia de velocidades y con saltos que ocurren cuando la velocidad se cambia. Este modelo es libre del arbitraje si las direcciones de saltos están en cierta correspondencia con las direcciones [...] de velocidades del movimiento subyacente. Suponemos que la tasa de interés depende del estado de mercado. Las estrategias reproducibles para opciones son construidas en detalles. Se obtienen las fórmulas de forma cerrada para los precios de opción. Abstract in english In this paper we develop a financial market model based on continuous time random motions with alternating constant velocities and with jumps occurring when the velocity switches. If jump directions are in the certain correspondence with the velocity directions of the underlying random motion with r [...] espect to the interest rate, the model is free of arbitrage and complete. Memory effects of this model are discussed.

  13. Telegraph models of financial markets

    Directory of Open Access Journals (Sweden)

    NIKITA RATANOV

    Full Text Available In this paper we develop a financial market model based on continuous time random motions with alternating constant velocities and with jumps occurring when the velocity switches. If jump directions are in the certain correspondence with the velocity directions of the underlying random motion with respect to the interest rate, the model is free of arbitrage and complete. Memory effects of this model are discussed.En este artículo introducimos un modelo de mercado financiero basado en movimientos aleatorios con la alternancia de velocidades y con saltos que ocurren cuando la velocidad se cambia. Este modelo es libre del arbitraje si las direcciones de saltos están en cierta correspondencia con las direcciones de velocidades del movimiento subyacente. Suponemos que la tasa de interés depende del estado de mercado. Las estrategias reproducibles para opciones son construidas en detalles. Se obtienen las fórmulas de forma cerrada para los precios de opción.

  14. The rise of emerging markets' financial market architecture: constituting new roles in the global financial goverancen

    OpenAIRE

    Metzger, Martina; Taube, Gu?nther

    2010-01-01

    This paper analyses the impact of the global financial crisis on Brazil, India and South Africa whose financial markets have shown strong resilience to the global financial turmoil. The paper shows, that in contrast to advanced countries in these emerging market economies there is contagion from the real sector through a slump in exports and a decline in industrial production. Although exposure to toxic assets has been very low, financial markets of the economies under consideration have come...

  15. “Lamfalussy Architecture” – A Model for Consolidating the Financial Markets’ Supervision

    Directory of Open Access Journals (Sweden)

    Nicolae Dardac

    2008-08-01

    Full Text Available The enhancement of convergence in the supervisory practices, both by increasing the quality of the legal framework and of the regulations in the field of financial services and by improving the consultation process, represents a prerequisite for setting up the Single Market for financial services at EU level. In order to reach this goal a new approach, known as “Lamfalussy Architecture”, has been developed. The implementation of this model will increase the efficiency of the regulatory and supervisory framework within the financial markets, by removing the obstacles in the way of their integration into the Single Market. At the same time, setting up an EU Single Market implies a thorough monitoring of the financial stability through a constant review of the regulatory and supervisory framework.

  16. Relationship Service Marketing and Investment in Financial Market of Iran

    OpenAIRE

    Mehrdad Alipour; Reza Ahmadi; Hamed Abasi Nami

    2012-01-01

    In competitive world, having expertise, knowledge and marketing experience for financial market activities, especially brokerage firms has proven inevitable. This should be accompanied by performing marketing operations along with intermediary roles and carrying on the daily transactions of shares in the Tehran stock exchange market. The current study aims investigating the level of marketing knowledge used in stock exchange market, identifying the reasons behind deficient use of the marketin...

  17. Fraudulent agents in an artificial financial market

    OpenAIRE

    Scalas, Enrico; Cincotti, Silvano; Dose, Christian; Raberto, Marco

    2003-01-01

    The problem of insider trading and other illegal practices in financial markets is an important issue in the field of financial regulatory policies. Market control bodies, such as the US SEC or the Italian CONSOB regularly perform statistical analyses on security prices in order to unveil clues of fraudulent behaviour within the market. Fraudulent behaviour is connected to the more general problem of information asymmetries, which had already been addressed in the field of e...

  18. Financial Markets, Financial Intermediation, and Bailout Policy

    OpenAIRE

    Vinogradov, Dmitri V.

    2006-01-01

    The 1980s and 1990s have been marked with a series of financial and banking crises all over the world. This turned the attention of economists to such questions as how a financial system should be structured in order to reduce the vulnerability of an economy to the risk of a crisis, or what policy should regulators follow in order to prevent the crises, and what regulatory measures would help in reduction of harmful effects of the crises? This dissertation studies relative advantages of a ba...

  19. Understanding Financial Market States Using Artificial Double Auction Market

    OpenAIRE

    Yim, Kyubin; Oh, Gabjin; Kim, Seunghwan

    2015-01-01

    The ultimate value of theories of the fundamental mechanisms comprising the asset price in financial systems will be reflected in the capacity of such theories to understand these systems. Although the models that explain the various states of financial markets offer substantial evidences from the fields of finance, mathematics, and even physics to explain states observed in the real financial markets, previous theories that attempt to fully explain the complexities of finan...

  20. Financial instability from local market measures

    Science.gov (United States)

    Bardoscia, Marco; Livan, Giacomo; Marsili, Matteo

    2012-08-01

    We study the emergence of instabilities in a stylized model of a financial market, when different market actors calculate prices according to different (local) market measures. We derive typical properties for ensembles of large random markets using techniques borrowed from statistical mechanics of disordered systems. We show that, depending on the number of financial instruments available and on the heterogeneity of local measures, the market moves from an arbitrage-free phase to an unstable one, where the complexity of the market—as measured by the diversity of financial instruments—increases, and arbitrage opportunities arise. A sharp transition separates the two phases. Focusing on two different classes of local measures inspired by real market strategies, we are able to analytically compute the critical lines, corroborating our findings with numerical simulations.

  1. Fraudulent agents in an artificial financial market

    CERN Document Server

    Scalas, E; Dose, C; Raberto, M; Scalas, Enrico; Cincotti, Silvano; Dose, Christian; Raberto, Marco

    2003-01-01

    The problem of insider trading and other illegal practices in financial markets is an important issue in the field of financial regulatory policies. Market control bodies, such as the US SEC or the Italian CONSOB regularly perform statistical analyses on security prices in order to unveil clues of fraudulent behaviour within the market. Fraudulent behaviour is connected to the more general problem of information asymmetries, which had already been addressed in the field of experimental economics. Recently, interesting conclusions were drawn thanks to a computer-simulated market where agents had different pieces of information about the future dividend cash flow of exchanged securities. Here, by means of an agent-based artificial market: the Genoa Artificial Stock Market (GASM), the more specific problem of fraudulent behaviour in a financial market is studied. A simplified model of fraudulent behaviour is implemented and the action of fraudulent agents on the statistical properties of simulated prices and the...

  2. Financial instability from local market measures

    International Nuclear Information System (INIS)

    We study the emergence of instabilities in a stylized model of a financial market, when different market actors calculate prices according to different (local) market measures. We derive typical properties for ensembles of large random markets using techniques borrowed from statistical mechanics of disordered systems. We show that, depending on the number of financial instruments available and on the heterogeneity of local measures, the market moves from an arbitrage-free phase to an unstable one, where the complexity of the market—as measured by the diversity of financial instruments—increases, and arbitrage opportunities arise. A sharp transition separates the two phases. Focusing on two different classes of local measures inspired by real market strategies, we are able to analytically compute the critical lines, corroborating our findings with numerical simulations. (paper)

  3. Financial Stability and Market Structure: International Evidence

    Directory of Open Access Journals (Sweden)

    Marcos Soares da Silva

    2012-04-01

    Full Text Available Although the economic theory recognizes the ambiguous relationship between market structure and stability of the bank sector, some models, such as the one of competition-fragility by Allen and Gale (2004, suggest that increasing competition leads financial institutions to take more risks. As a result, financial markets that are more concentrated also present higher financial stability. To assess this hypothesis, we estimate a dynamic panel data model for 41 countries in the period from 1987 to 2007. The econometric model included covariates for level of income, characteristics of the financial market, economic environment, and macro prudential regulation. We used the following databases: “A new database on financial development and structure” and “Bank regulation and supervision”, from the World Bank, and “Systemic banking crises: a new database”, from the International Monetary Fund. The results indicate that the greater the market concentration the higher the stability of the banking system.

  4. A stochastic model for the financial market with discontinuous prices

    Directory of Open Access Journals (Sweden)

    Leda D. Minkova

    1996-01-01

    Full Text Available This paper models some situations occurring in the financial market. The asset prices evolve according to a stochastic integral equation driven by a Gaussian martingale. A portfolio process is constrained in such a way that the wealth process covers some obligation. A solution to a linear stochastic integral equation is obtained in a class of cadlag stochastic processes.

  5. MEASURING INTEGRATED MARKETING COMMUNICATION

    OpenAIRE

    Jerman, Damjana; Zavrs?nik, Bruno

    2011-01-01

    The concept of integrated marketing communications continues to gain widespread attention and interest among academics and practitioners around the world. Among the objectives of our paper may be considered dealing with changes in the conceptualization of integrated marketing communication and measuring the dimensions of this conceptual area. Two priorities guide our paper: 1) a more complete view for the conceptualization of integrated marketing communication; and 2) an empirical analysis fo...

  6. 76 FR 18445 - Financial Market Utilities

    Science.gov (United States)

    2011-04-04

    ...institutions or markets and thereby...that is a derivatives clearing...prescribe regulations, in consultation...agency or derivatives clearing...apply to market convention...activities, and regulation and oversight...UTILITIES (REGULATION HH) Sec...financial market utilities...is a derivatives...

  7. The Economic Efficiency of Financial Markets

    Science.gov (United States)

    Wang, Yougui

    In this paper, we investigate the economic efficiency of markets and specify its applicability to financial markets. The statistical expressions of supply and demand of a market are formulated in terms of willingness prices. By introducing probability of realized exchange, we also formulate the realized market surplus. It can be proved that only when the market is in equilibrium the realized surplus can reach its maximum value. The market efficiency can be measured by the ratio of realized surplus to its maximum value. For a financial market, the market participants are composed of two groups: producers and speculators. The former brings the surplus into the market and the latter provides liquidity to make them realized.

  8. Simple grading model for financial markets

    Science.gov (United States)

    Thuy Anh, Chu; Lan, Nguyen Tri; Viet, Nguyen Ai

    2015-06-01

    A simple way to estimate and grade a financial market by comparison the evolution process and the shape of distribution functions was proposed. In normal working state of financial market, the shape of distribution functions have one-peak form and change from Boltzmann-like to Gaussian-like distributions, while in risk moment might have two-peak form. The grad of financial markets was characterized by overlap area of initial and final distribution functions, and for risk degree by the separation between two shoulders of distribution function. The meaning of Levi tails of distribution and laws of general entropy and information was discussed.

  9. Building an integrated capital market in East Asia

    OpenAIRE

    Mccauley, Robert N.

    2007-01-01

    This paper takes stock of the state of financial integration in East Asia. It contrasts the international integration of equity markets, the regional integration of the markets for bonds and syndicated loans denominated in US dollars, and the insularity of most local currency bond markets. In the last, it finds that the regional issuance in the Japanese foreign bond ('Samurai') and euroyen markets did not recover from the shocks during and after the Asian financial crisis. However, it finds a...

  10. THE FINANCIAL CRISIS AND THE EMERGING MARKETS

    Directory of Open Access Journals (Sweden)

    LORENA POPESCU DUDUIAL?

    2014-06-01

    Full Text Available The emerging markets emerge and develop in the larger context of the international financial market development "is a consequence of the needs expressed by investors and those who wish to place their financial capital." Thus, to achieve a certain level of saturation economic zones and the lack of attractiveness of gains obtainable in certain markets determine the migration of capital to areas that are or may become interesting in terms of the gains that are achieved by investing in these areas in conjunction minimizing market risk assumed.

  11. Money market integration

    OpenAIRE

    Bartolini, Leonardo; Hilton, Spence; Prati, Alessandro

    2005-01-01

    We use transaction-level data and detailed modeling of the high-frequency behavior of federal funds-Eurodollar yield spreads to provide evidence of strong integration between the federal funds and Eurodollar markets, the two core components of the dollar money market. Our results contrast with previous research indicating that these two markets are segmented, showing them to be well integrated even at high (intraday) frequency. We document several patterns in the behavior of federal funds-Eur...

  12. Financial regulation in the EU: Cross-border capital flows, systemic risk and the European Banking Union as reference points for EU financial market integration

    OpenAIRE

    Haar, Brigitte

    2014-01-01

    This is a chapter for a forthcoming volume Oxford Handbook of Financial Regulation (Oxford University Press 2014) (eds. Eilís Ferran, Niamh Moloney, and Jennifer Payne). It provides an overview of EU financial regulation from the first banking directive up until its most recent developments in the aftermath of the financial crisis, focusing on the multiple layers of multi-level governance and their characteristic conceptual difficulties. Therefore the paper discusses the need to accommodate ...

  13. Financial regulation in the EU - cross-border capital flows, systemic risk and the European Banking Union as reference points for EU financial market integration : [Version June 2014

    OpenAIRE

    Haar, Brigitte

    2014-01-01

    This is a chapter for a forthcoming volume Oxford Handbook of Financial Regulation (Oxford University Press 2014) (eds. Eilís Ferran, Niamh Moloney, and Jennifer Payne). It provides an overview of EU financial regulation from the first banking directive up until its most recent developments in the aftermath of the financial crisis, focusing on the multiple layers of multi-level governance and their characteristic conceptual difficulties. Therefore the paper discusses the need to accommodate ...

  14. Corporate social responsibility and financial markets

    OpenAIRE

    Dam, Lammertjan

    2008-01-01

    This thesis examines the economics of corporate social responsibility, with an emphasis on the role of financial markets and institutions. Questions that are raised are: What does corporate social responsibility mean in an economic context? What is the impact of corporate social responsibility on the financial performance of a company? What kind of role can a stock market play in trying to achieve sustainable development? What is the relation between corporate social responsibility, economic...

  15. Global risk minimization in financial markets

    OpenAIRE

    Lisewski, Andreas Martin

    2009-01-01

    Recurring international financial crises have adverse socioeconomic effects and demand novel regulatory instruments or strategies for risk management and market stabilization. However, the complex web of market interactions often impedes rational decisions that would absolutely minimize the risk. Here we show that, for any given expected return, investors can overcome this complexity and globally minimize their financial risk in portfolio selection models, which is mathemati...

  16. Modelling financial crises of global equity markets

    OpenAIRE

    Cotter, John

    2004-01-01

    Extreme asset price movements have major consequences for an economy’s financial stability and monetary policies. The recent equity price movements associated with financial crises appear to be more pronounced and policy makers need to make accurate predictions of the frequency and severity of these events. This paper investigates the extreme behaviour of equity market returns and quantifies the possible losses associated with financial crises. Extreme value theory that models tail realisat...

  17. Financial Integration and Macroeconomic Volatility: Does Financial Development Matter?

    OpenAIRE

    Eozenou, Patrick

    2008-01-01

    In this paper, we analyze the relationship between international financial integration and macroeconomic volatility. Looking at a panel of 90 countries over the period 1960-2000, we find that domestic financial conditions matter when assessing the impact of financial integration on consumption growth volatility. More specifically, consumption growth volatility is found to increase with the degree of financial integration in countries with low level of financial development and to decrea...

  18. Network Topologies of Financial Market During the Global Financial Crisis

    OpenAIRE

    Nobi, Ashadun; Maeng, Seong Eun; Ha, Gyeong Gyun; Lee, Jae Woo

    2013-01-01

    We consider the effects of the global financial crisis through a local Korean financial market around the 2008 crisis. We analyze 185 individual stock prices belonging to the KOSPI (Korea Composite Stock Price Index), cosidering three time periods: the time before, during, and after the crisis. The complex networks generate from the fully connected correlation network by using the cross-correlation coefficients among the stock price time series of the companies. We generate ...

  19. Quantum Bohmian model for financial market

    Science.gov (United States)

    Choustova, Olga Al.

    2007-01-01

    We apply methods of quantum mechanics for mathematical modeling of price dynamics at the financial market. The Hamiltonian formalism on the price/price-change phase space describes the classical-like evolution of prices. This classical dynamics of prices is determined by “hard” conditions (natural resources, industrial production, services and so on). These conditions are mathematically described by the classical financial potential V(q), where q=(q1,…,qn) is the vector of prices of various shares. But the information exchange and market psychology play important (and sometimes determining) role in price dynamics. We propose to describe such behavioral financial factors by using the pilot wave (Bohmian) model of quantum mechanics. The theory of financial behavioral waves takes into account the market psychology. The real trajectories of prices are determined (through the financial analogue of the second Newton law) by two financial potentials: classical-like V(q) (“hard” market conditions) and quantum-like U(q) (behavioral market conditions).

  20. Solvable Stochastic Dealer Models for Financial Markets

    CERN Document Server

    Yamada, Kenta; Ito, Takatoshi; Takayasu, Misako

    2008-01-01

    We introduce solvable stochastic dealer models, which can reproduce basic empirical laws of financial markets such as the power law of price change. Starting from the simplest model that is almost equivalent to a Poisson random noise generator, the model becomes fairly realistic by adding only two effects, the self-modulation of transaction intervals and a forecasting tendency, which uses a moving average of the latest market price changes. Based on the present microscopic model of markets, we find a quantitative relation with market potential forces, which has recently been discovered in the study of market price modeling based on random walks.

  1. Solvable stochastic dealer models for financial markets

    Science.gov (United States)

    Yamada, Kenta; Takayasu, Hideki; Ito, Takatoshi; Takayasu, Misako

    2009-05-01

    We introduce solvable stochastic dealer models, which can reproduce basic empirical laws of financial markets such as the power law of price change. Starting from the simplest model that is almost equivalent to a Poisson random noise generator, the model becomes fairly realistic by adding only two effects: the self-modulation of transaction intervals and a forecasting tendency, which uses a moving average of the latest market price changes. Based on the present microscopic model of markets, we find a quantitative relation with market potential forces, which have recently been discovered in the study of market price modeling based on random walks.

  2. Regulation of Banking and Financial Markets

    OpenAIRE

    Pacces, A. M.; Heremans, D.

    2011-01-01

    Abstract: This paper is one chapter of the volume “Regulation and Economics” of the second edition of the Encyclopedia of Law and Economics. The authors review the economics of banking and financial markets and the regulatory response to market failure. Market failure in finance depends on problems of information and externalities. Regulation addresses these problems through conduct of business rules and prudential requirements. This approach has recently proved insufficient to prevent...

  3. Financial derivatives in power marketing: The basics

    International Nuclear Information System (INIS)

    With the ongoing changes in the power industry worldwide, electricity is beginning to be traded like other commodities. The use of financial derivative instruments in power markets is on the rise. The purpose of this paper is to explain the role of these derivatives in risk management which is vital for survival in the increasingly competitive industry. Starting with the familiar cash markets, the paper discusses the basics of futures, options, and swap markets as applied to electric energy trading

  4. Cohesiveness in Financial News and its Relation to Market Volatility

    Science.gov (United States)

    Piškorec, Matija; Antulov-Fantulin, Nino; Novak, Petra Kralj; Mozeti?, Igor; Gr?ar, Miha; Vodenska, Irena; Šmuc, Tomislav

    2014-05-01

    Motivated by recent financial crises, significant research efforts have been put into studying contagion effects and herding behaviour in financial markets. Much less has been said regarding the influence of financial news on financial markets. We propose a novel measure of collective behaviour based on financial news on the Web, the News Cohesiveness Index (NCI), and we demonstrate that the index can be used as a financial market volatility indicator. We evaluate the NCI using financial documents from large Web news sources on a daily basis from October 2011 to July 2013 and analyse the interplay between financial markets and finance-related news. We hypothesise that strong cohesion in financial news reflects movements in the financial markets. Our results indicate that cohesiveness in financial news is highly correlated with and driven by volatility in financial markets.

  5. Financial integration and financial development in transition economies : what happens during financial crises ?

    OpenAIRE

    Brezigar-masten, Arjana; Coricelli, Fabrizio; Masten, Igor

    2010-01-01

    This papers provides an empirical analysis of the role of financial development and financial integration in the growth dynamics of transition countries. We focus on the role of financial integration in determining the impact of financial development on growth, distinguishing "normal times" from periods of financial crises. In addition to confirming the significant positive effect on growth exerted by financial development and financial integration, our estimates show that a higher degree of ...

  6. Could short selling make financial markets tumble?

    CERN Document Server

    Andersen, J V

    2003-01-01

    It is suggested to consider long term trends of financial markets as a growth phenomenon. The question that is asked is what conditions are needed for a long term sustainable growth or contraction in a financial market? The paper discuss the role of traditional market players of long only mutual funds versus hedge funds which take both short and long positions. It will be argued that financial markets since their very origin and only till very recently, have been in a state of ``broken symmetry'' which favored long term growth instead of contraction. The reason for this ``broken symmetry'' into a long term ``bull phase'' is the historical almost complete dominance by long only players in financial markets. Dangers connected to short trading are illustrated by the appearence of long term bearish trends seen in analytical results and by simulation results of an agent based market model. Recent short trade data of the Nasdaq Composite index show an increase in the short activity prior to or at the same time as d...

  7. Banks, financial markets and growth

    OpenAIRE

    Deidda, Luca Gabriele; Fattouh, Bassam

    2005-01-01

    We analyze the interaction between bank and market finance in a model where bankers gather information through monitoring and screening. We show that if a market characterized by a disclosure law is established such that entrepreneurs wishing to raise market finance can credibly disclose their sources of financing, this might undermine bankers' incentive to screen, even when screening is efficient. Correspondingly, other things being equal, the change from a bank-based system to one in which ...

  8. Career concerns in financial markets

    OpenAIRE

    Dasgupta, Amil; Prat, Andrea

    2004-01-01

    What are the equilibrium features of a market where a sizeable portion of traders face career concerns? This question is central to our understanding of Þnancial markets that are increasingly dominated by institutional investors. We construct a model of delegated portfolio management that captures key features of the US mutual fund industry and we embed it into an asset pricing set-up. Fund managers differ in their ability to understand market fundamentals, and in every period investors choo...

  9. Correlated Stochastic Dynamics in Financial Markets.

    OpenAIRE

    Perelló Palou, Josep

    2001-01-01

    Thesis investigates the dynamics of financial markets. Nowadays, this is one of the emergent fields in physics and requires a multidisciplinary approach. The thesis studies the first work made by the financial mathematicians and presents those in a more comprehensible form for a physicist. Option pricing is perhaps most complete problem. Until very recently, stochastic differential equations theory was solely applied to finance by mathematicians. The thesis reviews the theory of Black-Schole...

  10. Game complete analysis for financial markets stabilization

    OpenAIRE

    Carfì, David; Musolino, Francesco

    2011-01-01

    The aim of this paper is to propose a methodology to stabilize the financial markets using Game Theory and in particular the Complete Study of a Differentiable Game, introduced in the literature by David Carfì. Specifically, we will focus on two economic operators: a real economic subject and a financial institute (a bank, for example) with a big economic availability. For this purpose we will discuss about an interaction between the two above economic subjects: the Enterprise, our first pla...

  11. On Risks and Opportunities in Financial Markets

    OpenAIRE

    Lansdorp, S.D.

    2012-01-01

    Investing in financial securities inevitably involves risks on the one hand and opportunities on the other hand. This thesis bundles four different studies on risks and/or opportunities in financial markets. In one study, we examine the cross-sectional explanatory power of different risk-measures in pricing U.S. stocks and find that investors dislike downside risk. In the second study, we show that conventional short-term reversal strategies exhibit dynamic exposures to systematic risks. Elim...

  12. Financial innovation, market participation and asset prices

    OpenAIRE

    Calvet, Laurent; Gonzalez-eiras, Marti?n; Sodini, Paolo

    2001-01-01

    This paper investigates the pricing effects of financial innovation in an economy with endogenous participation and heterogeneous income risk. The introduction of non-redundant assets endogenously modifies the participation set, reduces the covariance between dividends and participants' consumption and thus leads to lower risk premia. In multisector economies, financial innovation spreads accross markets through the diversified portfolio of new entrants, and has rich effects on the cross-sect...

  13. Integrated Marketing Communications

    Science.gov (United States)

    Black, Jim

    2004-01-01

    Integration has become a cliche in enrollment management and student services circles. The term is used to describe everything from integrated marketing to seamless services. Often, it defines organizational structures, processes, student information systems, and even communities. In Robert Sevier's article in this issue of "College and…

  14. News Cohesiveness: an Indicator of Systemic Risk in Financial Markets

    CERN Document Server

    Piškorec, Matija; Novak, Petra Kralj; Mozeti?, Igor; Gr?ar, Miha; Vodenska, Irena; Šmuc, Tomislav

    2014-01-01

    Motivated by recent financial crises significant research efforts have been put into studying contagion effects and herding behaviour in financial markets. Much less has been said about influence of financial news on financial markets. We propose a novel measure of collective behaviour in financial news on the Web, News Cohesiveness Index (NCI), and show that it can be used as a systemic risk indicator. We evaluate the NCI on financial documents from large Web news sources on a daily basis from October 2011 to July 2013 and analyse the interplay between financial markets and financially related news. We hypothesized that strong cohesion in financial news reflects movements in the financial markets. Cohesiveness is more general and robust measure of systemic risk expressed in news, than measures based on simple occurrences of specific terms. Our results indicate that cohesiveness in the financial news is highly correlated with and driven by volatility on the financial markets.

  15. Financial methods in competitive electricity markets

    Science.gov (United States)

    Deng, Shijie

    The restructuring of electric power industry has become a global trend. As reforms to the electricity supply industry spread rapidly across countries and states, many political and economical issues arise as a result of people debating over which approach to adopt in restructuring the vertically integrated electricity industry. This dissertation addresses issues of transmission pricing, electricity spot price modeling, as well as risk management and asset valuation in a competitive electricity industry. A major concern in the restructuring of the electricity industries is the design of a transmission pricing scheme that will ensure open-access to the transmission networks. I propose a priority-pricing scheme for zonal access to the electric power grid that is uniform across all buses in each zone. The Independent System Operator (ISO) charges bulk power traders a per unit ex ante transmission access fee based on the expected option value of the generated power with respect to the random zonal spot prices. The zonal access fee depends on the injection zone and a self-selected strike price determining the scheduling priority of the transaction. Inter zonal transactions are charged (or credited) with an additional ex post congestion fee that equals the zonal spot price difference. The unit access fee entitles a bulk power trader to either physical injection of one unit of energy or a compensation payment that equals to the difference between the realized zonal spot price and the selected strike price. The ISO manages congestion so as to minimize net compensation payments and thus, curtailment probabilities corresponding to a particular strike price may vary by bus. The rest of the dissertation deals with the issues of modeling electricity spot prices, pricing electricity financial instruments and the corresponding risk management applications. Modeling the spot prices of electricity is important for the market participants who need to understand the risk factors in pricing electricity financial instruments such as electricity forwards, options and cross-commodity derivatives. It is also essential for the analysis of financial risk management, asset valuation, and project financing. In the setting of diffusion processes with multiple types of jumps, I examine three mean-reversion models for modeling the electricity spot prices. I impose some structure on the coefficients of the diffusion processes, which allows me to easily compute the prices of contingent claims (or, financial instruments) on electricity by Fourier methods. I derive the pricing formulas for various electricity derivatives and examine how the prices vary with different modeling assumptions. I demonstrate a couple of risk management applications of the electricity financial instruments. I also construct a real options approach to value electric power generation and transmission assets both with and without accounting for the operating characteristics of the assets. The implications of the mean-reversion jump-diffusion models on financial risk management and real asset valuation in competitive electricity markets are illustrated. With a discrete trinomial lattice modeling the underlying commodity prices, I estimate the effects of operational characteristics on the asset valuation by means of numerical examples that incorporate these aspects using stochastic dynamic programming. (Abstract shortened by UMI.)

  16. The financial crisis: A wake-up call for strengthening regional monitoring of financial markets and regional coordination of financial sector policies?

    OpenAIRE

    Winkler, Adalbert

    2010-01-01

    How much can regional monitoring of financial markets and coordination of financial sector policies contribute to preventing and mitigating financial crises? This paper reviews and compares the experiences of Europe and Asia, which have taken different routes and have achieved different levels of regional financial integration. The analysis suggests that the harmonization and coordination of regulation and supervision, with a strong focus on maturity and currency mismatch problems, would cons...

  17. Real and Financial Integration in East Asia

    OpenAIRE

    KIM, SOYOUNG; Lee, Jong-wha

    2008-01-01

    We examine the real and financial integration of East Asian economies, comparing the degree of real versus financial integration, the degree of global versus regional integration, and the extent of integration before versus after the 1997/98 financial crisis in East Asian economies. We analyze price and quantity measures of integration such as the size of intra- and inter-regional trade, cross-border financial assets, correlation of stock returns, and interest rate differentials. In addition,...

  18. Temporal Evolution of Financial Market Correlations

    CERN Document Server

    Fenn, Daniel J; Williams, Stacy; McDonald, Mark; Johnson, Neil F; Jones, Nick S

    2010-01-01

    We investigate financial market correlations using random matrix theory and principal component analysis. We use random matrix theory to demonstrate that correlation matrices of asset price changes contain structure that is incompatible with uncorrelated random price changes. We then identify the principal components of these correlation matrices and demonstrate that a small number of components accounts for a large proportion of the variability of the markets that we consider. We then characterize the time-evolving relationships between the different assets by investigating the correlations between the asset price time series and principal components. Using this approach, we uncover notable changes that occurred in financial markets and identify the assets that were significantly affected by these changes. We show in particular that there was an increase in the strength of the relationships between several different markets following the 2007--2008 credit and liquidity crisis.

  19. Temporal evolution of financial-market correlations

    Science.gov (United States)

    Fenn, Daniel J.; Porter, Mason A.; Williams, Stacy; McDonald, Mark; Johnson, Neil F.; Jones, Nick S.

    2011-08-01

    We investigate financial market correlations using random matrix theory and principal component analysis. We use random matrix theory to demonstrate that correlation matrices of asset price changes contain structure that is incompatible with uncorrelated random price changes. We then identify the principal components of these correlation matrices and demonstrate that a small number of components accounts for a large proportion of the variability of the markets that we consider. We characterize the time-evolving relationships between the different assets by investigating the correlations between the asset price time series and principal components. Using this approach, we uncover notable changes that occurred in financial markets and identify the assets that were significantly affected by these changes. We show in particular that there was an increase in the strength of the relationships between several different markets following the 2007-2008 credit and liquidity crisis.

  20. Essays on banking and financial markets

    OpenAIRE

    Hilberg, Bjo?rn

    2012-01-01

    In this thesis the behavior of banks in financial markets which banks frequently use to obtain short-term as well as long-term financing is studied. In the first chapter we incorporate an interbank market for collateralized lending among banks into a dynamic, stochastic, general equilibrium (DSGE) framework to analyze the impact of variations in the expected value of the collateral on the interbank lending volume. We find that a central bank which decides to lower the haircut on eligible coll...

  1. Three essays on financial markets and banking

    OpenAIRE

    Bertsch, Christoph

    2013-01-01

    This thesis comprises theoretical work on financial markets and banking. The first essay features a model of liquidity provision. I analyze how the severity of adverse selection problems in one market is affected if alternative sources of finance, which are not subject to adverse selection problems, become more easily available. In particular, I find that the adverse selection problem can be either mitigated or amplified, giving rise to new implications for equilibrium welfare, efficiency and...

  2. Information provision in financial markets

    OpenAIRE

    Bennouri, Moez; Clark, C.Robert; Robert, Jacques

    2010-01-01

    We set up a rational expectations model in which investors trade a risky asset based on a private signal they receive about the quality of the asset, and a public signal that represents a noisy aggregation of the private signals of all investors. Our model allows us to examine what happens to market performance (market depth, price efficiency, volume of trade, and expected welfare) when regulators can induce improved information provision in one of two ways. Regulations can be designed that e...

  3. Rethinking Consumer Protection Policy in Financial Markets

    Directory of Open Access Journals (Sweden)

    Liran Haim

    2013-10-01

    Full Text Available Normal 0 false false false EN-US JA HE /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin-top:0in; mso-para-margin-right:0in; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0in; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:Calibri; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-bidi-language:HE;} Financial products for consumers usually are characterized by complexity and incomprehensibility. Consumers typically find themselves defeated when attempting to control their financial destiny by understanding these products. This Article explores the economic and social factors that lead to this reality, analyzes its highly negative private and social ramifications and proposes an appropriate policy response. I argue that the current market structure creates a reality in which financial institutions are motivated to produce complex financial products for consumers in order to maximize their profits. This market structure, combined with inadequate policy, induces inefficiency by allocating the comprehension costs of financial products to the consumer.   My thesis is that a fundamental change in risk allocation policy will steer the market toward consumer comprehension of financial products and, therefore, will reduce private and social costs, increase consumer trust in financial institutions and promote social cohesion. I propose a new default liability rule under which financial institutions would be required to introduce internal procedures and mechanisms to ensure product comprehension among all of their consumers. To encourage maximum compliance with my proposal, I suggest implementing a reputation-based incentives method that would require every financial institution branch to publicly post a service quality ranking assigned by the regulator. I also support a trust-oriented licensing policy that would encourage the inclusion of new trustworthy financial institutions in the market and offer the implementation of a new regime for supervising financial product contract terms.                 

  4. Market microstructure and nonlinear dynamics keeping financial crisis in context

    CERN Document Server

    2014-01-01

    Examines the market microstructure dynamics to understand effects of financial downturn Provides information and analysis of new financial regulations Helps to define optimal investment strategies A definitive volume with contributions from leading experts on market microstructure

  5. Rough paths in idealized financial markets

    CERN Document Server

    Vovk, Vladimir

    2010-01-01

    This note is a review of known results about the paths of security prices in idealized financial markets that satisfy a version of the no-arbitrage condition. Without making any probabilistic assumptions, it is sometimes possible to characterize the roughness of the price paths. A few simple new results are also stated.

  6. Statistics of financial markets an introduction

    CERN Document Server

    Franke, Jürgen; Hafner, Christian Matthias

    2015-01-01

    Now in its fourth edition, this book offers a detailed yet concise introduction to the growing field of statistical applications in finance. The reader will learn the basic methods of evaluating option contracts, analyzing financial time series, selecting portfolios and managing risks based on realistic assumptions about market behavior. The focus is both on the fundamentals of mathematical finance and financial time series analysis, and on applications to given problems concerning financial markets, thus making the book the ideal basis for lectures, seminars and crash courses on the topic. For this new edition the book has been updated and extensively revised and now includes several new aspects, e.g. new chapters on long memory models, copulae and CDO valuation. Practical exercises with solutions have also been added. Both R and Matlab Code, together with the data, can be downloaded from the book’s product page and www.quantlet.de

  7. The statistical mechanics of financial markets

    CERN Document Server

    Voit, Johannes

    2003-01-01

    From the reviews of the first edition - "Provides an excellent introduction for physicists interested in the statistical properties of financial markets. Appropriately early in the book the basic financial terms such as shorts, limit orders, puts, calls, and other terms are clearly defined. Examples, often with graphs, augment the reader’s understanding of what may be a plethora of new terms and ideas… [This is] an excellent starting point for the physicist interested in the subject. Some of the book’s strongest features are its careful definitions, its detailed examples, and the connection it establishes to physical systems." PHYSICS TODAY "This book is excellent at illustrating the similarities of financial markets with other non-equilibrium physical systems. [...] In summary, a very good book that offers more than just qualitative comparisons of physics and finance." (www.quantnotes.com) This highly-praised introductory treatment describes parallels between statistical physics and finance - both thos...

  8. Open dynamic behaviour of financial markets

    Science.gov (United States)

    Gong, F. F.; Gong, F. X.; Gong, F. Y.

    2006-02-01

    Open dynamic behaviour of financial markets with internal interactions between agents and with external “fields” from other systems are investigated using the approach of Grossman and Stiglitz for inefficient markets, and Keynes for interference of the market using physics of finance (referred to hereafter as phynance). The simulation results indicate that the NYSE data analyzed in Plerou, V. et al., Nature 421, 130 (2003) can be fitted by an equation of order parameter ? and local deviation R of type: -(R+0.03) ?+ 0.6 ?3 + 0.02 = 0, which is shown to be in remarkable agreement with Plerou's data.

  9. News Cohesiveness: an Indicator of Systemic Risk in Financial Markets

    OpenAIRE

    Piškorec, Matija; Antulov-Fantulin, Nino; Novak, Petra Kralj; Mozeti?, Igor; Gr?ar, Miha; Vodenska, Irena; Šmuc, Tomislav

    2014-01-01

    Motivated by recent financial crises significant research efforts have been put into studying contagion effects and herding behaviour in financial markets. Much less has been said about influence of financial news on financial markets. We propose a novel measure of collective behaviour in financial news on the Web, News Cohesiveness Index (NCI), and show that it can be used as a systemic risk indicator. We evaluate the NCI on financial documents from large Web news sources o...

  10. Foreign bond markets and financial market development: International perspectives

    OpenAIRE

    Batten, Jonathan A.; Hogan, Warren P.; Szilagyi, Peter G.

    2009-01-01

    The domestic bond markets of the Asia and Pacific region have grown considerably since the Asian financial crisis of 1997, although they remain undeveloped relative to the region's weight in the world economy. This paper proposes that in order to encourage further development of these markets, regulators should make them more accessible to foreign borrowers. To that end we offer insights into the nature and mechanics of foreign bond issuance by investigating the key characteristics of 3,132 f...

  11. The role of accounting in financial markets

    Directory of Open Access Journals (Sweden)

    André Taue Saito

    2009-12-01

    Full Text Available This paper discusses the relation between accounting and financial markets by showingthat the relevance of this relation is clearly stated by the different interests of managers,investors, shareholders, creditors, and the government, among other stakeholders due to thefact that it gives them updated and reliable information about the financial condition ofthe company. The study is supported by three pillars: relation between finance and theaccounting theory, evolution of the role played by professionals in this area; and theimportance of the impact of the accounting information for the economic agents. Theresults suggest that stakeholders demand different financial information in order to assesscompany performance. This work contributes by highlighting that accounting must considerthe different needs of stakeholders and not solely financial metrics of profitability.

  12. Fractional integration and cointegration in US financial time series data

    OpenAIRE

    Caporale, Guglielmo Maria; Luis A. Gil-Alana

    2011-01-01

    This paper examines several US monthly financial time series data using fractional integration and cointegration techniques. The univariate analysis based on fractional integration aims to determine whether the series are I(1) (in which case markets might be efficient) or alternatively I(d) with d < 1, which implies mean reversion. The multivariate framework exploiting recent developments in fractional cointegration allows to investigate in greater depth the relationships between financial se...

  13. International market integration and market interdependence: evidence from China's stock market in the post-WTO accession period

    OpenAIRE

    He, Hongbo

    2012-01-01

    The Chinese government has implemented a series of financial liberalisation policies in stock market after China’s accession into the WTO in 2001. However, it remains somewhat unclear whether and to what extent China’s financial liberalisation has influenced its stock market in the post-WTO accession period. This thesis examines this issue from the perspectives of international market integration and market interdependence. This thesis mainly includes three empirical studies: 1) gauging t...

  14. Financial Crises in Emerging Markets

    Science.gov (United States)

    This project, from the National Bureau of Economic Research (NBER), studies "the causes of currency crises in emerging market countries as well as the policies that can reduce the risk of future crises and the adverse effects when such crises occur." Along with a extensive collection of downloadable NBER research papers on this subject, the site also lists upcoming conferences on emerging markets and reports on past conferences. Chapters from forthcoming books authored by NBER associates as well as other authors affiliated with the World Bank, the Federal Reserve System, and numerous universities are also available for download. Those just beginning to learn about this topic will want to read the list of questions that the project is attempting to answer.

  15. Study of Stylized Facts in Indian Financial Markets

    Directory of Open Access Journals (Sweden)

    Chitrakalpa Sen

    2011-01-01

    Full Text Available Stylized empirical facts emerging from the statistical analysis of price variations in various types of financial markets have attracted the attention of researchers since a long time. These are a set of properties, common across many instruments, markets and time periods that has been observed by independent studies. The objective of this research is to study stylized facts of financial time series by using data from the Indian financial market. BSE SENSEX is used as a proxy for the Indian market. Particular stress is given to the study of volatility using different models from the GARCH School including GARCH, EGARCH, TARCH, Asymmetric Component GARCH etc. The raw SENSEX daily return series are found to be non-normal having fat tails, show significant amount of asymmetry and exhibit strong volatility persistence as well as volatility clustering. This study also examines the possibility of long-term dependence (long memory in Absolute SENSEX daily return series. Rescaled range analysis, modified rescaled range analysis and GPH test are used for this purpose. The results indicate presence of long memory and also show the series to be fractionally integrated. The findings obtained are in broad agreement with the stylized facts observed in financial time series.

  16. Financial Symmetry and Moods in the Market

    Science.gov (United States)

    Savona, Roberto; Soumare, Maxence; Andersen, Jørgen Vitting

    2015-01-01

    This paper studies how certain speculative transitions in financial markets can be ascribed to a symmetry break that happens in the collective decision making. Investors are assumed to be bounded rational, using a limited set of information including past price history and expectation on future dividends. Investment strategies are dynamically changed based on realized returns within a game theoretical scheme with Nash equilibria. In such a setting, markets behave as complex systems whose payoff reflect an intrinsic financial symmetry that guarantees equilibrium in price dynamics (fundamentalist state) until the symmetry is broken leading to bubble or anti-bubble scenarios (speculative state). We model such two-phase transition in a micro-to-macro scheme through a Ginzburg-Landau-based power expansion leading to a market temperature parameter which modulates the state transitions in the market. Via simulations we prove that transitions in the market price dynamics can be phenomenologically explained by the number of traders, the number of strategies and amount of information used by agents, all included in our market temperature parameter. PMID:25856392

  17. Financial symmetry and moods in the market.

    Science.gov (United States)

    Savona, Roberto; Soumare, Maxence; Andersen, Jørgen Vitting

    2015-01-01

    This paper studies how certain speculative transitions in financial markets can be ascribed to a symmetry break that happens in the collective decision making. Investors are assumed to be bounded rational, using a limited set of information including past price history and expectation on future dividends. Investment strategies are dynamically changed based on realized returns within a game theoretical scheme with Nash equilibria. In such a setting, markets behave as complex systems whose payoff reflect an intrinsic financial symmetry that guarantees equilibrium in price dynamics (fundamentalist state) until the symmetry is broken leading to bubble or anti-bubble scenarios (speculative state). We model such two-phase transition in a micro-to-macro scheme through a Ginzburg-Landau-based power expansion leading to a market temperature parameter which modulates the state transitions in the market. Via simulations we prove that transitions in the market price dynamics can be phenomenologically explained by the number of traders, the number of strategies and amount of information used by agents, all included in our market temperature parameter. PMID:25856392

  18. Excess Demand Financial Market Model

    OpenAIRE

    Michael, Fredrick; Evans, John; Johnson, M. D.

    2002-01-01

    Recently we reported on an application of the Tsallis non-extensive statistics to the S&P500 stock index. There we argued that the statistics are applicable to a broad range of markets and exchanges where anamolous (super) diffusion and 'heavy' tails of the distribution are present, as they are in the S&P500. We have characterized the statistics of the underlying security as non-extensive, and now we seek to generalize to the non-extensive statistics the excess demand models...

  19. Agent-based models of financial markets

    International Nuclear Information System (INIS)

    This review deals with several microscopic ('agent-based') models of financial markets which have been studied by economists and physicists over the last decade: Kim-Markowitz, Levy-Levy-Solomon, Cont-Bouchaud, Solomon-Weisbuch, Lux-Marchesi, Donangelo-Sneppen and Solomon-Levy-Huang. After an overview of simulation approaches in financial economics, we first give a summary of the Donangelo-Sneppen model of monetary exchange and compare it with related models in economics literature. Our selective review then outlines the main ingredients of some influential early models of multi-agent dynamics in financial markets (Kim-Markowitz, Levy-Levy-Solomon). As will be seen, these contributions draw their inspiration from the complex appearance of investors' interactions in real-life markets. Their main aim is to reproduce (and, thereby, provide possible explanations) for the spectacular bubbles and crashes seen in certain historical episodes, but they lack (like almost all the work before 1998 or so) a perspective in terms of the universal statistical features of financial time series. In fact, awareness of a set of such regularities (power-law tails of the distribution of returns, temporal scaling of volatility) only gradually appeared over the nineties. With the more precise description of the formerly relatively vague characteristics (e.g. moving from the notion of fat tails to the more concrete one of a power law with index around three), it became clear that financial ma three), it became clear that financial market dynamics give rise to some kind of universal scaling law. Showing similarities with scaling laws for other systems with many interacting sub-units, an exploration of financial markets as multi-agent systems appeared to be a natural consequence. This topic has been pursued by quite a number of contributions appearing in both the physics and economics literature since the late nineties. From the wealth of different flavours of multi-agent models that have appeared up to now, we discuss the Cont-Bouchaud, Solomon-Levy-Huang and Lux-Marchesi models. Open research questions are discussed in our concluding section

  20. Adaptive Control Applied to Financial Market Data.

    Czech Academy of Sciences Publication Activity Database

    Šindelá?, Jan; Kárný, Miroslav

    Vol. I. Praha : Matfyz press, 2007, s. 1-6. ISBN 978-80-7378-023-4. [Week of Doctoral Students 2007. Praha (CZ), 05.06.2007-08.06.2007] R&D Projects: GA MŠk(CZ) 2C06001 Institutional research plan: CEZ:AV0Z10750506 Keywords : baysian statistics * finance * financial engineering * stochastic control Subject RIV: BB - Applied Statistics, Operational Research http://library.utia.cas.cz/separaty/2007/si/sindelar-adaptive control applied to financial market data.pdf

  1. International financial integration and crisis intensity

    OpenAIRE

    ROSE, Andrew K.

    2012-01-01

    This paper analyzes the causes of the 2008 - 2009 global financial crisis together with its manifestations, using a Multiple Indicator Multiple Cause (MIMIC) model. The analysis is conducted on a cross-section of 85 countries. It is found that more financially integrated countries do not seem to have suffered more during the most serious macroeconomic crisis in decades. This strengthens the case for international financial integration; if the costs of international financial integration were ...

  2. European Responses to Globalization and Financial Market integration: perceptions of economic and monetary union in Britain, France and Germany

    OpenAIRE

    Verdun, Amy

    2000-01-01

    Contributing to the literature on European integration, this book investigates the perceptions of political actors towards the creation of Economic and Monetary Union (EMU) in Europe. The research is largely based on personal interviews conducted with key informants in central banks, finance ministries, employers' organizations, and trade unions in Britain, France, and Germany. It examines why actors perceived EMU to serve or frustrate their interests, concluding that actors favored the EMUfo...

  3. Quarterly Review: International Banking and Financial Market Developments, June 2000

    Science.gov (United States)

    According to this issue of International Banking and Financial Market Development, equity markets, especially those trading technology stocks, marked the first several months of this year as "a period of heightened market volatility."

  4. On Financial Markets Based on Telegraph Processes

    CERN Document Server

    Ratanov, Nikita

    2007-01-01

    The paper develops a new class of financial market models. These models are based on generalized telegraph processes: Markov random flows with alternating velocities and jumps occurring when the velocities are switching. While such markets may admit an arbitrage opportunity, the model under consideration is arbitrage-free and complete if directions of jumps in stock prices are in a certain correspondence with their velocity and interest rate behaviour. An analog of the Black-Scholes fundamental differential equation is derived, but, in contrast with the Black-Scholes model, this equation is hyperbolic. Explicit formulas for prices of European options are obtained using perfect and quantile hedging.

  5. Federal reserve policies and financial market conditions during the crisis

    OpenAIRE

    Brave, Scott A.; Genay, Hesna

    2011-01-01

    During the recent financial crisis, the Federal Reserve implemented a series of extraordinary and unconventional policies to alleviate the impact of the crisis on financial markets and the economy. In this paper, we examine the effects of these policies on broad financial market conditions, explicitly taking into account that policy was endogenously determined in response to prevailing financial market and economic conditions. We find that the Fed was more likely to initiate or expand new pro...

  6. Agent-based models of financial markets

    Science.gov (United States)

    Samanidou, E.; Zschischang, E.; Stauffer, D.; Lux, T.

    2007-03-01

    This review deals with several microscopic ('agent-based') models of financial markets which have been studied by economists and physicists over the last decade: Kim-Markowitz, Levy-Levy-Solomon, Cont-Bouchaud, Solomon-Weisbuch, Lux-Marchesi, Donangelo-Sneppen and Solomon-Levy-Huang. After an overview of simulation approaches in financial economics, we first give a summary of the Donangelo-Sneppen model of monetary exchange and compare it with related models in economics literature. Our selective review then outlines the main ingredients of some influential early models of multi-agent dynamics in financial markets (Kim-Markowitz, Levy-Levy-Solomon). As will be seen, these contributions draw their inspiration from the complex appearance of investors' interactions in real-life markets. Their main aim is to reproduce (and, thereby, provide possible explanations) for the spectacular bubbles and crashes seen in certain historical episodes, but they lack (like almost all the work before 1998 or so) a perspective in terms of the universal statistical features of financial time series. In fact, awareness of a set of such regularities (power-law tails of the distribution of returns, temporal scaling of volatility) only gradually appeared over the nineties. With the more precise description of the formerly relatively vague characteristics (e.g. moving from the notion of fat tails to the more concrete one of a power law with index around three), it became clear that financial market dynamics give rise to some kind of universal scaling law. Showing similarities with scaling laws for other systems with many interacting sub-units, an exploration of financial markets as multi-agent systems appeared to be a natural consequence. This topic has been pursued by quite a number of contributions appearing in both the physics and economics literature since the late nineties. From the wealth of different flavours of multi-agent models that have appeared up to now, we discuss the Cont-Bouchaud, Solomon-Levy-Huang and Lux-Marchesi models. Open research questions are discussed in our concluding section.

  7. Network Topologies of Financial Market During the Global Financial Crisis

    CERN Document Server

    Nobi, Ashadun; Ha, Gyeong Gyun; Lee, Jae Woo

    2013-01-01

    We consider the effects of the global financial crisis through a local Korean financial market around the 2008 crisis. We analyze 185 individual stock prices belonging to the KOSPI (Korea Composite Stock Price Index), cosidering three time periods: the time before, during, and after the crisis. The complex networks generate from the fully connected correlation network by using the cross-correlation coefficients among the stock price time series of the companies. We generate the threshold networks (TN), the minimal spanning tees (MST), and the hierarchical network (HN) from the fully connected cross-correlation networks. By assigning a threshold value of the cross-correlation coefficient, we obtain the threshold networks. We observe the power law of the degree distribution in the limited range of the threshold. The degree distribution of the largest cluster in the threshold networks during the crisis is fatter than other periods. The clustering coefficient of the threshold networks follows the power law in the...

  8. Intermediaries, Financial Markets and Growth: Some more International Evidence

    OpenAIRE

    Afonso, Anto?nio; Ferreira, Raquel; Freitas, Edmund; No?brega, Celso; Pinheiro, Jose?

    2003-01-01

    We examine how financial institutions affect growth, taking into the account the organisational features of the financial system namely systems characterised by strong financial intermediaries and systems where the financial markets assume a more important role. We use a panel of 24 developed and developing countries over the 70s, 80s and 90s, to evaluate the existence of possible links between the type of preponderant financial system (bank-based or more capital markets based) and economic g...

  9. Patterns in financial markets: Dynamic time warping

    OpenAIRE

    Coelho, Mariana Sa?tiro

    2012-01-01

    This work project introduces the performance of the algorithm Dynamic Time Warping amidst trading strategies in the financial markets. The employed procedure allows the comparison between any two sequences of data with different time lengths. Different features for the method were implemented, although those did not improve its promptness or accuracy in the outcomes obtained. Two potential investment strategies are presented within this theme. One yielded satisfactory outcomes whilst the othe...

  10. Large-volatility dynamics in financial markets

    OpenAIRE

    X. F. Jiang; Zheng, B; Shen, J

    2010-01-01

    We investigate the large-volatility dynamics in financial markets, based on the minute-to-minute and daily data of the Chinese Indices and German DAX. The dynamic relaxation both before and after large volatilities is characterized by a power law, and the exponents $p_\\pm$ usually vary with the strength of the large volatilities. The large-volatility dynamics is time-reversal symmetric at the time scale in minutes, while asymmetric at the daily time scale. Careful analysis r...

  11. Introduction to convex optimization in financial markets

    OpenAIRE

    Pennanen, Teemu

    2012-01-01

    Convexity arises quite naturally in financial risk management. In risk preferences concerning random cash-flows, convexity corresponds to the fundamental diversification principle. Convexity is a basic property also of budget constraints both in classical linear models as well as in more realistic models with transaction costs and constraints. Moreover, modern securities markets are based on trading protocols that result in convex trading costs. The first part of this paper gives an intr...

  12. Correlation, hierarchies, and networks in financial markets

    OpenAIRE

    Tumminello, M; Lillo, F; Mantegna, R. N.

    2008-01-01

    We discuss some methods to quantitatively investigate the properties of correlation matrices. Correlation matrices play an important role in portfolio optimization and in several other quantitative descriptions of asset price dynamics in financial markets. Specifically, we discuss how to define and obtain hierarchical trees, correlation based trees and networks from a correlation matrix. The hierarchical clustering and other procedures performed on the correlation matrix to ...

  13. A Benchmark Model for Financial Markets

    OpenAIRE

    Platen, Eckhard

    2001-01-01

    This paper introduces a benchmark model for financial markets, which is based on the unique characterization of a benchmark portfolio that is chosen to be the growth optimal portfolio. The general structure of risk premia for asset prices and portfolios is derived. Furthermore, the short rate is obtained as an average of appreciation rates. The benchmark model is shown to be locally arbitrage free, however, it still permits some form of arbitrage. Finally, a subclass of arbitrage free conting...

  14. Financial market spillovers around the globe

    OpenAIRE

    Dimpfl, Thomas; Jung, Robert C.

    2011-01-01

    Financial market spillovers around the globeThis paper investigates the transmission of return and volatility spillovers around the globe. It draws on index futures of three representative indices, namely the Dow Jones Euro Stoxx 50, the S&P 500 and the Nikkei 225. Devolatised returns and realised volatilities are modeled separately using a structural vector autoregressive model, thereby accounting for the particular sequential time structure of the trading venues. Within this framework, we t...

  15. Rethinking Risk in International Financial Markets

    OpenAIRE

    Campbell-pownall, R. A. J.

    2001-01-01

    This thesis aims to address many of the issues raised concerning the appropriate definition and measurement of risk. An alternative approach to the estimation of risk, and the risk-return trade-off in international financial markets is investigated. Rather than focusing on the deviation of returns as the appropriate measure for risk, the more relevant negative domain when defining risk is focused upon. The notion of downside risk is applied as a more appropriate measure for risk. The focus is...

  16. Rational information choice in financial market equilibrium

    OpenAIRE

    Muendler, Marc-andreas

    2005-01-01

    Adding a stage of signal acquisition to the expected utility model shows that Bayesian updating results in a well defined law of demand for financial information when asset return distributions are conjugate priors to signals such as in the gamma-Poisson case. Signals have a positive marginal utility value that falls in their number if and only if investors are risk averse, asset markets large, and variance-mean ratios of asset returns high in fully revealing rational expectations equilibrium...

  17. Adaptive Control Applied to Financial Market Data.

    Czech Academy of Sciences Publication Activity Database

    Šindelá?, Jan; Kárný, Miroslav

    Strasbourg cedex : European Science Foundation, 2007, s. 1-6. [Advanced Mathematical Methods for Finance. Víde? (AT), 17.09.2007-22.09.2007] R&D Projects: GA MŠk(CZ) 2C06001 Institutional research plan: CEZ:AV0Z10750506 Keywords : bayesian statistics * portfolio optimization * finance * adaptive control Subject RIV: BB - Applied Statistics, Operational Research http://library.utia.cas.cz/separaty/2007/si/sindelar-adaptive control applied to financial market data.pdf

  18. Agent-based Models of Financial Markets

    CERN Document Server

    Samanidou, E; Stauffer, D; Lux, T

    2008-01-01

    This review deals with several microscopic (``agent-based'') models of financial markets which have been studied by economists and physicists over the last decade: Kim-Markowitz, Levy-Levy-Solomon, Cont-Bouchaud, Solomon-Weisbuch, Lux-Marchesi, Donangelo-Sneppen and Solomon-Levy-Huang. After an overview of simulation approaches in financial economics, we first give a summary of the Donangelo-Sneppen model of monetary exchange and compare it with related models in economics literature. Our selective review then outlines the main ingredients of some influential early models of multi-agent dynamics in financial markets (Kim-Markowitz, Levy-Levy-Solomon). As will be seen, these contributions draw their inspiration from the complex appearance of investors' interactions in real-life markets. Their main aim is to reproduce (and, thereby, provide possible explanations) for the spectacular bubbles and crashes seen in certain historical episodes, but they lack (like almost all the work before 1998 or so) a perspective ...

  19. Balance, growth and diversity of financial markets

    CERN Document Server

    Kardaras, Constantinos

    2008-01-01

    A financial market comprising of a certain number of distinct companies is considered, and the following statement is proved: either a specific agent will surely beat the whole market unconditionally in the long run, or (and this "or" is not exclusive) all the capital of the market will accumulate in one company. Thus, absence of any "free unbounded lunches relative to the total capital" opportunities lead to the most dramatic failure of diversity in the market: one company takes over all other until the end of time. In order to prove this, we introduce the notion of perfectly balanced markets, which is an equilibrium state in which the relative capitalization of each company is a martingale under the physical probability. Then, the weaker notion of balanced markets is discussed where the martingale property of the relative capitalizations holds only approximately, we show how these concepts relate to growth-optimality and efficiency of the market, as well as how we can infer a shadow interest rate that is im...

  20. The Implications of Investor Behaviour to Financial Markets

    OpenAIRE

    Majmin, Lisa Desiree

    2012-01-01

    Financial markets are subject to sentiment from within and beyond their nation's borders. Fund flows either flood markets with liquidity, or drain them to the point of asset fire sales. This typically occurs in accordance with investors' beliefs and risk preferences and ultimately renders markets unstable. This thesis serves to establish the implications of investor behaviour to financial markets. Chapter 2 proposes macro sentiment as a leading indicator for financial instability ...

  1. Financial integration and financial development in transition economies: What happens during financial crises?

    Directory of Open Access Journals (Sweden)

    Igor Masten

    2011-12-01

    Full Text Available

    This paper provides an empirical analysis of the role of financial development and financial integration in the growth dynamics of transition countries. We focus on the role of financial integration in determining the impact of financial development on growth, distinguishing “normal times” from periods of financial crises. In addition to confirming the significant positive effect on growth exerted by financial development and financial integration, our estimates show that a higher degree of financial openness tends to reduce the contractionary effect of financial crises, by cushioning the effect on the domestic supply of credit. Consequently, the high reliance on international capital flows by transition countries does not necessarily increase their financial fragility. This implies that financial protectionism is a self-defeating policy, at least for transition countries.

  2. International financial markets' influence on the welfare performance of alternative exchange rate regimes

    OpenAIRE

    Hoffmann, Mathias

    2008-01-01

    In this paper Friedmann (1953) and Mundell´s (1968) position favouring flexible over alternative exchange rate regimes is reassessed in the context of international financial market integration. In a new open economy macroeconomic framework the paper shows that financial market integration causes a monetary policy trade-off between stabilising domestic goods prices as opposed to stabilising the terms of trade. Therefore, the welfare ranking of different exchanges rate rules changes during th...

  3. Integration of European Bond Markets

    DEFF Research Database (Denmark)

    Christiansen, Charlotte

    2014-01-01

    I investigate the time variation in the integration of EU government bond markets. The integration is measured by the explanatory power of European factor portfolios for the individual bond markets for each year. The integration of the government bond markets is stronger for EMU than non-EMU members and stronger for old than new EU members. For EMU countries, the integration is weaker the lower the credit rating is. During the recent crisis periods, the integration is weaker, particularly for EMU countries.

  4. Financial integration and financial development in transition economies: What happens during financial crises?

    OpenAIRE

    Igor Masten; Fabrizio Coricelli; Arjana Brezigar-Masten

    2009-01-01

    This paper provides an empirical analysis of the role of financial development and financial integration in the growth dynamics of transition countries. We focus on the role of financial integration in determining the impact of financial development on growth, distinguishing “normal times” from periods of financial crises. In addition to confirming the significant positive effect on growth exerted by finan...

  5. The Financial Innovation and the Development of Capital Markets

    OpenAIRE

    OVIDIU STOICA

    2006-01-01

    In the last decades, the financial instruments developed very quickly, the world economy becoming “a paper economy”. The financial innovation transformed the financial system, offers for the financial intermediaries and investors’ new opportunities, but also brings new risks. The financial supervisory authorities passed from the regulation and deregulation process again to the re-regulation process in the intent to insure the stability in the financial markets and a development without ...

  6. Trend Switching Processes in Financial Markets

    Science.gov (United States)

    Preis, Tobias; Stanley, H. Eugene

    For an intriguing variety of switching processes in nature, the underlying complex system abruptly changes at a specific point from one state to another in a highly discontinuous fashion. Financial market fluctuations are characterized by many abrupt switchings creating increasing trends ("bubble formation") and decreasing trends ("bubble collapse"), on time scales ranging from macroscopic bubbles persisting for hundreds of days to microscopic bubbles persisting only for very short time scales. Our analysis is based on a German DAX Future data base containing 13,991,275 transactions recorded with a time resolution of 10- 2 s. For a parallel analysis, we use a data base of all S&P500 stocks providing 2,592,531 daily closing prices. We ask whether these ubiquitous switching processes have quantifiable features independent of the time horizon studied. We find striking scale-free behavior of the volatility after each switching occurs. We interpret our findings as being consistent with time-dependent collective behavior of financial market participants. We test the possible universality of our result by performing a parallel analysis of fluctuations in transaction volume and time intervals between trades. We show that these financial market switching processes have features similar to those present in phase transitions. We find that the well-known catastrophic bubbles that occur on large time scales - such as the most recent financial crisis - are no outliers but in fact single dramatic representatives caused by the formation of upward and downward trends on time scales varying over nine orders of magnitude from the very large down to the very small.

  7. Strategic Investment and Market Integration

    OpenAIRE

    Ganslandt, Mattias

    2001-01-01

    The competitive effect of international market integration in industries with imperfect competition is of great policy interest. This paper focuses on the link between monopolization and market segmentation. It presents a model of multi-market entry deterrence with or without market commitments. We derive sufficient conditions for entry deterrence with productive capacity in the multi-market game. It is shown that to deter entry in the multi-market game, the first-mover installs productions c...

  8. Herd behavior in financial markets: an experiment with financial market professionals

    OpenAIRE

    Marco Cipriani; Antonio Guarino

    2009-01-01

    We study herd behavior in a laboratory financial market with financial market professionals. An important novelty of the experimental design is the use of a strategy-like method. This allows us to detect herd behavior directly by observing subjects' decisions for all realizations of their private signal. In the paper, we compare two treatments: one in which the price adjusts to the order flow in such a way that herding should never occur, and one in which the presence of event uncertainty mak...

  9. Estimating WACC for Regulated Industries on Developing Financial Markets and in Times of Market Uncertainty

    OpenAIRE

    Igor Stubelj; Primož Dolenc; Mateja Jerman

    2014-01-01

    The paper deals with the estimation of weighted average cost of capital (WACC) for regulated industries in developing financial markets from the perspective of the current financial-economic crisis. In current financial market situation some evident changes have occurred: risk-free rates in solid and developed financial markets (e. g. USA, Germany) have fallen, but due to increased market volatility, the risk premiums have increased. The latter is especially evident in transition economies wh...

  10. Business Cycle Fluctuations and International Financial Integration

    OpenAIRE

    Kizys, Renatas; Pierdzioch, Christian

    2004-01-01

    Theoretical research on the determinants of business-cycle fluctuations implies that the degree of international financial integration can have important implications for the propagation of, e.g., macroeconomic policy shocks in an open economy. An important assumption underlying this research is that the degree of financial integration can be taken as exogenously given. Because recent empirical research has demonstrated that financial integration may change over time, we use data for the G7 c...

  11. Quantifying meta-correlations in financial markets

    Science.gov (United States)

    Kenett, Dror Y.; Preis, Tobias; Gur-Gershgoren, Gitit; Ben-Jacob, Eshel

    2012-08-01

    Financial markets are modular multi-level systems, in which the relationships between the individual components are not constant in time. Sudden changes in these relationships significantly affect the stability of the entire system, and vice versa. Our analysis is based on historical daily closing prices of the 30 components of the Dow Jones Industrial Average (DJIA) from March 15th, 1939 until December 31st, 2010. We quantify the correlation among these components by determining Pearson correlation coefficients, to investigate whether mean correlation of the entire portfolio can be used as a precursor for changes in the index return. To this end, we quantify the meta-correlation - the correlation of mean correlation and index return. We find that changes in index returns are significantly correlated with changes in mean correlation. Furthermore, we study the relationship between the index return and correlation volatility - the standard deviation of correlations for a given time interval. This parameter provides further evidence of the effect of the index on market correlations and their fluctuations. Our empirical findings provide new information and quantification of the index leverage effect, and have implications to risk management, portfolio optimization, and to the increased stability of financial markets.

  12. The Mechanism of Stock Market Integration: Evidence for the Taiwan and U.S. Stock Markets

    Directory of Open Access Journals (Sweden)

    Min-Hsien Chiang

    2004-01-01

    Full Text Available This study investigates sources of the comovement of the Taiwan and U.S. stock markets. The empirical evidence shows that both economic fundamentals and equity risk premiums can act as transmission mechanisms of both markets. In the meantime, the financial integration is much stronger than real economic integration. Moreover, the deregulation of foreign investments in Taiwan and the Southeast Asian financial crisis in 1997 did not alter the transmission mechanisms of real economic and equity risk premium factors."

  13. The Mechanism of Stock Market Integration: Evidence for the Taiwan and U.S. Stock Markets

    OpenAIRE

    Min-Hsien Chiang; Rung-Ho Lai; Hsiao-Ching Lee

    2004-01-01

    This study investigates sources of the comovement of the Taiwan and U.S. stock markets. The empirical evidence shows that both economic fundamentals and equity risk premiums can act as transmission mechanisms of both markets. In the meantime, the financial integration is much stronger than real economic integration. Moreover, the deregulation of foreign investments in Taiwan and the Southeast Asian financial crisis in 1997 did not alter the transmission mechanisms of real economic and equity ...

  14. Modelling share volume traded in financial markets

    CERN Document Server

    Gontis, V

    2001-01-01

    A simple analytically solvable model exhibiting a 1/f spectrum in an arbitrarily wide frequency range was recently proposed by Kaulakys and Meskauskas (KM). Signals consisting of a sequence of pulses show that inherent origin of the 1/f noise is Brownian fluctuations of the average intervent time between subsequent pulses of the pulse sequence. We generalize the KM model to reproduce the variety of self-affine time series exhibiting power spectral density S(f) scaled as power of their frequency f. Numerical calculations with the generalized discrete model (GDM) reproduce power spectral density S(f) scaled as power of frequency 1/f^b for various values of b, including b =1/2 for applications in financial markets. The particular applications of the model proposed are related with financial time series of share volume traded.

  15. Large-volatility dynamics in financial markets

    CERN Document Server

    Zheng, B

    2010-01-01

    We investigate the large-volatility dynamics in financial markets, based on the minutely and daily data of the Chinese Indices and German DAX. The dynamic relaxation both before and after large volatilities is characterized by a power law, and the exponents $p_\\pm$ usually vary with the strength of the large volatilities. The large-volatility dynamics is time-reversal symmetric at the minutely time scale, while asymmetric at the daily time scale. Careful analysis reveals that the time-reversal asymmetry is mainly induced by exogenous events. It is also the exogenous events which drive the financial dynamics to a non-stationary state. In general, the Chinese Indices and German DAX are in different universality classes. An interacting herding model without and with exogenous driving forces could qualitatively describe the large-volatility dynamics.

  16. The stability of financial market networks

    Science.gov (United States)

    Yan, Xin-Guo; Xie, Chi; Wang, Gang-Jin

    2014-08-01

    We investigate the stability of a financial market network by measuring its topological robustness, namely the ability of the network to resist structural or topological changes. The closing prices of 710 stocks in the Shanghai Stock Exchange (SSE) from 2005 to 2011 are chosen as the empirical data. We divide the period into three sub-periods: before, during, and after the US sub-prime crisis. By monitoring the size of the clusters which fall apart from the network after removing the nodes (i.e., the listed companies in the SSE), we find that: i) the SSE network is sensitive to the nodes' failure, which implies that the network is unstable. ii) the SSE network before the financial crisis has the strongest robustness against the intentional topological damage; iii) the hubs (i.e., highly connected nodes) connect with each other directly and play a vital important role in maintaining SSE network's stability.

  17. Eroding market stability by proliferation of financial instruments

    OpenAIRE

    Caccioli, Fabio; Marsili, Matteo; Vivo, Pierpaolo

    2009-01-01

    We contrast Arbitrage Pricing Theory (APT), the theoretical basis for the development of financial instruments, with a dynamical picture of an interacting market, in a simple setting. The proliferation of financial instruments apparently provides more means for risk diversification, making the market more efficient and complete. In the simple market of interacting traders discussed here, the proliferation of financial instruments erodes systemic stability and it drives the m...

  18. Incomplete Financial Markets and Jumps in Asset Prices

    DEFF Research Database (Denmark)

    Crès, Hervé; Markeprand, Tobias Ejnar

    2009-01-01

    A dynamic pure-exchange general equilibrium model with uncertainty is studied. Fundamentals are supposed to depend continuously on states of nature. It is shown that: 1. if financial markets are complete, then asset prices vary continuously with states of nature, and; 2. if financial markets are incomplete, jumps in asset prices may be unavoidable. Consequently incomplete financial markets may increase volatility in asset prices significantly.

  19. Dynamic Interrelations Between the Key Financial Market Segments of Ukraine ???????????? ??????????? ???????? ????????? ??????????? ????? ???????

    Directory of Open Access Journals (Sweden)

    Lunyakov Oleg V.

    2012-09-01

    Full Text Available The key characteristics of the dynamic relationship between the credit market, securities market and foreign exchange market in the emerging of financial cycle in Ukraine have outlined. It is shown that the strong interrelations between the concerned segments of the financial market there strengthen in the expansion phase of credit and boom on asset prices. At the same time the financial intermediaries change the perception of risk on every phase of the cycle, and in the general, euphoria leads to excessive accumulation of systemic financial risk.? ?????? ???????? ??????????? ??????????? ???????????? ???????????? ????? ????????? ??????, ?????? ?????? ????? ? ???????? ?????? ? ???????? ???????????? ??????????? ????? ? ???????. ????????, ??? ?????? ??????????? ????? ????????? ?????????? ??????????? ????? ??????????? ?? ???? ?????????? ??????? ? ????? ??? ?? ??????. ??? ???? ?? ?????? ???? ??????????? ????? ? ?????????? ??????????? ???????? ?????????? ?????, ??? ? ???????? ???????? ??????? ????? ? ??????????? ?????????? ????????? ?????????? ??????.

  20. BASIC TRENDS OF THE GLOBAL FINANCIAL MARKET DEVELOPMENT

    Directory of Open Access Journals (Sweden)

    Ivan LUCHIAN

    2013-01-01

    Full Text Available The world (global financial market is designated for the exchange of capital and credit, including currency and foreign exchange markets. Ensuring freedom of movement of capital internationally, it is an important condition for the functioning of the world economy. The world (global financial market is a system of relations of supply and demand on the financial capital, which operates in the international arena as the purchase and payment facilities, credit, investment resources. This article is concerned to demonstrate main directions and tendencies of development of global financial market.

  1. The realism of assumptions does matter: Why Keynes-Minsky theory must replace efficient market theory as the guide to financial regulation policy

    OpenAIRE

    Crotty, James

    2011-01-01

    The radical deregulation of financial markets after the 1970s was a precondition for the explosion in size, complexity, volatility and degree of global integration of financial markets in the past three decades. It therefore contributed to the severity and breadth of the recent global financial crisis. It is not likely that deregulation would have been so extreme and the crisis so threatening had most financial economists adopted Keynes-Minsky financial market theory, which concludes that unr...

  2. CHALLENGES OF FINANCIAL AUDIT - THE IMPACT OF INTRODUCING UNIQUE REGULATION OF FINANCIAL MARKETS IN ROMANIA

    Directory of Open Access Journals (Sweden)

    Mitica Pepi

    2013-07-01

    Full Text Available The theme of our research is related to the new type of relationship between financial audits (statutory and unique regulation of financial markets in Romania.The Romanian authorities have decided as from 2013 regulation of financial markets, capital market, insurance market and private pensions market to achieve by a single entity, this situation will also lead to a number of challenges in the relationship between the auditor and the new regulatory regime. The main elements of our study are: the relationship between the audit committee and regulatory authority; quality of financial reporting for financial market entities. The auditor plays an important role in financial markets because it certifies the financial statements in accordance with European Union practice . It is also interesting to note potential interference that can occur in single regulation between compliance audit and financial stability and return on investment between performance audit and financial markets.In this case, financial regulation can coexist with compliance audit. EU legislation recommends that the auditor discuss with the audit committee the quality and acceptability of the financial reporting process.This recommendation is what should constitute a possible consensus to be highly unlikely between audit committees would align auditors in financial reporting disputes with management financial entities. In this regard, auditors should identify the factors we consider important in determining the quality of financial reporting. .We conducted this research in an effort to identify the possible divergence between the type of regulations that can emit single regulatory authority and the audit process. New regulator will operate on two levels, issue general regulations apply to all three categories of financial markets, capital market, insurance market and private pensions market, but in the same time and in greater extent will issue specific regulations of each market in part. We want to identify the extent to which audit the entities in these markets will be influenced by these changes. Interest is our largest to determine whether the audit can identify any changes in the new regulatory requirements on quality of financial statements.Our research results show the high importance of the audit committee in ensuring the high quality of financial reporting in the financial markets and seeks to identify potential points of conflict between audit conservatism and unique market regulation.

  3. Adoption of the Objectives of the Monetary and Economic Union and European Financial Integration

    Directory of Open Access Journals (Sweden)

    M?D?LINA R?DOI

    2014-05-01

    Full Text Available The European concerns, with old traditions in forming multinational financial markets, developed in the integration of the financial markets and of the European banking systems which allowed the investors from any European country to follow the orders on the best market, through the best beneficiary, benefitting from the most effective financial-banking services. This market offers sophisticated and modern financial tools, which cope with the needs of the invertors, portfolio managers, transnational companies and traders, having an impact over the balanced economic development of the European countries and unemployment reduction.

  4. Estimating and Forecasting Volatility of Financial Markets Using Asymmetric GARCH Models: An Application on Turkish Financial Markets

    OpenAIRE

    Rasim Ilker Gokbulut; Mehmet Pekkaya

    2014-01-01

    Volatility in financial markets, particularly stock exchange markets, is an important issue that concerns theorists and practitioners. Over the past 30 years, there has been a vast literature for modeling the temporal dependencies in volatility of financial markets. Also, more recently researches have been examining the asymmetry and non-linear properties in variance of financial assets, rather than the conditional mean. In this study, a comprehensive empirical analysis of the mean return and...

  5. Essays on financial integration and institutional quality

    OpenAIRE

    Dadasov, Ramin Rufat Oglu

    2012-01-01

    This thesis comprises four individual essays and deals with the question of how international financial integration may influence quality of economic institutions in developing countries. While the first three essays provide theoretical models of different channels, through which financial integration may affect institutional quality, the last work is an empirical investigation into the influence of liberalization of the financial account on institutional development. The first essay ?Financ...

  6. Correlation of financial markets in times of crisis

    Science.gov (United States)

    Sandoval, Leonidas; Franca, Italo De Paula

    2012-01-01

    Using the eigenvalues and eigenvectors of correlations matrices of some of the main financial market indices in the world, we show that high volatility of markets is directly linked with strong correlations between them. This means that markets tend to behave as one during great crashes. In order to do so, we investigate financial market crises that occurred in the years 1987 (Black Monday), 1998 (Russian crisis), 2001 (Burst of the dot-com bubble and September 11), and 2008 (Subprime Mortgage Crisis), which mark some of the largest downturns of financial markets in the last three decades.

  7. Shocks in financial markets, price expectation, and damped harmonic oscillators

    OpenAIRE

    Junior, Leonidas Sandoval; Franca, Italo Paula

    2011-01-01

    Using a modified damped harmonic oscillator model equivalent to a model of market dynamics with price expectations, we analyze the reaction of financial markets to shocks. In order to do this, we gather data from indices of a variety of financial markets for the 1987 Black Monday, the Russian crisis of 1998, the crash after September 11th (2001), and the recent downturn of markets due to the subprime mortgage crisis in the USA (2008). Analyzing those data we were able to est...

  8. Financial markets, banking and the design of monetary policy: A stable baseline scenario

    OpenAIRE

    Florian Hartmann; Peter Flaschel

    2014-01-01

    A baseline integration of commercial banks into the disequilibrium framework with behavioral traders of Charpe et al. (2011, 2012) is presented. At the core of the analysis is the impact the banking sector exerts on the interaction of real and financial markets. Potentially destabilizing feedback channels in the presence of imperfect macroeconomic portfolio adjustment and heterogeneous expectations are investigated. Given the possible financial market instability, various policy instruments h...

  9. Precautionary credit lines: A means to contain contagion in financial markets?

    OpenAIRE

    Golder, Stefan M.

    1999-01-01

    The liberalization of capital accounts and the integration of financial markets in recent years have helped to spur growth in many emerging markets and have allowed global investors to diversify risks internationally. Furthermore, increased capita! mobility has helped to tame governments in their fiscal and monetary policies. Nevertheless, the Asian currency and financial crisis and its aftermath have revealed structural problems on the national as well as on the international level and have ...

  10. Measuring the Impact of Financial Crisis on International Markets: An Application of the Financial Stress Index

    OpenAIRE

    Christopoulos, Apostolos G.; John Mylonakis; Christos Koromilas

    2011-01-01

    The scope of paper is to examine whether the recent financial crisis has had any impact on international capital markets and more precisely on the 4 primary international stock markets of England, France, Japan, the United States and Greece. The research is based on the use of the Financial Stress Index (FSI) from July 2005 until December 2008 and August 2009. Research results showed that the recent financial crisis has had a negative impact on all examined markets, with the Tokyo stock excha...

  11. Market Selection of Financial Trading Strategies: Global Stability

    OpenAIRE

    Evstigneev, I. V.; Hens, Thorsten; Schenk-hoppe?, Klaus Reiner

    2001-01-01

    In this paper we analyze the long-run dynamics of the market selec-tion process among simple trading strategies in an incomplete asset market with endogenous prices. We identify a unique surviving finan-cial trading strategy. Investors following this strategy asymptotically gather total market wealth. This result generalizes findings by Blume and Easley (1992) to any complete or incomplete asset market.

  12. Financial market breakdown due to strategy constraints and information asymmetry

    OpenAIRE

    Hu, Jie

    1995-01-01

    This paper demonstrates the relevance of strategy constraints on market makers to the possibility of financial market breakdown when there is information asymmetry between market makers and investors; both the case of competitive market makers and the case of a monopolistic market marker are included. Specifically, the paper discusses three types of strategy constraints on the market makers and their implications for the equilibria. The results call attention to the need for more precise spec...

  13. A marketing perspective on the impact of financial and non-financial measures on shareholder value

    Scientific Electronic Library Online (English)

    Nic S, Terblanche; Charlene, Gerber; Pierre, Erasmus; Delia, Schmidt.

    Full Text Available The pressure for financial accountability contributed to widespread concern about the function of marketing within the company. Consequently, marketers have become preoccupied with measuring the performance of marketing activity. Diverse financial and non-financial methods have been developed to pro [...] vide evidence of how marketing activity impacts on the bottom line. This article proposes an approach whereby financial and non-financial performance measures are combined to measure the contribution of marketing to sales. Secondary data from two retail brands within the same industry were analysed whereby actual accounting data were adjusted to examine the link between marketing expenditures, specifically with regard to the 4Ps (typical non-financial measures), and sales. The results of the time series regression showed that the nature of the relationship between marketing expenditures and sales is dependent largely on the product characteristics. The link between marketing and sales depicted serves as a starting point from which to build a more robust measurement tool incorporating financial and non-financial marketing performance measures that will serve to justify investment in the marketing of a brand.

  14. Financial development and corporate growth in the EU single market.

    Czech Academy of Sciences Publication Activity Database

    Bena, J.; Jurajda, Št?pán

    Split : University of Split, Faculty of Economics, 2009, s. 1-24. [International Conference /8./ "Challenges of Europe: Financial Crisis and Climate Change". Split (HR), 21.05.2009-23.05.2009] Institutional research plan: CEZ:AV0Z70850503 Keywords : financial development * corporate growth * access to financial markets Subject RIV: AH - Economics

  15. Diversifying in the Integrated Markets of ASEAN+3 : A Quantitative Study of Stock Market Correlation

    OpenAIRE

    Stark, Caroline; Nordell, Emelie

    2010-01-01

    There is evidence that globalization, economic assimilation and integration among countries and their financial markets have increased correlation among stock markets and the correlation may in turn impact investors’ allocation of their assets and economic policies. We have conducted a quantitative study with daily stock index quotes for the period January 2000 and December 2009 in order to measure the eventual correlation between the markets of ASEAN+3. This economic integration consists o...

  16. Geometry of Financial Markets -- Towards Information Theory Model of Markets

    CERN Document Server

    Piotrowski, E W; Piotrowski, Edward W.; Sladkowski, Jan

    2006-01-01

    Most of parameters used to describe states and dynamics of financial market depend on proportions of the appropriate variables rather than on their actual values. Therefore, projective geometry seems to be the correct language to describe the theater of financial activities. We suppose that the object of interest of agents, called here baskets, form a vector space over the reals. A portfolio is defined as an equivalence class of baskets containing assets in the same proportions. Therefore portfolios form a projective space. Cross ratios, being invariants of projective maps, form key structures in the proposed model. Quotation with respect to an asset X (i.e. in units of X) are given by linear maps. Among various types of metrics that have financial interpretation, the min-max metrics on the space of quotations can be introduced. This metrics has an interesting interpretation in terms of rates of return. It can be generalized so that to incorporate a new numerical parameter (called temperature) that describes ...

  17. Bank competition and international financial integration: Evidence using a new index

    OpenAIRE

    Pasricha, Gurnain

    2010-01-01

    In the debate on the benefits and costs of international financial integration recent literature has emphasized thresholds in the development of domestic markets as preconditions to benefitting from international integration. This paper offers an alternative view - that of development of competition in domestic markets as an aide to de-facto openness. Lack of competition in domestic financial systems may prevent countries from reaping the benefits of international integration simply because t...

  18. Managing financial integration and capital mobility: Policy lessons from the past two decades

    OpenAIRE

    Aizenman, Joshua; Pinto, Brian

    2011-01-01

    The accumulated experience of emerging markets over the last two decades has laid bare the tenuous links between external financial integration and faster growth on the one hand and the proclivity of such integration to fuel costly crises on the other. These crises have not gone without learning. During the 1990s and 2000s, emerging markets converged to the middle ground of the policy space defined by the macroeconomic trilemma, with growing financial integration, controlled exchange rate fle...

  19. Quantifying the Relationship Between Financial News and the Stock Market

    OpenAIRE

    Alanyali, Merve; Moat, Helen Susannah; Preis, Tobias

    2013-01-01

    The complex behavior of financial markets emerges from decisions made by many traders. Here, we exploit a large corpus of daily print issues of the Financial Times from 2nd January 2007 until 31st December 2012 to quantify the relationship between decisions taken in financial markets and developments in financial news. We find a positive correlation between the daily number of mentions of a company in the Financial Times and the daily transaction volume of a company's stock both on the day be...

  20. Marketing investment courage and financial performance - A study of profiles and financial implications among Finnish firms

    OpenAIRE

    Karvonen, Vilma

    2010-01-01

    The purpose of this study is to research what marketing investment courage is and how it can impact firms’ financial performance. The literature review provides a theoretical overview of marketing investments, their characteristics and targets, investment courage and the routes through which marketing investment courage can impact firms’ financial performance through actual investments. The empirical study investigates the current state of marketing investment courage among Finnish compan...

  1. Hierarchical structure of stock price fluctuations in financial markets

    International Nuclear Information System (INIS)

    The financial market and turbulence have been broadly compared on account of the same quantitative methods and several common stylized facts they share. In this paper, the She–Leveque (SL) hierarchy, proposed to explain the anomalous scaling exponents deviating from Kolmogorov monofractal scaling of the velocity fluctuation in fluid turbulence, is applied to study and quantify the hierarchical structure of stock price fluctuations in financial markets. We therefore observed certain interesting results: (i) the hierarchical structure related to multifractal scaling generally presents in all the stock price fluctuations we investigated. (ii) The quantitatively statistical parameters that describe SL hierarchy are different between developed financial markets and emerging ones, distinctively. (iii) For the high-frequency stock price fluctuation, the hierarchical structure varies with different time periods. All these results provide a novel analogy in turbulence and financial market dynamics and an insight to deeply understand multifractality in financial markets. (paper)

  2. Practical volatility and correlation modeling for financial market risk management

    OpenAIRE

    Andersen, Torben G.; Bollerslev, Tim; Christoffersen, Peter F.; Diebold, Francis X.

    2005-01-01

    What do academics have to offer market risk management practitioners in financial institutions? Current industry practice largely follows one of two extremely restrictive approaches: historical simulation or RiskMetrics. In contrast, we favor flexible methods based on recent developments in financial econometrics, which are likely to produce more accurate assessments of market risk. Clearly, the demands of real-world risk management in financial institutions ? in particular, real-time risk t...

  3. Financial Markets Interactions between Economic Theory and Practice

    OpenAIRE

    Nicolau, Mihaela

    2010-01-01

    During the last decades many financial analysts, either theorists or practitioners, have dedicated their studies to the interactions between different financial sectors. The results of these researches confirm that commodities, bonds and stock markets are closely related, therefore a thorough analysis of one should includes considerations of the other two. The aim of this article is to demonstrate that, even if from the theoretical point of view financial markets present typical and strong co...

  4. The peculiarities of the financial market development in Ukraine

    OpenAIRE

    Shkolnyk, Inna; Kozmenko, Olha

    2008-01-01

    This paper addresses the condition of savings and investments enviroment in the world economy and in particular regions. As a result of financial globalization there were formed promissory economies in a number of countries including the economically developed ones. It is necessary to investigate peculiarities of the financial market development in Ukraine comparing it to the countries with the same conditions of market growth, particularly, it is useful to compare the Ukrainian financial mar...

  5. The financial crisis of 2008 in fixed income markets

    OpenAIRE

    Dwyer, Gerald P.; Tkac, Paula

    2009-01-01

    We explore how a relatively small amount of heterogeneous securities created turmoil in financial markets in much of the world in 2007 and 2008. The drivers of the financial turmoil and the financial crisis of 2008 were heterogeneous securities that were hard to value. These securities created concerns about counterparty risk and ultimately created substantial uncertainty. The problems spread in ways that were hard to see in advance. The run on prime money market funds in September 2008 and t...

  6. A generalized spin model of financial markets

    CERN Document Server

    Chowdhury, D; Chowdhury, Debashish; Stauffer, Dietrich

    1999-01-01

    We reformulate the Cont-Bouchaud model of financial markets in terms of classical "super-spins" where the spin value is a measure of the number of individual traders represented by a portfolio manager of an investment agency. We then extend this simplified model by switching on interactions among the super-spins to model the tendency of agencies getting influenced by the opinion of other managers. We also introduce a fictitious temperature (to model other random influences), and time-dependent local fields to model slowly changing optimistic or pessimistic bias of traders. We point out close similarities between the price variations in our model with $N$ super-spins and total displacements in an $N$-step Levy flight. We demonstrate the phenomena of natural and artificially created bubbles and subsequent crashes as well as the occurrence of "fat tails" in the distributions of stock price variations.

  7. When Can Social Media Lead Financial Markets?

    Science.gov (United States)

    Zheludev, Ilya; Smith, Robert; Aste, Tomaso

    2014-02-01

    Social media analytics is showing promise for the prediction of financial markets. However, the true value of such data for trading is unclear due to a lack of consensus on which instruments can be predicted and how. Current approaches are based on the evaluation of message volumes and are typically assessed via retrospective (ex-post facto) evaluation of trading strategy returns. In this paper, we present instead a sentiment analysis methodology to quantify and statistically validate which assets could qualify for trading from social media analytics in an ex-ante configuration. We use sentiment analysis techniques and Information Theory measures to demonstrate that social media message sentiment can contain statistically-significant ex-ante information on the future prices of the S&P500 index and a limited set of stocks, in excess of what is achievable using solely message volumes.

  8. Editorial: AABFJ Volume 8, Issue 4 Special Issue in Financial Markets and Financial Instruments

    Directory of Open Access Journals (Sweden)

    Ciorstan Smark

    2014-10-01

    Full Text Available Financial planning in Australia is in a time of change and challenge. Educational standards and regulation are in flux. There is a strong need to move financial planning into a more esteemed professional position as financial planners are not always considered the safest source of advice for people in Asia and the pacific rim when it comes to investing their much needed retirement funds. This Special Issue on Financial Planning and Financial Instruments brings together articles from financial planning, banking, financial markets and retirement policy.

  9. Identifying States of a Financial Market

    CERN Document Server

    Münnix, Michael C; Schäfer, Rudi; Seligman, Francois Leyvraz Thomas H; Guhr, Thomas; Stanley, H E

    2012-01-01

    The understanding of complex systems has become a central issue because complex systems exist in a wide range of scientific disciplines. Time series are typical experimental results we have about complex systems. In the analysis of such time series, stationary situations have been extensively studied and correlations have been found to be a very powerful tool. Yet most natural processes are non-stationary. In particular, in times of crisis, accident or trouble, stationarity is lost. As examples we may think of financial markets, biological systems, reactors or the weather. In non-stationary situations analysis becomes very difficult and noise is a severe problem. Following a natural urge to search for order in the system, we endeavor to define states through which systems pass and in which they remain for short times. Success in this respect would allow to get a better understanding of the system and might even lead to methods for controlling the system in more efficient ways. We here concentrate on financial...

  10. BANKS AND FINANCIAL INTERMEDIATIONS’ GLOBAL ROLE OF IN MARKETS’ GENERAL EQUILIBRIUM

    Directory of Open Access Journals (Sweden)

    Madalina-Antoaneta RADOI

    2010-12-01

    Full Text Available Due to globalization factors, financial intermediations still create many problems to national economies as far as the markets’ general equilibrium is concerned. Although the world is divided into more than 200 nations with unequal power, there is less than half a dozen key currencies to go round to facilitate the international financial transactions. Considering that the combinations between the flexible exchange rates and the free circulation of capital and information have made the financial system be strongly interconnected internationally, however, some national economies preserve financial circuits that are not indirectly integrated in the world system.These aspects have led to the analysis of the relations between the financial intermediaries on domestic and foreign markets, the banks and financial intermediations’ global role in national economies and internationally.

  11. Banks, financial markets, and international consumption risk sharing

    OpenAIRE

    Leibrecht, Markus; Scharler, Johann

    2009-01-01

    In this paper we empirically explore how characteristics of the domestic financial system influence the international allocation of consumption risk using a sample of OECD countries. Our results show that the extent of risk sharing achieved does not depend on the overall development of the domestic financial system per se. Rather, it depends on how the financial system is organized. Specifically, we find that countries characterized by developed financial markets are less exposed to idiosyncr...

  12. The consequence of financial crises in Albanian insurance market

    OpenAIRE

    Edmira Cakrani; Filloreta Madani

    2010-01-01

    The Albanian insurance market is not influenced considerably from current financial crisis. Early yet phase of development with the very low penetration level explains steadiness of insurance market to exposure influence of global financial crisis. Another factor contributed to stability of insurance market is focusing insurance businesses more on the compulsory insurance segment which is not fully liberalized. Conservative investment policies of Albanian insurers also contributed to avoiding...

  13. The Adoption of Digital Marketing in Financial Services under Crisis

    Directory of Open Access Journals (Sweden)

    Daj A.

    2009-12-01

    Full Text Available Led by social media, online search, consumer generated content, virtual communities, and considering the increased focus on digital technologies, the longer-term prospects for digital marketing and the global online medium continue to be bright. Given the recent decline of the financial markets and the economic fallout, financial institutions have to implement new digital marketing techniques both for cost optimization and for dealing with the crisis of confidence.

  14. The Adoption of Digital Marketing in Financial Services under Crisis

    OpenAIRE

    Daj A.; Chirca A.

    2009-01-01

    Led by social media, online search, consumer generated content, virtual communities, and considering the increased focus on digital technologies, the longer-term prospects for digital marketing and the global online medium continue to be bright. Given the recent decline of the financial markets and the economic fallout, financial institutions have to implement new digital marketing techniques both for cost optimization and for dealing with the crisis of confidence.

  15. Sovereign wealth funds in the globalization of financial markets

    Directory of Open Access Journals (Sweden)

    Djordje Cuzovic

    2012-05-01

    Full Text Available This paper analyses the investment funds with special emphasis on Sovereign Wealth Funds (SWFs, as new participants in the financial market. Considering that financial markets are one of the main carriers of globalization, our goal is to investigate development and the role of these investment funds with reference to contemporary theory and progressive practice of the market of developed countries. Although SWFs emerged in practice more than fifty years ago, they are not sufficiently explored in the theory.

  16. Financial market implications of the Federal debt paydown

    OpenAIRE

    Fleming, Michael J.

    2001-01-01

    U.S. Treasury securities fill several crucial roles in financial markets: they are a risk-free benchmark, a reference and hedging benchmark, and a reserve asset to the Federal Reserve and other financial institutions. Many of the features that make the Treasury market an attractive benchmark and reserve asset are likely to be adversely affected by the paydown of the federal debt, and recent developments suggest that this may be happening already. Market participants are responding by moving a...

  17. Financial Derivatives Market for Grid Computing

    CERN Document Server

    Aubert, David; Lindset, Snorre; Huuse, Henning

    2007-01-01

    This Master thesis studies the feasibility and properties of a financial derivatives market on Grid computing, a service for sharing computing resources over a network such as the Internet. For the European Organization for Nuclear Research (CERN) to perform research with the world's largest and most complex machine, the Large Hadron Collider (LHC), Grid computing was developed to handle the information created. In accordance with the mandate of CERN Technology Transfer (TT) group, this thesis is a part of CERN's dissemination of the Grid technology. The thesis gives a brief overview of the use of the Grid technology and where it is heading. IT trend analysts and large-scale IT vendors see this technology as key in transforming the world of IT. They predict that in a matter of years, IT will be bought as a service, instead of a good. Commoditization of IT, delivered as a service, is a paradigm shift that will have a broad impact on all parts of the IT market, as well as on the society as a whole. Political, e...

  18. INTEGRATION OF FINANCIAL AND NON-FINANCIAL REPORTS UNDER MANAGEMENT CONDITIONS

    Directory of Open Access Journals (Sweden)

    Mihail PRODANCIUK

    2013-02-01

    Full Text Available The paper presents the assessment of the development of integrated reports overseas and describes the stages of establishment of such a system. The form and structure of corporate reporting is developed, and is differentiated, reflecting the integrated information regarding aspects of financial and non-financial activity: statistical indicators, economical, financial and social, company strategy, future cash flows, the value of human capital, and the stability of the business model. Goals and objectives of corporate reports are determined, which consist in providing reliable information on all company activities in accordance with strategic objectives and management models. The structure of the integrated report takes into consideration the requirements of the management system, of the legislative bodies and other institutions, and is considered the basis for the development of branch reports models. Its structure will depend on the size of the legal-organizational form and the social value of the company in society. The author of the article suggests three approaches to achieving corporate reports in the section of social responsibility indicators; where each company chooses the form of reporting in accordance with the available categories that depend on the size and strategic policy. The suggested integrated reports are instrumental to the observance of the stable development doctrines and will become a tool that, in the near future, will ensure the company an effective interaction with financial markets and the stakeholders of market relations.

  19. Strategic Opportunities Afforded by Integrated Marketing

    Directory of Open Access Journals (Sweden)

    CONSTANTIN SASU

    2006-01-01

    Full Text Available This paper explores integrated marketing, examines how integrated marketing differs from traditional definitions of marketing, and offers insights into what kinds of institutions might most benefit from integrated marketing. It closes with a brief outline of the components of an integrated marketing plan.

  20. Strategic Opportunities Afforded by Integrated Marketing

    OpenAIRE

    CONSTANTIN SASU

    2006-01-01

    This paper explores integrated marketing, examines how integrated marketing differs from traditional definitions of marketing, and offers insights into what kinds of institutions might most benefit from integrated marketing. It closes with a brief outline of the components of an integrated marketing plan.

  1. Financial markets regulation in the energy sector. A few financial aspects of energy transactions

    International Nuclear Information System (INIS)

    In addition to energy legislation, financial markets legislation and regulation (FMR) are becoming increasingly important for the energy sector. Consequently, parties on the energy market not only have to deal with the energy and competition authorities (the Dte and NMa respectively), but may also face supervision by The Netherlands Authority for the Financial Markets (AFM). Energy transactions may trigger certain prohibitions and obligations under financial and securities law, the most relevant of which are discussed in this article. Both the recent changes as a result of the Financial Markets Supervision Act ('Wet op het financieel toezicht', Wft) entering into force as per 1 January 2007 and the anticipated future amendments following the implementation of the Markets in Financial Instruments Directive (MiFID) are examined

  2. Eroding market stability by proliferation of financial instruments

    Science.gov (United States)

    Caccioli, F.; Marsili, M.; Vivo, P.

    2009-10-01

    We contrast Arbitrage Pricing Theory (APT), the theoretical basis for the development of financial instruments, with a dynamical picture of an interacting market, in a simple setting. The proliferation of financial instruments apparently provides more means for risk diversification, making the market more efficient and complete. In the simple market of interacting traders discussed here, the proliferation of financial instruments erodes systemic stability and it drives the market to a critical state characterized by large susceptibility, strong fluctuations and enhanced correlations among risks. This suggests that the hypothesis of APT may not be compatible with a stable market dynamics. In this perspective, market stability acquires the properties of a common good, which suggests that appropriate measures should be introduced in derivative markets, to preserve stability. in here

  3. Macroeconomic Determinants of Commodity Returns in Financialized Markets

    Directory of Open Access Journals (Sweden)

    Adam Zaremba

    2014-04-01

    Full Text Available Financialization of commodity markets has been a broadly discussed topic in recent years. However, its implications for commodity investors have not yet been fully explored. This paper concentrates on the macroeconomic determinants of commodity returns in financialized and non-financialized markets and on their role for a tactical asset allocation. The study aims to contribute to the academic literature in four ways. First, it provides fresh evidence on the interdependences between commodity returns, inflation and the business activity. Second, it documents increased correlation of the commodity returns with the business activity in the financialized markets. Third, it explores changes in the lead/lag relationship of commodity prices and the business cycle. Fourth, it proves that the commodities retained their inflation hedging abilities in the financialized markets. The computations are based on listings of various commodity indices between 1970 and 2013.

  4. Economic implications of corporate financial reporting in brazilian and european financial markets

    OpenAIRE

    Benetti, C.

    2010-01-01

    The main objective of this study is to determine how the people involved in the accounting process consider the role of accounting information in an economic environment where capital markets play a major role. The study is also aimed at determining whether International Financial Reporting Standards (IFRS) will help fulfill this role. To this end, we compare the perceptions of financial officers, financial analysts and auditors, using Europe as a proxy for a highly developed capital market e...

  5. Foreign banks and financial stability in emerging markets: Evidence from the global financial crisis

    OpenAIRE

    Vogel, Ursula; Winkler, Adalbert

    2010-01-01

    Foreign banks have increased their market share in many emerging markets since the mid-1990s. We examine whether this contributed to financial stability in the respective host countries in the global financial crisis. Our results suggest that the stabilizing impact of foreign banks was limited to the cross-border component of financial globalization and to two regions: Eastern Europe and Sub-Saharan Africa. Only in the latter region was this translated into more stable credit growth. Thus hop...

  6. Sustainable financial markets: Financial transaction tax and high capital buffers indispensable

    OpenAIRE

    Scha?fer, Dorothea

    2013-01-01

    The sustainability of the financial markets is a requirement that has only appeared on the economic policy agenda very recently, whereas a stable financial system has been a declared goal for decades. The relationship between sustainability and stability is, however, still unclear. The two terms are often used synonymously but stability is only one part of sustainability. The following outlines the requirements for sustainable financial markets based on the current general principles of envir...

  7. The Interaction between Market Sentiments in the U.S. Financial Market and Global Equity Market

    Directory of Open Access Journals (Sweden)

    Huijian Dong

    2014-12-01

    Full Text Available This paper adopts the volatility index and Baker-Wurgler index as the U.S. financial market sentiment measures. Using monthly data from June 1965 to December 2010, we identify the causal relationships between sentiment and the performance of global equity markets. We include 23 G20 market indices, 28 European indices, 25 Asia-Pacific indices, and 10 Americas indices, and employ Granger causality procedure to explore the linkages. We find that the international equity markets are not greatly affected by the U.S. financial market sentiment. The type of extreme sentiment, whether it is optimistic or pessimistic, is irrelevant to its influential power. The equity markets that are affected by the volatility index do not cluster in any region. In contrast, the majority of global equity markets can Granger cause the U.S. investor sentiments, with optimistic market atmosphere being more affected. The equity markets in the Americas and Europe are highly influential to the U.S. investors, compared to the Asian markets.

  8. INDIVIDUAL INVESTORS AND THE FINANCIAL CRISIS : TOWARDS A SCALE OF LOYALTY : APPLICATION TO TUNISIAN FINANCIAL MARKET

    OpenAIRE

    Jahmane, Abderrahman; Van Hoorebeke Delphine; Fustier Bernard

    2011-01-01

    Retail investors are now a class of stock exchange operators whose importance is growing in most international markets. But following the events of the financial crisis the world has known, there was a lack of trust between investors and financial markets, which we pose the problem of retention of investors and the indicators which are based on their behavior discision and stay on the market.

  9. Deepening European Financial Integration: Theoretical Considerations and Empirical Evaluation of Growth and Employment Benefits

    OpenAIRE

    Beckmann, Rainer; Eppendorfer, Carsten; Neimke, Markus

    2002-01-01

    This paper analyses some long-run macroeconomic effects of European financial integration. In particular we focus on the further reduction and abolition of cross-border barriers impeding the entry into the markets of banking and insurance products. We follow a theoretical as well as an empirical approach to make predictions about how deeper integration will affect growth and unemployment rates. In our growth model we show that enhanced foreign financial market penetration should increase the ...

  10. Measuring the Impact of Financial Crisis on International Markets: An Application of the Financial Stress Index

    Directory of Open Access Journals (Sweden)

    Apostolos G. Christopoulos

    2011-05-01

    Full Text Available The scope of paper is to examine whether the recent financial crisis has had any impact on international capital markets and more precisely on the 4 primary international stock markets of England, France, Japan, the United States and Greece. The research is based on the use of the Financial Stress Index (FSI from July 2005 until December 2008 and August 2009. Research results showed that the recent financial crisis has had a negative impact on all examined markets, with the Tokyo stock exchange being the one mostly affected. It was, also, found increased variability of performances following the start of the financial crisis, a fact that is indicative of the presence of conditional heteroscedasticity. As far as the Greek market is concerned, the recent financial crisis has not affected in general the credit expansion towards enterprises and households; however, it has affected the credit expansion to enterprises and households on a case-to-case basis.

  11. Understanding the source of multifractality in financial markets

    Science.gov (United States)

    Barunik, Jozef; Aste, Tomaso; Di Matteo, T.; Liu, Ruipeng

    2012-09-01

    In this paper, we use the generalized Hurst exponent approach to study the multi-scaling behavior of different financial time series. We show that this approach is robust and powerful in detecting different types of multi-scaling. We observe a puzzling phenomenon where an apparent increase in multifractality is measured in time series generated from shuffled returns, where all time-correlations are destroyed, while the return distributions are conserved. This effect is robust and it is reproduced in several real financial data including stock market indices, exchange rates and interest rates. In order to understand the origin of this effect we investigate different simulated time series by means of the Markov switching multifractal model, autoregressive fractionally integrated moving average processes with stable innovations, fractional Brownian motion and Levy flights. Overall we conclude that the multifractality observed in financial time series is mainly a consequence of the characteristic fat-tailed distribution of the returns and time-correlations have the effect to decrease the measured multifractality.

  12. EVALUATION OF CONTRIBUTION OF DEBT MARKET IN INDIAN FINANCIAL MARKET: AN EMPIRICAL STUDY

    Directory of Open Access Journals (Sweden)

    K. Ekambaram

    2014-12-01

    Full Text Available Indian Debt market is the financial market with two segment viz. the government securities market and corporate bond market, but the size of the latter is only about 14% of the total debt market. This is reflective of both, the relative recurrent fiscal deficits and the underdeveloped status of the corporate debt market. In spite of liberalization in stock market the share of debt market is still at bottom level when we compare it with equity market. Even in debt market the major portion is in the form of private placement.

  13. Testing the Informational Efficiency on the Romanian Financial Market

    OpenAIRE

    Aurora Murgea; Marilen Pirtea; Bogdan Dima

    2006-01-01

    The classical models of portfolio selection could not be applied on a market were the efficient market hypothesis is not valid (at least in a “weak” sense). The aim of this paper is to enlighten the difficulties of portfolio construction in a financial market with institutional and structural deficiencies, like the Romanian one, and to propose an alternative approach to the problem. The main features of our analysis are: 1) an empirical test for the efficient market hypothesis in the Roma...

  14. Repo funding and internal capital markets in the financial crisis

    OpenAIRE

    Du?wel, Cornelia

    2013-01-01

    This paper examines how the exposure of German parent banks to the disruptions on sale and repurchase markets (repo markets) during the financial crisis has affected their provision of funds to their foreign branches and subsidiaries via bank-internal capital markets. The collapse of the subprime market, the rescue of Bear Stearns and the bankruptcy of Lehman Brothers are analyzed with regard to their role as amplifiers of uncertainty about the value of collateral used in repo transactions an...

  15. Integrating Europe's Securities Markets: The Way Forward

    Directory of Open Access Journals (Sweden)

    Daniel Mark Azzopardi

    2011-08-01

    Full Text Available Having been earmarked as one of the primary objectives towards the creation of the Single Market from early on, the consolidation of securities legislation in the EU really took off under the auspices of the Financial Services Action Plan (or FSAP.The implementation of the Plan’s objectives was achieved most successfully through the Lamfalussy approach, a four-level model which was applied successfully to many framework Directives. While the creation of a single legal framework for the Union was in development, numerous efforts had also been made towards other aspects of market integration, namely convergence in interpretation, supervision and enforcement. With the latest round of proposals put forward by the Commission, the European securities market has never looked more likely to becoming a truly unified and singular entity. This article provides a brief overview on how the EU has fared thus far on this monumental project, while highlighting areas which need to be improved, and what measures can be taken to improve them. The article also discusses the latest measures taken by the EU to create a supervisory architecture in the financial services sphere, primarily through the introduction of three regulatory authorities for banking, insurance and securities, with particular focus on the new European Securities Market Authority.

  16. Inflation, Business Cycles, and Commodity Investing in Financialized Markets

    Directory of Open Access Journals (Sweden)

    Adam Zaremba

    2015-01-01

    Full Text Available Financialization of commodity markets has been a broadly discussed topic in recent years. However, its implications for commodity investors have not yet been fully explored. This paper concentrates on the macroeconomic determinants of commodity returns in financialized and nonfinancialized markets and on their role for a tactical asset allocation. The study aims to contribute to the academic literature in four ways. First, it provides fresh evidence on the interdependences between commodity returns, inflation and the business activity. Second, it documents increased correlation of the commodity returns with the business activity in the financialized markets. Third, it explores changes in the lead/lag relationship of commodity prices and the business cycle. Fourth, it proves that the commodities retained their inflation hedging abilities in the financialized markets. The computations are based on listings of various commodity indices, which are calculated by S&P-GSCI, JP Morgan, and Dow Jones-UBS, between 1970 and 2013.

  17. Financial Markets Interactions between Economic Theory and Practice

    Directory of Open Access Journals (Sweden)

    Mihaela NICOLAU

    2010-12-01

    Full Text Available During the last decades many financial analysts, either theorists or practitioners, have dedicated their studies to the interactions between different financial sectors. The results of these researches confirm that commodities, bonds and stock markets are closely related, therefore a thorough analysis of one should includes considerations of the other two. The aim of this article is to demonstrate that, even if from the theoretical point of view financial markets present typical and strong correlations between them, under economic turmoil the correlations change their signs. Both elementary rules of economic theory and examples with real time series are used in the demonstration. The results of our research emphasize that a simple theoretical analysis of financial markets’ behaviour through inflation and interest rates cannot define the real interactions of the markets and more robust research approaches are required.

  18. The liberalisation of Chinese financial markets: (September 2012).

    Czech Academy of Sciences Publication Activity Database

    Semerák, Vilém

    Singapore : World Scientific, 2015 - (Brown, K.), s. 309-326 ISBN 978-1-78326-454-4 Institutional support: RVO:67985998 Keywords : financial markets * China * liberalisation Subject RIV: AH - Economics

  19. On utility maximization in discrete-time financial market models

    OpenAIRE

    Rasonyi, Miklos; Stettner, Lukasz

    2005-01-01

    We consider a discrete-time financial market model with finite time horizon and give conditions which guarantee the existence of an optimal strategy for the problem of maximizing expected terminal utility. Equivalent martingale measures are constructed using optimal strategies.

  20. Financial Integration and Financial Crisis: Croatia Approaching the EMU

    Directory of Open Access Journals (Sweden)

    Dražen Derado

    2009-09-01

    Full Text Available The breakdown of command economies has significantly increased growth potentials all over Europe and opened up prospects for economic development. Encouraged by that, the EU embarked on the process of deeper economic integration. Its main aspects – economic liberalization and monetary integration – coincided with the worldwide globalization of trade and capital flows. As a laggard country in the process of economic integration, Croatia is in a particularly difficult position – besides soaring trade deficit, it is highly indebted and strongly dependant upon foreign capital. Appreciating theoretical inferences and empirical evidence on monetary integration, while taking reference to the realized level of international financial integration and external vulnerability, the aim of the paper is to find out if Croatia fulfils the criteria for successful monetary integration.

  1. Derivatives, Hedge Accounting Disclosure And Impact On Indian Financial Market

    Directory of Open Access Journals (Sweden)

    Prabhakara T

    2013-09-01

    Full Text Available In India, the emergence and growth of derivatives market is relatively a recent phenomenon. Since its inception in June 2000, derivatives market has exhibited exponential growth both in terms of volume and number of contract traded. The market turnover has grown from Rs.2365 Cr. in 2000-2001 to Rs.16807782.22 Cr. in 2012-13. Within a short span of twelve years, derivatives trading in India has surpassed cash segment in terms of turnover and number of traded contracts. The passed study encompasses in its objective and significance, concept, definition, types, features, market, trend, growth, Future prospects and challenges of derivatives in India. The problem is concerned with financial risks or not and why? Thus, the article reviews the use of derivative financial instruments for financial hedge and their effects to minimize the financial risks of the entities and bankrupt entities as well as their impacts on financial markets through decisions of investors and managers because their decisions are based on analysis results of financial statements. A country's accounting policy has not applied the derivative financial instruments for financial hedging, leading to affect that country's economy or not? Especially, the financial markets of Indian countries with similar economies have not also applied the hedge accounting to their hedge activities. The article uses the accounting theories of international accounting standards and Generally Accepted Accounting Principles and applies the methods of statistical data analysis about Indian derivatives market to show the results of hedge accounting that are concerned with the performance of derivatives products in Indian marke

  2. Taxing the Financially Integrated Multinational Firm

    DEFF Research Database (Denmark)

    Johannesen, Niels

    2010-01-01

    This paper develops a theoretical model of corporate taxation in the presence of financially integrated multinational firms. Under the assumption that multinational firms at least partly use internal loans to finance foreign investment, we find that the optimal corporate tax rate is positive from the perspective of a small, open economy. This finding contrasts the standard result that the optimal source based capital tax is zero. Intuitively, to the extent that multinational firms finance investment in country i with loans from affiliates in country j, the burden of corporate taxes in the latter country partly fall on investment and thus workers in the former country. This tax exporting mechanism introduces a scope for corporate taxes, which is not present in standard models of international taxation. Accounting for the internal capital markets of multinational firms thus represents a way to resolve the tension between standard theory predicting zero capital taxes and the casual observation that countries tend to employ corporate taxes at fairly high rates.

  3. Limited financial market participation: a transaction cost-based explanation

    OpenAIRE

    Paiella, Monica

    2001-01-01

    This paper focuses on the issue of limited financial market participation and determines a lower bound on the level of fixed transaction costs that are required to reconcile observed portfolio choices with asset returns within an isoelastic utility framework. The bound is determined from the set of conditions that ensure the optimality of consumption behavior by financial market non-participants. It represents the lowest possible cost rationalizing observed non-participation ch...

  4. International Stock Market Comovements: What Happened during the Financial Crisis?.

    Czech Academy of Sciences Publication Activity Database

    Horváth, Roman; Poldauf, P.

    2012-01-01

    Ro?. 12, ?. 1 (2012), s. 1-21. ISSN 1524-5861 R&D Projects: GA ?R GA402/09/0965 Institutional research plan: CEZ:AV0Z10750506 Institutional support: RVO:67985556 Keywords : stock market comovements * financial crisis * GARCH Subject RIV: AH - Economics http://library.utia.cas.cz/separaty/2012/E/horvath-international stock market comovements what happened during the financial crisis.pdf

  5. Multiple Time Series Ising Model for Financial Market Simulations

    Science.gov (United States)

    Takaishi, Tetsuya

    2015-01-01

    In this paper we propose an Ising model which simulates multiple financial time series. Our model introduces the interaction which couples to spins of other systems. Simulations from our model show that time series exhibit the volatility clustering that is often observed in the real financial markets. Furthermore we also find non-zero cross correlations between the volatilities from our model. Thus our model can simulate stock markets where volatilities of stocks are mutually correlated.

  6. PUBLIC TREASURY IN THE CONTEXT OF GLOBALIZED FINANCIAL MARKETS

    OpenAIRE

    Drago? Ilie

    2011-01-01

    In the development and functioning process of the economy, the financing of current andinvestment activities is a key factor, the mobilization of necessary funds being possible bythe existence of financial markets. In the financial markets, public treasury plays a key role.The economic crisis has left economies without cash and the banking system was unable tosecure, through the mechanism of credit, the necessary resources for the normal functioningof economy. In these circumstances the Publi...

  7. Recurrence Quantification Analysis of Financial Market Crashes and Crises

    OpenAIRE

    Piskun, Oleksandr; Piskun, Sergii

    2011-01-01

    Financial markets are systems with the complex behavior, that can be hardly analyzed by means of linear methods. Recurrence Quantification Analysis (RQA) is a nonlinear methodology, which is able to work with the nonstationary and short data series. Thus, we apply RQA for the studying of the critical events on financial markets. For the present research, stock crashes of DJI 1929; DJI, NYSE and S&P500 1987; NASDAQ 2000; HSI 1994, 1997 and Spanish 1992, Portuguese 1992, Briti...

  8. A Knowledge-Based Consultant for Financial Marketing

    OpenAIRE

    Kastner, John; Apte, Chidanand; Griesmer, James

    1986-01-01

    This article describes an effort to develop a knowledge-based financial marketing consultant system. Financial marketing is an excellent vehicle for both research and application in artificial intelligence (AI). This domain differs from the great majority of previous expert system domains in that there are no well-defined answers (in traditional sense); the goal here is to obtain satisfactory arguments to support the conclusions made. A large OPS5-based system was implemented as an initial pr...

  9. How to recover from the financial market flu.

    Science.gov (United States)

    Doody, Dennis

    2008-05-01

    The widely publicized subprime mortgage crisis and soaring crude oil prices have contributed to considerable market volatility in recent months, inducing queasiness among institutional investors. A four-layer approach to asset allocation that carefully considers assets, liquidity, currency, and risk may be the best strategy for maintaining an institution's financial health through today's volatile market. Perhaps the biggest challenge in such financially turbulent times is keeping fear in check. PMID:18546970

  10. A Causal Relationship between Financial Market Development and Economic Growth

    OpenAIRE

    Athanasios Vazakidis; Antonios Adamopoulos

    2010-01-01

    Problem statement: This study investigated the causal relationship between financial market development and economic growth for United Kingdom for the period 1965-2007 using a Vector Error Correction Model (VECM). Questions were raised whether financial market development causes economic growth or reversely taking into account the negative effect of interest rate. The objective of this study was to examine the causal relationships between these variables using Granger causality tests based on...

  11. Co-movements between Latin American and U.S. stock markets: convergence after the financial crisis

    OpenAIRE

    Ram??rez Hassan, Andr??s; Pantoja Robayo, Javier

    2013-01-01

    Currently, the world is facing a continuous process of integration in different aspects and financial markets are no exception to this development. Despite the fact that global integration is gradual, one can find some specific events that might help to accelerate this trend. This paper shows that after the financial crisis of 2008, which mainly occurred in the United States, the Latin American stock markets exhibit a higher level of convergence, measured by the correlation between the annual...

  12. Financial development and corporate growth in the EU single market.

    Czech Academy of Sciences Publication Activity Database

    Bena, J.; Jurajda, Št?pán

    2011-01-01

    Ro?. 78, ?. 311 (2011), s. 401-428. ISSN 0013-0427 R&D Projects: GA MŠk LC542 Institutional research plan: CEZ:AV0Z70850503 Keywords : financial development * corporate growth * access to financial markets Subject RIV: AH - Economics Impact factor: 1.152, year: 2011

  13. Openness, financial markets, and policies : cross-country and dynamic patterns

    OpenAIRE

    Bertola, Giuseppe; Lo Prete, Anna

    2009-01-01

    We document significant and robust empirical relationships in cross-country panel data between government size or social expenditure on the one hand, and trade and financial development indicators on the other. Across countries, deeper economic integration is associated with more intense government redistribution, but more developed financial markets weaken that relationship. Over time, controlling for country-specific effects, public social expenditure appears to be eroded by globalization t...

  14. Financial Markets Barriers’ in Agricultural Sector: Empirical Evidence of Iran

    Directory of Open Access Journals (Sweden)

    Seyed Jalal Sadeghi Sharif

    2009-10-01

    Full Text Available This paper aims to examine the relationship between financial market development and agricultural sector in Iran. The study attempts to answer these questions empirically and try to shed some light on the roles of financial development as well as other conditional variables in agricultural sector. The results of this study shows that the financial market in agricultural sector, however there is some weakness still. The authors come to conclusion that for improving this vital sector in Iran the weakness should be removed or at least reduced as early as possible.

  15. Higher-order phase transitions on financial markets

    Science.gov (United States)

    Kasprzak, A.; Kutner, R.; Perelló, J.; Masoliver, J.

    2010-08-01

    Statistical and thermodynamic properties of the anomalous multifractal structure of random interevent (or intertransaction) times were thoroughly studied by using the extended continuous-time random walk (CTRW) formalism of Montroll, Weiss, Scher, and Lax. Although this formalism is quite general (and can be applied to any interhuman communication with nontrivial priority), we consider it in the context of a financial market where heterogeneous agent activities can occur within a wide spectrum of time scales. As the main general consequence, we found (by additionally using the Saddle-Point Approximation) the scaling or power-dependent form of the partition function, Z(q'). It diverges for any negative scaling powers q' (which justifies the name anomalous) while for positive ones it shows the scaling with the general exponent ?(q'). This exponent is the nonanalytic (singular) or noninteger power of q', which is one of the pilar of higher-order phase transitions. In definition of the partition function we used the pausing-time distribution (PTD) as the central one, which takes the form of convolution (or superstatistics used, e.g. for describing turbulence as well as the financial market). Its integral kernel is given by the stretched exponential distribution (often used in disordered systems). This kernel extends both the exponential distribution assumed in the original version of the CTRW formalism (for description of the transient photocurrent measured in amorphous glassy material) as well as the Gaussian one sometimes used in this context (e.g. for diffusion of hydrogen in amorphous metals or for aging effects in glasses). Our most important finding is the third- and higher-order phase transitions, which can be roughly interpreted as transitions between the phase where high frequency trading is most visible and the phase defined by low frequency trading. The specific order of the phase transition directly depends upon the shape exponent ? defining the stretched exponential integral kernel. On this basis a simple practical hint for investors was formulated.

  16. Financial Systems and Capital Markets: an alternative view

    OpenAIRE

    Mavroudeas, Stavros; Lapavitsas, Costas

    1999-01-01

    This paper presents the Marxist theory of the financial system and the capital markets. First, it surveys the orthodox literature on the relationship between finance and the economy. Then, the function of the capital markets is analysed. Finally the differences between the orthodox and the Marxist perspective are being explained.

  17. Financial markets design and developing country growth :the case of Dubai International Financial Exchange (DIFX)

    OpenAIRE

    Sasso, Wael Saksouk Dit

    2007-01-01

    The aim of this thesis is showing how financial market design can facilitate the growth of developing countries. The paper is divided into two main parts (II and III). Part II explains how financial markets support developing countries by improving the accumulation of capital and increasing the pace of technological enhancements, since both advance growth and economic productivity. These two roles are in turn direct consequences of performing the six growth related functions: mobilization of ...

  18. Financial Repression To Financial Liberalisation Of Indian Banking And Capital Market Sectors (pre &post 1991 Reforms)

    OpenAIRE

    Raghavendra Rao Rentala

    2012-01-01

    Financial sector of any Economy is multi-faceted term. It refers to legal and institutional arrangements, financial intermediaries, markets and instruments with both domestic and external dimensions. The Economic Development of a nation is reflected by the progress of the various economic units, broadly classified into Corporate sector, Government and Household sector. While performing their activities these units will be placed in a surplus/deficit/balanced budgetary situations.Financial sy...

  19. Financial Investment Management: Testing the Market Model on the Romanian Capital Market during the Post Financial Crisis

    Directory of Open Access Journals (Sweden)

    Radu CIOBANU

    2011-06-01

    Full Text Available This article presents an analysis of the decision of investing in the capital market in Romania during 2009-2010, in the context of overcoming the global financial crisis. In the first part of the paper, we have made a brief presentation of the simplified model of market analysis introduced in the specialized literature by William Sharpe, the respective model representing the starting point in our study. The purpose of the present study is to emphasize how the evolutions of the financial securities rates listed on the Bucharest Stock Exchange could be explained based on the evolution of BET Romanian capital market index. Although the study over this phenomenon has begun in the middle of the last century, every day new studies appear that are either coming in addition to the already existing ones or are bringing a new approach regarding the financial theory. The novelty of the present study conducted by us resides in the highlighting of the evolutions of the financial securities rates during July 2009 – December 2010 periods. The second part of the paper presents the results of a study conducted on the Romanian capital market, emphasizing the correlations between the most important securities on the Romanian capital market, as parts of BET index and market index. The aim is to check whether during this period the evolution of the financial securities’ return can be explained more or less by the return of the capital market.

  20. A statistical physics perspective on criticality in financial markets

    CERN Document Server

    Bury, Thomas

    2013-01-01

    Stock markets are complex systems exhibiting collective phenomena and particular features such as synchronization, fluctuations distributed as power-laws, non-random structures and similarity to neural networks. Such specific properties suggest that markets operate at a very special point. Financial markets are believed to be critical by analogy to physical systems but few statistically founded evidence have been given. Through a data-based methodology and comparison to simulations inspired by statistical physics of complex systems, we show that the Dow Jones and indices sets are not rigorously critical. However, financial systems are closer to the criticality in the crash neighborhood.

  1. A statistical physics perspective on criticality in financial markets

    International Nuclear Information System (INIS)

    Stock markets are complex systems exhibiting collective phenomena and particular features such as synchronization, fluctuations distributed as power-laws, non-random structures and similarity to neural networks. Such specific properties suggest that markets operate at a very special point. Financial markets are believed to be critical by analogy to physical systems, but little statistically founded evidence has been given. Through a data-based methodology and comparison to simulations inspired by the statistical physics of complex systems, we show that the Dow Jones and index sets are not rigorously critical. However, financial systems are closer to criticality in the crash neighborhood. (paper)

  2. Phantastic objects and the financial market's sense of reality: a psychoanalytic contribution to the understanding of stock market instability.

    Science.gov (United States)

    Tuckett, David; Taffler, Richard

    2008-04-01

    This paper sets out to explore if standard psychoanalytic thinking based on clinical experience can illuminate instability in financial markets and its widespread human consequences. Buying, holding or selling financial assets in conditions of inherent uncertainty and ambiguity, it is argued, necessarily implies an ambivalent emotional and phantasy relationship to them. Based on the evidence of historical accounts, supplemented by some interviewing, the authors suggest a psychoanalytic approach focusing on unconscious phantasy relationships, states of mind, and unconscious group functioning can explain some outstanding questions about financial bubbles which cannot be explained with mainstream economic theories. The authors also suggest some institutional features of financial markets which may ordinarily increase or decrease the likelihood that financial decisions result from splitting off those thoughts which give rise to painful emotions. Splitting would increase the future risk of financial instability and in this respect the theory with which economic agents in such markets approach their work is important. An interdisciplinary theory recognizing and making possible the integration of emotional experience may be more useful to economic agents than the present mainstream theories which contrast rational and irrational decision-making and model them as making consistent decisions on the basis of reasoning alone. PMID:18405290

  3. The Marketing Plan: An Integrative Device for Teaching Marketing Management.

    Science.gov (United States)

    Berdine, W. R.; Petersen, James C.

    1980-01-01

    The importance of the marketing plan is stressed as an integrative device for teaching marketing management, and a structure is presented to assist students in designing a marketing plan. Components of this plan include marketing objectives, targeting market and buying motives, external environment and competition, product, price, and promotion.…

  4. Financial Literacy: Getting beyond the Markets

    Science.gov (United States)

    Stanford, Jim

    2010-01-01

    Recently, several Canadian provinces have added financial literacy into core curriculum for high school students, and in his 2009 budget, federal Finance Minister Jim Flaherty announced the creation of a Task Force to evaluate current financial literacy initiatives. Typically, these initiatives focus on "individual responsibility", implying that…

  5. Quantifying trading behavior in financial markets using Google Trends.

    Science.gov (United States)

    Preis, Tobias; Moat, Helen Susannah; Stanley, H Eugene

    2013-01-01

    Crises in financial markets affect humans worldwide. Detailed market data on trading decisions reflect some of the complex human behavior that has led to these crises. We suggest that massive new data sources resulting from human interaction with the Internet may offer a new perspective on the behavior of market participants in periods of large market movements. By analyzing changes in Google query volumes for search terms related to finance, we find patterns that may be interpreted as "early warning signs" of stock market moves. Our results illustrate the potential that combining extensive behavioral data sets offers for a better understanding of collective human behavior. PMID:23619126

  6. Models of Financial Markets with Extensive Participation Incentives

    OpenAIRE

    Yeung, C. H.; Wong, K. Y. Michael; Zhang, Yi-cheng

    2007-01-01

    We consider models of financial markets in which all parties involved find incentives to participate. Strategies are evaluated directly by their virtual wealths. By tuning the price sensitivity and market impact, a phase diagram with several attractor behaviors resembling those of real markets emerge, reflecting the roles played by the arbitrageurs and trendsetters, and including a phase with irregular price trends and positive sums. The positive-sumness of the players' weal...

  7. International stock market comovements: what happened during the financial crisis?

    OpenAIRE

    Horvath, Roman; Poldauf, Petr

    2011-01-01

    We investigate the stock market comovements in Australia, Brazil, Canada, China, Germany, Hong Kong, Japan, Russia, South Africa, the UK, and the USA, both at the market and sectoral level in 2000-2010. Using multivariate GARCH models, our results suggest that the correlation among equity returns during the financial crisis (2008-2010) somewhat increased suggesting that the crisis represented a common shock to all countries. The U.S. stock market is found to be the most correlated with the st...

  8. The Market for Financial Derivatives: Removing Impediments to Growth

    OpenAIRE

    Bacha, Obiyathulla I.

    2004-01-01

    This paper begins with an evaluation of the performance of the Malaysian market for financial derivatives. Despite a headstart, Malaysia appears to be lagging substantially when compared to the performance of other Asian derivative markets. While the other Asian markets though newer, have seen explosive growth in volume, trading volume in Malaysia appears to have shrunk. We examine why this has been the case and identify several macro and micro level impediments. Among macro level impedim...

  9. Credit Rating Agencies, Financial Regulations and the Capital Markets

    OpenAIRE

    Shahzad, K.

    2013-01-01

    This thesis studies the role of credit rating agencies (CRAs) in capital markets, and the effects of two important regulatory decisions that are taken to improve the quality of information available to the capital markets. In particular, this thesis examines a) the importance of credit ratings to the debt markets and the level of trust investors place on CRAs b) whether the adoption of International Financial Reporting Standards (IFRS) improves the quality of accounting information in Europea...

  10. The effects of relative performance objectives on financial markets

    OpenAIRE

    Igan, Deniz; Pinheiro, Marcelo

    2012-01-01

    We analyze the implications of linking the compensation of fund managers to the return of their portfolio relative to that of a benchmark. In the presence of such relative-performance-based objectives, investors have reduced expected utility but markets are typically more informative and deeper. Furthermore, in a multiple asset/market framework we show that (i) relative performance concerns lead to an increase in the correlation between markets (financial contagion); (ii) benchmark inclusi...

  11. FINANCIAL GLOBALIZATION AND THE LEVEL OF INTEGRATION INTO THE INTERNATIONAL FINANCIAL

    Directory of Open Access Journals (Sweden)

    ?.?. ????????

    2012-03-01

    Full Text Available  The article contains detailed information on the impact of globalization on the development of the global financial market, discussed ways of understanding the essence of financial globalization.

  12. Integration and Comovement of Developed and Emerging Islamic Stock Markets: A Case Study of Malaysia

    OpenAIRE

    Naseri, Marjan; Masih, Mansur

    2014-01-01

    This paper attempts to analyse the extent of financial integration of two developed (the U.S. and Japan) and two emerging Islamic stock markets (China and India) with the Malaysian Islamic stock market in order for the Malaysian financial traders to make decision about their portfolio diversification, risk management and asset allocation. Despite the growing interest in Islamic finance, there are few empirical studies investigating integration of Islamic stock markets. As a res...

  13. Testing the Informational Efficiency on the Romanian Financial Market

    Directory of Open Access Journals (Sweden)

    Aurora Murgea

    2006-03-01

    Full Text Available The classical models of portfolio selection could not be applied on a market were the efficient market hypothesis is not valid (at least in a “weak” sense. The aim of this paper is to enlighten the difficulties of portfolio construction in a financial market with institutional and structural deficiencies, like the Romanian one, and to propose an alternative approach to the problem. The main features of our analysis are: 1 an empirical test for the efficient market hypothesis in the Romanian financial market case; 2 a critical distinction between the concept of “risk” and the concept of “incertitude”; 3 the use of the individual yield/risk ratio versus the market one as a selection variable; 4 the renouncement at the use in the selection procedure of an “non-risky” asset; 5 an example of the proposed selection procedure. The output of this approach could be resumed by the thesis that, even in a situation when the financial market is affected by severe disfunctions, there is a possibility to build an “optimal” portfolio based on a yield-risk arbitrage inside an efficiency frontier and to obtain a “good” schema of an financial placement, in spite of the limited possibilities for a efficient portfolio management.

  14. Consolidated supervision of financial institutions and financial market in the Republic of Croatia

    Directory of Open Access Journals (Sweden)

    Bojana Olgi? Draženovi?

    2005-06-01

    Full Text Available The question of regulation and supervision of all parts of financial system is of major importance for any country. In order to protect the interest of the society and to accelerate the economic development, it is necessary to provide adequate legal framework as well as independent supervision institutions. The regulations refer mostly to maintenance of financial stability and consumer protection. The article points out that the structure of the financial sector in the Republic of Croatia is underdeveloped and characterized by domination of the banking sector. Therefore, bank supervision is one of the main tasks of Croatian national bank and all other financial institutions (except banks are regulated by other regulatory institutions. The problems of authority overlapping and insufficient regulation are becoming more complex by the development of financial sector and especially by the deregulation of financial markets. Because of that, it is reasonable to investigate the existing regulatory framework of Croatian financial system concerning its structure and development.

  15. Integration of liberalised energy market

    International Nuclear Information System (INIS)

    The markets for electricity, natural gas and district heating are inter-linked both with respect to the energy flows and with respect to ownership of supply sources and infrastructure. The extent and the possible consequences of these linkages are examined in this report. The options for public interventions in these markets are analysed to compare instruments with respect to their ability to provide the necessary incentives for an efficient functioning of the liberalised markets. Aspects of retail markets with households facing multi-product distribution companies and aspects of the production of combined heat and power based on natural gas has been covered. This project identifies some important aspects related to final consumers and the interaction of markets with different types of regulation and scope for liberalisation. From a Danish perspective the district heat market and the dependence on market conditions for natural gas is a specific concern. Consumer concerns also relate to the creation of multi-product energy distribution companies that are privately owned and possibly controlled by foreign interests. Such companies might use bundled sales of energy products to extent their dominant position in one market e.g. a regulated heat market to a market with considerable competition (electricity). Bundled sales would not necessarily result in a loss for the consumer due to economies of scope in supplying energy products. However, the regulatory authorities responsible for district heat prices will have a more complicated job in surveying the bundled price setting. Integration of activities within natural gas distribution and CHP production has been analysed with respect to incentives and welfare implications. Results of the project point to critical market conditions and identify areas of concern for regulatory policies. The analysis shows that there is a large welfare loss associated with having monopolies in both natural gas supplies and the CHP production. If liberalisation allows integration of these two energy markets welfare would be improved relative to the first case. Furthermore the analysis shows that the existence of differentiated electricity production technology (fuels) reduces the welfare loss from the monopoly in the natural gas supply even though the natural gas keeps a high market share. (au)

  16. Financial Market Regulation in Germany - Capital Requirements of Financial Institutions

    Directory of Open Access Journals (Sweden)

    Daniel Karl Detzer

    2015-03-01

    Full Text Available This paper examines capital adequacy regulation in Germany. The first part reviews capital adequacy regulation from the 1930s up to the financial crisis and identifies two main trends: a gradual softening of the eligibility criteria for equity and increasing reliance on internal risk models. While the first trend has been reversed following the financial crisis, internal risk models still play a central role. Therefore, the second part discusses the problems with the use of internal risk models and discusses the potentials of Basel 2.5 and Basel III to alleviate the identified problems. It is concluded that the relevant problems are not resolved. Therefore, in the final part some suggestions of how the problems could be addressed properly are given.

  17. The Market Survival of Publicly Traded Traditional and Market-Based Financial Intermediaries

    Directory of Open Access Journals (Sweden)

    Marc Schaffer

    2015-03-01

    Full Text Available The financial crisis highlighted the pivotal role that financial intermediaries play in the economy. Recent research has analyzed the differences between traditional and market-based financial intermediaries, noting the greater balance sheet volatility of the former category. Using these volatility differences as a basis, this paper compares the stock market delisting behavior of market-based and traditional financial intermediaries. Using survival analysis, I find that market-based intermediaries carry greater cumulative incidence of stock market delisting due to firm failure and M&A activity relative to traditional intermediaries. Additionally, idiosyncratic risk plays an important role in the survival behavior across these institutional structures. JEL Classifications: G20, G21

  18. Estimating WACC for Regulated Industries on Developing Financial Markets and in Times of Market Uncertainty

    Directory of Open Access Journals (Sweden)

    Igor Stubelj

    2014-03-01

    Full Text Available The paper deals with the estimation of weighted average cost of capital (WACC for regulated industries in developing financial markets from the perspective of the current financial-economic crisis. In current financial market situation some evident changes have occurred: risk-free rates in solid and developed financial markets (e. g. USA, Germany have fallen, but due to increased market volatility, the risk premiums have increased. The latter is especially evident in transition economies where the amplitude of market volatility is extremely high. In such circumstances, there is a question of how to calculate WACC properly. WACC is an important measure in financial management decisions and in our case, business regulation. We argue in the paper that the most accurate method for calculating WACC is the estimation of the long-term WACC, which takes into consideration a long-term stable yield of capital and not the current market conditions. Following this, we propose some solutions that could be used for calculating WACC for regulated industries on the developing financial markets in times of market uncertainty. As an example, we present an estimation of the capital cost for a selected Slovenian company, which operates in the regulated industry of electric distribution.

  19. Models of financial markets with extensive participation incentives

    Science.gov (United States)

    Yeung, C. H.; Wong, K. Y. Michael; Zhang, Y.-C.

    2008-02-01

    We consider models of financial markets in which all parties involved find incentives to participate. Strategies are evaluated directly by their virtual wealth. By tuning the price sensitivity and market impact, a phase diagram with several attractor behaviors resembling those of real markets emerge, reflecting the roles played by the arbitrageurs and trendsetters, and including a phase with irregular price trends and positive sums. The positive sumness of the players’ wealth provides participation incentives for them. Evolution and the bid-ask spread provide mechanisms for the gain in wealth of both the players and market makers. New players survive in the market if the evolutionary rate is sufficiently slow. We test the applicability of the model on real Hang Seng Index data over 20 years. Comparisons with other models show that our model has a superior average performance when applied to real financial data.

  20. Ambiguity Aversion and Incompleteness of Financial Markets

    OpenAIRE

    Mukerji, Sujoy; Tallon, Jean-marc

    2001-01-01

    It is widely thought that incomes risks can be shared by trading infinancial assets. But financial assets typically carry some riskidiosyncratic to them, hence, disposing incomes risk using financial assetswill involve buying into the inherent idiosyncratic risk. However, standardtheory argues that diversification would reduce the inconvenience ofidiosyncratic risk to arbitrarily low levels. This argument is less robustthan what standard theory leads us to believe: ambiguity aversion canexace...

  1. The internalist perspective on inevitable arbitrage in financial markets

    Science.gov (United States)

    Matsuno, Koichiro

    2003-06-01

    Arbitrage as an inevitable component of financial markets is due to the robust interplay between the continuous and the discontinuous stochastic variables appearing in the underlying dynamics. We present empirical evidence of such an arbitrage through the laboratory experiment on a portfolio management in the Japan-United States financial markets over the last several years, under the condition that the asset allocation was updated every day over the entire period. The portfolio management addressing the foreign exchange, the stock, and the bond markets was accomplished as referring to and processing only those empirical data that have been complied by and made available from the monetary authorities and the relevant financial markets so far. The averaged annual yield of the portfolio counted in the denomination of US currency was slightly greater than the averaged yield of the same physical assets counted in the denomination of Japanese currency, indicating the occurrence of arbitrage pricing in the financial markets. Daily update of asset allocation was conducted as referring to the predictive movement internal to the dynamics such that monetary flow variables, that are discontinuously stochastic upon the act of measurement internal to the markets, generate monetary stock variables that turn out to be both continuously stochastic and robust in the effect.

  2. Financial Market Models for the Grid

    OpenAIRE

    Marti?nez Ortuno, Fernando

    2011-01-01

    The existing network of computing devices around the world created by the Internet gives the possibility of establishing a global market for computing power, where anybody connected to this network can acquire computing power or sell his own spare computing resources in exchange for real money. This potential global market for computing power, which does not exist yet, is what we study in this thesis. Specifically, we study the market with both analytic and simulated models. Th...

  3. Central bank communication in the financial crisis: Evidence from a survey of financial market participants

    OpenAIRE

    Hayo, Bernd; Neuenkirch, Matthias

    2014-01-01

    In this paper, we study whether central bank communication has a positive effect on market participants' perception of central banks' (i) credibility, (ii) unorthodox measures, and (iii) independence. We utilise a survey of more than 500 financial market participants from around the world who answered questions in reference to the Bank of England (BoE), the Bank of Japan (BoJ), the European Central Bank (ECB), and the Federal Reserve (Fed). We find that market participants believe that the Fe...

  4. Aftershock Prediction for High-Frequency Financial Markets' Dynamics

    Science.gov (United States)

    Baldovin, Fulvio; Camana, Francesco; Caraglio, Michele; Stella, Attilio L.; Zamparo, Marco

    The occurrence of aftershocks following a major financial crash manifests the critical dynamical response of financial markets. Aftershocks put additional stress on markets, with conceivable dramatic consequences. Such a phenomenon has been shown to be common to most financial assets, both at high and low frequency. Its present-day description relies on an empirical characterization proposed by Omori at the end of 1800 for seismic earthquakes. We point out the limited predictive power in this phenomenological approach and present a stochastic model, based on the scaling symmetry of financial assets, which is potentially capable to predict aftershocks occurrence, given the main shock magnitude. Comparisons with S&P high-frequency data confirm this predictive potential.

  5. Complex systems: from nuclear physics to financial markets

    International Nuclear Information System (INIS)

    We compare correlations and coherent structures in nuclei and financial markets. In the nuclear physics part we review giant resonances which can be interpreted as a coherent structure embedded in chaos. With similar methods we investigate the financial empirical correlation matrix of the DAX and Dow Jones. We will show, that if the time-zone delay is properly accounted for, the two distinct markets largely merge into one. This is reflected by the largest eigenvalue that develops a gap relative to the remaining, chaotic eigenvalues. By extending investigations of the specific character of financial collectivity we also discuss the criticality-analog phenomenon of the financial log-periodicity and show specific examples.

  6. The Use of Financial Derivatives in Emerging Market Economies: An Empirical Evidence from Bosnia and Herzegovina's Non-Financial Firms

    OpenAIRE

    Emira Kozarevic; Meldina Kokorovic Jukan; Beriz Civic

    2014-01-01

    This paper discusses development of financial derivatives markets in emerging market economies, focusing on the use of financial derivatives in risk management purposes of non-financial firms in Bosnia and Herzegovina. For achieving the research goals authors collected data on the derivatives market structure and types of derivative instrument traded, focusing commercial banks, because of the authors’ prior knowledge of the derivatives market. Additionally, in order to assess the current st...

  7. Analysis of Spin Financial Market by GARCH Model

    International Nuclear Information System (INIS)

    A spin model is used for simulations of financial markets. To determine return volatility in the spin financial market we use the GARCH model often used for volatility estimation in empirical finance. We apply the Bayesian inference performed by the Markov Chain Monte Carlo method to the parameter estimation of the GARCH model. It is found that volatility determined by the GARCH model exhibits ''volatility clustering'' also observed in the real financial markets. Using volatility determined by the GARCH model we examine the mixture-of-distribution hypothesis (MDH) suggested for the asset return dynamics. We find that the returns standardized by volatility are approximately standard normal random variables. Moreover we find that the absolute standardized returns show no significant autocorrelation. These findings are consistent with the view of the MDH for the return dynamics

  8. FBIH financial market segmentation on the basis of image factors

    Directory of Open Access Journals (Sweden)

    Arnela Bevanda

    2008-12-01

    Full Text Available The aim of the study is to recognize, single out and define market segments useful for future marketing strategies, using certain statistical techniques on the basis of influence of various image factors of financial institutions. The survey included a total of 500 interviewees: 250 bank clients and 250 clients of insurance companies. Starting from the problem area and research goal, the following hypothesis has been formulated: Basic preferences of clients in regard of image factors while selecting financial institutions are different enough to be used as such for differentiating significant market segments of clients. Two segments have been singled out by cluster analysis and named, respectively, traditionalists and visualists. Results of the research confirmed the established hypothesis and pointed to the fact that managers in the financial institutions of the Federation of Bosnia and Herzegovina (FBIH must undertake certain corrective actions, especially when planning and implementing communication strategies, if they wish to maintain their competitiveness in serving both selected segments.

  9. Using the Scaling Analysis to Characterize Financial Markets

    CERN Document Server

    Matteo, T D; Dacorogna, M M

    2003-01-01

    We empirically analyze the scaling properties of daily Foreign Exchange rates, Stock Market indices and Bond futures across different financial markets. We study the scaling behaviour of the time series by using a generalized Hurst exponent approach. We verify the robustness of this approach and we compare the results with the scaling properties in the frequency-domain. We find evidence of deviations from the pure Brownian motion behavior. We show that these deviations are associated with characteristics of the specific markets and they can be, therefore, used to distinguish the different degrees of development of the markets.

  10. Evaluation of wholesale electric power market rules and financial risk management by agent-based simulations

    Science.gov (United States)

    Yu, Nanpeng

    As U.S. regional electricity markets continue to refine their market structures, designs and rules of operation in various ways, two critical issues are emerging. First, although much experience has been gained and costly and valuable lessons have been learned, there is still a lack of a systematic platform for evaluation of the impact of a new market design from both engineering and economic points of view. Second, the transition from a monopoly paradigm characterized by a guaranteed rate of return to a competitive market created various unfamiliar financial risks for various market participants, especially for the Investor Owned Utilities (IOUs) and Independent Power Producers (IPPs). This dissertation uses agent-based simulation methods to tackle the market rules evaluation and financial risk management problems. The California energy crisis in 2000-01 showed what could happen to an electricity market if it did not go through a comprehensive and rigorous testing before its implementation. Due to the complexity of the market structure, strategic interaction between the participants, and the underlying physics, it is difficult to fully evaluate the implications of potential changes to market rules. This dissertation presents a flexible and integrative method to assess market designs through agent-based simulations. Realistic simulation scenarios on a 225-bus system are constructed for evaluation of the proposed PJM-like market power mitigation rules of the California electricity market. Simulation results show that in the absence of market power mitigation, generation company (GenCo) agents facilitated by Q-learning are able to exploit the market flaws and make significantly higher profits relative to the competitive benchmark. The incorporation of PJM-like local market power mitigation rules is shown to be effective in suppressing the exercise of market power. The importance of financial risk management is exemplified by the recent financial crisis. In this dissertation, basic financial risk management concepts relevant for wholesale electric power markets are carefully explained and illustrated. In addition, the financial risk management problem in wholesale electric power markets is generalized as a four-stage process. Within the proposed financial risk management framework, the critical problem of financial bilateral contract negotiation is addressed. This dissertation analyzes a financial bilateral contract negotiation process between a generating company and a load-serving entity in a wholesale electric power market with congestion managed by locational marginal pricing. Nash bargaining theory is used to model a Pareto-efficient settlement point. The model predicts negotiation results under varied conditions and identifies circumstances in which the two parties might fail to reach an agreement. Both analysis and agent-based simulation are used to gain insight regarding how relative risk aversion and biased price estimates influence negotiated outcomes. These results should provide useful guidance to market participants in their bilateral contract negotiation processes.

  11. A coopetitive approach to financial markets stabilization and risk management

    OpenAIRE

    Carfì, David; Musolino, Francesco

    2012-01-01

    The aim of this paper is to propose a methodology to stabilize the financial markets by adopting Game Theory, in particular, the Complete Study of a Differentiable Game and the new mathematical model of Coopetitive Game, proposed recently in the literature by D. Carfì. Specifically, we will focus on two economic operators: a real economic subject and a financial institute (a bank, for example) with a big economic availability. For this purpose we will discuss about an interaction between the...

  12. Getting it Right: What to Reform in International Financial Markets

    OpenAIRE

    Hausmann, Ricardo; Ferna?ndez-arias, Eduardo

    2000-01-01

    Our review of the main proposals on international financial architecture currently under consideration gives reasons for concern that excessive emphasis on improving stability by impeding capital flows will have a deleterious development impact. Sustainable development requires initiatives addressing the failures of international financial markets that make capital flows so small and volatile. Our analysis identifies a number of alternative initiatives and principles to get them right in conn...

  13. Development in Financial Markets and the performance of German IPOs

    OpenAIRE

    Gounopoulos, D.; Hoebelt, J.

    2013-01-01

    By using an expanded sample of German IPOs listed between 1992 and 2012 covering two major amendments on the financial market, IFRS adoption and the recent financial crisis. Their results indicate that IFRS adoption has reduced underpricing in Germany and has significantly affected their long-term performance. This clearly suggests the advantages of preparing IFRS accounts which might be an incentive for private companies to use IFRS voluntarily. Similarly firms that have gone public during t...

  14. Herd behavior and aggregate fluctuations in financial markets

    CERN Document Server

    Cont, R; Cont, Rama; Bouchaud, Jean-Philippe

    1997-01-01

    We present a simple model of a stock market where a random communication structure between agents gives rise to a heavy tails in the distribution of stock price variations in the form of an exponentially truncated power-law, similar to distributions observed in recent empirical studies of high frequency market data. Our model provides a link between two well-known market phenomena: the heavy tails observed in the distribution of stock market returns on one hand and 'herding' behavior in financial markets on the other hand. In particular, our study suggests a relation between the excess kurtosis observed in asset returns, the market order flow and the tendency of market participants to imitate each other.

  15. Financial Transaction Tax and Financial Market Stability with Diverse Beliefs

    OpenAIRE

    Rieger, Jörg

    2014-01-01

    This papers studies the impact of a ?nancial transactions tax on the trading volume and asset price volatility in a model with heterogeneous beliefs. To model heterogeneous beliefs we follow Kurz (1994, 1997) and restrict the class of beliefs to the subset of rational beliefs. We study a tax on bond and asset purchases. The simulated model shows that the introduction of a transaction tax results in a lower trading volume and therefore in less liquid ?nancial markets. Because of the decrea...

  16. Empirical Studies on Financial Markets: Private Equity, Corporate Bonds and Emerging Markets

    OpenAIRE

    Zwart, G.J. de

    2008-01-01

    This dissertation consists of five empirical studies on financial markets. Each study can be read independently and covers a specific market, either private equity, corporate bonds or emerging markets. The first study documents that risk factors cannot account for the significant excess returns of selection strategies based on value, momentum or earnings revisions indicators in the emerging equity market. The second study presents empirical evidence that security analysts do not efficiently u...

  17. DETERMINANTS OF BANKS’ COMPETITIVENESS IN LOCAL FINANCIAL MARKETS

    Directory of Open Access Journals (Sweden)

    Ryszard Kata

    2012-04-01

    Full Text Available The article presents the analysis of determinants of banks’ competitiveness in local financial markets, with respect to local (cooperative banks and branches of large commercial banks. The paper also evaluates the competitive position of the banks using the synthetic measure of competitive advantage MPK. The article proves that tere are considerable differences between the analyzed groups of banks, in terms of their competitiveness and its determining factors (which are banks’ assets. The paper also indicates the areas in which particular banks shouldmake changes in their resources and operational strategies in order to improve their competitiveness in local financial markets.

  18. Three state herding model of the financial markets

    CERN Document Server

    Kononovicius, Aleksejus

    2012-01-01

    We propose a Markov jump process with the three state herding interaction. We see our approach as an agent-based model for the financial markets. Under certain assumptions this agent-based model can be related to the stochastic description exhibiting sophisticated statistical features. Along with power-law probability density function of the absolute returns we are able to reproduce the fractured power spectral density, which is observed in the high-frequency financial market data. Given example of consistent agent-based and stochastic modeling will provide background for the further developments in the research of complex social systems.

  19. General autocatalytic theory and simple model of financial markets

    Science.gov (United States)

    Thuy Anh, Chu; Lan, Nguyen Tri; Viet, Nguyen Ai

    2015-06-01

    The concept of autocatalytic theory has become a powerful tool in understanding evolutionary processes in complex systems. A generalization of autocatalytic theory was assumed by considering that the initial element now is being some distribution instead of a constant value as in traditional theory. This initial condition leads to that the final element might have some distribution too. A simple physics model for financial markets is proposed, using this general autocatalytic theory. Some general behaviours of evolution process and risk moment of a financial market also are investigated in framework of this simple model.

  20. The continuous time random walk formalism in financial markets

    CERN Document Server

    Masoliver, J; Perello, J; Weiss, G H

    2006-01-01

    We adapt continuous time random walk (CTRW) formalism to describe asset price evolution and discuss some of the problems that can be treated using this approach. We basically focus on two aspects: (i) the derivation of the price distribution from high-frequency data, and (ii) the inverse problem, obtaining information on the market microstructure as reflected by high-frequency data knowing only the daily volatility. We apply the formalism to financial data to show that the CTRW offers alternative tools to deal with several complex issues of financial markets.

  1. Modelling Information Flows in Financial Markets

    OpenAIRE

    Brody, Dorje C.; Hughston, Lane P.; Macrina, Andrea

    2010-01-01

    This paper presents an overview of information-based asset pricing. In this approach, an asset is defined by its cash-flow structure. The market is assumed to have access to "partial" information about future cash flows. Each cash flow is determined by a collection of independent market factors called X-factors. The market filtration is generated by a set of information processes, each of which carries information about one of the X-factors, and eventually reveals the X-fact...

  2. Models of Financial Markets with Extensive Participation Incentives

    CERN Document Server

    Yeung, C H; Zhang, Y -C

    2007-01-01

    We consider models of financial markets in which all parties involved find incentives to participate. Strategies are evaluated directly by their virtual wealths. By tuning the price sensitivity and market impact, a phase diagram with several attractor behaviors resembling those of real markets emerge, reflecting the roles played by the arbitrageurs and trendsetters, and including a phase with irregular price trends and positive sums. The positive-sumness of the players' wealths provides participation incentives for them. Evolution and the bid-ask spread provide mechanisms for the gain in wealth of both the players and market-makers. The enhanced survival of the new players through strategy pre-learning provides a mechanism to attract an influx of new players. We test the applicability of the model on real Hang Seng Index data over 20 years. Comparisons with other models show that our model has a superior average performance when applied to real financial data.

  3. Double Power Law Decay of the Persistence in Financial Markets

    CERN Document Server

    Jain, S

    2008-01-01

    The persistence phenomenon is studied in the Japanese financial market by using a novel mapping of the time evolution of the values of shares quoted on the Nikkei Index onto Ising spins. The method is applied to historical end of day data from the Japanese stock market during 2002. By studying the time dependence of the spins, we find clear evidence for a double-power law decay of the proportion of shares that remain either above or below ` starting\\rq\\ values chosen at random. The results are consistent with a recent analysis of the data from the London FTSE100 market. The slopes of the power-laws are also in agreement. We estimate a long time persistence exponent for the underlying Japanese financial market to be 0.5.

  4. A simple financial market model with chartists and fundamentalists: market entry levels and discontinuities

    OpenAIRE

    Tramontana, Fabio; Westerhoff, Frank; Gardini, Laura

    2011-01-01

    We present a simple financial market model with interacting chartists and fundamentalists. Since some of these speculators only become active when a certain misalignment level has been crossed, the dynamics are driven by a discontinuous piecewise linear map. The model endogenously generates bubbles and crashes and excess volatility for a broad range of parameter values - and thus explains some key phenomena of financial markets. Moreover, we provide a complete analytical study of the model's ...

  5. Uncovered Interest Parity and Financial Market Volatility

    Directory of Open Access Journals (Sweden)

    Alexandra Horobet

    2009-06-01

    Full Text Available Our paper addresses the relationship between exchange rates changes and interest rate differentials in the UIP framework, by taking into account capital market and foreign exchange market volatility. We use eight currencies, of which five are Central and Eastern European and three are developed markets currencies, and their relationship to the US dollar. We use OLS regressions to capture the influenceof volatility on UIP testing. We find that UIP is not validated, overall and in times of high volatility, but the direction in the exchange rate change indicated by the interest rate differential follows the UIP framework. The relationship between interest rate differentials and exchange rates changes is weak and takinginto account market volatility does not significantly alter our results.

  6. Hitting time distributions in financial markets

    Science.gov (United States)

    Valenti, Davide; Spagnolo, Bernardo; Bonanno, Giovanni

    2007-08-01

    We analyze the hitting time distributions of stock price returns in different time windows, characterized by different levels of noise present in the market. The study has been performed on two sets of data from US markets. The first one is composed by daily price of 1071 stocks trade for the 12-year period 1987-1998, the second one is composed by high frequency data for 100 stocks for the 4-year period 1995-1998. We compare the probability distribution obtained by our empirical analysis with those obtained from different models for stock market evolution. Specifically by focusing on the statistical properties of the hitting times to reach a barrier or a given threshold, we compare the probability density function (PDF) of three models, namely the geometric Brownian motion, the GARCH model and the Heston model with that obtained from real market data. We will present also some results of a generalized Heston model.

  7. Hitting Time Distributions in Financial Markets

    CERN Document Server

    Valenti, D; Spagnolo, B; Bonanno, Giovanni; Spagnolo, Bernardo; Valenti, Davide

    2006-01-01

    We analyze the hitting time distributions of stock price returns in different time windows, characterized by different levels of noise present in the market. The study has been performed on two sets of data from US markets. The first one is composed by daily price of 1071 stocks trade for the 12-year period 1987-1998, the second one is composed by high frequency data for 100 stocks for the 4-year period 1995-1998. We compare the probability distribution obtained by our empirical analysis with those obtained from different models for stock market evolution. Specifically by focusing on the statistical properties of the hitting times to reach a barrier or a given threshold, we compare the probability density function (PDF) of three models, namely the geometric Brownian motion, the GARCH model and the Heston model with that obtained from real market data. We will present also some results of a generalized Heston model.

  8. Equilibrium and welfare in markets with financially constrained arbitrageurs

    OpenAIRE

    Gromb, Denis; Vayanos, Dimitri

    2002-01-01

    We propose a multiperiod model in which competitive arbitrageurs exploit discrepancies between the prices of two identical risky assets traded in segmented markets. Arbitrageurs need to collateralize separately their positions in each asset, and this implies a financial constraint limiting positions as a function of wealth. In our model, arbitrage activity benefits all investors because arbitrageurs supply liquidity to the market. However, arbitrageurs might fail to take a socially optimal le...

  9. Using transfer entropy to measure information flows between financial markets

    OpenAIRE

    Dimpfl, Thomas; Peter, Franziska J.

    2012-01-01

    We use transfer entropy to quantify information flows between financial markets and propose a suitable bootstrap procedure for statistical inference. Transfer entropy is a model-free measure designed as the Kullback-Leibler distance of transition probabilities. Our approach allows to determine, measure and test for information transfer without being restricted to linear dynamics. In our empirical application, we examine the importance of the credit default swap market relative to the corporat...

  10. Evidence of market manipulation in the financial crisis

    OpenAIRE

    Misra, Vedant; Lagi, Marco; Bar-yam, Yaneer

    2011-01-01

    We provide direct evidence of market manipulation at the beginning of the financial crisis in November 2007. The type of manipulation, a "bear raid," would have been prevented by a regulation that was repealed by the Securities and Exchange Commission in July 2007. The regulation, the uptick rule, was designed to prevent manipulation and promote stability and was in force from 1938 as a key part of the government response to the 1929 market crash and its aftermath. On Novemb...

  11. Modelling extreme financial returns of global equity markets

    OpenAIRE

    Cotter, John

    2004-01-01

    Extreme asset price movements appear to be more pronounced recently and have major consequences for an economy’s financial stability and monetary policies. This paper investigates the extreme behaviour of equity market returns and quantifies the probabilities of these losses. Taking fourteen major equity markets the study is able to ascertain similarities and divergences in the tail returns from around the world. To do so, it applies extreme value theory to equity indices ...

  12. Financial markets trend: ageing and pension system reform

    OpenAIRE

    Panetta, Ida Claudia

    2006-01-01

    Ageing have prompted important changes in the structure of pension system with substantial differences across the most developed countries. Given that ageing populations are driving a growing need for private form of saving for retirement, the pension fund industry is like to exert an increasing influence in the financial markets. Much of the additional retirement related flows to capital markets will be intermediated by pension funds although their importance varies considerably across count...

  13. The balance sheet approach to financial crises in emerging markets

    OpenAIRE

    Cozzi, Giovanni; Toporowski, Jan

    2006-01-01

    This paper contrasts the conventional balance sheet approach to the analysis of economic disturbances in emerging markets with the alternative balance sheet approach that applies and extends Minsky's Financial Instability Hypothesis to (open) emerging market economies. Earlier balance sheet studies are found to be flawed because of a failure to disaggregate firms' balance sheets. Examination of such balance sheets in Thailand, Malaysia, Indonesia, Singapore, and Hong Kong suggests that firms ...

  14. Computational modeling of collective human behavior: Example of financial markets

    OpenAIRE

    Kirou, Andy; Ruszczycki, Blazej; Walser, Markus; Johnson, Neil F.

    2008-01-01

    We discuss how minimal financial market models can be constructed by bridging the gap between two existing, but incomplete, market models: a model in which a population of virtual traders make decisions based on common global information but lack local information from their social network, and a model in which the traders form a dynamically evolving social network but lack any decision-making based on global information. We show that a suitable combination of these two mode...

  15. Characterization of large price variations in financial markets

    OpenAIRE

    Johansen, Anders

    2002-01-01

    Statistics of drawdowns (loss from the last local maximum to the next local minimum) plays an important role in risk assessment of investment strategies. As they incorporate higher ($>$ two) order correlations, they offer a better measure of real market risks than the variance or other cumulants of daily (or some other fixed time scale) of returns. Previous results have shown that the vast majority of drawdowns occurring on the major financial markets have a distribution whi...

  16. Business groups in emerging markets: financial control and sequential investment

    OpenAIRE

    Hainz, Christa

    2006-01-01

    Business groups in emerging markets perform better than unaffiliated firms. One explanation is that business groups substitute some functions of missing institutions, for example, enforcing contracts. We investigate this by setting up a model where firms within the business group are connected to each other by a vertical production structure and an internal capital market. Thus, the business group?s organizational mode and the financial structure allow a self-enforcing contract to be designe...

  17. Business Groups in Emerging Markets - Financial Control and Sequential Investment

    OpenAIRE

    Hainz, Christa

    2006-01-01

    Business groups in emerging markets perform better than unaffiliated firms. One explanation is that business groups substitute some functions of missing institutions, for example, enforcing contracts. We investigate this by setting up a model where firms within the business group are connected to each other by a vertical production structure and an internal capital market. Thus, the business group's organizational mode and the financial structure allow a self-enforcing contract to be designed...

  18. Imperfect Financial Markets as a Commitment Device for the Government

    OpenAIRE

    Simon, Jenny

    2014-01-01

    When the government lacks the ability to commit to a tax policy over time, agents? involvement in imperfect financial markets can be welfare improving. Agents borrow against their promised income in markets that are incomplete in the sense that claims cannot be resold without loss. Taking these contractual positions into account thus changes the government?s ex-post incentives to renege on the promised tax schedule. Any increase in redistribution ex-post would lead to some agents not being ...

  19. Modelling Information Flows in Financial Markets

    CERN Document Server

    Brody, Dorje C; Macrina, Andrea

    2010-01-01

    This paper presents an overview of information-based asset pricing. In this approach, an asset is defined by its cash-flow structure. The market is assumed to have access to "partial" information about future cash flows. Each cash flow is determined by a collection of independent market factors called X-factors. The market filtration is generated by a set of information processes, each of which carries information about one of the X-factors, and eventually reveals the X-factor. Each information process has two terms, one of which contains a "signal" about the associated X-factor, and the other of which represents "market noise". The price of an asset is given by the expectation of the discounted cash flows in the risk-neutral measure, conditional on the information provided by the market. When the market noise is modelled by a Brownian bridge one is able to construct explicit formulae for asset prices, as well as semi-analytic expressions for the prices and greeks of options and derivatives. In particular, op...

  20. Electrodynamical model of quasi-efficient financial market

    CERN Document Server

    Ilinskii, K N; Ilinski, Kirill N.; Stepanenko, Alexander S.

    1998-01-01

    The modelling of financial markets presents a problem which is both theoretically challenging and practically important. The theoretical aspects concern the issue of market efficiency which may even have political implications \\cite{Cuthbertson}, whilst the practical side of the problem has clear relevance to portfolio management \\cite{Elton} and derivative pricing \\cite{Hull}. Up till now all market models contain "smart money" traders and "noise" traders whose joint activity constitutes the market \\cite{DeLong,Bak}. On a short time scale this traditional separation does not seem to be realistic, and is hardly acceptable since all high-frequency market participants are professional traders and cannot be separated into "smart" and "noisy". In this paper we present a "microscopic" model with homogenuous quasi-rational behaviour of traders, aiming to describe short time market behaviour. To construct the model we use an analogy between "screening" in quantum electrodynamics and an equilibration process in a mar...

  1. Corporate Investments in Asian Emerging Markets: Financial Conditions, Financial Development, and Financial Constraints

    OpenAIRE

    Wang, Jianxin; Gochoco-Bautista, Maria Socorro; Sotocinal, Noli

    2013-01-01

    Motivated by the literature on the finance–growth nexus, this paper explores the mechanisms through which finance affects corporate investments and capital accumulation. We separate the effects of financial conditions from those of financial development. Based on a sample of firms from five Asian emerging economies, we find that (1) financial conditions and financial development affect corporate investments through different channels. Financial conditions affect firms' growth opportunities an...

  2. The effects of a financial transaction tax in an artificial financial market

    OpenAIRE

    Fricke, Daniel; Lux, Thomas

    2013-01-01

    We investigate the effects of a Financial Transaction Tax (FTT) in an order-driven artificial financial market. FTTs are meant to limit short-term speculative behavior by reducing the amount of excess liquidity in the system. To quantify these effects, adjustments in trading strategies and their effects on liquidity need to be taken into account. We model an agent-based continuous double-auction, allowing for a continuum of investment strategies within the chartist/fundamentalist framework. F...

  3. The Financial Instruments for Risk Management on the International Financial Markets

    OpenAIRE

    Alina Hagiu

    2008-01-01

    The international financial market is extremely volatile because of the influence of anumerous objective and subjective factors. Because of these, în their fight for maximizing the profit, the creditinstitutes confronts permanently with all sort of risks.It is important to know that the risk is generated by a numerous operations and procedures. From thesecause, at least în the financial field, the risk must be considered as a complex of risks, în the sense that they canhave common causes, and...

  4. Financial Liberalization, Private Investment and Portfolio Choice: Financialization of Real Sectors in Emerging Markets

    OpenAIRE

    Demir, Firat

    2008-01-01

    Using firm level panel data, we analyze the impacts of rates of return gap between financial and fixed investments under uncertainty on real investment performance in three emerging markets, Argentina, Mexico and Turkey. Employing a portfolio choice model to explain the low fixed investment rates in developing countries during the 1990s, we suggest that rather than investing in irreversible long term fixed investments, firms may choose to invest in reversible short term financial investments ...

  5. The structure and resilience of financial market networks

    Science.gov (United States)

    Kauê Dal'Maso Peron, Thomas; da Fontoura Costa, Luciano; Rodrigues, Francisco A.

    2012-03-01

    Financial markets can be viewed as a highly complex evolving system that is very sensitive to economic instabilities. The complex organization of the market can be represented in a suitable fashion in terms of complex networks, which can be constructed from stock prices such that each pair of stocks is connected by a weighted edge that encodes the distance between them. In this work, we propose an approach to analyze the topological and dynamic evolution of financial networks based on the stock correlation matrices. An entropy-related measurement is adopted to quantify the robustness of the evolving financial market organization. It is verified that the network topological organization suffers strong variation during financial instabilities and the networks in such periods become less robust. A statistical robust regression model is proposed to quantity the relationship between the network structure and resilience. The obtained coefficients of such model indicate that the average shortest path length is the measurement most related to network resilience coefficient. This result indicates that a collective behavior is observed between stocks during financial crisis. More specifically, stocks tend to synchronize their price evolution, leading to a high correlation between pair of stock prices, which contributes to the increase in distance between them and, consequently, decrease the network resilience.

  6. The structure and resilience of financial market networks.

    Science.gov (United States)

    Peron, Thomas Kaue Dal'Maso; Costa, Luciano da Fontoura; Rodrigues, Francisco A

    2012-03-01

    Financial markets can be viewed as a highly complex evolving system that is very sensitive to economic instabilities. The complex organization of the market can be represented in a suitable fashion in terms of complex networks, which can be constructed from stock prices such that each pair of stocks is connected by a weighted edge that encodes the distance between them. In this work, we propose an approach to analyze the topological and dynamic evolution of financial networks based on the stock correlation matrices. An entropy-related measurement is adopted to quantify the robustness of the evolving financial market organization. It is verified that the network topological organization suffers strong variation during financial instabilities and the networks in such periods become less robust. A statistical robust regression model is proposed to quantity the relationship between the network structure and resilience. The obtained coefficients of such model indicate that the average shortest path length is the measurement most related to network resilience coefficient. This result indicates that a collective behavior is observed between stocks during financial crisis. More specifically, stocks tend to synchronize their price evolution, leading to a high correlation between pair of stock prices, which contributes to the increase in distance between them and, consequently, decrease the network resilience. PMID:22462993

  7. Essays on financial markets and the macroeconomy

    OpenAIRE

    Mo?nch, Emanuel

    2006-01-01

    This thesis consists of four essays of independent interest which make empirical and methodological contributions to the fields of financial economics and macroeconomics. The first essay deals with the proper specification of investors’ information set in tests of conditional asset pricing models. In particular, it advances the use of dynamic factors as conditioning variables. By construction, dynamic factors summarize the information in a large number of variables and are therefore intui...

  8. Shocks, Crashes and Bubbles in Financial Markets

    OpenAIRE

    Johansen, Anders; Sornette, Didier

    2010-01-01

    In a series of papers based on analogies with statistical physics models, we have proposed that most financial crashes are the climax of so-called log-periodic power law signatures (LPPL) associated with speculative bubbles (Sornette and Johansen, 1998; Johansen and Sornette, 1999; Johansen et al. 1999; Johansen et al. 2000; Sornette and Johansen, 2001a). In addition, a large body of empirical evidence supporting this proposition have been presented (Sornette et al. 1996; Sornette and Johanse...

  9. Non-computability, unpredictability, and financial markets

    OpenAIRE

    Grac?a, Daniel

    2012-01-01

    One of the most significant achievements from theoretical computer science was to show that there are non-computable problems, which can- not be solved through algorithms. Although the formulation of such prob- lems is mathematical, they often can be interpreted as problems derived from other elds, like physics or computer science. However no non- computable problem with economical or financial inspiration has been presented before.1 Here we study the problem of valuation: giv...

  10. Understanding the source of multifractality in financial markets.

    Czech Academy of Sciences Publication Activity Database

    Baruník, Jozef; Aste, T.; Di Matteo, T.; Liu, R.

    2012-01-01

    Ro?. 391, ?. 17 (2012), s. 4234-4251. ISSN 0378-4371 R&D Projects: GA ?R GA402/09/0965 Institutional research plan: CEZ:AV0Z10750506 Keywords : Multifractality * Financial market s * Hurst exponent Subject RIV: AH - Economics Impact factor: 1.676, year: 2012 http://www.sciencedirect.com/science/article/pii/S0378437112002890

  11. IBM announces global Grid computing solutions for banking, financial markets

    CERN Multimedia

    2003-01-01

    "IBM has announced a series of Grid projects around the world as part of its Grid computing program. They include IBM new Grid-based product offerings with business intelligence software provider SAS and other partners that address the computer-intensive needs of the banking and financial markets industry (1 page)."

  12. Traders' strategy with price feedbacks in financial market

    OpenAIRE

    Mizuno, Takayuki; Nakano, Tohur; Takayasu, Misako; Takayasu, Hideki

    2003-01-01

    We introduce an autoregressive-type model of prices in financial market taking into account the self-modulation effect. We find that traders are mainly using strategies with weighted feedbacks of past prices. These feedbacks are responsible for the slow diffusion in short times, apparent trends and power law distribution of price changes.

  13. Correlation between Islamic stock and Commodity markets: An investigation into the impact of financial crisis and financialization of commodity markets

    OpenAIRE

    Khan, Aftab; Masih, Mansur

    2014-01-01

    The repercussions of the recent financial crisis were felt over different parts of the world causing much calamity to different markets, economies and investors. The capital markets, in particular, took a severe hit during the crisis plummeting to all-time lows. However, before the crisis, the significant rise in commodity prices since 2002 and their subsequent fall since July 2008 have revived the debate on the role of commodities in the strategic and tactical asset allocation process. There...

  14. Cointegration-based financial networks study in Chinese stock market

    Science.gov (United States)

    Tu, Chengyi

    2014-05-01

    We propose a method based on cointegration instead of correlation to construct financial complex network in Chinese stock market. The network is obtained starting from the matrix of p-value calculated by Engle-Granger cointegration test between all pairs of stocks. Then some tools for filtering information in complex network are implemented to prune the complete graph described by the above matrix, such as setting a level of statistical significance as a threshold and Planar Maximally Filtered Graph. We also calculate Partial Correlation Planar Graph of these stocks to compare the above networks. Last, we analyze these directed, weighted and non-symmetric networks by using standard methods of network analysis, including degree centrality, PageRank, HITS, local clustering coefficient, K-shell and strongly and weakly connected components. The results shed a new light on the underlying mechanisms and driving forces in a financial market and deepen our understanding of financial complex network.

  15. Coherent Patterns in Nuclei and in Financial Markets

    CERN Document Server

    Drozdz, S; Speth, J

    2010-01-01

    In the area of traditional physics the atomic nucleus belongs to the most complex systems. It involves essentially all elements that characterize complexity including the most distinctive one whose essence is a permanent coexistence of coherent patterns and of randomness. From a more interdisciplinary perspective, these are the financial markets that represent an extreme complexity. Here, based on the matrix formalism, we set some parallels between several characteristics of complexity in the above two systems. We, in particular, refer to the concept - historically originating from nuclear physics considerations - of the random matrix theory and demonstrate its utility in quantifying characteristics of the coexistence of chaos and collectivity also for the financial markets. In this later case we show examples that illustrate mapping of the matrix formulation into the concepts originating from the graph theory. Finally, attention is drawn to some novel aspects of the financial coherence which opens room for s...

  16. Hitting Time Distributions in Financial Markets

    OpenAIRE

    Valenti, Davide; Spagnolo, Bernardo; Bonanno, Giovanni

    2006-01-01

    We analyze the hitting time distributions of stock price returns in different time windows, characterized by different levels of noise present in the market. The study has been performed on two sets of data from US markets. The first one is composed by daily price of 1071 stocks trade for the 12-year period 1987-1998, the second one is composed by high frequency data for 100 stocks for the 4-year period 1995-1998. We compare the probability distribution obtained by our empir...

  17. Testing for nonlinear dependence in financial markets.

    Science.gov (United States)

    Dore, Mohammed; Matilla-Garcia, Mariano; Marin, Manuel Ruiz

    2011-07-01

    This article addresses the question of improving the detection of nonlinear dependence by means of recently developed nonparametric tests. To this end a generalized version of BDS test and a new test based on symbolic dynamics are used on realizations from a well-known artificial market for which the dynamic equation governing the market is known. Comparisons with other tests for detecting nonlinearity are also provided. We show that the test based on symbolic dynamics outperforms other tests with the advantage that it depends only on one free parameter, namely the embedding dimension. This does not hold for other tests for nonlinearity. PMID:21645438

  18. On the Market Risks Prevention of China’s Commercial Banks’Financial Product under the Financial Crisis

    OpenAIRE

    Mengchun Ding; Hongxin Li

    2009-01-01

    The year 2009 faces significant changes of economy. In front of the global financial crisis originated from Wall Street sub-prime mortgage crisis, China will be affected inevitably. The financial products market of the banking industry suffers from serious test. Starting from the concept, the classification, the risks, and the development of China’s commercial banks’ financial products, this paper analyzes the market risks of China’s commercial banks’ financial products under the fina...

  19. Financial Networks in the Korean Stock Exchange Market

    CERN Document Server

    Yoon, S M; Yoon, Seong-Min; Kim, Kyungsik

    2005-01-01

    We investigate the financial network in the Korean stock exchange (KSE) market, using both numerical simulations and scaling arguments. We estimate the cross-correlation on the stock price exchanges of all companies listed on the the Korean stock exchange market, where all companies are fully connected via weighted links, by introducing a weighted random graph. The degree distribution and the edge density are discussed numerically from the market graph, and the statistical analysis for the degree distribution of vertices is particularly found to approximately follow the power law.

  20. DEEPENING SERVICES MARKET INTEGRATION - A CRITICAL ASSESSMENT

    Directory of Open Access Journals (Sweden)

    Jacques Pelkmans

    2007-12-01

    Full Text Available The greatest asset of the European Union is undoubtedly its internal market. However, the internal market is not completed: it suffers from a giant hole with respect to many services. The present contribution addresses the status of services in the internal market and, in particular, the horizontal liberalisation (or, the lack of it of services outside the two large sectors which greatly deepened market integration (6 modes of transport and 3 financial services markets. Because a horizontal perspective on services in the EU is still little understood, it is briefly summarized what services really are and how their regulatory logic in the internal market can help to classify them. The (strong economic case for deepening services market integration is built on recent empirical economic analysis as well as simulation. This is followed by a discussion, with flowchart, of the Bolkestein draft directive, against the backdrop of the frustrating lack of, or at best, selective progress on services for decades. A survey of economic impact studies of the draft directive is provided, too, underpinning its importance even when the infamous origin principle is taken out. Some light is subsequently shed on the tumultuous politicisation of the services debate. Emphasis is laid on the socio-economic context (which, it is submitted, sharpened the discussion at times into polarisation and a series of other factors such as the diversity of the national regulatory frameworks of services and the labour employed, the complexity of the draft directive, the potentially radical nature of the origin principle (especially for those not aware of the case law of the ECJ, the dominant role of the EP and the opportunism of leading national politicians. Finally, directive 2006/123 –meanwhile in force – is explained and briefly assessed. Apart from the conspicuous manifestation of 'Angst' in drafting the directive, the (de merits are set out. The conclusion is that a badly drafted directive with excessive emphasis on exclusions and derogations, and which lacks a driving principle, nevertheless comprises several functional obligations in general (e.g single window, administrative cooperation in dedicated networks, etc., significant advantages for free establishment (which imply equally significant economic gains and a firm discipline for (or prohibition of bad practices with respect to temporary provision of services.

  1. Endogenous versus Exogenous Crashes in Financial Markets

    CERN Document Server

    Johansen, A

    2002-01-01

    We perform an extended analysis of the distribution of drawdowns in the two leading exchange markets (US dollar against the Deutsmark and against the Yen), in the major world stock markets, in the U.S. and Japanese bond market and in the gold market, by introducing the concept of ``coarse-grained drawdowns,'' which allows for a certain degree of fuzziness in the definition of cumulative losses and improves on the statistics of our previous results on the existence of ``outliers'' or ``kings.'' Then, for each identified outlier, we check whether log-periodic power law signatures (LPPS) are present and take the existence of LPPS as the qualifying signature for an endogenous crash: this is because a drawdown outlier is seen as the end of a speculative unsustainable accelerating bubble generated endogenously. In the absence of LPPS, we are able to identify what seems to have been the relevant historical event, i.e., a new piece of information of such magnitude and impact that it is seems reasonable to attribute t...

  2. How financial markets impact Alberta gas pricing

    International Nuclear Information System (INIS)

    The relationship between natural gas supply and price and market fundamentals was probed with particular reference to how they affect the pricing of Alberta natural gas. It was concluded that Alberta gas prices are most affected by fluctuations in the NYMEX and that the expanding pipeline capacity will increase the liquidity in the Alberta/NYMEX Basis

  3. On the Market Risks Prevention of China’s Commercial Banks’Financial Product under the Financial Crisis

    Directory of Open Access Journals (Sweden)

    Mengchun Ding

    2009-07-01

    Full Text Available The year 2009 faces significant changes of economy. In front of the global financial crisis originated from Wall Street sub-prime mortgage crisis, China will be affected inevitably. The financial products market of the banking industry suffers from serious test. Starting from the concept, the classification, the risks, and the development of China’s commercial banks’ financial products, this paper analyzes the market risks of China’s commercial banks’ financial products under the financial crisis and advances specific countermeasures for China’s commercial banks dealing with crisis and defending market risks.

  4. Sector strength and efficiency on developed and emerging financial markets

    Science.gov (United States)

    Fiedor, Pawe?

    2014-11-01

    In this paper we analyse the importance of sectors and market efficiency on developed and emerging financial markets. To perform this we analyse New York Stock Exchange between 2004 and 2013 and Warsaw Stock Exchange between 2000 and 2013. To find out the importance of sectors we construct minimal spanning trees for annual time series consisting of daily log returns and calculate centrality measures for all stocks, which we then aggregate by sectors. Such analysis is of interest to analysts for whom the knowledge of the influence of particular groups of stocks to the market behaviour is crucial. We also analyse the predictability of price changes on those two markets formally, using the information-theoretic concept of entropy rate, to find out the differences in market efficiency between a developed and an emerging market, and between sectors themselves. We postulate that such analysis is important to the study of financial markets as it can contribute to the profitability of investments, particularly in the case of algorithmic trading.

  5. Using an Artificial Financial Market for studying a Cryptocurrency Market

    OpenAIRE

    Cocco, Luisanna; Concas, Giulio; Marchesi, Michele

    2014-01-01

    This paper presents an agent-based artificial cryptocurrency market in which heterogeneous agents buy or sell cryptocurrencies, in particular Bitcoins. In this market, there are two typologies of agents, Random Traders and Chartists, which interact with each other by trading Bitcoins. Each agent is initially endowed with a finite amount of crypto and/or fiat cash and issues buy and sell orders, according to her strategy and resources. The number of Bitcoins increases over ti...

  6. Micro and Macro Benefits of Random Investments in Financial Markets

    CERN Document Server

    Biondo, Alessio Emanuele; Rapisarda, Andrea

    2014-01-01

    In this paper, making use of recent statistical physics techniques and models, we address the specific role of randomness in financial markets, both at the micro and the macro level. In particular, we review some recent results obtained about the effectiveness of random strategies of investment, compared with some of the most used trading strategies for forecasting the behavior of real financial indexes. We also push forward our analysis by means of a Self-Organized Criticality model, able to simulate financial avalanches in trading communities with different network topologies, where a Pareto-like power law behavior of wealth spontaneously emerges. In this context, we present new findings and suggestions for policies based on the effects that random strategies can have in terms of reduction of dangerous financial extreme events, i.e. bubbles and crashes.

  7. Micro and macro benefits of random investments in financial markets

    Science.gov (United States)

    Biondo, A. E.; Pluchino, A.; Rapisarda, A.

    2014-10-01

    In this paper, making use of recent statistical physics techniques and models, we address the specific role of randomness in financial markets, both at the micro and the macro level. In particular, we review some recent results obtained about the effectiveness of random strategies of investment, compared with some of the most used trading strategies for forecasting the behavior of real financial indexes. We also push forward our analysis by means of a Self-Organized Criticality model, able to simulate financial avalanches in trading communities with different network topologies, where a Pareto-like power law behavior of wealth spontaneously emerges. In this context, we present new findings and suggestions for policies based on the effects that random strategies can have in terms of reduction of dangerous financial extreme events, i.e. bubbles and crashes.

  8. Global Economic Crisis. Case Study on the Romanian Financial Market

    Directory of Open Access Journals (Sweden)

    Prof. Ph. D. Stelian Stancu

    2009-05-01

    Full Text Available The first part of the present paper proposes to study the concept of global financial system and the issues that led to outline its approach frame, as well as what effects could have the actual economic crisis on the global financial system and which are the factors considered to be the causes that generated economic crises in the last few years.Moreover, in this paper we refer to the concept of financial instability, more precise we underline the fact that banks can represent the main financial instability stimulus.In the final part of this paper we analyze the Romanian capital market on the global economic crisis background being emphasized the fact that the effects of this crisis are felt also on our national economy.

  9. Crossover Phenomena in Detrended Fluctuation Analysis Used in Financial Markets

    International Nuclear Information System (INIS)

    A systematic analysis of Shanghai and Japan stock indices for the period of Jan. 1984 to Dec. 2005 is performed. After stationarity is verified by ADF (Augmented Dickey-Fuller) test, the power spectrum of the data exhibits a power law decay as a whole characterized by 1/f? processes with possible long range correlations. Subsequently, by using the method of detrended fluctuation analysis (DFA) of the general volatility in the stock markets, we find that the long-range correlations are occurred among the return series and the crossover phenomena exhibit in the results obviously. Further, Shanghai stock market shows long-range correlations in short time scale and shows short-range correlations in long time scale. Whereas, for Japan stock market, the data behaves oppositely absolutely. Last, we compare the varying of scale exponent in large volatility between two stock markets. All results obtained may indicate the possibility of characteristic of multifractal scaling behavior of the financial markets.

  10. Rebuild Normality in Chinese Financial Markets with Range-Based Bipower Variance

    Directory of Open Access Journals (Sweden)

    Lianqian Yin

    2014-11-01

    Full Text Available Realized range and bipower variance are two important improvements for increasingly popular high-frequency realized estimators in financial markets. This paper verifies a new type of estimator named realized range-based bipower variance and carries out its empirical research with high frequency data from Shanghai Composite Index (SHCI and Shenzhen Synthesis Index (SZSI. The results show that 1 this estimator combines merits of bothrealized range and realized bipower variance. It is as efficient as realized range estimator and at the same timeremains a consistent estimation of integrated variance of Chinese financial markets’ fluctuation; 2 After standardized by realized range based bipower variance, the distributions of SHCI and SZSI’s daily returns are neither skew nor with high kurtos is anymore. The fact tail and high peak of daily returns are basically eliminated by this high-frequency variance estimator, and the standardized distributions of these returns are nearly normal. 3 Comparative studies show that among four types of realized volatility estimators, the range based bipower variance is the best one to rebuild normality in Chinese financial markets. These findings mean when measuring volatility or fluctuations of financial assets, the usage of this new estimator will increase the performance of many financial practices like pricing or risk management. One feasible way to extend this paper is to consider co-estimators of related assets and detect their impacts to the dynamics of volatilities.

  11. Coupled effects of market impact and asymmetric sensitivity in financial markets

    OpenAIRE

    Zhong, Li-xin; Xu, Wen-juan; Ren, Fei; Shi, Yong-dong

    2012-01-01

    By incorporating market impact and asymmetric sensitivity into the evolutionary minority game, we study the coevolutionary dynamics of stock prices and investment strategies in financial markets. Both the stock price movement and the investors' global behavior are found to be closely related to the phase region they fall into. Within the region where the market impact is small, investors' asymmetric response to gains and losses leads to the occurrence of herd behavior, when ...

  12. Credit market imperfections, financial market regulation and business cycles in Eastern Europe

    OpenAIRE

    Drechsel, Katja; Westermann, Frank

    2009-01-01

    Credit market imperfections give rise to boom-bust cycle episodes in emerging markets. In the present paper, we aim to provide a comprehensive analysis for Eastern Europe. We focus on documenting credit market imperfections, asymmetric financing opportunities across sectors, and business cycle fluctuations at the aggregate and sectoral level. The results will be discussed in the policy context of the re-regulation of the financial system. We will propose in an unconventional way to think abou...

  13. Heterogeneous volatility cascade in financial markets

    Science.gov (United States)

    Zumbach, Gilles; Lynch, Paul

    2001-09-01

    Using high frequency data, we have studied empirically the change of volatility, also called volatility derivative, for various time horizons. In particular, the correlation between the volatility derivative and the volatility realized in the next time period is a measure of the response function of the market participants. This correlation shows explicitly the heterogeneous structure of the market according to the characteristic time horizons of the different agents. It reveals a volatility cascade from long to short time horizons, with a structure different from the one observed in turbulence. Moreover, we have developed a new ARCH-type model which incorporates the different groups of agents, with their characteristic memory. This model reproduces well the empirical response function, and allows us to quantify the importance of each group.

  14. Heterogeneous volatility cascade in financial markets

    CERN Document Server

    Zumbach, G; Zumbach, Gilles; Lynch, Paul

    2001-01-01

    Using high frequency data, we have studied empirically the change of volatility, also called volatility derivative, for various time horizons. In particular, the correlation between the volatility derivative and the volatility realized in the next time period is a measure of the response function of the market participants. This correlation shows explicitly the heterogeneous structure of the market according to the characteristic time horizons of the differents agents. It reveals a volatility cascade from long to short time horizons, with a structure different from the one observed in turbulence. Moreover, we have developed a new ARCH-type model which incorporates the different groups of agents, with their characteristic memory. This model reproduces well the empirical response function, and allows us to quantify the importance of each group.

  15. Noise Trader Risk in Financial Markets

    OpenAIRE

    Long, J. Bradford; Shleifer, Andrei; Summers, Lawrence H.; Waldmann, Robert J.

    1990-01-01

    We present a simple overlapping generations model of an asset market in which irrational noise traders with erroneous stochastic beliefs both affect prices and earn higher expected returns. The unpredictability of noise traders' beliefs creates a risk in the price of the asset that deters rational arbitrageurs from aggressively betting against them. As a result, prices can diverge significantly from fundamental values even in the absence of fundamental risk. Moreover, bearing a disproportiona...

  16. Benefits of an integrated European electricity market

    OpenAIRE

    Böckers, Veit; Haucap, Justus; Heimeshoff,Ulrich

    2013-01-01

    This paper analyses the benefits of further market integration of European wholesale electricity markets. Major gains from trade are sill left unrealized due to (1) uncomplete market coupling of national wholesale markets, (2) isolated national regulation of capacity and reserve mechanisms (CRM) and (3) a lack of harmonization of national support schemes for renewable energies.

  17. An adaptive stochastic model for financial markets

    International Nuclear Information System (INIS)

    An adaptive stochastic model is introduced to simulate the behavior of real asset markets. The model adapts itself by changing its parameters automatically on the basis of the recent historical data. The basic idea underlying the model is that a random variable uniformly distributed within an interval with variable extremes can replicate the histograms of asset returns. These extremes are calculated according to the arrival of new market information. This adaptive model is applied to the daily returns of three well-known indices: Ibex35, Dow Jones and Nikkei, for three complete years. The model reproduces the histograms of the studied indices as well as their autocorrelation structures. It produces the same fat tails and the same power laws, with exactly the same exponents, as in the real indices. In addition, the model shows a great adaptation capability, anticipating the volatility evolution and showing the same volatility clusters observed in the assets. This approach provides a novel way to model asset markets with internal dynamics which changes quickly with time, making it impossible to define a fixed model to fit the empirical observations.

  18. Assessment of Development of Financial Markets in Central and Eastern European Countries During the Period of Transformation ?????? ???????? ?????????? ?????? ? ??????? ??????????? ? ????????? ?????? ? ?????? ?????????????

    Directory of Open Access Journals (Sweden)

    Kasiyan Yevgeniy V.

    2013-05-01

    Full Text Available The article studies development of financial markets of transition economies of Central and Eastern Europe as an important factor that influences economic growth. The article also draws attention to specific features of financial reforms directed at creation of efficient stock markets and its productivity. The author makes assessment of the level of development of the securities markets in the countries of Central and Eastern Europe in the context of their qualitative characteristics, such as depth, efficiency and stability. The author also shows the level of integration into international markets of capital and conducts comparison with developed neighbouring countries – members of European Union. The article also studies main shortcomings and problems of development of financial markets in these states and sets prospects of their development in the post-crisis period.? ?????? ?????? ??????????? ???????? ?????????? ?????? ?????????? ???????? ??????????? ? ????????? ?????? ??? ??????? ???????, ????????? ?? ????????????? ????. ? ?????? ????? ?????????? ???????? ?? ??????????? ?????????? ?????? ???????????? ?? ???????? ??????????? ???????? ?????? ? ?? ????????????????. ??????? ??????? ?????? ?????? ???????? ?????? ?????? ????? ? ??????? ??????????? ? ????????? ?????? ? ????????? ?? ???????????? ????????????? ????? ??? ???????, ????????????? ? ????????????, ??????? ??????? ?????????? ? ????????????? ????? ???????? ? ????????? ????????????? ?????????????? ? ????????? ????????? ????????–??????? ???????????? ?????. ????? ? ???? ?????? ??????????? ???????? ?????????? ? ???????? ???????? ?????????? ?????? ? ???? ????????????, ???????? ??????????? ?? ???????? ? ????????????? ??????.

  19. Flights and CAViaR - Financial market stability and the stock-bond return relation

    OpenAIRE

    Viitanen, Tero

    2011-01-01

    PURPOSE OF THE STUDY This paper investigates the intranational dynamic relationship between daily stock and government bond returns of selected countries between January 1, 1999 and December 31, 2010 to assess financial market stability in different countries and market conditions. The underlying hypothesis of this paper is that the financial markets of the world’s most advanced economies exhibit financial market stability even under extreme market conditions and potentially systemic ev...

  20. Time Varying Market Integration and Expected Rteurns in Emerging Markets

    OpenAIRE

    Jong, F. C. J. M.; Roon, F. A.

    2001-01-01

    We use a simple model in which the expected returns in emerging markets depend on their systematic risk as measured by their beta relative to the world portfolio as well as on the level of integration in that market.The level of integration is a time-varying variable that depends on the market value of the assets that can be held by domestic investors only versus the market value of the assets that can be traded freely.Our empirical analysis for 30 emerging markets shows that there are strong...

  1. Market Integration, Return and Volatility Dynamics: Empirical Evidence from African Stock Markets

    Directory of Open Access Journals (Sweden)

    Kashif Saleem

    2014-08-01

    Full Text Available This study examines the extent of integration of liberalized African equity markets with the US, the world, the BRIC countries, and other emerging markets. Specifically, we examine the relationship between seven African markets, namely those of Kenya, South Africa, Mauritius, Tunisia, Egypt, Zambia, and Morocco with the World market index and the US market index. In addition, the relationship between the African markets and the BRIC countries, and the Emerging Market Index is analyzed. We investigate, whether there are pure contagion effects in the markets under consideration during the (US financial crisis of 2008. A bivariate VAR–GARCH–BEKK model is used in the analysis. Our empirical findings support the notion that these markets are still green for investment and provide portfolio benefits. Diversification benefits with African stock markets are dwindling over the years, but these benefits do not disappear entirely. Furthermore, the increased correlations between the African and the developed markets are still small, in comparison with correlations found between developed markets

  2. Responsiveness of the MENA Economic Growth to the EU Financial Integration: A Problem Evaluation

    Directory of Open Access Journals (Sweden)

    Seyed Komail Tayebi

    2011-01-01

    Full Text Available Implementing a currency union may lead members to face financial crisis if their financial markets are not ready to adopt themselves to a new situation. There are still problems like ownership concentration and self-governing states cause limitation in economic growth, financial development, and the ability of a country to take advantage of financial integration. The evidence is that the proportion of global financial flows dedicated to the low- and middle-income developing economies, decreased after the Asian crisis of 1997-98 (Das, 2006. These problems explain why the impact of financial integration has been limited and why it can lead to capital flight and financial crises. In this study, we develop an analytical framework of economic growth and assessing special and differential treatment of currency union (a subject of financial integration members (like the EU and apply this framework to MENA countries. We propose specifically that one can evaluate the "average" impact of the currency union membership on growth of the countries. It reveals the fact that the routine program evaluation can be for all the EU and MENA members. We will call this treated or untreated, respectively. Next, we predict such outcomes for a group of countries based on matching of their characteristics. Hence we use the matching method to make a relationship between a response variable (economic growth and a treatment variable (financial integration experimentally in the economies of the EU and MENA.

  3. Thresholds in the process of international financial integration

    OpenAIRE

    Kose, M. Ayhan; Prasad, Eswar S.; Taylor, Ashley D.

    2009-01-01

    The financial crisis has re-ignited the fierce debate about the merits of financial globalization and its implications for growth, especially for developing countries. The empirical literature has not been able to conclusively establish the presumed growth benefits of financial integration. Indeed, a new literature proposes that the indirect benefits of financial integration may be more important than the traditional financing channel emphasized in previous analyses. A major complication, how...

  4. Measuring Spatial Integration in Niger Grain Markets

    Directory of Open Access Journals (Sweden)

    Seydou Zakari

    2014-01-01

    Full Text Available This paper investigates the spatial integration of Niger cereal markets using monthly retail prices of four staple crops consumed daily in the country. We used co-integration techniques to analyze the price relationship between six main markets. The results revealed high co-integration in Millet and Maize market pairs. On the Contrary, the study indicates also high absence of co-integration in most of Rice and Sorghum markets. Many factors such as poor infrastructures, government interventions, may be major impediments to spatial integration between markets. Development of private grain marketing will help to improve trading between markets, thereby increasing competition and circulation of grain from surplus areas to supply deficit areas.

  5. Integrated Marketing Communication plan for GSK Nordic

    OpenAIRE

    Savelius, Sanna

    2013-01-01

    The purpose of this thesis was to create an integrated marketing communication plan for GSK Nordic. This included creating a marketing gift that will be sent to Swedish service firms and suggestions on how IMC could be implemented also in the future. The focus was on creating a marketing gift which would help GSK Nordic achieve their goal of finding co-operation partner from Sweden. Theoretical part of this thesis focused on the concept of integrated marketing com-munication and communica...

  6. Mitigating corporate water risk: Financial market tools and supply management

    Directory of Open Access Journals (Sweden)

    Wendy M. Larson

    2012-10-01

    Full Text Available A decision framework for business water-risk response is proposed that considers financial instruments and supply management strategies. Based on available and emergent programmes, companies in the agricultural, commodities, and energy sectors may choose to hedge against financial risks by purchasing futures contracts or insurance products. These strategies address financial impacts such as revenue protection due to scarcity and disruption of direct operations or in the supply chain, but they do not directly serve to maintain available supplies to continue production. In contrast, companies can undertake actions in the watershed to enhance supply reliability and/or they can reduce demand to mitigate risk. Intermediate strategies such as purchasing of water rights or water trading involving financial transactions change the allocation of water but do not reduce overall watershed demand or increase water supply. The financial services industry is playing an increasingly important role, by considering how water risks impact decision making on corporate growth and market valuation, corporate creditworthiness, and bond rating. Risk assessment informed by Conditional Value-at-Risk (CVaR measures is described, and the role of the financial services industry is characterised. A corporate decision framework is discussed in the context of water resources management strategies under complex uncertainties.

  7. Business Process Management Integration Solution in Financial Sector

    Directory of Open Access Journals (Sweden)

    2009-01-01

    Full Text Available It is vital for financial services companies to ensure the rapid implementation of new processes to meet speed-to-market, service quality and compliance requirements. This has to be done against a background of increased complexity. An integrated approach to business processes allows products, processes, systems, data and the applications that underpin them to evolve quickly. Whether it’s providing a loan, setting up an insurance policy, or executing an investment instruction, optimizing the sale-to-fulfillment process will always win new business, cement customer loyalty, and reduce costs. Lack of integration across lending, payments and trading, on the other hand, simply presents competitors who are more efficient with a huge profit opportunity.

  8. Financial Restatements, Information Asymmetry, and Market Liquidity

    Directory of Open Access Journals (Sweden)

    KwangJoo Koo

    2014-07-01

    Full Text Available This paper examine whether firms experience different liquidity effects from earnings restatements before and after the implementation of the Sarbanes-Oxley Act (SOX by analyzing various measures of liquidity surrounding the announcement day in the period of 1997-2005.  The study is based on the premise that SOX was intended to improve the transparency and reliability of reported information. We find that the spreads measured in cents detect an abnormality in liquidity due to a general downward trend in the spreads during the period. Dividing the period into three sub-periods because the SOX reinforce more accountability and more confidence for public financial information, we find virtually all declines in liquidity come from the pre-SOX period, which conversely explains that, no significant change in liquidity in the post-Sox period. Decrease in liquidity is influenced by restatements due to revenue recognition, those prompted by party other than auditors. The results show that firms experience more severe liquidity consequences following restatements announced before SOX. Therefore, information asymmetry should be less problematic, and liquidity should be less adversely affected, for restatements announced after SOX.

  9. Modelling Financial Markets by Self-Organized Criticality

    CERN Document Server

    Biondo, A E; Rapisarda, A

    2015-01-01

    We present a financial market model, characterized by self-organized criticality, that is able to generate endogenously a realistic price dynamics and to reproduce well-known stylized facts. We consider a community of heterogeneous traders, composed by chartists and fundamentalists, and focus on the role of informative pressure on market participants, showing how the spreading of information, based on a realistic imitative behavior, drives contagion and causes market fragility. In this model imitation is not intended as a change in the agent's group of origin, but is referred only to the price formation process. We introduce in the community also a variable number of random traders in order to study their possible beneficial role in stabilizing the market, as found in other studies. Finally we also suggest some counterintuitive policy strategies able to dampen fluctuations by means of a partial reduction of information.

  10. Inflation and deflation in financial markets

    Science.gov (United States)

    Kaizoji, Taisei

    2004-11-01

    The aim of this paper is to show new empirical results on the statistical properties of absolute log returns, defined as the absolute value of the log return, in a stock market. We used the daily data of the Nikkei 225 index of the 28-year period from January of 1975 to December of 2002, and compared the statistical properties of the return and absolute log returns in the inflationary (bubble) period with those in the deflationary (anti-bubble) period. Our results show that the distribution of absolute log returns is approximated by the q-exponential distribution where q=1.14, that is, a power-law distribution, in the inflationary period from January of 1975 to December of 1989, and it is accurately described by the q-exponential distribution where q=1, that is, an exponential distribution, in the deflationary period from January of 1990 to December of 2002.

  11. Financial Friction and Multiplicative Markov Market Game

    CERN Document Server

    Aurell, E; Aurell, Erik; Muratore-Ginanneschi, Paolo

    1999-01-01

    We study long-term growth-optimal strategies on a simple market with linear proportional transaction costs. We show that several problems of this sort can be solved in closed form, and explicit the non-analytic dependance of optimal strategies and expected frictional losses of the friction parameter. We present one derivation in terms of invariant measures of drift-diffusion processes (Fokker- Planck approach), and one derivation using the Hamilton-Jacobi-Bellman equation of optimal control theory. We also show that a significant part of the results can be derived without computation by a kind of dimensional analysis. We comment on the extension of the method to other sources of uncertainty, and discuss what conclusions can be drawn about the growth-optimal criterion as such.

  12. 76 FR 44763 - Authority To Designate Financial Market Utilities as Systemically Important

    Science.gov (United States)

    2011-07-27

    ...on Capital Markets Regulation, the Council...for valuing derivatives transactions...which is a market counterparty...the existing regulation of systemically...designated financial market utility that is a derivatives clearing...

  13. Modelling financial markets by the multiplicative sequence of trades

    CERN Document Server

    Gontis, V; Gontis, Vygintas; Kaulakys, Bronislovas

    2004-01-01

    We introduce the stochastic multiplicative point process modelling trading activity of financial markets. Such a model system exhibits power-law spectral density S(f) ~ 1/f**beta, scaled as power of frequency for various values of beta between 0.5 and 2. Furthermore, we analyze the relation between the power-law autocorrelations and the origin of the power-law probability distribution of the trading activity. The model reproduces the spectral properties of trading activity and explains the mechanism of power-law distribution in real markets.

  14. A New Approach to Spreadsheet Analytics Management in Financial Markets

    CERN Document Server

    Sentence, Brian

    2008-01-01

    Spreadsheets in financial markets are frequently used as database, calculator and reporting application combined. This paper describes an alternative approach in which spreadsheet design and database technology have been brought together in order to alleviate management and regulatory concerns over the operational risks of spreadsheet usage. In particular, the paper focuses on the rapid creation and centralised deployment of statistical analytics within a software system now in use by major investment banks, and presents a novel technique for the manipulation in spreadsheets of high volumes of intraday market data.

  15. Self-fulfilling Ising Model of Financial Markets

    CERN Document Server

    Zhou, W X; Zhou, Wei-Xing; Sornette, Didier

    2005-01-01

    We study a dynamical Ising model of agents' opinions (buy or sell) with coupling coefficients reassessed continuously in time according to how past external news (magnetic field) have explained realized market returns. By combining herding, the impact of external news and private information, we test within the same model the hypothesis that agents are rational versus irrational. We find that the stylized facts of financial markets are reproduced only when agents are over-confident and mis-attribute the success of news to predict return to herding effects, thereby providing positive feedbacks leading to the model functioning close to the critical point.

  16. Financial market pressure, tacit collusion and oil price formation

    International Nuclear Information System (INIS)

    We explore a hypothesis that a change in investment behaviour among international oil companies (IOC) towards the end of the 1990s had long-lived effects on OPEC strategies, and on oil price formation. Coordinated investment constraints were imposed on the IOCs through financial market pressures for improved short-term profitability in the wake of the Asian economic crisis. A partial equilibrium model for the global oil market is applied to compare the effects of these tacitly collusive capital constraints on oil supply with an alternative characterised by industrial stability. Our results suggest that even temporary economic and financial shocks may have a long-term impact on oil price formation. (author)

  17. Using trading strategies to detect phase transitions in financial markets

    Science.gov (United States)

    Forró, Z.; Woodard, R.; Sornette, D.

    2015-04-01

    We show that the log-periodic power law singularity model (LPPLS), a mathematical embodiment of positive feedbacks between agents and of their hierarchical dynamical organization, has a significant predictive power in financial markets. We find that LPPLS-based strategies significantly outperform the randomized ones and that they are robust with respect to a large selection of assets and time periods. The dynamics of prices thus markedly deviate from randomness in certain pockets of predictability that can be associated with bubble market regimes. Our hybrid approach, marrying finance with the trading strategies, and critical phenomena with LPPLS, demonstrates that targeting information related to phase transitions enables the forecast of financial bubbles and crashes punctuating the dynamics of prices.

  18. Market risk stress testing for internationally active financial institutions

    Directory of Open Access Journals (Sweden)

    Markovi? Petar

    2011-01-01

    Full Text Available The paper develops a comprehensive framework for market risk stress testing in internationally active financial institutions. We begin by defining the scope and type of the stress test and explaining how to select risk factors and the stress time horizon. We then address challenges related to data gathering, followed by in-depth discussion of techniques for developing realistic shock scenarios. Next the process of shock application to a particular portfolio is described, followed by determination of portfolio profit and loss. We conclude by briefly discussing the issue of assigning probability to stress scenarios. We illustrate the framework by considering the development of a ‘worst case’ scenario using global financial market data from Thomson Reuters Datastream.

  19. An empirical capital market rate function for an emerging market economy in international financial crisis

    OpenAIRE

    Harmse, Chris; Du Toit, Charlotte Barbara

    1999-01-01

    After the first democratic election in South Africa in April 1994, South Africa's financial markets became more exposed and vulnerable to international developments, vide the financial crisis of 1998. This vulnerability raises some important questions. Has its greater degree of openness led to a structural change in the South African economy? Are long-term interest rates now primarily determined by international sentiment regardless of domestic economic and political conditions, during period...

  20. Coupled effects of market impact and asymmetric sensitivity in financial markets

    CERN Document Server

    Zhong, Li-Xin; Ren, Fei; Shi, Yong-Dong

    2012-01-01

    By incorporating market impact and asymmetric sensitivity into the evolutionary minority game, we study the coevolutionary dynamics of stock prices and investment strategies in financial markets. Both the stock price movement and the investors' global behavior are found to be closely related to the phase region they fall into. Within the region where the market impact is small, investors' asymmetric response to gains and losses leads to the occurrence of herd behavior, when all the investors are prone to behave similarly in an extreme way and large price fluctuations occur. A linear relation between the standard deviation of stock price changes and the mean value of strategies is found. With full market impact, the investors tend to self-segregate into opposing groups and the introduction of asymmetric sensitivity leads to the disappearance of dominant strategies. Compared with the situations in the stock market with little market impact, the stock price fluctuations are suppressed and an efficient market occ...

  1. Market risk stress testing for internationally active financial institutions

    OpenAIRE

    Markovi? Petar; Uroševi? Branko

    2011-01-01

    The paper develops a comprehensive framework for market risk stress testing in internationally active financial institutions. We begin by defining the scope and type of the stress test and explaining how to select risk factors and the stress time horizon. We then address challenges related to data gathering, followed by in-depth discussion of techniques for developing realistic shock scenarios. Next the process of shock application to a particular portfolio is described, followed by det...

  2. A New Approach to Spreadsheet Analytics Management in Financial Markets

    OpenAIRE

    Sentence, Brian

    2008-01-01

    Spreadsheets in financial markets are frequently used as database, calculator and reporting application combined. This paper describes an alternative approach in which spreadsheet design and database technology have been brought together in order to alleviate management and regulatory concerns over the operational risks of spreadsheet usage. In particular, the paper focuses on the rapid creation and centralised deployment of statistical analytics within a software system now...

  3. Efficient trading strategies in financial markets with proportional transaction costs

    OpenAIRE

    Campi, Luciano; Jouini, Elye?s; Porte, Vincent

    2011-01-01

    In this article, we characterize efficient portfolios, i.e. portfolios which are optimal for at least one rational agent, in a very general financial market model with proportional transaction costs. In our setting, transaction costs may be random, time-dependent, have jumps and the preferences of the agents are modeled by multivariate expected utility functions. Thanks to the dual formulation of expected multivariate utility maximization problem established in Campi and Owen \\cite{CO}, we pr...

  4. Financial matchmakers in credit markets with heterogeneous borrowers

    OpenAIRE

    Becsi, Zsolt; Li, Victor; Wang, Ping

    2000-01-01

    What happens when liquidity increases in credit markets and more funds are channeled from borrowers to lenders? We examine this question in a general equilibrium model where financial matchmakers help borrowers (firms) and lenders (households) search out and negotiate profitable matches and where the composition of heterogeneous borrowers adjusts to satisfy equilibrium entry conditions. We find that enhanced liquidity causes entry by all borrowers and tends to benefit low-quality borrowers di...

  5. Modelling financial markets by the multiplicative sequence of trades

    OpenAIRE

    Gontis, Vygintas; Kaulakys, Bronislovas

    2004-01-01

    We introduce the stochastic multiplicative point process modelling trading activity of financial markets. Such a model system exhibits power-law spectral density S(f) ~ 1/f**beta, scaled as power of frequency for various values of beta between 0.5 and 2. Furthermore, we analyze the relation between the power-law autocorrelations and the origin of the power-law probability distribution of the trading activity. The model reproduces the spectral properties of trading activity a...

  6. A new financial metric for the art market

    OpenAIRE

    Charlin, Ventura; Cifuentes, Arturo

    2013-01-01

    This paper introduces a new financial metric for the art market. The metric, which we call Artistic Power Value (APV), is based on the price per unit of area (dollars per square centimeter) and is applicable to two-dimensional art objects such as paintings. In addition to its intuitive appeal and ease of computation, this metric has several advantages from the investor’s viewpoint. For example, it makes it easy to: (i) estimate price ranges for different artists; (ii) perform comparisons...

  7. Asymptotic Arbitrage in Large Financial Markets With Friction

    OpenAIRE

    Le?pinette, Emmanuel; Ostafe, Lavinia

    2011-01-01

    In the modern version of Arbitrage Pricing Theory suggested by Kabanov and Kramkov the fundamental financially meaningful concept is an asymptotic arbitrage. The "real world" large market is represented by a sequence of "models" and, though each of them is arbitrage free, investors may obtain non-risky profits in the limit. Mathematically, absence of the asymptotic arbitrage is expressed as contiguity of envelopes of the sets of equivalent martingale measures and objective probabilities. The ...

  8. The value of social networks in financial markets

    OpenAIRE

    Rancan, Michela

    2013-01-01

    Social contacts influence decisions and economic outputs in a variety of contexts. Does social network matter also in financial markets? In this paper I investigate the effect of social networks on mutual funds performance by exploiting data on the education of U.S. fund managers. The results show that performance is better for fund managers with many social connections. Furthermore, positional advantages in the social network generate superior performance. This evidence suggests that social...

  9. Financial Crises in Efficient Markets: How Fundamentalists Fuel Volatility

    OpenAIRE

    Szafarz, Ariane

    2010-01-01

    When a financial crisis breaks out, speculators typically get the blame whereas fundamentalists are presented as the safeguard against excessive volatility. This paper proposes an asset pricing model where two types of rational traders coexist: short-term speculators and long-term fundamentalists, both sharing the same information set. In this framework, excess volatility not only exists, but is actually fueled by fundamental trading. Actually, efficient markets are more volatile with a few s...

  10. Financial disclosure and market transparency with costly information processing

    OpenAIRE

    Di Maggio, Marco; Pagano, Marco

    2014-01-01

    We study a model where some investors ("hedgers") are bad at information processing, while others ("speculators") have superior information-processing ability and trade purely to exploit it. The disclosure of financial information induces a trade externality: if speculators refrain from trading, hedgers do the same, depressing the asset price. Market transparency reinforces this mechanism, by making speculators' trades more visible to hedgers. As a consequence, issuers will oppose both the di...

  11. Coherent Patterns in Nuclei and in Financial Markets

    OpenAIRE

    Drozdz, S.; Kwapien, J.; Speth, J.

    2010-01-01

    In the area of traditional physics the atomic nucleus belongs to the most complex systems. It involves essentially all elements that characterize complexity including the most distinctive one whose essence is a permanent coexistence of coherent patterns and of randomness. From a more interdisciplinary perspective, these are the financial markets that represent an extreme complexity. Here, based on the matrix formalism, we set some parallels between several characteristics of...

  12. Revenue diversification in emerging market banks: implications for financial performance

    OpenAIRE

    Ben Gamra, Saoussen; Plihon, Dominique

    2011-01-01

    Shaped by structural forces of change, banking in emerging markets has recently experienced a decline in its traditional activities, leading banks to diversify into new business strategies. This paper examines whether the observed shift into non-interest based activities improves financial performance. Using a sample of 714 banks across 14 East-Asian and Latin-American countries over the post 1997-crisis changing structure, we find that diversification gains are more than of...

  13. Jump Telegraph Processes and Financial Markets with Memory

    OpenAIRE

    Nikita Ratanov

    2007-01-01

    The paper develops a new class of financial market models. These models are based on generalized telegraph processes with alternating velocities and jumps occurring at switching velocities. The model under consideration is arbitrage-free and complete if the directions of jumps in stock prices are in a certain correspondence with their velocity and with the behaviour of the interest rate. A risk-neutral measure and arbitrage-free formulae for a standard call option are constructed. This model ...

  14. Imperfect Financial Markets and the Cyclicality of Social Spending

    OpenAIRE

    Froemel, Maren

    2014-01-01

    I develop a novel link between frictions in international financial markets and fiscal procyclicality.Complementing existing evidence, A decomposition of government expenditure into social spending and public good spending reveals that the cyclical correlation of social spending exhibits the biggest differences across countries. I build a small open economy model with income inequality, endogenous fiscal policy and sovereign default risk to rationalize this spending procyclicality. Government...

  15. On the Modular Dynamics of Financial Market Networks

    OpenAIRE

    Silva, Filipi N.; Comin, Cesar H.; Peron, Thomas K. DM.; Rodrigues, Francisco A.; Ye, Cheng; Wilson, Richard C.; Hancock, Edwin; Costa, Luciano da F

    2015-01-01

    The financial market is a complex dynamical system composed of a large variety of intricate relationships between several entities, such as banks, corporations and institutions. At the heart of the system lies the stock exchange mechanism, which establishes a time-evolving network of transactions among companies and individuals. Such network can be inferred through correlations between time series of companies stock prices, allowing the overall system to be characterized by ...

  16. The continuous time random walk formalism in financial markets

    OpenAIRE

    Masoliver, J.; Montero, M.; Perello, J.; Weiss, G. H.

    2006-01-01

    We adapt continuous time random walk (CTRW) formalism to describe asset price evolution and discuss some of the problems that can be treated using this approach. We basically focus on two aspects: (i) the derivation of the price distribution from high-frequency data, and (ii) the inverse problem, obtaining information on the market microstructure as reflected by high-frequency data knowing only the daily volatility. We apply the formalism to financial data to show that the C...

  17. Determinants of banks' competitiveness in local financial markets

    OpenAIRE

    Ryszard Kata

    2012-01-01

    The article presents the analysis of determinants of banks' competitiveness in local financial markets, with respect to local (cooperative) banks and branches of large commercial banks. The paper also evaluates the competitive position of the banks using the synthetic measure of competitive advantage MPK. The article proves that there are considerable differences between the analyzed groups of banks, in terms of their competitiveness and its determining factors (which are banks' assets). The ...

  18. Exclusion particle models of limit order financial markets

    CERN Document Server

    Challet, D; Challet, Damien; Stinchcombe, Robin

    2002-01-01

    We introduce a new family of exclusion particle models of financial markets where each particle is a limit order. The general notion of trends is introduced, which yield rich types of under/overdiffusive price behaviour; the simplicity of these type of models allows us to analyze the structure of the Hurst plot. We also study price increment correlation function as a function of the trend duration.

  19. Application of stochastic optimal control to financial market debt crises

    OpenAIRE

    Stein, Jerome L.

    2009-01-01

    This interdisciplinary paper explains how mathematical techniques of stochastic optimal control can be applied to the recent subprime mortgage crisis. Why did the financial markets fail to anticipate the recent debt crisis, despite the large literature in mathematical finance concerning optimal portfolio allocation and stopping rules? The uncertainty concerns the capital gain, the return on capital and the interest rate. An optimal debt ratio is derived where the drift is probabilistic but su...

  20. Market Integration through Data Protection: A EU-Mercosur analysis

    OpenAIRE

    Viola Azevedo Cunha, Mario

    2011-01-01

    In the context of the continuous advance of information technologies and biomedicine, and of the creation of economic blocs, this thesis is devoted to the analysis of the role data protection plays in the integration of markets, with a special emphasis on financial and insurance services. Moreover, it is also concerned with the identification of differences in the data protection systems of EU member states and with the development of common standards and principles of data protection that co...

  1. Capital Market Integration in Euroland - The Role of Banks

    OpenAIRE

    Buch, Claudia M.

    1999-01-01

    The introduction of the euro marks a milestone in the process of European financial market integration. This paper analyzes the implications of the euro for cross-border banking activities. A portfolio model is used which captures the role of banks as providers of informational and of risk-diversification services. By eliminating exchange rate risks, the euro enhances the incentives of banks to expand within Euroland. Yet, while the currency bias in bank portfolios will be eliminated, the hom...

  2. Agent-Based Simulation of Financial Markets: A Modular, Continuous-time Approach

    OpenAIRE

    Boer-Sorban, K.

    2008-01-01

    The dynamics of financial markets is subject of much debate among researchers and financial experts trying to understand and explain how financial markets work and traders behave. Diversified explanations result from the complexity of markets, and the hardly observable aspects of price formation mechanisms and of participants' motivation behind trading decisions. In an attempt to provide a better understanding of market dynamics, studies in the realm of agent-based computational economics rep...

  3. Stock Market Financial Risk Prevention and Portfolio Optimization Based on MATLAB 7

    OpenAIRE

    Wen Jing-hua; Zhang Mei; Liu Qing-qing

    2013-01-01

    Investment decision of stock market is the important content researched in the fields of economic management. Aiming at the problem of Financial Risk in Stock Market and Investment Portfolio Optimization, it was researched start from the stock market financial risk measurement and management theory, by making use of the expectation and variance of the proceeds, it was measured that the portfolio expected return and financial risk. Based on this, it was built that the stock market portfolio to...

  4. Financial News and Market Panics in the Age of Highfrequency Sentiment Trading Algorithms

    DEFF Research Database (Denmark)

    Kleinnijenhuis, Jan; Schultz, Friederike

    2013-01-01

    Whether financial news may contribute to market panics is not an innocent question. A positive answer is easily used as a legitimation to limit the freedom of financial journalists. Long-term effects of news are moreover inconsistent with the Efficient Market Hypothesis (EMH), which maintains that new information gives immediately rise to a new equilibrium. The EMH is under discussion, however, as a result of the transformation of financial markets and of financial journalism due to new economic thoughts, new communication theories, high-frequency trading and high-frequency sentiment analysis. As a case study of a market panic we show the impact of US news, UK news and Dutch news on three Dutch banks during the financial crisis of 2007–9. To avoid market panics, financial journalists may strive for greater transparency, not only on asset prices and corporate philosophies, but also on network dependencies in the worldwide financial markets.

  5. Stylized facts of financial markets and market crashes in Minority Games

    OpenAIRE

    Challet, Damien; Marsili, Matteo; Zhang, Yi-cheng

    2001-01-01

    We present and study a Minority Game based model of a financial market where adaptive agents -- the speculators -- interact with deterministic agents -- called producers. Speculators trade only if they detect predictable patterns which grant them a positive gain. Indeed the average number of active speculators grows with the amount of information that producers inject into the market. Transitions between equilibrium and out of equilibrium behavior are observed when the relat...

  6. The Financial Protectionism-Financial Integration Dilemma through Capital Mobility: Economic Performance vs Financial Crises

    Directory of Open Access Journals (Sweden)

    Fatma Kchir Jedidi

    2011-10-01

    Full Text Available In this paper, a theoretical and an empirical discussion of the post-crisis supremacy of financial integration over financial protectionism are proposed. The debate is done through a survey of the advantages each line of thinking brings about to improve economic performance and reduce crisis probability or its magnitude. Moreover, in this paper we study the impact of financial integration through capital mobility on economic growth of a sample of emerging countries. The contribution of our paper is the use of a number of capital mobility openness measures. Thus, we propose to test whether this impact varies with the used measure, the time period and the sample of selected countries. We adopted a panel data analysis technique proposed by Arellano and Bond. With reference to the different estimations conducted, we can conclude that the impact of capital mobility liberalization on economic growth depends on the openness indicator or measure used, the sample of countries studied and the time period examined.

  7. Multi-agent-based Order Book Model of financial markets

    Science.gov (United States)

    Preis, T.; Golke, S.; Paul, W.; Schneider, J. J.

    2006-08-01

    We introduce a simple model for simulating financial markets, based on an order book, in which several agents trade one asset at a virtual exchange continuously. For a stationary market the structure of the model, the order flow rates of the different kinds of order types and the used price time priority matching algorithm produce only a diffusive price behavior. We show that a market trend, i.e. an asymmetric order flow of any type, leads to a non-trivial Hurst exponent for the price development, but not to "fat-tailed" return distributions. When one additionally couples the order entry depth to the prevailing trend, also the stylized empirical fact of "fat tails" can be reproduced by our Order Book Model.

  8. Testing for detailed balance in a financial market

    Science.gov (United States)

    Fiebig, H. R.; Musgrove, D. P.

    2015-06-01

    We test a historical price-time series in a financial market (the NASDAQ 100 index) for a statistical property known as detailed balance. The presence of detailed balance would imply that the market can be modeled by a stochastic process based on a Markov chain, thus leading to equilibrium. In economic terms, a positive outcome of the test would support the efficient market hypothesis, a cornerstone of neo-classical economic theory. In contrast to the usage in prevalent economic theory the term equilibrium here is tied to the returns, rather than the price-time series. The test is based on an action functional S constructed from the elements of the detailed balance condition and the historical data set, and then analyzing S by means of simulated annealing. Checks are performed to verify the validity of the analysis method. We discuss the outcome of this analysis.

  9. On the Modular Dynamics of Financial Market Networks

    CERN Document Server

    Silva, Filipi N; Peron, Thomas K DM; Rodrigues, Francisco A; Ye, Cheng; Wilson, Richard C; Costa, Edwin Hancockm Luciano da F

    2015-01-01

    The financial market is a complex dynamical system composed of a large variety of intricate relationships between several entities, such as banks, corporations and institutions. At the heart of the system lies the stock exchange mechanism, which establishes a time-evolving network of transactions among companies and individuals. Such network can be inferred through correlations between time series of companies stock prices, allowing the overall system to be characterized by techniques borrowed from network science. Here we study the presence of communities in the inferred stock market network, and show that the knowledge about the communities alone can provide a nearly complete representation of the system topology. This is done by defining a simple random model sharing only the sizes and interconnectivity between communities observed in the time-evolving stock market network. We show that many topological characteristics of the inferred networks are preserved in the modeled networks. In particular, we find t...

  10. Financial transmission rights meet Cournot: How TCCs curb market power

    International Nuclear Information System (INIS)

    This paper reconsiders the problem of market power when generators face a demand curve limited by a transmission constraint. After demonstrating that the problem's importance originates in an inherent ambiguity in Cournot-Nash theory, the author reviews Oren's argument that generators in this situation capture all congestion rents. In the one-line case, this argument depends on an untested hypothesis while in the three-line case, the Nash equilibrium was misidentified. Finally, the argument that financial transmission rights (and TCCs in particular) will have zero market value is refuted by modeling the possibility of their purchase by generators. This allows transmission owners, who initially own the TCCs, to capture some of the congestion rent. In fact when total capacity exceeds line capacity by more than the capacity of the largest generator, TCCs should attain their perfectly competitive value, thereby curbing the market power of generators

  11. The Marketing-Finance Interface Towards Financial Services: with Special Reference to New Services Provided by Futures Exchanges

    OpenAIRE

    Pennings, J. M. E.; Wetzels, M.G.M; Meulenberg, M. T. G.

    1999-01-01

    The financial services industry is one of the fastest growing service industries. The financial services industry includes financial derivatives markets such as options and futures markets. In order to ensure survival, firms providing financial services show a rapid product innovation. However, for financial services the risk of failure is considerable. Argues that a synthesis between the financial approach and the marketing approach towards financial services provides a conceptual framework ...

  12. Banks, Development Financial Institutions and Credit Markets in India: A Simple Model of Financial Intermediation

    OpenAIRE

    Ghosh, Saibal

    2003-01-01

    The paper examines the interaction between a bank and a development financial institution (DFIs) in a macroeconomic set-up, both of whom can lend for working capital and investment finance purposes. Our analysis reveals that the reduction in the interest rate premium on bonds over the deposit rate is an important pre-requisite for the DFI to raise its market share in both investment finance and working capital lending. Also, greater corporate access to bond financing raises investment, output...

  13. Pre & Post-Recession Stock Markets Integration: Some Empirical Evidence

    Directory of Open Access Journals (Sweden)

    Purna Chandra Padhan

    2013-03-01

    Full Text Available The financial markets across globe have become distinctly integrated owing to liberalization and globalsiationpolicy as well as advancement of information technology. The contagion effect of macroeconomic disturbancesor financial crisis, internally and externally, is rapidly disseminating across various economies. The recent globalrecession of 2007-09 started with US subprime crises and subsequently followed by Lehman brother crisisaffected all most all major economies of the world. In this contenxt, the present paper explores the stock marketintegration of leading stock exchanges across various countries during pre and post economic crisis of 2007-09.Thus for empirical analysis, it uses the data since 2004-2012. It attempts to find out the breaks point, if any, inthe pattern of stock price movements endogenously. Further efforts have also been made to examine changingpattern of relationship among stock prices using bivariate and multivariate cointegration techniques. The studysuggests that although stock markets are integrated globally, the integration is very weak. This proposes thatstock prices as well as returns are not strongly interrelated across markets. The Granger casualty results alsoprovides mixed evidences, although some changes are noticed about the causality between stock prices frompre-recession to post recession period in Chinese stock markets.

  14. Integrating gas and electric markets and regulation

    International Nuclear Information System (INIS)

    The issues determining what energy companies must do to compete in an increasingly competitive energy market and what regulators must do to ensure fairness in competition were discussed. The similarities of gas and electric markets, and the factors driving their integration were highlighted. The importance of communications and customer service in the energy market and the nature of market power in the gas and electric industries was described. Three reasons were given why gas/electric mergers will be beneficial: (1) operating efficiency, (2) applying gas experience to electric markets, and (3) opportunity to exercise market power. Potential regulatory problems were also reviewed

  15. Integration and contagion in US housing markets

    OpenAIRE

    Cotter, John; Gabriel, Stuart A.; Roll, Richard

    2011-01-01

    This paper explores integration and contagion among US metropolitan housing markets. The analysis applies Federal Housing Finance Agency (FHFA) house price repeat sales indexes from 384 metropolitan areas to estimate a multi-factor model of U.S. housing market integration. It then identifies statistical jumps in metropolitan house price returns as well as MSA contemporaneous and lagged jump correlations. Finally, the paper evaluates contagion in housing markets via parametric assessment of...

  16. From Discrete-Time Models to Continuous-Time, Asynchronous Models of Financial Markets

    OpenAIRE

    Boer-sorban, K.; Kaymak, U.; Spiering, J.

    2006-01-01

    Most agent-based simulation models of financial markets are discrete-time in nature. In this paper, we investigate to what degree such models are extensible to continuous-time, asynchronous modelling of financial markets. We study the behaviour of a learning market maker in a market with information asymmetry, and investigate the difference caused in the market dynamics between the discrete-time simulation and continuous-time, asynchronous simulation. We show that the characteristics of the m...

  17. The Use of Financial Derivatives in Emerging Market Economies: An Empirical Evidence from Bosnia and Herzegovina's Non-Financial Firms

    Directory of Open Access Journals (Sweden)

    Emira Kozarevic

    2014-03-01

    Full Text Available This paper discusses development of financial derivatives markets in emerging market economies, focusing on the use of financial derivatives in risk management purposes of non-financial firms in Bosnia and Herzegovina. For achieving the research goals authors collected data on the derivatives market structure and types of derivative instrument traded, focusing commercial banks, because of the authors’ prior knowledge of the derivatives market. Additionally, in order to assess the current state and development perspectives of derivatives usage by the non-financial firms, authors conducted a research on the random sample of non-financial firms, using data from the Foreign Trade Chamber of Bosnia and Herzegovina as well as the information from lists of derivatives users-clients provided by some banks of Bosnia and Herzegovina. The research shows that derivatives market in the country exists as an over-the-counter market, where banks play dominant role and offer different types of derivative instruments. Three types of derivatives are being offered: currency forwards, currency swaps, and interest rate forwards. The main reason for the poor offer is low demand, lack of non-financial firms’ knowledge about benefits of derivatives, and low number of business operations on the global markets by the non-financial firms.

  18. Market integration and exchange rates in primary commodity markets

    OpenAIRE

    Asche, Frank; Tvetera?s, Sigbjørn

    2003-01-01

    In most recent studies on international market integration exchange rates have not received much attention. This is in contrasts to the exchange rate pass-through literature where the degree of substitution normally is restricted. We revisit the seminal paper of Richardson (1978) that addresses the issue of exchange rate pass-through together with market integration, but in a multivariate cointegration framework. In addition to standard test like the law of one price and exchange rate pass-th...

  19. On the inherent instability of international financial markets: Natural nonlinear interactions between stock and foreign exchange markets

    OpenAIRE

    Dieci, Roberto; Westerhoff, Frank

    2011-01-01

    We develop a novel financial market model in which the stock markets of two countries are linked via and with the foreign exchange market. To be precise, there are domestic and foreign speculators in each of the two stock markets which rely either on linear technical or linear fundamental trading strategies to determine their orders. Since foreign stock market speculators require foreign currency to conduct their trades, all three markets are connected. Our setup entails a natural nonlinearit...

  20. Who Drives the Market? Estimating a Heterogeneous Agent-based Financial Market Model Using a Neural Network Approach

    OpenAIRE

    Klein, A.; Urbig, D.; Kirn, S.

    2008-01-01

    Introduction. The objects of investigation of this work are micro-level behaviors in stock markets. We aim at better understanding which strategies of market participants drive stock markets. The problem is that micro-level data from real stock markets are largely unobservable. We take an estimation perspective to obtain daily time series of fractions of chartists and fundamentalists among market participants. We estimate the heterogeneous agent-based financial market model introduced by Lux ...

  1. Impact of Financial News Headline and Content to Market Sentiment

    Directory of Open Access Journals (Sweden)

    Tan Li

    2014-04-01

    Full Text Available Business and financial news are important resources that investors referred to when monitoring the stock performance. News brings us the latest information about the stock market. Studies have shown that business and financial news have a strong correlation with future stock performance. Business and financial news can be used to extract sentiments and opinions that may assist in the stock price predictions. In this paper, we present a sentiment analyser for financial news articles using lexicon-based approach. We utilized two most important elements of news, the headline and the content as our test data. We use polarity lexicon to distinguish between positive and negative polarity of each term in the corpus. We further investigate on how news headline will affect the sentiment analysis by adjusting the weights of the news headline and news content’s sentiment value. Three sets of experiments were carried out using headline only, content only and headline and content as test data. In the experiment, we used non-stemming tokens and stemming tokens when considering individual word found in the news article. The preliminary results are presented and discussed in this paper.

  2. 76 FR 38059 - Defining Larger Participants in Certain Consumer Financial Products and Services Markets

    Science.gov (United States)

    2011-06-29

    ...markets.'' \\11\\ The factors to be considered in making...involving consumer financial products or services,\\12...supervision, and any other factor that the CFPB determines...consumer financial product or service'') and...consumer credit and related activities, money...

  3. In which Financial Markets do Mutual Fund Theorems hold true?

    CERN Document Server

    Schachermayer, Walter; Taflin, Erik

    2007-01-01

    The Mutual Fund Theorem (MFT) is considered in a general semimartingale financial market S with a finite time horizon T, where agents maximize expected utility of terminal wealth. It is established that: 1) Let N be the wealth process of the num\\'eraire portfolio (i.e. the optimal portfolio for the log utility). If any path-independent option with maturity T written on the num\\'eraire portfolio can be replicated by trading \\emph{only} in N, then the (MFT) holds true for general utility functions, and the num\\'eraire portfolio may serve as mutual fund. This generalizes Merton's classical result on Black-Scholes markets. Conversely, under a supplementary weak completeness assumption, we show that the validity of the (MFT) for general utility functions implies the same replicability property for options on the num\\'eraire portfolio described above. 2) If for a given class of utility functions (i.e. investors) the (MFT) holds true in all complete Brownian financial markets S, then all investors use the same utili...

  4. Dynamics of cluster structures in a financial market network

    Science.gov (United States)

    Kocheturov, Anton; Batsyn, Mikhail; Pardalos, Panos M.

    2014-11-01

    In the course of recent fifteen years the network analysis has become a powerful tool for studying financial markets. In this work we analyze stock markets of the USA and Sweden. We study cluster structures of a market network constructed from a correlation matrix of returns of the stocks traded in each of these markets. Such cluster structures are obtained by means of the P-Median Problem (PMP) whose objective is to maximize the total correlation between a set of stocks called medians of size p and other stocks. Every cluster structure is an undirected disconnected weighted graph in which every connected component (cluster) is a star, or a tree with one central node (called a median) and several leaf nodes connected with the median by weighted edges. Our main observation is that in non-crisis periods of time cluster structures change more chaotically, while during crises they show more stable behavior and fewer changes. Thus an increasing stability of a market graph cluster structure obtained via the PMP could be used as an indicator of a coming crisis.

  5. IS THE ROMANIAN FINANCIAL MARKET PREPARED TO SUPPORT PENSION SYSTEM REFORM?

    OpenAIRE

    LAURA RAISA MILO?

    2012-01-01

    The paper outlines the challenges that a multi-pillar functional pension system may bring, considering the current state of development of the Romanian financial system, considering the macroeconomic stability, the current financial infrastructure and the existence of a regulatory and supervisory framework. After realizing an overview over the Romanian pension market, issues like the capacity of the domestic financial market of generating long-term returns and adequate financial instruments a...

  6. The Future of Financial Markets and Regulation: What Strategy for Europe?

    OpenAIRE

    Gosse?, Jean-baptiste; Plihon, Dominique

    2011-01-01

    This article provides insight into the future of financial markets and regulation in order to define what would be the best strategy for Europe. To preserve financial stability, Europe has to choose between financial opening and independently determining how to regulate finance. Among the five scenarios we defined, three achieve financial stability both inside and outside Europe. In terms of market efficiency, the multi-polar scenario is the best and the fragmentation scenario is the worst, s...

  7. Product Market Integration, Comparative Advantages and Labour Market Performance

    DEFF Research Database (Denmark)

    Andersen, Torben M.; Rose Skaksen, Jan

    2004-01-01

    In this paper, we set up a two-country general equilibrium modelwhere trade unions have wage bargaining power. We show that adecrease in trade distortions inducing further product market integrationgives rise to specialization gains as well as a labour market reformeffect. The implications of the specialization gains are similar to anincrease in labour productivity, whereas the labour market reform effectis similar to an increase in the degree of competition in the labourmarket. Wages, employment and welfare increase as a result of furtherproduct market integration. It is interesting to note that the labourmarket reform effect of product market integration is achieved despitean increase in the wage level.JEL Classification: F15, J30, J50.Keywords: Trade frictions, wage formation, employment, welfaregains.

  8. How does the financial crisis affect volatility behavior and transmission among European stock markets?

    OpenAIRE

    Faten Ben Slimane; Mohamed Mehanaoui; Irfan Akbar Kazi

    2013-01-01

    The spread of the global financial crisis of 2008/2009 was rapid, and impacted the functioning and the performance of financial markets. Due to the importance of this phenomenon, this study aims to explain the impact of the crisis on stock market behavior and interdependence through the study of the intraday volatility transmission. This paper investigates the patterns of linkage dynamics among three European stock markets—France, Germany, and the UK—during the global financial crisis, by...

  9. Empirical evidence on financial spillovers and contagion to international stock markets

    OpenAIRE

    Serwa, Dobromil

    2005-01-01

    In this thesis different definitions of financial contagion are explored. These definitions are applied to test for evidence of contagion on a number of stock markets and during several turbulent periods. First, we investigate the question whether emerging stock markets are more or less vulnerable to large financial shocks than developed capital markets. Second, this study analyzes how significant financial turmoil can change the direction and strength of spillovers between a mature calm mark...

  10. Contagion effect of financial crisis on OECD stock markets

    OpenAIRE

    Kazi, Irfan Akbar; Guesmi, Khaled; Kaabia, Olfa

    2011-01-01

    In this paper we investigate the contagion effect between stock markets of U.S and sixteen OECD countries due to Global Financial Crisis (2007-2009). We apply Dynamic Conditional Correlation GARCH model Engle (2002) to daily stock price data (2002-2009). In order to recognize the contagion effect, we test whether the mean of the DCC coefficients in crisis period differs from that in the pre-crisis period. The identification of break point due to the crisis is made by Bai-Perron (1998, 2003) s...

  11. Ito calculus without probability in idealized financial markets

    CERN Document Server

    Vovk, Vladimir

    2011-01-01

    We consider idealized financial markets in which price paths of the traded securities are cadlag functions, imposing mild restrictions on the allowed size of jumps. We prove the existence of quadratic variation for typical price paths, where the qualification "typical" means that there is a trading strategy that risks only one monetary unit and brings infinite capital if quadratic variation does not exist. This result allows one to apply numerous known results in pathwise Ito calculus to typical price paths; we give a brief overview of such results.

  12. Problems of periodisation of transformation of financial behaviour of households in the market of financial services of Ukraine

    Directory of Open Access Journals (Sweden)

    Kovtun Oksana A.

    2013-03-01

    Full Text Available The goal of this article is justification of transformation of financial behaviour of households within the proposed periodisation of formation and development of the economic system and financial markets of Ukraine. The article conducts analysis of existing periodisations of the national financial market, reveals their advantages and disadvantages and offers own periodisation of establishment and development of the market of financial services. In the process of the study the article proves that changes that take place in the economy directly influence mentality and financial behaviour of households. Deliberate, active or inertial behaviour of households, in its turn, forms both increase and reduction of market demand on several financial services. Prospective directions of further studies are development of indicators of financial behaviour of households under modern conditions and construction of models that would allow formation of behavioural clusters. To do this it is necessary to analyse foreign experience of management of financial potential of households with the aim to detect existing mechanisms of activation of their financial activity and to develop new effective ones.

  13. Economic and Financial Integration of CEECs: The Impact of Financial Instability

    Directory of Open Access Journals (Sweden)

    Claudiu T. Albulescu

    2011-03-01

    Full Text Available The recent financial crisis had a powerful impact upon the European countries' economies, in particular on those from Central and Eastern Europe, with some small exceptions. Thus, applying a panel data approach for a large sample of CEECs, we demonstrate that financial instability negatively influences these countries economic and financial integration. If instability is measured by means of a financial instability index, we have used two classical indicators for the economic integration, namely trade openness and trade intensity index. Indicators such as the interest rates co-movement and the asset share of foreign-owned banks were chosen to calculate financial integration. We highlight the fact that the crisis events hinder the process of CEECs' integration into the EU, deepening the economic gaps between more and less developed EU members.

  14. Coupled effects of market impact and asymmetric sensitivity in financial markets

    Science.gov (United States)

    Zhong, Li-Xin; Xu, Wen-Juan; Ren, Fei; Shi, Yong-Dong

    2013-05-01

    By incorporating market impact and asymmetric sensitivity into the evolutionary minority game, we study the coevolutionary dynamics of stock prices and investment strategies in financial markets. Both the stock price movement and the investors’ global behavior are found to be closely related to the phase region they fall into. Within the region where the market impact is small, investors’ asymmetric response to gains and losses leads to the occurrence of herd behavior, when all the investors are prone to behave similarly in an extreme way and large price fluctuations occur. A linear relation between the standard deviation of stock price changes and the mean value of strategies is found. With full market impact, the investors tend to self-segregate into opposing groups and the introduction of asymmetric sensitivity leads to the disappearance of dominant strategies. Compared with the situations in the stock market with little market impact, the stock price fluctuations are suppressed and an efficient market occurs. Theoretical analyses indicate that the mechanism of phase transition from clustering to self-segregation in the present model is similar to that in the majority-minority game and the occurrence and disappearance of efficient markets are related to the competition between the trend-following and the trend-aversion forces. The clustering of the strategies in the present model results from the majority-wins effect and the wealth-driven mechanism makes the market become predictable.

  15. Characterization of large price variations in financial markets

    CERN Document Server

    Johansen, A

    2002-01-01

    Statistics of drawdowns (loss from the last local maximum to the next local minimum) plays an important role in risk assessment of investment strategies. As they incorporate higher ($>$ two) order correlations, they offer a better measure of real market risks than the variance or other cumulants of daily (or some other fixed time scale) of returns. Previous results have shown that the vast majority of drawdowns occurring on the major financial markets have a distribution which is well-represented by a stretched exponential, while the largest drawdowns are occurring with a significantly larger rate than predicted by the bulk of the distribution and should thus be characterized as outliers. In the present analysis, the definition of drawdowns is generalised to coarse-grained drawdowns or so-called epsilon-drawdowns and a link between such epsilon-outliers and preceding log-periodic power law bubbles previously identified is established.

  16. Characterization of large price variations in financial markets

    Science.gov (United States)

    Johansen, Anders

    2003-06-01

    Statistics of drawdowns (loss from the last local maximum to the next local minimum) plays an important role in risk assessment of investment strategies. As they incorporate higher (> two) order correlations, they offer a better measure of real market risks than the variance or other cumulants of daily (or some other fixed time scale) of returns. Previous results have shown that the vast majority of drawdowns occurring on the major financial markets have a distribution which is well represented by a stretched exponential, while the largest drawdowns are occurring with a significantly larger rate than predicted by the bulk of the distribution and should thus be characterized as outliers (Eur. Phys. J. B 1 (1998) 141; J. Risk 2001). In the present analysis, the definition of drawdowns is generalized to coarse-grained drawdowns or so-called ?-drawdowns and a link between such ?- outliers and preceding log-periodic power law bubbles previously identified (Quantitative Finance 1 (2001) 452) is established.

  17. Computational modeling of collective human behavior: Example of financial markets

    CERN Document Server

    Kirou, Andy; Walser, Markus; Johnson, Neil F

    2008-01-01

    We discuss how minimal financial market models can be constructed by bridging the gap between two existing, but incomplete, market models: a model in which a population of virtual traders make decisions based on common global information but lack local information from their social network, and a model in which the traders form a dynamically evolving social network but lack any decision-making based on global information. We show that a suitable combination of these two models -- in particular, a population of virtual traders with access to both global and local information -- produces results for the price return distribution which are closer to the reported stylized facts. We believe that this type of model can be applied across a wide range of systems in which collective human activity is observed.

  18. 48 CFR 252.209-7007 - Prohibited Financial Interests for Lead System Integrators.

    Science.gov (United States)

    2010-10-01

    ... false Prohibited Financial Interests for Lead System Integrators. 252...209-7007 Prohibited Financial Interests for Lead System Integrators. As...clause: Prohibited Financial Interests for Lead System Integrators (JUL...

  19. 48 CFR 3052.209-75 - Prohibited financial interests for lead system integrators.

    Science.gov (United States)

    2010-10-01

    ... false Prohibited financial interests for lead system integrators. 3052...209-75 Prohibited financial interests for lead system integrators. As...clause: PROHIBITED FINANCIAL INTERESTS FOR LEAD SYSTEM INTEGRATORS (JUL...

  20. Forecasting Financial Market Annual Performance Measures: Further Evidence

    Directory of Open Access Journals (Sweden)

    Edward J. Lusk

    2010-01-01

    Full Text Available Problem statement: Forecasting is simple; producing accurate forecasts is the essential task. Experience suggests that financial managers often assume that because models used in forecasting are appropriate that they are effective. This study addresses this assumption. Effective is taken to mean forecasts where the Absolute Percentage Error (APE is equal to or less than 10%. It has been reported that forecasts of the CAPM-β using the Bloomberg heuristic did not provide effective forecasts. We were interested to determine if the lack of forecasting accuracy is peculiar to β or is more pervasive. Approach: We expanded the analysis to include three measures of Excess Market Return: Jensen’s α (Jα, the Sharpe Performance Index (SPI and the Treynor Performance Index (TPI and two measures of market risk: we once again consider β and also a measure of non-market risk called idiosyncratic Risk (iR. We used information on 58 firms continuously traded on the NYSE or the NASDAQ from 1980 to and including 2008 to evaluate the effectiveness of forecasts of: Jα, SPI, TPI, β and iR. Results: Using Exponential Smoothing or (1,0,0 ARIMA models, we found no evidence that effective forecasts of these five market measures can be derived from such forecasting models. Conclusion/Recommendations: The important implication is: Financial Managers should be aware that even though they are they are using appropriate models to generate forecasts of Jα, SPI, TPI, β and iR that is no guarantee that such forecasts are effective. Finally, the authors’ results are posted on Scholarly Commons.

  1. Stock market integration in Africa

    OpenAIRE

    Agyei-Ampomah, S

    2011-01-01

    Purpose – The purpose of this paper is to examine the nature and extent of linkages between African stock markets and the relationships between these markets and that of regional and global indices. Design/methodology/approach – The monthly returns of S&P/IFC return indices for ten African countries over the period 1998-2007 were analyzed. The index return volatility was decomposed into three components following Barari and the contributions of regional and global market movements to the loca...

  2. Impact of global financial crisis on stylized facts between energy markets and stock markets

    Science.gov (United States)

    Leng, Tan Kim; Cheong, Chin Wen; Hooi, Tan Siow

    2014-06-01

    Understanding the stylized facts is extremely important and has becomes a hot issue nowadays. However, recent global financial crisis that started from United States had spread all over the world and adversely affected the commodities and financial sectors of both developed and developing countries. This paper tends to examine the impact of crisis on stylized facts between energy and stock markets using ARCH-family models based on the experience over 2008 global financial crisis. Empirical results denote that there is long lasting, persists and positively significant the autocorrelation function of absolute returns and their squares in both markets for before and during crisis. Besides that, leverage effects are found in stock markets whereby bad news has a greater impact on volatility than good news for both before and during crisis. However, crisis does not indicate any impact on risk-return tradeoff for both energy and stock markets. For forecasting evaluations, GARCH model and FIAPARCH model indicate superior out of sample forecasts for before and during crisis respectively.

  3. An econophysics approach to analyse uncertainty in financial markets: an application to the Portuguese stock market

    CERN Document Server

    Dionisio, A; Mendes, D A; Dionisio, Andreia; Menezes, Rui; Mendes, Diana A.

    2006-01-01

    In recent years there has been a closer interrelationship between several scientific areas trying to obtain a more realistic and rich explanation of the natural and social phenomena. Among these it should be emphasized the increasing interrelationship between physics and financial theory. In this field the analysis of uncertainty, which is crucial in financial analysis, can be made using measures of physics statistics and information theory, namely the Shannon entropy. One advantage of this approach is that the entropy is a more general measure than the variance, since it accounts for higher order moments of a probability distribution function. An empirical application was made using data collected from the Portuguese Stock Market.

  4. An econophysics approach to analyse uncertainty in financial markets: an application to the Portuguese stock market

    Science.gov (United States)

    Dionisio, A.; Menezes, R.; Mendes, D. A.

    2006-03-01

    In recent years there has been a closer interrelationship between several scientific areas trying to obtain a more realistic and rich explanation of the natural and social phenomena. Among these it should be emphasized the increasing interrelationship between physics and financial theory. In this field the analysis of uncertainty, which is crucial in financial analysis, can be made using measures of physics statistics and information theory, namely the Shannon entropy. One advantage of this approach is that the entropy is a more general measure than the variance, since it accounts for higher order moments of a probability distribution function. An empirical application was made using data collected from the Portuguese Stock Market.

  5. Timeliness of Financial Reporting in Emerging Capital Markets: Evidence from Turkey

    OpenAIRE

    Tu?rel, Asli Gunduzay

    2010-01-01

    Timely financial reporting is an essential ingredient for a well-functioning capital market. This study has two objectives. The first one is to measure the extend of timeliness of financial reporting in a developing country, Turkey. The second one is to establish the impact of both company specific and audit related factors on timeliness of financial reporting in Turkey. This study reports on the results of an empirical investigation of the timeliness of financial reports by 211 non-financial...

  6. Dynamic effects of increasing heterogeneity in financial markets

    International Nuclear Information System (INIS)

    Despite canonical behavioural financial market models [Day R, Huang W. Bulls, bears and market sheep. J Econ Behav Org 1990;14:299-329], that use different types of agents (i.e., fundamentalist vs. chartists), we develop a model in which the source of instability is the interaction of groups that are homogeneous in the strategy they use, but have heterogeneous beliefs about the fundamental value of the asset. Specifically, heterogeneity arises among two groups of fundamentalists that follow gurus. We show that an increasing distance between beliefs (the degree of heterogeneity), leads first (i) to a pitchfork bifurcation to arise secondly (ii) it generates, together with a larger reaction to misalignment of both market maker and agents, the appearance of a periodic, or even, chaotic, price fluctuation; (iii) finally a homoclinic bifurcation [Dieci R, Bischi GI, Gardini L. From bi-stability to chaotic oscillations in a macroeconomic model. Chaos, Solitons and Fractals 2001;12:805-22] transforms a two piece chaotic set into a one piece chaotic set that generates bull and bear markets.

  7. Alternate entropy measure for assessing volatility in financial markets

    Science.gov (United States)

    Bose, Ranjan; Hamacher, Kay

    2012-11-01

    We propose two alternate information theoretical approaches to assess non-Gaussian fluctuations in the return dynamics of financial markets. Specifically, we use superinformation, which is a measure of the disorder of the entropy of time series. We argue on theoretical grounds on its usefulness and show that it can be applied effectively for analyzing returns. A study of stock market data for over five years has been carried out using this approach. We show how superinformation helps to identify and classify important signals in the time series. The financial crisis of 2008 comes out very clearly in the superinformation plots. In addition, we introduce the super mutual information. Distinct super mutual information signatures are observed that might be used to mitigate idiosyncratic risk. The universality of our approach has been tested by carrying out the analysis for the 100 stocks listed in S&P100 index. The average superinformation values for the S&P100 stocks correlates very well with the VIX.

  8. Evidence of market manipulation in the financial crisis

    CERN Document Server

    Misra, Vedant; Bar-Yam, Yaneer

    2011-01-01

    We provide direct evidence of market manipulation at the beginning of the financial crisis in November 2007. The type of manipulation, a "bear raid," would have been prevented by a regulation that was repealed by the Securities and Exchange Commission in July 2007. The regulation, the uptick rule, was designed to prevent manipulation and promote stability and was in force from 1938 as a key part of the government response to the 1928 market crash and its aftermath. On November 1, 2007, Citigroup experienced an unusual increase in trading volume and decrease in price. Our analysis of financial industry data shows that this decline coincided with an anomalous increase in borrowed shares, the selling of which would be a large fraction of the total trading volume. The selling of borrowed shares cannot be explained by news events as there is no corresponding increase in selling by share owners. A similar number of shares were returned on a single day six days later. The magnitude and coincidence of borrowing and r...

  9. Price Dynamics and Market Volatility: Behavioral Heterogeneity under Switching Trading Strategies on Artificial Financial Market

    Directory of Open Access Journals (Sweden)

    Yosra Mefteh Rekik

    2015-03-01

    Full Text Available In recent years, studying stock markets using multi-agent based models has grow into an important research area due to the fact that this line of attack replicates the nature of the financial market where varied traders with a mixture of expectations and diverse points of rationality network with each other through the market. The main aim of this paper is to include selected finding from behavioral finance into agent model hypothesis. In particular we revise the switching of the trading strategies such as the switching between, uninformed agents, informed agents, zero-intelligence and switchers traders. More precisely we focus on the relationship concerning switching and the excess volatility of the stock market prices and to addresses the question of why traders switch from one type to another.

  10. The Evolutionary Model of Financial Markets in Terms of Transformation Economy ???????????? ?????? ????????? ??????????? ????? ? ???????? ????????????????? ?????????

    Directory of Open Access Journals (Sweden)

    Zakharchenko Pavel V.

    2012-12-01

    Full Text Available The article is devoted to solving of actual problem the construction and research management model the conduct of financial market in the conditions of transformation economy. It is offered and in theory grounded conception of management the conduct of financial market of Ukraine. On its basis the nonlinear dynamic model of evolutional conduct of fund market is built, the scenarios of development of economic processes are got at such market.?????? ????????? ??????? ?????????? ???????? ?????????? ? ???????????? ?????? ?????????? ?????????? ??????????? ????? ? ???????? ????????????????? ?????????. ?????????? ? ???????????? ?????????? ????????? ?????????? ?????????? ??????????? ????? ???????. ?? ?? ?????? ????????? ?????????? ???????????? ?????? ????????????? ????????? ????????? ?????, ???????? ???????? ???????? ????????????? ????????? ?? ????? ?????.

  11. Parametric yield curve modeling in an illiquid and undeveloped financial market

    OpenAIRE

    Silvije Orsag; Davor Zoricic

    2013-01-01

    This paper examines the possibility of applying two most popular parametric yield curve models (Nelson-Siegel and Svensson) in the Croatian financial market. In such an illiquid and undeveloped financial market yield curve modeling presents a special challenge primarily regarding the available market data. The use of the yield curve models is limited compared to the developed markets and the interpretation of the resulting yield curves requires much more cautiousness. However this paper clear...

  12. Price Integration between Europe and Regional Markets in Africa: A Test of the Law of One Price

    OpenAIRE

    Piesse, Jenifer; Hearn, Bruce Allen

    2011-01-01

    This study examines the degree of price-integration of equity index assets between the major markets of Africa, namely Morocco, Tunisia, Egypt, Kenya, Nigeria, Namibia and South Africa with the prominent European markets of London and Paris. The application of Vector Autoregressive and Autoregressive Distributed Lag methods reveals that African markets are largely price-segmented. The only markets that are price-integrated have shared economic and financial institutions such as Namibia and So...

  13. Financial overview of integrated community energy systems

    Energy Technology Data Exchange (ETDEWEB)

    Croke, K. G.; Hurter, A. P.; Lerner, E.; Breen, W.; Baum, J.

    1977-01-01

    This report is designed to analyze the commercialization potential of various concepts of community-scale energy systems that have been termed Integrated Community Energy Systems (ICES). A case analysis of alternative ICES concepts applied to a major metropolitan development complex is documented. The intent of this study is twofold: (1) to develop a framework for comparing ICES technologies to conventional energy supply systems and (2) to identify potential problems in the commercialization of new systems approaches to energy conservation. In brief, the ICES Program of the ERDA Office of Energy Conservation is intended to identify the opportunities for energy conservation in the community context through analysis, development, and/or demonstration of: location and design of buildings, building complexes, and infrastructure links; engineering and systems design of existing, emerging, and advanced energy production and delivery technologies and systems; regulatory designs for public planning, administration, and regulation of energy-conserving community development and energy services; and financial planning for energy-conserving community development and energy supply systems.

  14. Branding and Integrating Marketing Communications to Strengthen Brand : case: Bank X

    OpenAIRE

    Nguyen Thanh, Thuy

    2014-01-01

    In the market where many active competitors provide the same or similar products or services, branding is the strategic key indicator that facilitates a company in achieving its financial target, reputation and customer’s loyalty. This thesis concentrates on analyzing branding strategy and integrating marketing communications to strengthen brand with the case study of Bank X. Although the Bank has a long active history in both international and the Vietnamese markets, the brand is not y...

  15. Integrating Strategic Marketing on an Institutional Level.

    Science.gov (United States)

    Liu, Sandra S.

    1998-01-01

    Higher education differs from other service enterprises in its social responsibility and the context for decision making. An integrated marketing strategy based on the identified positioning of the institution plays a crucial role in successful enrollment and long-term institutional development. Marketing can make a significant contribution to…

  16. HERDING BEHAVIOR UNDER MARKETS CONDITION: EMPIRICAL EVIDENCE ON THE EUROPEAN FINANCIAL MARKETS

    Directory of Open Access Journals (Sweden)

    Moatemri Ouarda

    2013-01-01

    Full Text Available This study presents four main contributions to the literature of behavior herding. Firstly, it extends the behavioral researches of herding of the investors on a developed market and mainly on a European market as a whole. Secondly, we are interested in examination of herding behavior at the level of sectors by using data at the levels of companies. Thirdly, this document estimates the implications of herding behavior in terms of returns, volatility and volume of transaction. Fourthly, the herding behavior is revealed as well during the period of the recent global financial crisis in 2007-2008 and of Asian crisis. Our results reveal a strong evidence of herding behavior sharply contributed to a bearish situation characterized by a strong volatility and a trading volume. The repercussion of herding during the period of the recent financial crisis is clearly revealed for the sectors of the finance and the technology.

  17. Vertical integration and performance in marketing channels

    OpenAIRE

    Childerley, Angela M.

    1980-01-01

    Since the late 1960's there has been an increasing tendency to analyse marketing channels as social systems rather than as economic systems. Despite this, the relationship between vertical integration and performance in marketing channels has continued to be analysed from an economic perspective. In this study, not only is a social systems approach adopted to examine the relationship between vertical integration and performance, but certain additional features are also...

  18. Capital Market Integration and Consumption Risk Sharing over the Long Run

    DEFF Research Database (Denmark)

    Rangvid, Jesper; Santa-Clara, Pedro

    We empirically investigate time variation in capital market integration and consumption risk sharing using data for 16 countries from 1875 to 2012. We show that there has been considerable variation over time in the degrees of capital market integration and consumption risk sharing and that higher capital market integration forecasts more consumption risk sharing in the future. This finding is robust is to controlling for trade openness and exchange rate volatilities. Hence, financial integration seems to drive consumption risk sharing whereas we find no evidence that risk sharing forecasts market integration. We also calculate the welfare costs of imperfect capital market integration and risk sharing and find that these costs vary a lot over time. Finally, we show that consumption risk sharing is higher during times of crises, i.e. at times when marginal utility is high and risk sharing is most valuable.

  19. When the financial markets start coughing, office markets quickly catch a cold

    Directory of Open Access Journals (Sweden)

    Sabine Dörry

    2011-11-01

    Full Text Available “Where does property ‘fit’ into the dynamics of value creation under contemporary capitalism?” and “What about the economics of property?”, only recently did Christophers (2010: 94 address these questions to his fellow geographers. With Towers of Capital, Lizieri has now presented a long overdue book, which insightfully investigates the multifaceted – though primarily economic – phenomena of office markets, specifically in international financial centres (IFCs, and their strong entanglement...

  20. Effects of Participation in a Simulation Game on Marketing Students' Numeracy and Financial Skills

    Science.gov (United States)

    Brennan, Ross; Vos, Lynn

    2013-01-01

    The need to endow marketing graduates with skills relevant to employability grows ever more important. Marketing math and elementary financial understanding are essential employability skills, particularly given the contemporary emphasis on marketing metrics, but the evidence is that marketing graduates are often relatively weak in such skills.…

  1. Financial Integration in East Asia: An Empirical Investigation

    OpenAIRE

    Lee, Hyun-hoo; Huh, Hyeon-seung; Park, Donghyun

    2011-01-01

    The central objective of this paper is to empirically evaluate the degree of linkages among East Asian equity and bond markets. The primary contribution of our paper to the empirical literature is that we use a financial gravity model grounded in economic theory. Using data from the International Monetary Fund's Coordinated Portfolio Investment Survey, we find that intra-East Asian financial asset holdings of four East Asian economies - Hong Kong, China; Japan; the Republic of Korea; and Sing...

  2. Geometry of financial markets—Towards information theory model of markets

    Science.gov (United States)

    Piotrowski, Edward W.; S?adkowski, Jan

    2007-08-01

    Most parameters used to describe states and dynamics of financial market depend on proportions of the appropriate variables rather than on their actual values. Therefore, projective geometry seems to be the correct language to describe the theater of financial activities. We suppose that the objects of interest of agents, called here baskets, form a vector space over the reals. A portfolio is defined as an equivalence class of baskets containing assets in the same proportions. Therefore portfolios form a projective space. Cross ratios, being invariants of projective maps, form key structures in the proposed model. Quotation with respect to an asset ? (i.e. in units of ?) is given by linear maps. Among various types of metrics that have financial interpretation, the min-max metric on the space of quotations can be introduced. This metric has an interesting interpretation in terms of rates of return. It can be generalized so that to incorporate a new numerical parameter (called temperature) that describes agent's lack of knowledge about the state of the market. In a dual way, a metric on the space of market quotation is defined. In addition, one can define an interesting metric structure on the space of portfolios/quotation that is invariant with respect to hyperbolic (Lorentz) symmetries of the space of portfolios. The introduced formalism opens new interesting and possibly fruitful fields of research.

  3. Gender Differences in Student Financial Market Attitudes and Awareness: An Exploratory Study

    Science.gov (United States)

    Ford, Matthew W.; Kent, Daniel W.

    2010-01-01

    Female college students are generally thought to possess lower levels of financial market knowledge than their male counterparts. However, previous studies have lacked conceptual and methodological focus on market-based dimensions of financial literacy. We hypothesize that male and female college students respond differently to perceptions of…

  4. The impact of the new wave of financial regulation for European energy markets

    International Nuclear Information System (INIS)

    As the financial and physical markets for energy have increasingly become intertwined, energy trade is also covered by financial legislation. The European Commission wishes to strengthen this financial regulation of energy trade. It has put forward a set of regulatory proposals aimed at stabilizing financial markets and limiting volatility of energy prices. The most noteworthy are EMIR, MAD, REMIT and the revised MiFID. Key elements are transparency, new trading venues, central clearing obligations and mandatory transaction reporting. This article evaluates the likely outcomes for energy markets, given the new incentives for market parties. It argues that although there is no ground to exempt particular energy market participants such as energy companies from financial legislation, increased regulation will not necessarily bring about the effects the Commission desires. The causal link between derivatives trading and volatility of energy prices is not known precisely and many of the economic effects of the proposed legislation are theoretically and empirically ambiguous. Moreover, potentially conflicting instruments and objectives risk policy inconsistency. - Highlights: ? The European Commission has put forward a set of financial legislation to stabilize both financial markets and energy prices. ? This article assesses the impact of this financial regulation on energy markets. ? It shows that the theoretical and empirical effects of key elements in this legislaects of key elements in this legislation are ambiguous. ? It argues that, if enacted, particular market parties such as energy companies should not be exempted. ? It concludes that this set of legislation will not necessarily bring about the effects the Commission desires.

  5. 77 FR 9592 - Defining Larger Participants in Certain Consumer Financial Product and Service Markets

    Science.gov (United States)

    2012-02-17

    ...provides a consumer financial product or service...for ``consumer financial products or services...creditors' losses from non-repayment and thereby...to pay the entire cost at the time of purchase...market for consumer financial products or...

  6. A Limit Theorem for Financial Markets with Inert Investors

    CERN Document Server

    Bayraktar, E; Sircar, R; Bayraktar, Erhan; Horst, Ulrich; Sircar, Ronnie

    2006-01-01

    We study the effect of investor inertia on stock price fluctuations with a market microstructure model comprising many small investors who are inactive most of the time. It turns out that semi-Markov processes are tailor made for modelling inert investors. With a suitable scaling, we show that when the price is driven by the market imbalance, the log price process is approximated by a process with long range dependence and non-Gaussian returns distributions, driven by a fractional Brownian motion. Consequently, investor inertia may lead to arbitrage opportunities for sophisticated market participants. The mathematical contributions are a functional central limit theorem for stationary semi-Markov processes, and approximation results for stochastic integrals of continuous semimartingales with respect to fractional Brownian motion.

  7. Are Hungarian financial markets liquid enough? The theory and practice of FX and government securities market liquidity

    OpenAIRE

    Csávás, Csaba; Erhart, Szilárd

    2005-01-01

    The subject of our study is market liquidity, which is an important element of the functioning of financial markets. Adequate liquidity of markets is of great significance from the point of view of both market participants and the central bank. On the one hand, of all market segments an examination was made of the domestic forint-euro spot FX market, which is of key importance due to the openness of the country’s economy. On the other hand, an analysis was made of the market of forint denomin...

  8. Design of an Experiment to Test Quantum Probabilistic Behavior of the Financial market

    CERN Document Server

    Khrennikov, Andrei

    2009-01-01

    The recent crash demonstrated (once again) that the description of the financial market by present financial mathematics cannot be considered as totally satisfactory. We remind that nowadays financial mathematics is heavily based on the use of random variables and stochastic processes which are described by Kolmogorov's measure-theoretic model for probability ("classical probabilistic model"). I speculate that the present financial crises is a sign (a kind of experiment to test validity of classical probability theory at the financial market) that the use of this model in finances should be either totally rejected or at least completed. One of the best candidates for a new probabilistic financial model is quantum probability or its generalizations, so to say quantum-like (QL) models. Speculations that the financial market may be nonclassical have been present in scientific literature for many years. The aim of this note is to move from the domain of speculation to rigorous statistical arguments in favor of pr...

  9. An investigation on the effects of perception and marketing expenditure, financial and non-financial promotions on brand equity

    Directory of Open Access Journals (Sweden)

    Abbas Ataheryan

    2013-09-01

    Full Text Available This paper presents a study to investigate the effects of perception and marketing expenditures as well as financial and non-financial promotions on brand equity. The proposed study of this paper prepares a questionnaire in Likert scale and distributes it among regular customers of three types of Shampoo in city of Tehran, Iran. The implementation of structural equation modeling for the proposed study of this paper has been accomplished based on LISREL software. The results of the survey on testing various hypotheses indicate that perception on marketing expenditure, financial as well as non-financial promotion and word of mouth advertisement influence positively on brand awareness and negatively on non-financial promotions (?=0.01. In addition, brand awareness influences positively on perception quality (?=0.01. Brand awareness as well as brand associate also influence on brand loyalty (?=0.01.

  10. An Investigation of the Integrity of Internet Financial Reporting

    OpenAIRE

    Barry Smith; Aileen Pierce

    2005-01-01

    Since the mid 1990s, large companies have increasingly used the Internet to disclose business and financial information. Internet technology is regularly claimed to facilitate greater relevance and timeliness of business information. The integrity of information disclosed on corporate websites has, however, been subject to comparatively little scrutiny. This study focuses on the integrity of Internet Financial Reporting (IFR) by reference to the adequacy of underlying corporate governance pro...

  11. Integrated marketing communications at solar energy equipment market

    Directory of Open Access Journals (Sweden)

    I.L. Litovchenko

    2013-12-01

    Full Text Available The aim of the article. The article is devoted to the development of the concept of «integrated marketing communications», as well as its adaptation to a specific market of solar energy equipment. The theoretical development of foreign and domestic scholars in the field of IMC is considered. The aim of the article is to define the concept of «integrated marketing communications» and use them in the market of solar ?nergy equipment in an information economy. The author's definition of the concept of IMC is given, including the achievement of synergies. The reasons for the transition to the use of modern enterprises IMC in marketing activities are explored, as well as the tendencies of their distribution. The results of the analysis. The article identified the following reasons for the transition to the concept of IMC: reducing the efficiency of the individual instruments of marketing communications policy, the rapid growth of the flow of information and the development of technology marketing communications under the influence of the Internet, and the transition to the individualization of consumption and, consequently, to a two-way interactive marketing communication; glut similar services and products. The study identified the following reasons for the transition to the concept of IMC: reducing the efficiency of the individual instruments of marketing communications policy, the rapid growth of the flow of information and the development of technology marketing communications under the influence of the Internet, and the transition to the individualization of consumption and, consequently, to a two-way interactive marketing communication; glut similar services and products. Trends of the present stage of development of the IMC are demonstrated. The factors that influence formation of the IMC complex of enterprise in the market of solar energy equipment are identified. They are the goals of the firm and its strategies are used , the type of product or market, target audience and its characteristics (readiness to buy, the specific behavior of consumers, national and cultural, stage of the life cycle of the advertised goods; traditions found in communication policy of the company and its major competitors. In accordance with the results of theoretical studies carried out by us, the concept of IMC was adapted to the market of solar power equipment companies, which was formed by a set of marketing tools included in IMC. Conclusions and directions of further researches. The authors proposed a list of marketing activities, which form the IMC for this market such as personal selling and direct marketing; PR; sales promotion; in the Internet space: contextual and banner advertising, social networks, organization of forums, portals, webinars; exhibition activities; customer club organization, training and tours. The directions of further researches are to study the approaches to the formation of IMC for different types of markets, the impact of Internet technology on the strategy of IMC, calculation of proportionality use of marketing funds within the IMC.

  12. Debt and incomplete financial markets: a case for nominal GDP targeting

    OpenAIRE

    Sheedy, Kevin D.

    2013-01-01

    Financial markets are incomplete, thus for many agents borrowing is possible only by accepting a financial contract that specifies a fixed repayment. However, the future income that will repay this debt is uncertain, so risk can be inefficiently distributed. This paper argues that a monetary policy of nominal GDP targeting can improve the functioning of incomplete financial markets when incomplete contracts are written in terms of money. By insulating agents' nominal incomes from aggregate re...

  13. The Local Fractal Properties of the Financial Time Series on the Polish Stock Exchange Market

    OpenAIRE

    Grech, D.; Pamu?a, G.

    2007-01-01

    We investigate the local fractal properties of the financial time series based on the evolution of the Warsaw Stock Exchange Index (WIG) connected with the largest developing financial market in Europe. Calculating the local Hurst exponent for the WIG time series we find an interesting dependence between the behavior of the local fractal properties of the WIG time series and the crashes appearance on the financial market.

  14. Comparison of Bank-Oriented or Market-Oriented Financial System and Inspiration

    OpenAIRE

    Shumei Wang,; Jingting Ma

    2009-01-01

    In order to get benefits from trade, financial system plays an important role. Without financial system, commodities are traded in spot market. Every family collects capitals by self resources. To collect capitals by the internal financing to build railways is just as the words said by Marx in Capital: “I am afraid of no railways till today.” In present economic system, financial system has two kinds of structures, namely the market-oriented one and the bank intermediary-oriented one. By ...

  15. Studying international spillovers in a New Keynesian continuous time framework with financial markets

    OpenAIRE

    Hayo, Bernd; Niehof, Britta

    2013-01-01

    In light of the recent financial and real economic crisis, it seems clear that macroeconomists need to better account for the influence of financial markets. This paper explores the consequences of treating the interaction between different financial markets, monetary policy, and the real economy seriously by developing a fully dynamic theoretical model. Starting from a standard New Keynesian framework, we reformulate and extend the model by means of stochastic differential equations so as to...

  16. Appraisal of The Effect of The Global Financial Meltdown on The Nigerian Money Market

    OpenAIRE

    Ajao, Mayowa Gabriel; Festus, Babatunde Oshobuye

    2011-01-01

    This study looked at the effect of the global financial meltdown on the Nigerian money market. To start with, it identified the major problems associated with the Global financial crisis and its effects on the Nigeria economy. As the crisis affect trade and investment flows, the Nigerian money market have so far triggered a rebound and allayed panic about the systemic financial collapse. The Ordinary Least Square (OLS) technique of regression analysis was adopted in analyzing the empirical da...

  17. Unit-linked life insurance in Lévy-process financial markets - modeling, hedging and statistics

    OpenAIRE

    Riesner, Martin

    2006-01-01

    The main aim of this thesis is the development of locally risk-minimizing hedging strategies for unit-linked life insurance contracts whose unit is modeled in a general Lévy-process financial market. It therefore merges the quite advanced and in recent years developed theory of Lévy-process financial markets with the theory of unit-linked life insurances and provides moreover a quadratic hedging framework for insurance payment streams exposed to pure financial and pure insurance risk. In...

  18. Resolution of financial distress :determinants of restructuring outcome in the Norwegian bond market

    OpenAIRE

    Knapstad, Sigurd; Skarbøvik, Erik Sønderland

    2012-01-01

    This thesis analyses possible determinants explaining restructuring outcomes for financially distressed firms in the Norwegian bond market. This includes both Norwegian firms and foreign firms issuing bonds in the Norwegian market, restricted to bonds issued or matured in the seven year period between January 1st 2005 and December 31st 2011. Our findings indicate that firms resolving financial distress only by postponing obligations have better financial performance, are larger measured in to...

  19. Agent-based simulation of a financial market

    CERN Document Server

    Raberto, M; Focardi, S M; Marchesi, M; Raberto, Marco; Cincotti, Silvano; Focardi, Serigo M.; Marchesi, Michele

    2001-01-01

    This paper introduces an agent-based artificial financial market in which heterogeneous agents trade one single asset through a realistic trading mechanism for price formation. Agents are initially endowed with a finite amount of cash and a given finite portfolio of assets. There is no money-creation process; the total available cash is conserved in time. In each period, agents make random buy and sell decisions that are constrained by available resources, subject to clustering, and dependent on the volatility of previous periods. The model herein proposed is able to reproduce the leptokurtic shape of the probability density of log price returns and the clustering of volatility. Implemented using extreme programming and object-oriented technology, the simulator is a flexible computational experimental facility that can find applications in both academic and industrial research projects.

  20. Is oil supply choked by financial market pressures?

    International Nuclear Information System (INIS)

    Since the late 1990s, financial analysts have focused strongly on short-term profitability for benchmarking and valuation of international oil and gas companies. The increasing pressure for strict capital discipline among oil and gas companies may have reduced their willingness to invest for future reserves and production growth. The current high oil price is partly due to low exploration activity in the oil industry the last decade. We present and discuss the background for this development-based on previous academic research, industry trends and current valuation practices. An estimated econometric model of stock market valuation among oil and gas companies suggests that analysts and companies have put exaggerate weight on short-term earnings and accounting profitability. We therefore expect that the attention will shift back to long-term reserve and production growth