May 2015 ~ Khmer4online

(Hot New) Sexy Girl

Financial-market risk, commonly measured in terms of asset-return volatility, plays a fundamental role in investment decisions, risk management and regulation. In this paper, we investigate a new modeling strategy that helps to better understand the forces that drive market risk. We use componentwise gradient boosting techniques to identify financial and macroeconomic factors influencing volatility and to assess the specific nature of their influence. Componentwise boosting is capable of producing parsimonious models from a, possibly, large number of predictors and—in contrast to other related techniques—allows a straightforward interpretation of the parameter estimates. Considering a wide range of potential risk drivers, we apply boosting to derive monthly volatility predictions for the equity market represented by S&P 500 index. Comparisons with commonly-used GARCH and EGARCH benchmark models show that our approach substantially improves out-of-sample volatility forecasts for short- and longer-run horizons. The results indicate that risk drivers affect future volatility in a nonlinear fashion.

The Emergency Economic Stabilization Act of 2008 was the response of the Federal government to the economic crisis of 2007-2009. Within this act, the Troubled Asset Relief Program (TARP) was the mechanism to attempt to stabilize the financial market through the injection of liquidity into troubled firms. This paper examines the effect of TARP bailouts on stock market volatility and investor fear. Using an event study methodology, we find evidence of significant decrease in stock-market volatility on the day of bailouts, and the day after. Additionally, findings show that the VIX, a proxy of investor fear, significantly declines on the second day subsequent to bailouts. The results suggest that government intervention, in the form of bailouts, is successful in stabilizing financial markets and reducing investor anxiety in the short-run. References

In this study, we raise the question of why bidders from high investor protection countries tend to make acquisitions in less protective countries. To answer this question, we use a sample of 462 cross-border and domestic acquisitions by Canadian bidders. Our results reveal that Canadian bidders making cross-border acquisitions outperform those making domestic acquisitions, which contrasts with the findings of studies conducted on US acquirers. This result is especially true when stock is involved in payment, and is robust to different target and deal characteristics. Another major result is that Canadian bidders exploit the high shareholder protection in Canada, to make the foreign target accept stock as a means of payment and avoid at the same time the signaling effect of stock as an overvaluation of the bidder, which is the usually observed effect in domestic acquisitions. This practice allows the bidder to enlarge its investors’ base and enhance the market and investors awareness without being considered as overvalued, which drives a positive effect on the bidder’s stock. Accordingly, we find that the probability of an all-stock payment is positively correlated with the difference in the shareholder protection between the bidder and target countries.

This paper examines the evidence of contagion in emerging debt markets during two default episodes: Russia’s 1998 and Argentina’s 2001. We find evidence supporting the presence of contagion in the form of intra and inter-regional spillover of extreme returns. Contrary to previous studies, however, contagion seems to happen at both tails of the returns distribution. Further, the presence of contagion is not limited to the periods of credit crisis, as it also extends into more tranquil periods. To check the robustness of our results, we apply the correlation approach, which has been used to study contagion in equity and foreign currency markets. Contrary to these studies, our results show that the correlations in credit markets remain relatively stable and do not deviate significantly from their historical levels during periods of crisis. These findings lead us to conclude that there is no contagion in emerging debt markets; only interdependence. The co-movement of emerging debt markets during the crisis periods emanates from these markets’ historical interdependence and is not a consequence of crises’ contagious effects, as it is the case in stock and foreign exchange markets. References Bae, K.-H., Karolyi, G.A., Stulz, R.M., 2003, A new approach to measuring financial contagion. Review of Financial Studies 16, 717-763. Baig, T., Goldfajn, I., 1999, Financial Market Contagion in the Asian Crisis. IMF Staff Papers 46, 167-195. Bekaert, G., Harvey, C.R., Ng, A., 2005, Market integration and contagion. Journal of Business 78, 39-69. Chakrabarti, R., Roll, R., 2002, East Asia and Europe during the 1997 Asian collapse: A clinical study of a financial crisis. Journal of Financial Markets 5, 1-30. Chiang, T.C., Jeon, B.N., Li, H., 2007, Dynamic correlation analysis of financial contagion: Evidence from Asian markets. Journal of International Money and Finance 26(7), 1206-1228. Corsetti, G., Pericoli, M., Sbracia, M., 2005, ‘Some contagion, some interdependence’: More pitfalls in tests of financial contagion. Journal of International Money and Finance 24, 1177-1199. Diebold, F. X., Yilmaz, K., 2009, Measuring financial asset return and volatility spillovers, with application to global equity markets. Economic Journal 119,158-171. Eichengreen, B., Rose, A.K., Wyplosz, C., 1997, Contagious currency crises. Working Paper, National Bureau of Economic Research. Erb, C.B., Harvey, C.R., Viskanta, T.E., 2000, Understanding emerging market bonds. Emerging Markets Quarterly, 1-16. Fazio, G., 2007, Extreme interdependence and extreme contagion between emerging markets. Journal of International Money and Finance 26(8), 1261-1291. Forbes, K., Rigobon, R., 2002, No contagion, only interdependence: measuring stock market comovements. Journal of Finance 57, 2223-2261. Forbes, K., Rigobon, R., 2000, Measuring contagion: conceptual and empirical issues. Working Paper, Massachusetts Institute of Technology. Gande, A., Parsley, D.C., 2005, New spillovers in the sovereign debt market. Journal of Financial Economics 75, 691-734. Glick, R., Rose, A.K., 1999, Contagion and trade: Why are currency crises regional? Journal of International Money and Finance 18(4), 603-617. Greene, W. H., 2003, Econometric Analysis., fifth ed. New Jersey: Prentice Hall. Hamao, Y., Masulis, R.W., Ng, V., 1990, Correlations in price changes and volatility across international stock markets. Review of Financial Studies 3, 281-307. Hornbeck, J.F., 2002, The Argentina financial crisis: A chronology of events. CRS Report for Congress. Kaminsky, G.L., Reinhart, C.M., 2000, On crises, contagion, and confusion. Journal of International Economics 51, 145-168. Kelly, J.M., Martins, L.F., Carlson, J.H., 1998, The relationships between bonds and stocks in emerging countries. Journal of Portfolio Management, Spring, 110-122. King, M.A., Wadhwani, S., 1990, Transmission of volatility between stock markets. Review of Financial Studies 3, 5-33. Lee, S.B., Kim, K.J., 1993, Does the October 1987 crush strengthen the co-movements among national stock markets? Review of Financial Economics 3, 89-102. Longstaff, F., Pan, J., Pedersen, L., Singleton, K., 2009, How sovereign is sovereign credit risk. Working paper, University of California- Los Angeles Loretan, M., English, W.B., 2000, Evaluating correlation ‘breakdowns’ during periods of market volatility. Working Paper, Board of Governors of the Federal Reserve System. McGuire, P., Schrijvers, M.A., 2003, Common factors in emerging market spreads. BIS Quarterly Review, December. Remolona, E.M., Scatigna, M., Wu, E., 2008, The dynamic pricing of sovereign risk in emerging markets. Journal of Fixed Income, Spring, 57-71. Remolona, E.M., Scatigna, M., Wu, E., 2007, Interpreting sovereign spreads. BIS Quarterly Review, March. Rigobon R., 2001, Contagion: How to measure it? Working Paper, National Bureau of Economic Research. Ronn, E.I., Sayrak, A., Tompaidis, S., 2000, The impact of large changes in asset prices on intra-market correlations in the domestic and international markets. Working Paper, University of Texas at Austin. Westphalen, M., 2001, The determinants of sovereign bond credit spreads changes. Working paper, Universite de Lausannne.

We develpo an empirical framework for the credit risk analysis of a generic portfolio of revolving credit accounts and apply it to a representative panel data set of credit card accounts. These data cover the period of the most recent recession and provide the opportunity to analyze the performance of such a portfolio under significant economic stress conditions. We consider a traditional framework for the analysis of credit risk where expected loss is represented in terms of the probability of default (PD), loss given default (LGD), and the exposure at default (EAD). The unsecured and revolving nature of credit card lending is naturally modeled in this framework. Our results indicate that unemployment, and in particular the level and change in unemployment, plays a significant role in the probability of transition across delinquency states in general and the probability of default in particular. The effect is heterogeneous and proportionally has a more significant impact for high credit score and for high-utilization accounts. Our results also indicate that unemployment and a downturn in economic conditions play a quantitatively small, or even irrelevant, role in the changes in account balance associated with changes in an account's delinquency status, and in the account balance exposure at default specifically. The impact of downturn economic conditions on the recovery rate and loss given default is found to be large. These findings are of particular relevance for the analysis of credit risk regulatory capital under the IRB approach within the Basel II capital accord.

This paper suggests that fraudulent companies share characteristics with companies engaged in earnings management. Thus, a mechanism could exist to detect fraudulent activities, using the Fraud Triangle in SAS 99. Empirically, I examine the association between bank executives’ incentives and earnings management, and find that stock options of bank executives are significantly and positively associated with the earnings management of their banks. In addition, larger, poorer performing banks with a lower number of outside blockholders manipulate their financial reports more through provision-for-loan-loss accounts. Overall, the findings might lead to new regulatory changes in the banking industry for early fraud detection.

This study investigates the role of credit risk factors in predicting European bank failures in light of the recent financial (banking) crisis. Using data from 90 European Union (EU) banks in 21 countries (including 9 banks that failed the 2011 stress tests undertaken by the European Banking Authority), we employ a random effects probit model to analyze the relative impact of credit risk determinants and macroeconomic factors in predicting bank failure. The empirical analysis provides new insights that support the impact of credit risk and macroeconomic factors in the prediction of bank failure. Given that systematic risk associated with the banking system can impact both financial and real sectors, this empirical work offers insights for fundamental-based monitoring of banking institutions.

We fill a research void by identifying characteristics that influence the decision to hire investment banks as advisers in acquisitions of private targets. We find that a bidder is more likely to hire an investment bank when the deal is large (in both relative and dollar terms), when it uses equity financing, when it has less experience in acquisitions of private targets, and when it is a high-tech firm. A private target is more likely to hire an investment bank for advice when the deal is large (in dollar terms), when the bidder has low growth opportunities, and when the bidder is more exposed to potential bankruptcy.

This paper investigates the casual relations and dynamic interactions among the different sizes of stock returns, interest rates, real activity, and inflation. The generalized impulse response functions and the generalized forecast error variance decomposition are computed in order to investigate interrelationships within the system. Results reveal that Unrestricted Vector Auto Regression outcome is a function of the size of stock returns. Specifically, the results suggest that the stock returns for the fifth and tenth deciles are leading indicators for future macroeconomic performance. However, stock return for the first decile leads the inflation rate and real interest rate but does not lead the real economic activity as represented by industrial production.

The textbook definitions of arbitrage, hedging and speculation often misrepresent these operations. Arbitrage is typically defined to imply no risk, no use of own capital and the simultaneity of buy and sell transactions. These conditions may or may not hold. Hedging and speculation are invariably described to be diametrically opposite operations, given the difference in the tastes for risk of hedgers and speculators. It can be demonstrated that hedging is a speculative activity and that hedgers and speculators react to the same parameters.

Volatility is a key parameter in currency option pricing. This paper examines alternative specifications of the volatility input to the Black-Scholes option pricing procedure. The focus is the relative performance of implied, realized, and GARCH-based models as predictors of market volatility to forecast currency options prices. Using exchange-traded, daily and intra-daily data for three major European currencies, the results indicate that the realized volatility model tends to outperform the other two specifications, both in-sample and out-of-sample. This result is intuitively appealing and expected to facilitate resolution of other problems in risk management applications.

In this paper, we study and compare the determinants of stock returns in the 1987 and 2008 stock market meltdowns with the multivariate regression analysis technique. We find that technical insolvency risk and bankruptcy risk were significant determinants of stock returns in the 2008 market meltdown. Investors were also somewhat concerned with bankruptcy risk in the 1987 market meltdown. However, technical insolvency risk was not a significant determinant of stock returns in the 1987 meltdown. Our findings indicate that stocks with higher betas, larger market cap, and greater return volatility lost more value in both meltdowns. We find the market-to-book ratio to be a significant determinant of stock returns in the 2008 meltdown but not in the 1987 meltdown. We find stock illiquidity to be a significant determinant of stock returns in the 1987 meltdown but not in the 2008 meltdown. With data for two most important stock market meltdowns in U.S. history since the Great Depression, we test several extant theories related to the determinants of stock returns.

An important question for stock market investors and bank supervisors is to which extent the stock returns of banks reflect business-cycle-sensitive risk in the banking industry. In order to answer this question, we used the stochastic discount factor model to derive a multivariate exponential GARCH-in-mean model. We used monthly U.S. data for the period from 1980 to 2006, for both real-time and revised macroeconomic data to estimate the model. Our empirical results show that using real-time rather than revised macroeconomic data can significantly alter estimates of the risk premium that stock market investors require for bearing business-cycle-sensitive risk in the banking industry.

Practitioners and regulators increasingly rely on economic theory to measure bank efficiency and liken institutes with each other. These studies lean first on several methods that could be either stochastic or deterministic and second the input-output definition is based on a production or intermediation approach. This restraining modeling is unaware of several factors that can influence meaningfully banking efficiency such as banks’ corporate governance. This paper aims to build a new model to measure bank efficiency. The goal of our model is to remedy existing model failings by the incorporation of the governance system. Our new model results imply contributions at both theoretical and empirical levels. From theoretical point of view, we develop an index to measure corporate governance productivity in the banking industry. This index is obtained by incorporating the governance variables in the usual expression of the directional technology distance function and a new development of the Luenberger productivity indicator. At empirical level, We apply this model on 146 banks dispersed in ten European countries. We show a significant effect of the governance variables on the construction of the technology frontier. In addition we find that the governance systems of Italy, Luxemburg and Netherlands are the more productive than the other systems.

VaR is central to financial risk management. In this study we use three methods to calculate VaR, namely the industry standard RiskMetrics, Monte Carlo simulation and Filtered Historical simulation. To model the return we use GARCH and NGARCH processes augmented with normally distributed jumps. We examine the implication for In-Sample testing in the presence of jumps and find that the inclusion of jumps generally leads to fewer VaR violations. This finding is consistent with the findings of other researchers. However, at higher confidence intervals and long horizon dates all methods and models fail In-Sample testing.

Herein we explore merger/risk arbitrage performance for hostile/unsolicited offers. We find that, regardless of merger outcome, the possibility of a sweetened offer generally adds a key risk factor. Moreover, the probability of receiving one or more sweetened offers is found to be significantly related to a merger type thereby signaling information asymmetry regarding post-merger improvement. Accordingly, we develop a simple sweetening prediction model which may prove helpful to those involved in merger/risk arbitrage, especially for hostile/unsolicited takeover attempts. References Full Text: Article Restricted Access

This study uses a modified present value framework to decompose the variance of returns of banks into the variance of contemporaneous expected returns and the variance of unexpected returns. The variance of unexpected returns accounts for most of the variance in total returns. When unexpected returns are decomposed into two components—cash-flow risk (fundamentals) and discount-rate risk (investor sentiment), cash-flow risk accounts for the major portion of unexplained risk, although discount-rate risk is also important. Moreover, the unexpected returns of banks fluctuate dramatically with changes in market conditions. In particular, the risk associated with cash-flow news is higher than the risk associated with discount-rate news during periods of economic expansion and easy monetary policy, while the variance of returns is more influenced by investor sentiments during periods of economic recession that are coupled with tightening monetary policies. Finally, the study shows that the relative importance of sentiment is higher for smaller banks than for larger ones.

With a comprehensive dataset of 58 countries over the period 1987-2010, this paper investigates the effect of IPO on bank performance, measured by efficiency scores estimated using the stochastic frontier approach. Post-issue underperformance is found over the IPO years. This paper further examines the long-run performance of IPO banks beyond the IPO years with regression analysis and finds that IPO banks’ cost efficiency improves while profit efficiency deteriorates after IPO. This study also documents the declining trend of cost efficiency after IPO, although the trend of post-IPO profit efficiency is country-dependent – an upward trend for U.S. banks and a downward trend for non-U.S. banks. It is also observed that large banks are associated with higher cost efficiency and lower profit efficiency, a higher capital ratio leads to low efficiency and banks relying more on traditional interest-generating businesses are more efficient.

We find that events signaling that the Volcker Rule would impose heavy restrictions on bank proprietary trading had a pronounced negative impact on money center banks, irrespective of whether the London Whale events (reflecting large proprietary trading losses by J.P. Morgan Chase) are included. The money center banks also experienced negative valuation effects in response to the London Whale events. Other types of banks experienced non-significant valuation effects in response to Volcker Rule events, but all banks experienced a reduction in risk in response to the first event signaling the impending development of the Volcker Rule. We attribute these results to a possible change in the perception of the banking industry, in which investors are more confident that bank risk-taking will be constrained within reasonable limits in the future. Furthermore, we find that the degree of risk reduction following the first event signaling the development of the Volcker Rule is more pronounced for banks that were larger, and that previously exhibited high volatility.

Finance business partner at RSC: Peter Jackson Peter Jackson The RSC supports Peter in his studies to become a qualified accountant alongside his current role as a finance business partner I started working at the Royal Society of Chemistry in November 2006 as I was looking for a move up the 'ladder' and wanted to work for a company that could give me better prospects than my current employer. The Royal Society of Chemistry stood out for me during interviews as it seemed like a professional yet friendly environment to work in and the sort of company you could be proud to be associated with. I started out as a finance assistant and was responsible for processing expenses and invoices. At that time, the finance department consisted of about 10 people and we shared the whole of the current office with six members of the events team. Within a couple of years I successfully applied for an assistant management accountant role, working on producing reports for budget holders and monthly accounts preparation. The Royal Society of Chemistry then agreed to support my study to become a qualified accountant and I began attending weekend classes and taking exams twice a year. During 2011 another opportunity arose during a restructure of the finance department and I started my current role as a finance business partner. I'm now at the stage where I have two exams left to take, out of a total of 11 papers until I achieve my qualification. I have stuck with the Royal Society of Chemistry for nearly eight years now because of the opportunities that I have enjoyed here. I have been promoted twice and seen excellent career progression; I have also been sponsored for my studies which secures my future as a qualified accountant

The Banking and Finance Review (BFR) is a bi-annual, peer-reviewed international research journal that provides a publication outlet for theoretical as well as empirical issues in the fields of banking and finance. The Banking and Finance Review seeks to promote research that enhances the profession’s understanding of banking and finance. The scope of the Banking and Finance Review is broad. It includes studies in the following areas:Banking, Financial Institutions, Corporate Finance, International Finance, Capital Markets, Commodities Market, Derivatives, Risk Management, Insurance , Fixed Income Securities, Alternative Investments, Portfolio & Security Analysis, Investments, Real Estate Finance and other areas of finance that may be of interest to academicians and financial professionals. The Banking and Finance Review board of editors and ad hoc referees guarantee the high quality standard of the journal.