Three Essays In Financial Market Structure
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Three Essays In Financial Market Structure
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Author : James Peter Weston
language : en
Publisher:
Release Date : 2000
Three Essays In Financial Market Structure written by James Peter Weston and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with categories.
Three Essays On Financial Markets
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Author : Cagdas Tahaoglu
language : en
Publisher:
Release Date : 2021
Three Essays On Financial Markets written by Cagdas Tahaoglu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with categories.
This dissertation consists of three essays that address recent topics in financial markets that concern for scholars, policymakers, and investors. The first essay examines the benefits of international diversification for US investors, while accounting for market development, corporate governance, market cap effects, and structural change across countries over period August 1996 -July 2013. Improved risk adjusted returns are obtained from a diversified portfolio consisting of a mix of developed and emerging countries. Additionally, we find that diversification benefits are not significant for most of the small-cap foreign assets when an investor already holds position in corresponding countries large-cap assets. Diversification benefits based on the governance effectiveness of a country's companies are not ubiquitous. We find that economically significant improvements in risk-return performance can be attained by adding large caps of developed countries with high and low overall Governance Metrics International (GMI) ratings and large and small caps of emerging countries with low overall GMI ratings to the investment universe containing the assets of common law developed countries. However, diversification benefits are economically significant only for large and small caps of low GMI emerging countries when short selling is not allowed. The second essay looks at the market impact of recent regulatory changes in Canada that provide for trading halts on individual stocks that experience large upside or downside movements. The focus is on all stocks traded on the Toronto Stock Exchange since the inception of the single stock circuit breaker rule (SSCB) in February 2012, to replace the short-sale uptick rule. The results support pricing efficiency: material information that caused the circuit breaker is incorporated in stock prices on the day of the halt (neither overreaction nor underreaction), with no decline in market liquidity. Using trade-by-trade data constructed on 5-minute trading intervals, we refine the daily results, and show that shocks in realized volatility are focused in the ten-minute trading interval surrounding the halts. While circuit breakers provide a limited "safety net" for investors when their stocks are subject to severe volatility, they do not provide for a quick turnaround for stocks experiencing severe price decline events. The last essay re-examines the historical vs implied volatility spread anomaly, reported by Goyal and Saretto (2009) using a second-order stochastic dominance (SSD) criterion. The approach incorporates transaction frictions, and is robust to model specification problems, return distributions, as well as preferences. It is found that option trading frictions such as cash collateral requirements and option trading costs significantly reduce but do not eliminate returns to a long-short straddle trading strategy pre-2006 period. However, the anomaly disappears after 2006, consistent with market efficiency. The SSD test results confirm the findings.
Three Essays On Network Peer Effects On Firms And Financial Markets
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Author : Bahman Fathi Ajirloo
language : en
Publisher:
Release Date : 2021
Three Essays On Network Peer Effects On Firms And Financial Markets written by Bahman Fathi Ajirloo and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with categories.
This dissertation consists of three essays that address recent topics in corporate finance that concern for scholars, policymakers, and investors. Main body of this dissertation has been developed based on the "nexus of contracts" theory of the firm which in recent years has sparked renewed debates on the motivation underlying firm size and boundary. The first essay explores a network of interconnected firms and examines the impact of the firm's relationships with peers, rivals, and customers on its capital structure, and how the firm's revealed peers influence its financing decisions. We demonstrate that industry classification approach is fraught with measurement error, and instead implement an alternative peer identification scheme that designates peer groups as those explicitly disclosed by managers to shareholders. The results contrast with previous studies that find only weak evidence for peer effects on capital structure. We find that peer effects are particularly strong when focal firms have persistent rivals, in the sense of supplying common customers for at least two consecutive years. While constructing the firm's actual network poses a challenge, the new approach can lead to more real-world insights about firm behavior. In the second essay, I approach to a challenging version of peer effects model with firm's and peer's multinomial decision outcome as endogenous and financial fundamentals as exogenous explanatory variables. I show that managers do not set dividend policy independently and they are significantly under the influence of few self-disclosed diverse competitors rather than industry peers. The test results show that firm's dividend change actions are significantly correlated with past dividend actions of its peers and it is highly predictable for the next period. I also investigate and report marginal effects of firm's and peers' different endogenous and exogenous determinants on the outcome decision variable for example a peer group with an overall dividend increase action in the past 180 days, increases the chance of the dividend increase in the focal firm. Considering the market capitalization of dividend paying firms, the identified marginal effects and prediction of the cash distribution are economically meaningful and important. In the third essay, I propose a new approach to model and measure intangible value of the firm as the joint of network feature and book value of the firm. Despite the growing importance, the empirical asset pricing research has struggled to evaluate the effects of intangible assets on firms' market value. Utilizing characteristics of the firm network, I propose a network-centric value factor to replace the under-performing traditional value factor (HML) in a series of asset pricing factor model. I show that the new value factor portfolio provides stronger performance in all periods of the sample. I also explore short and long strategies to better understand effects of the networks on value of the firms. Initial findings emphasize that asset pricing studies should adjust the factor models by including intangible network value of the firm.
Three Essays On Financial Markets
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Author : Pawan Jain
language : en
Publisher:
Release Date : 2013
Three Essays On Financial Markets written by Pawan Jain and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
This dissertation is composed of three essays. The first essay investigates the information content of the limit order book (LOB) on the Shanghai Stock Exchange (SHSE), a purely order-driven market, for predicting future stock price volatility. We find that the LOB supply schedule consistently and significantly predicts the future price volatility. But this predictive power of LOB declines during the extreme market wide movements. We also find that buy orders are more informative over future price volatility than sell orders but sell (buy) orders becomes more informative during the extreme market wide down (up) movement days. Finally, we document that predictive power of LOB is short lived and markets are efficient over the longer time horizon. The second essay examines the effect of high frequency trading on market quality, systemic risk and trading strategies. In 2010 the Tokyo Stock Exchange, the largest exchange headquartered outside the US, introduced a new trading platform, Arrowhead, which reduced latency by 99.97% and increased co-located high-frequency trading from zero to 36% of volume. Arrowhead improved market liquidity and reduced volatility, but it also amplified systematic risks factors like quotes to trade ratio, order-flow autocorrelation and cross correlation, and tail risks. Arrowhead also affected trading strategies by increasing trade price predictability and the use of fleeting orders. Cost of immediacy serves as a channel through which reduced latency affects market quality, systematic risks, and trading outcome. The third essay analyzes the links between corporate finance policies and investment clienteles by comparing the cross-sectional variation in the dividend payout policies of companies across 32 countries. Beyond the impact of firm-specific accounting and financial variables, this study investigates how the country level variations: shareholder demand due to demographic variations and consumption needs, agency problems manifested in the extent of minority shareholder protection and business disclosures, and market quality in terms of transparency and liquidity; affect dividend payout policies. We find that firms have generous dividend payout policies when diverse shareholder demands are strong, extents of business disclosures and legal protections are weak, and the market qualities are poor. The empirical evidence supports the presence of strong dividend clienteles in a global setting. .
Three Essays On Information Efficiency In Financial Markets And Product Market Interaction
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Author : Haina Ding
language : en
Publisher:
Release Date : 2014
Three Essays On Information Efficiency In Financial Markets And Product Market Interaction written by Haina Ding and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
This dissertation contains three independent essays. The first two essays look at the informational role of stock prices and its impact on the real economy. The last one explores the relationship between managerial incentive and product market competition. In the first essay, two firms compete in a product market and have an opportunity to invest in a risky technology either early on as a leader or later once stock prices reveal the value of the technology. Information leakage thus introduces an option of waiting, which enhances production efficiency. A potential leader may nevertheless be discouraged from investing upfront, when anticipating its competitor to invest later in response to good news. I show that an increase in product market competition increases the option value of waiting but has an ambiguous effect on information production. It may thus be the case that intense competition leads to more leakage such that no firm would invest, especially so in a smaller market. Given a moderate level of competition, price informativeness may improve investment outcome when investment profitability and the market size are relatively large. The second essay examines the feedback effects of certifications in financial markets. A firm has to decide whether to monitor (or to ascertain) internally the prospect of a potential investment or to delegate this task to a certifier who reveals his evaluations to the outsiders. The investment decision is then taken based on all of the information available in the market. The information asymmetry between the firm and lenders is alleviated under delegation, and hence the firm enjoys a lower cost of capital at the financing stage. Delegation however reduces the information advantage of speculators who then make less effort to acquire information. This results in a potential information crowding-out effect. We show that the firm may prefer to delegate when the prior belief about the investment prospect is relatively high, and to choose in-house information production when its own signal is more precise and when its current assets in place generate a higher expected payoff. The third essay considers a spatial competition model with horizontal and vertical differentiation. Two firms are assigned to exogenous locations on a circular city. Consumers, distributed on the circle, need to pay a transportation cost for purchasing. Anticipating a future uncertainty in product quality, firms simultaneously offer incentive contracts to managers to induce an optimal effort level. I show that competition may adversely affects incentives, as a lower transportation cost impairs a firm's local market power and consequently reduces a firm's marginal benefit from producing a high quality product, particularly when its competitor also produces a high quality product. On the other hand, greater competition reduces a firm's profit if it fails to improve product quality. This effect increases the optimal effort level and becomes dominant if the quality improvement is relatively large compared to the effort cost. Moreover, a large decrease in the transportation cost may change the market structure, such that the firm with better quality goods attracts all the demand, and thus the positive effect of competition on managerial effort becomes more significant.
Three Essays In Financial Economics
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Author : Harry Charles DeAngelo
language : en
Publisher:
Release Date : 1977
Three Essays In Financial Economics written by Harry Charles DeAngelo and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1977 with Capital productivity categories.
Three Essays On Financial Markets
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Author : Min Hwang
language : en
Publisher:
Release Date : 2001
Three Essays On Financial Markets written by Min Hwang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2001 with categories.
Three Essays In Financial Economics
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Author : Ian Wright
language : en
Publisher:
Release Date : 2015
Three Essays In Financial Economics written by Ian Wright and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
This dissertation explores various empirical financial phenomena. The first chapter presents evidence suggesting long-term uncertainty may be one reason firm activity has been slow to recover from the Great Recession. I show the current level of uncertainty and expectations of future uncertainty -- that is, the entire term structure of uncertainty -- are negatively correlated with firm investment rates. I present a simple model generating these effects through real options channels. Using equity options to obtain forward-looking estimates of firm and aggregate uncertainty at different horizons, I then show that both the level and slope of the term structure of uncertainty have negative conditional correlations with capital investment rates, consistent with the model. Numerically, a one standard deviation increase in firm (aggregate) uncertainty over the next 30 days correlates with a decrease in firm capital investment equal to 5.1% (1%) of the mean firm investment rate over the next quarter. A one standard deviation increase in firm (aggregate) uncertainty over the next year relative to the next 30 days correlates with a decrease in firm capital investment equal to 3.1% (4.4%) of the mean firm investment rate over the next quarter. I also find the correlation between both the level and slope of the term structure of uncertainty and R\ & D to be positive, supporting the theory that firms invest in growth options in the face of uncertainty. I discuss identification in this context and the particular relevance of my findings for government policy. The second chapter is co-authored with Ana Gomez Lemmen-Meyer and Enrique Seira. We establish four stylized facts about firm financing in private credit markets using a unique, comprehensive database of corporate loans in Mexico. First, firms receive a lower interest rate upon moving from one bank to another. Second, banks' pricing behavior toward their customers exhibits the "lock-in effect": firms' interest rates increase the longer they stay in a lending relationship with the same bank. Third, in a market where asymmetric information between banks has been mitigated, banks appear to compete for the highest quality borrowers and there is little evidence of adverse selection among switching firms. In fact, borrowers that switch banks appear to be of higher average quality than similar borrowers that do not. Fourth, firms that change lenders receive other more favorable lending terms after the change of lenders than they had prior to the change. These take the form of longer maturity loans and less required collateralization, providing positive evidence related to the hypothesis that banks compete for firms not just on interest rates, but also through other lending channels, and that firms switch banks to improve their lending terms. We document how these facts differ by firms' size, and note that the Mexican commercial credit market is really two markets: one for credit to large firms and one for credit to small firms. Finally, we explain how specific policies may have led to the environment giving rise to these stylized facts, discuss the implications of our findings for models of relationship lending and firm banking, and present a simple model rationalizing our results. The final chapter is co-authored with Todd Mitton and Keith Vorkink. In it we explore what may drive financial "bubbles" in speculative markets. Speculative behavior plays a key role in financial markets, but little is known about its causes. We test for neighborhood effects on speculative behavior using lottery sales data, allowing us to disentangle the effects of investor enthusiasm and information transmission. In a sample of 160,000 retailers, per capita lottery sales in a given census block increase by $0.26, on average, when per capita lottery sales increase by $1 in neighboring blocks. Exogenous variation in geographic barriers to interaction between neighbors suggests that the results may be driven largely by social interaction. Our analysis demonstrates a link between social interaction, investor enthusiasm, and speculative behavior that has important implications for financial markets, and may explain why financial bubbles occur.
Three Essays On The Industrial Organization Of Financial Markets
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Author : David F. Andrade
language : en
Publisher:
Release Date : 1997
Three Essays On The Industrial Organization Of Financial Markets written by David F. Andrade and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1997 with categories.
Three Essays On Current International Financial Markets
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Author : Seungho Lee
language : en
Publisher:
Release Date : 2019
Three Essays On Current International Financial Markets written by Seungho Lee and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
This dissertation consists of three essays that address recent developments in international financial markets that have been of concern for scholars, policymakers, and practitioners. The first essay examines how cultural factors can influence individual investors' trading behavior in response to risk in nine Eurozone countries. The markets studied were particularly affected by the global financial crisis, the subsequent European banking crisis, and the European sovereign debt crisis. Using mutual fund flows as proxy of investors' trading behavior, our evidence indicates that a country culture variable significantly affects investors' trading responsiveness to risk. Specifically, the impact of risk on fund flows is significantly positive and is larger in scale in countries with individualist cultures. The second essay attempts to investigate the effects of negative interest rate policies (NIRP) on foreign exchange and equity markets of eight European countries and Japan. To see the impacts of these policies, event studies and regime-switching vector autoregressive regression analyses are conducted for the nine countries that implement NIRP. The results provide valid evidence that the announcement of NIRP has a transitory effect on currency depreciation; long term effects are less evident. On the day of NIRP implementation, both currency and equity market returns reacted in response to the event efficiently and negatively, especially in Switzerland's case. These outcomes suggest that simulative monetary policy by lowering interest rates below zero might have counter-effects from those observed when interest rates are lowered, but to rates that remain positive. Additionally, findings from the long term analyses explain that interest rate term structure and cointegration level of local and the U.S. equity index may be related to effectiveness of NIRP in currency and equity markets, respectively. The last essay examines the determinants of the price of the leading cryptocurrency, Bitcoin. The analyses identify a number of factors that significantly affect the returns to investments in Bitcoin including: trading volume, high-low price spread, and extreme price change in the previous period. The latter result supports the assertion that recent severe price fluctuations in Bitcoin markets are primarily due to speculative investment activities. Furthermore, evidences suggested in this study explain possibility of market compromise and inefficiency of the cryptocurrency market, implying pivotal risks for Bitcoin market participants.