Three Essays On The Role Of Information Networks In Financial Markets
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Three Essays On The Role Of Information Networks In Financial Markets
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Author : Swasti Gupta-Mukherjee
language : en
Publisher:
Release Date : 2007
Three Essays On The Role Of Information Networks In Financial Markets written by Swasti Gupta-Mukherjee and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with Capital market categories.
Based on previous evidence that there are information heterogeneities in capital markets, three essays including empirical frameworks for examining the information processes that impact portfolio investments and corporate investments was proposed. The first essay considers information channels among mutual fund managers (fund-fund networks), and between holding companies and fund managers (fund-company networks). Results show that (1) fund-fund (fund-company) information networks help in generating positive risk-adjusted returns from holdings in absence of fund-company (fund-fund) networks; (2) fund-company networks create information advantage only when the networks are relatively exclusive. Superior networks seem to pick stocks which outperform beyond the quarter. The second essay examines mutual fund managers' tendency to deviate from the strategies of their peers. Results indicate a significantly negative relationship between the managers' deviating tendency and fund performance, suggesting that the average fund manager is more likely to make erroneous decisions when they deviate from their peers. The third essay investigates the determinants of target choices in corporate acquisitions. Results reveal the influence of various factors, including information asymmetries, which may drive this behavior, including economic opportunities, anti-takeover regimes, competitive responses to other managers, and acquirers' size and book-to-market ratios.
Essays On Information Diffusion And Stock Markets
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Author : Aaron Paul Burt
language : en
Publisher:
Release Date : 2017
Essays On Information Diffusion And Stock Markets written by Aaron Paul Burt and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with Stock exchanges categories.
My dissertation is a compilation of three separate research studies that explore how information diffuses in financial markets. The first chapter examines how non-uniform information diffusion through distinct networks segments U.S. financial markets. Using changes in newspaper ownership networks, I document that a network link between different geographic areas leads to increased comovement of turnover and returns between stocks headquartered in those areas. Consistent with delayed content sharing within a network, the largest increase in comovement is observed using weekly data. I show that the network-driven comovement is not driven by fundamentals and is weaker for large firms with high institutional ownership and decreases over time. I also document that a network link causes price levels of linked stocks to become more similar. My findings show that segmented information networks lead to segmented financial markets with implications for market efficiency, home bias, and the effects of changes in the U.S. media landscape on financial markets. The second chapter shows that investors do not fully monitor the information about directors available in the past prices of firms within the network the directors oversee. A long-short portfolio using this information yields an annual alpha of 6.6%. This predictability is limited to when firms share a director and is not driven by industry or previously identified economic links between firms. The predictability is largest in the long end, when small firms predict big firms, and when information on shared directors is costlier to obtain. Trading by the shared directors is a key mechanism: filtering on their trades increases the annual alpha to 15%. The third chapter studies the econometric properties of a commonly used network-based measure of information diffusion between economically linked firms. Previous studies use this measure to document failures of market efficiency with price discovery requiring up to a year. The measure is constructed as the long-short alpha of portfolios formed sorting on the preceding returns of firms economically linked to portfolio firms. We show that correlated alphas between linked firms bias these measures. Existing studies have monthly biases as large as a factor of two. This bias creates predictability even after price discovery completes. Subtracting the predicted return from the sorting firms' returns removes this bias. Eliminating this bias reveals a more efficient market than previously documented: price discovery takes one month.
Three Essays On Information Intermediaries In Financial Markets
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Author : Hamdi Driss
language : en
Publisher:
Release Date : 2014
Three Essays On Information Intermediaries In Financial Markets written by Hamdi Driss 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.
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.
Essays On Network Games With Incomplete Information With Applications In Finance
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Author : Christian Matthew Leister
language : en
Publisher:
Release Date : 2015
Essays On Network Games With Incomplete Information With Applications In Finance written by Christian Matthew Leister 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 dissertations includes three (3) chapters, each adding to the growing network games literature that incorporates incomplete information. Financial over-the-counter markets give motivating applications. (1) "Trading Networks and Equilibrium Intermediation" studies the efficiency of trade in networks. A network of intermediaries facilitates exchange between buyers and a seller. Intermediary traders face a private trading cost, a network characterizes the set of feasible transactions, and an auction mechanism sets prices. Stable networks, which are robust to agents' collusive actions, exist when cost uncertainty is acute and multiple, independent trading relationships are valuable. A free-entry process governs the formation of equilibrium networks. Such networks feature too few intermediaries relative to the optimal market organization and they exhibit an asymmetric structure amplifying the shocks experienced by key intermediaries. (2) "Interdealer Trade: Risk, Liquidity, and the role of Market Inventory" further studies traders facing private shocks, placed in a dynamic setting. Trades between ex ante symmetric, inventory carrying intermediaries ("dealers") are motivated by divergent liquidity needs of the counter parties. Market prices and asset flows are pinned by dealers' indifference between providing intermediation services and retaining liquidity to be utilized in subsequent interdealer markets. More active interdealer markets simultaneously increase the value to intermediation and the option-value to providing these services. Under infrequent shocks, interdealer trade boosts the availability of liquidity in the broader market. This boost decays with market inventory, which serves as a constraint on interdealer activity. Through this market mechanism, prices vary inversely with both search frictions between dealers and on their total current holdings. (3) "Information Acquisition and Response in Peer-effects Networks" endogenizes the quality of information that market participants carry in a general peer effects model. When pairwise peer effects are symmetric, asymmetries in acquired information are inefficiently low relative to the utilitarian benchmark. And with information privately acquired, all players face strictly positive gains to overstating their informativeness as to strategically influence the beliefs and behaviors of neighbors. If strategic substitutes in actions are present and significant, low centrality players move against their signals in anticipation of their neighbors' actions. A blueprint for optimal policy design is developed. Applications to market efficiency in financial crises and two-sided markets are discussed.
Essays On Information Transmission In Firm Networks And Financial Market Implications
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Author : Christoph Maximilian Schiller
language : en
Publisher:
Release Date : 2019
Essays On Information Transmission In Firm Networks And Financial Market Implications written by Christoph Maximilian Schiller 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 thesis consists of three chapters on firm-level production networks, information production and dissemination, and their impact on corporate policies and investment decisions. Chapter 1 provides an introduction of the essays and summarizes their main findings. Chapter 2 examines the role of international supply-chain relationships for the transmission of corporate Environmental and Social (E) policies, and the resulting impact on real E outcomes and firm performance. E policies propagate from customers to suppliers, especially when customers have higher bargaining power and suppliers are in countries with lower ESG standards. This transmission mechanism matters: suppliers subsequently reduce their toxic emissions, litigation and reputation risk decreases, and financial performance improves. Chapter 3 develops a measure for the speed of information diffusion along supply-chains and documents a causal relationship between the attention of key market participants, i.e. dual-covering analysts and cross-holding institutional investors, and the speed measure. The speed of information diffusion plays an important role for feedback effects from stock prices to corporate investments: supplier managers rely more on information in customer (supplier) stock prices when the speed of information diffusion along the supply chain is slower (faster). Consequently, the diffusion speed affects the coordination of relationship-specific investments between customers and suppliers and future operating performance of suppliers. Chapter 4 shows that international supply-chain links are an important channel for the propagation of financial contagion around the world. Following large country-level shocks, such as market-index jumps or natural disasters, dynamic conditional correlation (DCC) between U.S. suppliers and their foreign customers increases significantly, beyond country-level and industry effects. Consistent with a credit-chain mechanism, the effect is asymmetric for positive and negative shocks, more pronounced for supply-chain pairs with a closer relationship, higher leverage, lower cash holdings and firm profitability, and increases with the costs of bankruptcy resolution in the customers countries.
Essays On The Role Of Information In International Financial Markets
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Author : Zhichao Yuan
language : en
Publisher:
Release Date : 2000
Essays On The Role Of Information In International Financial Markets written by Zhichao Yuan 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 Customer Supplier Networks And Financial Markets
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Author : Xiao Yu
language : en
Publisher:
Release Date : 2018
Three Essays On Customer Supplier Networks And Financial Markets written by Xiao Yu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
This thesis is composed of three independent essays on customer-supplier networks and financial markets. The first chapter, entitled "Economic Links and Return Volatility", is co-authored with Keyi Zhang and Ramazan Gencay. This study investigates the propagation of stock return volatility along supply chains. Our results show that the effect of customer volatility is approximately 10 times as large as trading volume on supplier's volatility. Our findings are robust to controlling for variables capturing the time-series properties of volatility and a set of idiosyncratic, industry and market factors; tested under various assumptions regarding the activeness of customer-supplier linkages; and to different estimation methods. Our out-of-sample tests provide consistent evidence that incorporating customer channel improves volatility forecasting. Furthermore, the transfer of volatility is more pronounced when investors are more aware of customer-supplier linkages. The second chapter, entitled "Resilience to the Financial Crisis in Customer-Supplier Networks" is also co-authored with Ramazan Gencay and Keyi Zhang. Inspired by the Capital Asset Pricing Model (CAPM) beta, we construct customer and supplier betas to separately investigate potentially different properties of downstream and upstream linkages. With the adjacency matrix acting as a "filter" to extract each company's return covariances with its trading partners, the cross-sectional dependence contained in the customer-supplier network is summarized by our betas. We explore how these two betas are related to a company's resilience to the financial crisis of 2008-2009. We observe that a higher customer beta is generally associated with more resilience during the crisis. The third chapter, entitled "Economic Links and Credit Spreads", is co-authored with Ramazan Gencay, Daniele Signori, Yi Xue and Keyi Zhang. This paper has been published in the Journal of Banking and Finance. This study describes a model of financial networks that is suitable for the construction of proxies for counterparty risk. We find that, for each supplier, counterparties' leverage and option implied volatilities are significant determinants of corporate credit spreads in the period after the 2008-2009 U.S. recession. Our findings are robust after controlling for several idiosyncratic, industry, and market factors.
Three Essays On Asymmetric Information In Imperfect Financial Markets
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Author : Uptal Bhattacharya
language : en
Publisher:
Release Date : 1990
Three Essays On Asymmetric Information In Imperfect Financial Markets written by Uptal Bhattacharya and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1990 with categories.
Three Essays On Empirical Finance
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Author : Tse-Chun Lin
language : en
Publisher: Rozenberg Publishers
Release Date : 2009
Three Essays On Empirical Finance written by Tse-Chun Lin and has been published by Rozenberg Publishers this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.