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Using daily data since 2017, we disentangle China-specific structural shocks driving Chinese financial markets and examine spillovers across global markets. The novelty of this paper consists of simultaneously identifying China shocks with shocks emanating from the United States and shocks to global risk sentiment - two major forces driving global financial markets - to ensure that China spillover estimates do not reflect common factors. Our results show that shocks originating in China have material impacts on global equity markets, although spillovers are much smaller than those following shocks in the United States, or those triggered by shifts in global risk sentiment. By contrast, shocks from China account for a significant proportion of variation in global commodity prices, more on a par with those of the United States. Nevertheless, spillovers from China can be significantly amplified in an environment of heightened global volatility, or when the shocks are large. [ABSTRACT FROM AUTHOR]

Purpose: This paper examines the time-varying return connectedness between renewable energy, oil, precious metals, the Gulf Council Cooperation region and the United States stock markets during two successive crises: the pandemic Covid-19 and the 2022 Russo-Ukrainian war. The main objective is to investigate the effect of the Covid-19 pandemic and the Russo-Ukrainian war on the connectedness between the considered stock markets. Design/methodology/approach: This paper uses the time-varying parameter vector autoregression approach, which represents an extension of the Spillover approach (Diebold and Yilmaz, 2009, 2012, 2014), to examine the time-varying connectedness among stock markets. Findings: This paper reflects the effect of the two crises on the stock markets in terms of shock transmission degree. We find that the United States and renewable energy stock markets are the main net emitters of shocks during the global period and not just during the two considered crises sub-periods. Oil stock market is both an emitter and a receiver of shocks against Gulf Council Cooperation region and United States markets during the full sample period, which may be due to price fluctuation especially during the two crises sub-periods, which suggests that the future is for renewable energy. Originality/value: This paper examines the effect of the two recent and successive crises, the Covid-19 pandemic and the 2022 Russo-Ukrainian war, on the connectedness among traditional stock markets (the United States and Gulf Council Cooperation region) and commodities stock markets (renewable energy, oil and precious metals). [ABSTRACT FROM AUTHOR]

The announcement made by the Fed Chairman, Ben Bernanke, on May 22, 2013 regarding the reduction of the quantitative easing programme that took by storm the financial markets determined the significant volatility increase of the US markets and it was not limited to it. The financial markets in the emerging countries that benefited from an increase in their financial flows during the quantitative easing programme were the most affected by this announcement through the volatility increase, depreciation of exchange rate and massive capital outflows. The current paper tackles volatility and volatility transmission from the US market determined by the change of monetary policy to the Eastern European markets. To study the volatility of each stock and bond market of the countries in Eastern Europe, we used univariate heteroscedastic models while for the analysis of volatility transmission from the US market to the Eastern European markets we used the multivariate heteroscedastic models. The results obtained confirm the volatility transmission both on the stock markets, with the exception of Latvia and Lithuania, and on the bond markets in Eastern Europe. [ABSTRACT FROM AUTHOR]

This article discusses a research paper which investigates the stock market reaction to eight specific events during 1998 and 1999 that proposed regulatory changes in accounting for in-process research and development (IPR&D). By examining the market's reaction to these events, the researchers have argued that they can infer whether the problem with IPR&D is inappropriate accounting on the part of companies, or inappropriate policy and enforcement on the part of the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB). From the significant market reactions they detect for four out of the eight events and concluded that the market is more concerned about increased regulation of IPR&D than about the reliability of accounting estimates. In other words, the market did not see anything wrong with the IPR&D accounting rules in place. Its reaction reflected concerns about proposed regulatory changes in IPR&D accounting. However, these concerns were eliminated when the regulators withdrew the proposed changes. To the extent that the test is a valid one for inferring reliability and what accounting is appropriate, their test could be used to judge the appropriateness of accounting for other transactions as well.

This paper analyzes how the daily opening and closing of financial markets affect trading volume. We model the desire to trade at the beginning and end of the day as a function of overnight return volatility. NYSE data from 1933-88 indicate that closing volume is positively related to expected overnight volatility, while volume at the open is positively related to both expected and unexpected volatility from the previous night. We interpret the symmetric response of trading at the open and the close to expected volatility as being due to investor heterogeneities in the ability to bear risk when the market is closed. This desire of investors to trade prior to market closings indicates a cost of mandating marketwide circuit breakers. [ABSTRACT FROM AUTHOR]

Stock exchange operators compete for order flow by setting "make" fees for limit orders and "take" fees for market orders. When traders can quote continuous prices, exchange operators compete on total fee, because traders can choose prices that perfectly neutralize any fee division. The 1-cent minimum tick size, however, prevents traders from neutralizing fee division. The nonneutrality of division between make and take fees (1) allows an exchange operator to establish exchanges that differ in fee structure to engage in second-degree price discrimination and (2) destroys the Bertrand equilibrium, leads to frequent fee changes, and encourages entries of new exchanges. Received May 29, 2016; editorial decision April 19, 2018 by Editor Robin Greenwood. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

Around the 1860s, technological advancements in transport, communication and warehousing, contributed to the emergence of world markets for many staple commodities (e.g., cotton, wheat). At the same time, the economic needs of the companies involved in this commercial revolution stimulated the growth of markets for securities and shares. The growing complexity of global markets created propitious conditions for the emergence of a class of professional speculators. Initially, the frenzy that accompanied this process seemed to confirm traditional views, which identified speculation with gambling. With time, however, a new scientific literature emerged. Focussing on the last decade of the nineteenth century up to the early 1920s in the UK and US, our analysis brings to light how contributors to this new literature made the case for speculation against conventional wisdom. In so doing, they were not blind to the downside effects of speculation as a possible source of resource misallocation. Nevertheless, they chose to emphasise its constructive side, basing their arguments on the case of commodity markets, where the idea of a long-run equilibrium price to be attained by speculation appeared plausible. They employed the same arguments in the case of the stock exchange, downplaying differences between the two markets although they were well aware of them. Thus economists played a crucial role in convincing policymakers of the beneficial effects of the new speculative instruments, against the hostility of a large part of public opinion. Futures and their use for the purpose of short selling, the most controversial of the new trading practices, were gradually accepted and regarded as legitimate commercial transactions. On the other hand, options continued to attract suspicion for a long time and to be kept in a limbo between disreputable and acceptable operations. The paper expands the existing literature on the subject by providing the first systematic reconstruction of the shared analytical arguments that, in spite of differences between authors and contexts, contributed to making speculation gradually accepted in the UK and US. [ABSTRACT FROM AUTHOR]

This paper undertakes a modern event-study analysis of Operation Twist and uses its estimated effects to assess what should be expected for the recent policy of quantitative easing by the Federal Reserve, dubbed "QE2." The paper first shows that Operation Twist and QE2 are similar in magnitude. It then identifies six significant, discrete announcements in the course of Operation Twist that could have had a major effect on financial markets and shows that four did have statistically significant effects. The cumulative effect of these six announcements on longer-term Treasury yields is highly statistically significant but moderate, amounting to about 15 basis points (bp). This estimate is consistent both with time-series analysis undertaken not long after the event and with the lower end of empirical estimates of Treasury supply effects in the literature. The effects of Operation Twist on long-term agency and corporate bond yields are also statistically significant but smaller, about 13 bp for agency securities and 2 to 4 bp for corporates. Thus, the effects of Operation Twist seem to diminish substantially as one moves from Treasury securities toward private sector credit instruments. [ABSTRACT FROM AUTHOR]

The Federal Reserve (the Fed) is responsible for monitoring, analyzing and ultimately stabilizing US financial markets. It also has unrivalled access to economic data, high-level connections to financial institutions, and a large staff of professionally trained economists. Why then was it apparently unconcerned by the financial developments that are now widely recognized to have caused the 2008 financial crisis? Using a wide range of Fed documents from the pre-crisis period, particularly the transcripts of meetings of the Federal Open Market Committee (FOMC), this paper shows that Fed policymakers and staff were aware of relevant developments in financial markets, but paid infrequent attention to them and disregarded significant systemic threats. Drawing on literatures in economics, political science and sociology, the paper then demonstrates that the Fed's intellectual paradigm in the years before the crisis focused on ‘post hoc interventionism’ – the institution's ability to limit the fallout should a systemic disturbance arise. Further, the paper argues that institutional routines played a crucial role in maintaining this paradigm and in contributing to the Fed's inadequate attention to the warning signals in the pre-crisis period. [ABSTRACT FROM AUTHOR]

Large institutional investors own an increasing share of the equity markets in the United States. The implications of this development for financial markets are still unclear. The paper presents novel empirical evidence that ownership by large institutions predicts higher volatility and greater noise in stock prices as well as greater fragility in times of crisis. When studying the channel, we find that large institutional investors exhibit traits of granularity (i.e., subunits within a firm display correlated behavior), which reduces diversification of idiosyncratic shocks. Thus, large institutions trade larger volumes and induce greater price impact. This paper was accepted by David Simchi-Levi, finance. [ABSTRACT FROM AUTHOR]

This paper documents pervasive evidence of intra-industry reversals in monthly returns. Unlike the conventional reversal strategy based on stock returns relative to the market portfolio, we document intra-industry return reversals that are larger in magnitude, consistently present over time, and prevalent across subgroups of stocks, including large and liquid stocks. These return reversals are driven by order imbalances and noninformational shocks. Consistent with reversals representing compensation for supplying liquidity, intra-industry reversals are stronger following aggregate market declines and volatile times, reflecting binding capital constraints and limited risk-bearing capacity of liquidity providers. [ABSTRACT FROM PUBLISHER]

Market fragmentation is one of the policy issues which is being continuously discussed among the regulators in the securities market arena in the United States, Canada and Europe. This paper is an extant literature review paper and endeavours to explain the different forms of alternate trading systems which have caused the securities market to fragment. This paper discusses the rationale behind market fragmentation and facilitators for this kind of change in the securities market microstructure. Through the literature review on the subject, this paper aims at unveiling how some significant aspects related to securities market microstructure such as market quality, liquidity, price discovery, execution costs, fairness and investor confidence are impacted through market fragmentation. The paper further discusses how the exchanges and the regulators have responded to the challenges emerging from market fragmentation. [ABSTRACT FROM AUTHOR]

This paper examines inter-linkages between Indian and US equity, foreign exchange and money markets using the vector autoregressive-multivariate GARCH-BEKK framework. We investigate the impact of global financial crisis (GFC) and Eurozone debt crisis (EZDC) on the conditional volatility and conditional correlation estimates derived from the multivariate GARCH model for Indian and US financial markets. Our results indicate that there is significant bidirectional causality-in-mean between the Indian stock market returns and the Rs./USD market returns, and significant unidirectional causality-in-mean from the US stock market returns to the Indian stock market returns. As regards volatility spillovers, we find that volatility in the Indian stock market rises in response to domestic as well as US financial market shocks but Indian financial market shocks do not impact the US markets. Further, impact of the recent crisis episodes on the covariance matrix is found to be significant. We find that volatility in the Indian and US financial markets significantly amplified during GFC. The conditional correlations across asset markets were significantly accentuated in the wake of the two crisis episodes. The impact of GFC on cross-market conditional correlations is higher for majority of the asset market pairs in comparison to the EZDC. [ABSTRACT FROM AUTHOR]

This paper examines all 340 of the 2001 “bear market” acquisition announcements of U.S. target firms reported by Mergerstat/Shannon Pratt’s Control Premium StudyTM. This paper compares the “Control Premium” reported by Mergerstat/Shannon Pratt’s Control Premium StudyTM to a comparable “Cumulative Abnormal Return”(CAR) calculated using event study methodology. While the average total “Control Premium” reported by Mergerstat differed by only −3.45% from the event study CAR, significant differences presented themselves when the event period was broken down between the day −63 to −1 “runup” period and the day 0 to end “markup” period. [ABSTRACT FROM AUTHOR]

This paper investigates the existence of contrarian profits and their sources for the Athens Stock Exchange(ASE). The empirical analysis decomposes contrarian profits to sources due to common factor reactions, overreaction to firm-specific information, and profits not related to the previous two terms, as suggested by Jegadeesh and Titman(1995). Furthermore, in view of recent evidence that common stock returns are related to firm characteristics such as size and book-to-market equity, the paper decomposes contrarian profits to sources due to factors derived from the Fama and French(1993, 1996) three-factor model. For the empirical testing, size-sorted sub-samples that are rebalanced annually are employed, and in addition, adjustments for thin and infrequent trading are made to the data. The results indicate that serial correlation is present in equity returns and that it leads to significant short-run contrarian profits that persist even after we adjust for market frictions. Consistent with findings for the US market, contrarian profits decline as one moves from small stocks to large stocks, but only when market frictions are considered. Furthermore, the contribution to contrarian profits due to the overreaction to the firm-specific component appears larger than the underreaction to the common factors. [ABSTRACT FROM AUTHOR]

This article examines the market reactions to the trading suspensions in Hong Kong, China. Trading suspension aims to ensure that all investors have fair access to market information when any drastic change occurs, possibly causing a disorderly market. However, it is a controversial issue as to whether this goal can be realized during abnormal periods. While the existing literature on trading suspension provides evidence for the U.S. markets, few studies have investigated market reactions to trading suspensions outside the U.S. The purpose of this paper is to add new evidence to current literature on trading halts by investigating trading suspensions on the Stock Exchange of Hong Kong (SEHK). Specifically, this paper evaluates the effectiveness of trading suspensions in three aspects: the price discovery process, changes in return volatility and changes in trading volume. Both the SEHK and Securities and Futures Commission have authority to suspend stock trading. According to the SEHK's Rules, the Stock Exchange may suspend dealings in any securities where the following conditions exist.

This paper explores the importance of central banking policies in financial market performance, using the case of India. For this purpose, the paper comparatively analyzes the performance of financial markets during the regimes of last three governors of the Reserve Bank of India—Y V Reddy, D Subbarao, and Raghuram Rajan. The paper discusses the central banking policies in these periods with respect to monetary stability, inflation, and growth challenges. The paper presents an analysis of returns and volatility in stock markets and currency markets in their tenures in comparison with those from other selected emerging markets (Brazil, Russia, China, South Africa) and developed markets (USA and UK). The paper also brings out the leverage effect by applying the exponential generalized autoregressive conditional heteroskedasticity (EGARCH) model in addition to comparatively analyzing the performance of financial markets. Further, the paper assesses the impact of central banking policies on financial markets by using the fixed effect model on the reference countries for the period under reference. [ABSTRACT FROM AUTHOR]

Metadiscourse features are the way in which writers express their opinion and achieve not only coherence but also cohesion in their texts. Although metadiscourse features are widely employed, it is sometimes the case that writers tend to use them inappropriately, resulting in incoherent and ineffective texts. A review of the relevant literature reveals that a significant body of research has been conducted on metadiscourse features in various academic contexts. However, studies targetted at news settings are still limited. Hence, this study adapts Dafouz-Milne's model to identify the types, functions and linguistic realisations of metadiscourse features that are commonly used in business news. Quantitative data were collected from 15 business news articles from "Star Online" and "Focus Malaysia", respectively from September 2014 until June 2016. Semi-structured interviews were conducted with six business news writers individually. This paper aims to compare textual and interpersonal functions and their linguistic realisations to see whether business news in "Star Online" or "Focus Malaysia" has more engaging content to create awareness for writers. [ABSTRACT FROM AUTHOR]

Rule 415 allows a firm to register all the securities it reasonably expects to sell over the next two years and then, at the management's option, to sell those securities over these two years whenever it chooses. This paper examines whether equity offerings made under Rule 415 (shelf offerings) differ in issuing costs from equity offerings not sold under this rule. We find that shelf offerings cost 13% less for syndicated issues and 51% less for nonsyndicated issues. We also investigate the empirical relevance of the market overhang argument which suggests that shelf registrations depress the price of the registering firm's shares more than traditional registrations. Our data does not support the market overhang argument. [ABSTRACT FROM AUTHOR]

Whether insider trading affects stock prices is central to both the current debate over whether insider trading is harmful or pervasive, and to the broader public policy issue of how best to regulate securities markets. Using previously unexplored data on illegal insider trading from the Securities and Exchange Commission, this paper finds that the stock market detects the possibility of informed trading and impounds this information into the stock price. Specifically, the abnormal return on an insider trading day averages 3%, and almost half of the pre-announcement stock price run-up observed before takeovers occurs on insider trading days. Both the amount traded by the insider and additional trade-specific characteristics lead to the market's recognition of the informed trading. [ABSTRACT FROM AUTHOR]

Using daily and monthly stock returns we find no convincing evidence that Federal Reserve margin requirements have served to dampen stock market volatility. The contrary conclusion, expressed in recent papers by Hardouvelis (1988a,b), is traced to flaws in his test design. We do detect the expected negative relation between margin requirements and the amount of margin credit outstanding. We also confirm the recent finding by Schwert (1988) that changes in margin requirements by the Fed have tended to follow rather than lead changes in market volatility. [ABSTRACT FROM AUTHOR]

Purpose -- The purpose of this paper is to explain the Securities and Exchange Commission's recently proposed amendments to Rule 10b-18 under the Securities Exchange Act of 1934 that are intended to modernize Rule 10b-18 to reflect changes in the market since the Rule's adoption. Design/methodology/approach -- The paper provides an overview of Rule 10b-18, which provides an issuer that is buying its own stock a safe harbor fromliability for market manipulation if the issuer satisfies the purchase, timing, price and volume conditions defined in Rule 10b-18. It outlines the proposed amendments to the timing condition, price condition, limitation on disqualification, and the time in which the safe harbor is available in connection with an acquisition by a special purpose acquisition company. Findings -- The proposed amendments are intended to modernize Rule 10b-18 to reflect changes in the market since the Rule's adoption. Practical implications -- The proposed amendments to the price condition and the disqualification provisions will likely be welcome by issuers and brokers who have been challenged by the evolution of market practices and technology, but the amendments to the timing condition and the restrictions on SPACs could result in fewer opportunities for issuers to purchase their own shares under the safe harbor. Originality/value -- The paper provides practical guidance from experienced securities lawyers. [ABSTRACT FROM AUTHOR]

Drawing on recent contributions inferring financial interconnectedness from market data, our paper provides new insights on the evolution of the US financial industry over a long period of time by using several tools coming from network science. Relying on a Time-Varying Parameter Vector AutoRegressive (TVP-VAR) approach on stock market returns to retrieve unobserved directed links among financial institutions, we reconstruct a fully dynamic network in the sense that connections are let to evolve through time. The financial system analysed consists of a large set of 155 financial institutions that are all the banks, broker-dealers, insurance and real estate companies listed in the Standard & Poors’ 500 index over the 1993–2014 period. Looking alternatively at the individual, then sector-, community- and system-wide levels, we show that network sciences’ tools are able to support well-known features of the financial markets such as the dramatic fall of connectivity following Lehman Brothers’ collapse. More importantly, by means of less traditional metrics, such as sectoral interface or measurements based on contagion processes, our results document the co-existence of both fragmentation and integration phases between firms independently from the sectors they belong to, and doing so, question the relevance of existing macroprudential surveillance frameworks which have been mostly developed on a sectoral basis. Overall, our results improve our understanding of the US financial landscape and may have important implications for risk monitoring as well as macroprudential policy design. [ABSTRACT FROM AUTHOR]

This paper examines volatility transmission and conditional correlations behaviour between the US and the Asian stock markets considering the effect of the Global Financial crisis. One Asian mature market and 10 emerging markets are included in the sample. To carry out the analysis, we use a multivariate asymmetric GARCH model. Results show that there exists volatility transmission between the US and the Asian markets. Moreover, it is found that, after the crisis, volatility transmission patterns have barely changed. Finally, results suggest that the lower the country‘s level of development, the lower the correlation with the USA. [ABSTRACT FROM PUBLISHER]

This paper analyses the recent volley of market structure initiatives issued by the Securities and Exchange Coin miss ion (SEC) since time autumn of 2009. It observes that these initiatives are a natural outgrowth of the SEC'S adoption tinder the Securities Exchange Act of 1934 of Regulation ATS in 1998 and Regulation NMS in 2005 and time electronic market structure that has resulted from these rules. It asserts that time 'flash crash' that occurred on 6th May, 2010 is emblematic often SEC'S market structure challenges it faces. The paper describes the SEC'S recent mimarket structure initiatives, explains the issues they raise, and offers observations about certain of their aspects. It concludes with an analysis of the SEC'S approach and a recommendation of the three keys for the SEC to follow to obtain a result that would be beneficial to the markets. [ABSTRACT FROM AUTHOR]

This paper examines the dynamic linkages between the federal funds rate and the stock market during the 1970-2004 period using the VAR methodology. We detected a disconnection between Fed actions and market responses in the 1990s relative to the 1970s and 1980s. Upon further analyses, we observed asymmetric effects of monetary policy actions on the stock market and that such actions were more turbulent during bear markets than bull markets. Overall, our results appear to suggest that there was consistent dynamic relationship between the conduct of monetary policy and the corresponding behavior by the stock market during the last three decades. [ABSTRACT FROM AUTHOR]

This paper examines the long-term linkages between seven Central and Eastern European (CEE) emerging stock markets and two developed stock markets, namely the German and the US markets. The stability of the long-run relationships is studied using recursive cointegration analysis. The results reveal that the financial linkages between the CEE markets and the world markets increased with the beginning of the EU accession process. Furthermore, the application of the Gonzalo and Granger (J Bus Econ Stat 13:27–35, 1995) methodology indicates that the examined stock markets are partially integrated, while there is also evidence that the emerging stock markets of Central and Eastern Europe except for Estonia together with the German and the US stock markets, have a significant common permanent component, which drives this system of stock exchanges in the long run. Finally, it is worthwhile to note that the global financial crisis of 2007–2009 caused a slowdown in the convergence process. In addition we find evidence that the Slovenian stock market exhibits a moderate increase in the transitory component and this may be attributed to the Slovenian full membership in the euro area. [ABSTRACT FROM AUTHOR]

This paper shows that the momentum effect appears in the wake of both up-market and down-market states in the Spanish stock market, although in the first of these cases it is followed by return reversal. This evidence, which contradicts the predictions of Cooper et al. (2004), provides the rationale for taking into account the disposition effect among the possible explanatory factors behind the momentum effect in a behavioral theory context. [ABSTRACT FROM AUTHOR]

This paper examines if the Indian stock market moves with other markets in Asia and the United States in an era of capital market reforms and the sustained interest of foreign investors in that market. By using techniques of cointegration, vector autoregression, vector error-correction models, and Granger causality, we find that, though there is definite information leadership from the U.S. market to all Asian markets, the U.S. indexes do not uniquely influence the integration of Asian markets, while Japan is found to play a unique role in the integration of Asian markets. The U.S. market is seen not only to influence, but also to be influenced by information from most of the major Asian markets. The Indian stock return in recent times is definitely led by major stock index returns in the United States, Japan, as well as other Asian markets, such as Hong Kong, South Korea, and Singapore. More important, returns on the Indian market are also seen to exert considerable influence on stock returns in major Asian markets. [ABSTRACT FROM AUTHOR]

This paper examines how cross-listing impacts analyst coverage and forecast accuracy for U.S. firms that cross-list on foreign exchanges. By focusing on U.S. firms cross-listing abroad, we are able to discriminate between two competing explanations for the improvements in information intermediation experienced by foreign firms cross-listing in the U.S. (Lang, Lins, and Miller 2003); that is, whether the improvements are driven by generic cross-listing effects or by the strict disclosure and regulatory requirements specific to the U.S. markets. Our cross-sectional analysis indicates that cross-listing is negatively associated with analyst coverage, and our time-series analysis yields only marginal evidence of post-cross-listing improvement in forecast accuracy. Thus the cross-listing benefits documented in prior research for foreign firms cross-listing in the U.S. are not generalizable to all cross-listings and may be attributable to the strong disclosure and regulatory environment prevalent in the United States. [ABSTRACT FROM AUTHOR]

This paper extends the work in [Serletis & Shintani, 2003; Elder & Serletis, 2007; Koustas et al.; Hinich & Serletis, 2008] by re-examining the empirical evidence for random walk type behavior in the US stock market. In doing so, it uses daily data on the Dow Jones Industrial Average, over the period from January 3, 1928 to March 15, 2006, and a statistical-physical approach — "detrended fluctuations analysis" — providing a reliable framework for testing the information efficiency in financial markets as shown by Uritskaya [2005a, 2005b] and Uritskaya and Uritsky [2001]. The approach eliminates nonstationary market trends and focuses on the intrinsic correlation structure of stock market fluctuations at different time scales which is studied relative to random walks models. Our results indicate that the US stock market operates close to the state predicted by the efficient markets hypothesis. The observed transient deviations from this state are shown to have a statistical origin, consistent with a purely random geometric Brownian motion. [ABSTRACT FROM AUTHOR]

Previous research on the dynamic linkages between international financial markets focused on bivariate interequity or intercurrency relationships and do not allow a specific role for the currency or equity market, respectively. In this paper, we hypothesize that there are important, yet not well understood, dynamic relationships between international equity and currency markets and these are driven by information spillover via the mechanism of currency order flow. Using a trivariate asymmetric GARCH framework, we find that the relationships between equity and currency markets are significant, bidirectional, and pervasive. These relationships, which coexist with the relationships between U.S. and foreign equity markets, are much stronger in the volatilities than in the means. Importantly, we find strong support for our information spillover hypothesis where currency order flow is the economic mechanism by which information is transmitted. [ABSTRACT FROM AUTHOR]

Movements in the stock market can have a significant impact on the macroeconomy and are therefore likely to be an important factor in the determination of monetary policy. However, little is known about the magnitude of the Federal Reserve's reaction to the stock market, in part because the simultaneous response of equity prices to interest rates makes it difficult to estimate. This paper uses an identification technique based on the heteroskedasticity of stock market returns to measure the reaction of monetary policy to the stock market. We find a significant policy response, with a 5 percent rise (fall) in the S&P 500 index increasing the likelihood of a 25 basis point tightening (easing) by about a half. [ABSTRACT FROM AUTHOR]

The paper analyses convenience yields in the petroleum market. The implied convenience yield for petroleum and petroleum products is found to be driven by a non-stationary and mean reverting long memory process. The theoretical implication of this finding is established. It is suggested that this might be attributed to the fact that the market is expecting mean reversion in the spot prices. It is demonstrated that crude oil and unleaded gasoline are driven by similar mean reversion processes whereas heating oil exhibits a more seasonal pattern. This suggests that the market expects a more seasonal fluctuation in heating oil than crude oil or unleaded gasoline prices. Furthermore, the volatility process and its relation with the mean process has been found to be in accordance with the prediction of the theory of storage, i.e. positive convenience yields tend to be more volatile. In addition, it is argued that, consistent with implications of the theory of storage, higher convenience yields tend to cause higher volatility. However, the asymmetric nature of this causality implies that positive convenience yields are more likely to cause higher volatility than negative. [ABSTRACT FROM AUTHOR]

The Shanghai-Hong Kong Stock Connect has been in operation for more than a year. It is predictable that with the implementation of this scheme, cross-border securities disputes between the Mainland and Hong Kong will be on the rise. In resolving these disputes, one of the most important problems is the determination of substantive law that should apply to them. This paper makes feasible proposals to harmonize the choice of law rules regarding cross-border securities disputes under the Shanghai-Hong Kong Stock Connect with due reference made to the approaches adopted by the Hague Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary and the Uniform Commercial Code of the US. [ABSTRACT FROM AUTHOR]

The market microstructure literatures study how the traders work in the financial market. In this paper, we propose a novel heterogeneous agent-based multi-asset artificial stock market based on Santa Fe Artificial Stock Market (SFI-ASM) to compare the financial market microstructure between U.S. and China. We first develop a set of new parameters for the single stock market simulation to improve the way that agents monitor the market and choose different strategies, which make our model closer to the real financial market. Secondly, we construct a multiple assets financial market by incorporating two new types of agents, namely, zero-intelligence agents and less-intelligence agents, and conduct simulations for different evolution speeds, strategies, and intelligence levels to achieve the optimal models of Chinese and U.S. financial markets before and after the financial crisis. Based on the simulation results, we present a comprehensive analysis of the market microstructure for the two financial markets. [ABSTRACT FROM AUTHOR]

Testing the hypothesis that international equity market correlation increases in volatile times is a difficult exercise and misleading results have often been reported in the past because of a spurious relationship between correlation and volatility. Using "extreme value theory" to model the multivariate distribution tails, we derive the distribution of extreme correlation for a wide class of return distributions. Empirically, we reject the null hypothesis of multivariate normality for the negative tail, but not for the positive tail. We also find that correlation is not related to market volatility per se but to the market trend. Correlation increases in bear markets, but not in bull markets. [ABSTRACT FROM AUTHOR]

This paper presents evidence of the existence of a return effect on European stock markets coinciding with New York Stock Exchange (NYSE) holidays, which is particularly marked after positive closing returns on the NYSE the previous day. The effect is large enough to be exploited by trading index futures. This anomaly cannot be explained by seasonal effects, such as the day of the week effect, the January effect or the pre-holiday effect, nor is it consistent with behavioural finance models that predict positive correlation between trading volume and returns. However, examination of factors such as information volume or investor mix provides a reasonable explanation. [ABSTRACT FROM AUTHOR]

The goal of American stock market reform is the establishment of a central market in which public orders are executed at the best price obtainable in an environment of competitive market makers. Among the measures needed to achieve this are: a consolidated tape, a consolidated quotation system, and competitive commission rates. Among the alleged shortcomings of the projected market structure are: the alleged substitution of a dealer for an auction market; the possible loss of liquidity; the dangers of concentration; the demise of the small investor; and the incapacitation of investment banking. The paper argues: (1) the threat to the viability of the NYSE is exaggerated; (2) while the “crowd” around the post of the NYSE may be lost, the displacement process, the essence of an auction market, won't be; (3) the threat of institutional parallel trading to liquidity has been exaggerated; (4) the rapid response of stock prices to changes in the fortunes of the issuers does not signify either an illiquid or disorderly market; (5) attrition of brokerage houses will be significant but the industry will remain competitive; (6) there is little in the concept of the central market that should impact significantly on the volume of trading by individuals; (7) the virtues of encouraging trading per se are highly dubious; and (8) the future of investment banking is heavily dependent on a number of factors including future market participation by individuals, concentration of the industry, and inroads by commercial banks. [ABSTRACT FROM AUTHOR]

The 2007-2009 financial crisis, and its fallout, has strongly emphasized the need to define new ways and measures to study and assess the dynamics of financial markets. The S&P500 dynamics during 4/1999-4/2010 is investigated in terms of the index cohesive force (ICF - the balance between the stock correlations and the partial correlations after subtraction of the index contribution). We found a rapid market transition at the end of 2001 from a flexible state of low ICF into a stiff (nonflexible) state of high ICF that is prone to market systemic collapses. The stiff state is also marked by strong effect of the market index on the stock-stock correlations as well as bursts of high stock correlations reminiscence of epileptic brain activity. Finally, we make use of the recently introduced stock dependency networks to uncover changes in the market structure following the transition at the end of 2001. This analysis sheds new light on the origin and nature of the current crisis. The new approach is likely to be applicable to other classes of complex systems from gene networks to the human brain. [ABSTRACT FROM AUTHOR]

Most of the existing technical trading rules are linear in nature. This paper investigates the predictability of nonlinear time series model based trading strategies in the U.S. stock market. The performance of the nonlinear trading rule is compared with that of the linear model based rules. It is found that the self-exciting threshold autoregressive (SETAR) model based trading rules perform slightly better than the AR rules for the Dow Jones and Standard and Poor 500, while the AR rules perform slightly better in the NASDAQ market. Both the SETAR and the AR rules outperform the VMA rules. The results are confirmed by bootstrap simulations. [ABSTRACT FROM AUTHOR]

This paper examines the impact of Securities and Exchange Commission's Regulation Fair Disclosure (FD) on information leakage around voluntary management disclosures. We find a positive correlation between stock returns two days before and after the voluntary disclosure in the pre-Regulation FD period, but not in the post-Regulation FD period. After Regulation FD is implemented, pre-announcement abnormal return as a percentage of total return decreases by 26.1% ( 21.4%) for large firms with good (bad) news, suggesting that the amount of information leakage reduces for these firms. These findings provide support for the premise and the intended purpose of the regulation for large firms. [ABSTRACT FROM AUTHOR]

The increased demand and opportunity for cross-border trading activity has provided the opportunity to re-evaluate the appropriate regulatory approach to cross-border access. The regulation of cross-border products and services by securities firms has not kept pace with the growing globalisation and interwoveness of the securities markets. This has put pressure on regulators worldwide to come up with crossborder regulatory initiatives. From a regulatory perspective, various approaches of how to manage the regulatory tension have been proposed to accommodate the growing importance of rapidly growing markets and burgeoning cross-border trade and the decreasing importance of national borders in capital markets, while most regulatory infrastructures remain nationally based. A model that has gained increased interest is Mutual Recognition of securities regulation as a solution for effective regulation in the world of cross-border securities trade. The Mutual Recognition concept of the USA's Securities Exchange Committee (SEC), of which the discussion started in early 2007, is now gaining increased acceptance by the international community. With US investor demand for foreign securities exponentially increasing over the past few decades, the SEC is considerably expanding US investors' access to foreign markets and foreign securities intermediaries by developing a structure to mutually recognise foreign brokers-dealers and foreign exchanges. In March 2008, the SEC announced its plans to enter into formal Mutual Recognition discussions to explore initial agreements with a number of reliable foreign regulators in countries such as Australia, Canada and the EU. In their Joint Statement of 1st February, 2008, the SEC and the European Commission announced their will towards an integrated EUUS securities market by endorsing the Mutual Recognition of securities market law as the central approach. A transatlantic Mutual Recognition regime (framework) has the potential to realise the benefits associated with greater access of EU and US investors to broader and cheaper transatlantic market and international market intermediaries. Mutual Recognition could also simplify investors' ability on both sides of the Atlantic to greater diversify their market securities portfolio by broadening their investment choices and increasing their access to more information about foreign investment opportunities. In this paper the Mutual Recognition concept will be explained in more detail, including the mechanism, the framework, comparability process and the preconditions. Special focus is on the role of the Mutual Recognition approach as a way to create a transatlantic financial market. To what other topics, next to trading venues and intermediaries, can the scope of Mutual Recognition in the US-EU dialogue be enlarged? What does this concept mean for future regulatory cooperation and coordination? [ABSTRACT FROM AUTHOR]