scholarly journals Cross-section instability in financial markets: impatience, extrapolation, and switching

2021 ◽  
Author(s):  
Roberto Dieci ◽  
Xue-Zhong He
Keyword(s):  
Financial Markets ◽  
Cross Section ◽  
Asset Price ◽  
Asset Market ◽  
Long Run ◽  
Short Run ◽  
And Performance ◽  
Equilibrium Market ◽  
High Degree ◽  
Fundamental Price

AbstractThis paper presents a stylized model of interaction among boundedly rational heterogeneous agents in a multi-asset financial market to examine how agents’ impatience, extrapolation, and switching behaviors can affect cross-section market stability. Besides extrapolation and performance based switching between fundamental and extrapolative trading documented in single asset market, we show that a high degree of ‘impatience’ of agents who are ready to switch to more profitable trading strategy in the short run provides a further cross-section destabilizing mechanism. Though the ‘fundamental’ steady-state values, which reflect the standard present-value of the dividends, represent an unbiased equilibrium market outcome in the long run (to a certain extent), the price deviation from the fundamental price in one asset can spill-over to other assets, resulting in cross-section instability. Based on a (Neimark–Sacker) bifurcation analysis, we provide explicit conditions on how agents’ impatience, extrapolation, and switching can destabilize the market and result in a variety of short and long-run patterns for the cross-section asset price dynamics.

scholarly journals Momentum Trading, Contrarian Trading and Smart Money Manipulation

2016 ◽  
Vol 10 (2) ◽  
pp. 53 ◽  
Author(s):  
Chung-Chih Liao
Keyword(s):  
Asset Price ◽  
Trading Strategies ◽  
Asset Market ◽  
Market Anomalies ◽  
Profit Margins ◽  
Price Manipulation ◽  
Long Run ◽  
Smart Money ◽  
Short Run ◽  
Momentum Trading

There are two commonly recognized anomalies in the stock market, namely short-run momentum and long-run reversals. Under these two financial market anomalies, there are two trading strategies – momentum trading and contrarian trading – that can be adopted for the purpose of making profits. We model an asset market in which momentum traders, contrarian traders and informed rational speculators make transactions. We discovered that under certain conditions, the self-profiting motive of informed speculators will lead to their price manipulation behaviors, and result in momentum and reversals phenomenon on the asset price. We also found that the scenario of the relative quantity of the two types of behavioral traders and their profit margins is similar to that of a minority game.

Rethinking femininity in organisations: Experimental insights into team composition

2018 ◽  
Vol 26 (5) ◽  
pp. 866-879 ◽  
Author(s):  
Ronald Busse
Keyword(s):  
Sex Role ◽  
Role Expectations ◽  
Curvilinear Relationship ◽  
Sex Role Stereotypes ◽  
Long Run ◽  
Short Run ◽  
And Performance ◽  
State Of Affairs ◽  
Role Incongruity ◽  
Team Types

AbstractRole incongruity, sex role stereotypes and candidate selection procedures which oversatisfy masculine role expectations evoke an underrepresentation of femininity in organisations. The author seeks to remedy this bad state of affairs. This study is designed based on an experiment with 288 young executives simulating self-organised work groups and manipulated the degree of gender-related (not sex-related) heterogeneity. Results generally show a curvilinear relationship with an upright U-shaped format between heterogeneity and performance, team identity and intrateam communication. The major contribution in specific is that highly homogeneous teams outperform other team types in the short run, whereas highly heterogeneous teams succeed in the long run. Consequently, this work recommends ‘femininity enrichment’ in firms and discusses manageable practical advice to do so. As for the laboratory character, findings and implications for practicing managers have to be treated with caution. Finally, the most promising avenues for further research are illuminated.

COVID-19 pandemic and connectedness across financial markets

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Abubakr Naeem ◽  
Saba Sehrish ◽  
Mabel D. Costa
Keyword(s):  
Financial Markets ◽  
Financial Risk ◽  
Negative Impact ◽  
Spillover Effect ◽  
External Shocks ◽  
Content Type ◽  
Time Frequency ◽  
Long Run ◽  
Short Run ◽  
Momentum Trading

Purpose This study aims to estimate the time–frequency connectedness among global financial markets. It draws a comparison between the full sample and the sample during the COVID-19 pandemic. Design/methodology/approach The study uses the connectedness framework of Diebold and Yilmaz (2012) and Barunik and Krehlik (2018), both of which consider time and frequency connectedness and show that spillover is specific to not only the time domain but also the frequency (short- and long-run) domain. The analysis also includes pairwise connectedness by making use of network analysis. Daily data on the MSCI World Index, Barclays Bloomberg Global Treasury Index, Oil future, Gold future, Dow Jones World Islamic Index and Bitcoin have been used over the period from May 01, 2013 to July 31, 2020. Findings This study finds that cryptocurrency, bond and gold are hedges against both conventional stocks and Islamic stocks on average; however, these are not “safe havens” during an economic crisis, i.e. COVID-19. External shocks, such as COVID-19, strengthen the return connectedness among all six financial markets. Research limitations/implications For investors, the study provides important insights that during external shocks such as COVID-19, there is a spillover effect, and investors are unable to hedge risk between conventional stocks and Islamic stocks. These so-called safe haven investment alternatives suffer from the similar negative impact of systemic financial risk. However, during an external shock such as COVID-19, cryptocurrencies, bonds and gold can be used to hedge risk against conventional stocks, Islamic stocks and oil. Moreover, the findings imply that by engaging in momentum trading, active investors can gain short-run benefits before the market processes any new information. Originality/value The study contributes to the emergent literature investigating the connectedness among financial markets during the COVID-19 pandemic. It provides evidence that the return connectedness among six global financial markets, namely, conventional stocks, Islamic stocks, bond, oil, gold and cryptocurrency, is extremely strong. From a methodological standpoint, this study finds that COVID-19 pandemic shock has a significant short-run impact on the connectedness among financial markets.

scholarly journals Trade and economic development: global causality and development- and openness-related heterogeneity

2020 ◽  
Vol 17 (4) ◽  
pp. 923-944
Author(s):  
T. Gries ◽  
M. Redlin
Keyword(s):  
Economic Development ◽  
Trade Openness ◽  
Panel Cointegration ◽  
Ordinary Least Squares ◽  
Development Stage ◽  
Long Run ◽  
Short Run ◽  
Method Of Moments Estimation ◽  
General Method Of Moments ◽  
High Degree

Abstract This paper reconsiders the classic relationship between trade and economic development. We examine the short-term and long-run dynamics between trade and income for 167 countries over the period 1970–2011 and assume that the effect is not homogenous for all countries but rather varies according to the development stage and the degree of trade openness. We apply panel cointegration, Granger causality and panel error correction in combination with Dynamic Ordinary Least Squares and General Method of Moments estimation to explore the causal relationship between these two variables. The results suggest a statistically significant positive short-run and long-run global relationship between trade and income. However, when splitting the panel into different income and trade openness groups, a long-run relationship is observed only for high-income countries and countries with a relatively high degree of trade openness.

scholarly journals ENDOGENOUSLY SEGMENTED ASSET MARKET IN AN INVENTORY-THEORETIC MODEL OF MONEY DEMAND

2012 ◽  
Vol 18 (2) ◽  
pp. 438-472 ◽  
Author(s):  
Jonathan Chiu
Keyword(s):  
Interest Rates ◽  
Money Demand ◽  
Asset Market ◽  
Fixed Cost ◽  
Theoretic Model ◽  
Long Run ◽  
Nominal Interest Rates ◽  
Goods Market ◽  
Short Run ◽  
Money Transfers

This paper studies the effects of monetary policy in an inventory-theoretic model of money demand. In this model, agents keep inventories of money, despite the fact that money is dominated in rate of return by interest-bearing assets, because they must pay a fixed cost to transfer funds between the asset market and the goods market. In contrast to exogenous segmentation models in the literature, the timing of money transfers is endogenous. As a result, the model endogenizes the degree of market segmentation as well as the magnitudes of liquidity effects, price sluggishness, and the variability of velocity. I first show that the endogenous segmentation model can generate the positive long-run relationship between money growth and velocity observed in the data, which the exogenous segmentation model fails to capture. I also show that the short-run effects of money shocks on prices, inflation, and nominal interest rates are not robust.

Finance and Capital in the United States, 1850–1900

1967 ◽  
Vol 27 (4) ◽  
pp. 621-624 ◽  
Author(s):  
Richard Sylla
Keyword(s):  
Nineteenth Century ◽  
Financial Markets ◽  
Gilded Age ◽  
Banking System ◽  
The United States ◽  
Antebellum Era ◽  
Long Run ◽  
Short Run ◽  
Rapid Industrialization

The connections between financial development and economic growth are drawing increased attention on many fronts. This dissertation studies ways in which the American financial system functioned to aid in the accumulation and mobilization of capital in the second half of the nineteenth century. The evolution of the banking system, by far the dominant nineteenth-century financial intermediary, is emphasized, but the role of Federal government finance is of scarcely less importance. The interrelated actions of the banks and the Treasury did much to set the tone in various financial markets during most of the period. While considerable study has been devoted to these actions and their short-run effects, much less has been written about their long-run implications. A major contention of the work is that financial strains caused by the Civil War and the various responses to these strains were accompanied by significant changes in the banking system—in its structure, the types of assets in which it dealt, and in its relations with the Treasury—all of which increased its potential for satisfying the demands placed upon it by a rapidly expanding economy. These changes helped to make capital, which may well have been the relatively scarce factor in the antebellum era, more abundant in the postwar Gilded Age, and they therefore abetted the rapid industrialization of those decades.

scholarly journals Repercussions of COVID-19 on the Indian stock market

2021 ◽  
Vol 5 (S1) ◽  
pp. 1495-1509
Author(s):  
Dhananjay Ashri ◽  
Bibhu Prasad Sahoo ◽  
Ankita Gulati ◽  
Irfan UL Haq
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Banking Sector ◽  
Oil And Gas ◽  
Negative Impact ◽  
Long Run ◽  
Short Run ◽  
Indian Stock Market ◽  
The Impact ◽  
Daily Returns

The present paper determines the repercussions of the coronavirus on the Indian financial markets by taking the eight sectoral indices into account. By taking the sectoral indices into account, the study deduces the impact of virus outbreak on the various sectoral indices of the Indian stock market. Employing Welch's t-test and Non-parametric Mann-Whitney U test, we empirically analysed the daily returns of eight sectoral indices: Nifty Auto, Nifty FMCG, Nifty IT, Nifty Media, Nifty Metal, Nifty Oil and Gas, Nifty Pharma, and Nifty Bank. The results unveiled that pandemic had a negative impact on the automobile, FMCG, pharmaceuticals, and oil and gas sectors in the short run. In the long run, automobile, oil and gas, metals, and the banking sector have suffered enormously. The results further unveiled that no selected indices underperformed the domestic average, except NIFTY Auto. 

A Note on the Structure of Pakistan's Foreign Trade (Notes & Comments)

1969 ◽  
Vol 9 (2) ◽  
pp. 212-223 ◽  
Author(s):  
Joseph J. Stern
Keyword(s):  
Developing Countries ◽  
Foreign Exchange ◽  
Terms Of Trade ◽  
Relative Price ◽  
Primary Commodity ◽  
Primary Products ◽  
Long Run ◽  
Short Run ◽  
High Degree ◽  
The Impact

Developing countries generally are not only concerned with the level of their export earnings but also with the commodity and geographic composition of exports, and, to a lesser extent, of imports. Concern over a high degree of commo¬dity structure in exports is usually based on its presumed association with adverse price movements. A more diversified export commodity structure will reduce the impact on the overall level of foreign-exchange earnings from price fluctuations in any particular commodity. While concentration on a few commodities need not be identified with being a primary commodity exporter, for many developing countries a high degree of commodity concentration is often correlated with the exports of primary commodities [6 ; 9]. The familiar terms-of-trade argument, the belief that the relative price of primary commodity exports will fall, over the long run, as compared to the price of industrial goods imports, provides a second rationale for seeking a diversification in the composition of exports. Even in the short run the prices of most primary products in interna¬tional trade vary more sharply from year to year than those of most industrial products thus providing an additional incentive for decreasing commodity con¬centration [5].

INDIA: CURRENCY DEMONETISATION AND THE WAY AHEAD

2016 ◽  
Vol 12 (02) ◽  
Author(s):  
Kangan Jain ◽  
Sanjiv Pandiya
Keyword(s):  
Asset Price ◽  
Big Bang ◽  
Asset Price Bubbles ◽  
Price Bubbles ◽  
Long Run ◽  
Short Run ◽  
Entire Nation ◽  
Asset Classes ◽  
Almost All ◽  
The Way

In the backdrop of the recent Demonetisation promulgated by the PM on the night of 8th Nov.,2016, this paper attempts to put together the opposing views among economists, highlight the direction in which cash is headed and also lists the way ahead for India to emerge as a cleaner and transparent marketplace. Some economists opine recent demonetisation as a big bang structural reform the Indian economy needed. Almost all asset classes were reeling under huge price bubbles and assets like a decent house, gold had almost become inaccessible for the aam aadmi. In the short run, definitely the entire nation will pay the costs, however in the long run, this step will prick the asset price bubbles and cause prices to hover close to their real values, give a hit to parallel economy and reduce overall crime. On the other hand, for some economists, this demonetisation is more of a palliative to suppress the ills in the economy. Only some black money holders will get trapped and be impoverished for a lot of others may still find channels to offload their black money. Evidence from other nations show that the stride towards cashlessness is an inevitable step and for countries hitherto dependent on cash, its better late than never. The question is not whether or not to move ahead. Its rather about how to manage all the bedlam that the demonetisation has caused. The demonetisation in India is a clear indication of where the nation is moving. Cashless India is apparent, inevitable and needed! The paper also goes on to suggest measures such as gold registry along with real estate digitisation and periodic demonetisation of BCNs to give a final blow to the black economy.

scholarly journals Good coups, bad coups: evidence from Thailand’s financial markets

2018 ◽  
Vol 15 (2) ◽  
pp. 68-86
Author(s):  
Sutsarun Lumjiak ◽  
Nguyen Thi Thieu Quang ◽  
Christopher Gan ◽  
Sirimon Treepongkaruna
Keyword(s):  
Financial Markets ◽  
Foreign Exchange ◽  
Foreign Exchange Markets ◽  
Negative Consequences ◽  
Minimal Impact ◽  
Good Investment ◽  
Long Run ◽  
Daily Data ◽  
Short Run ◽  
Exchange Markets

This study investigates the short-run and long-run impact of coups on Thailand’s financial markets. Using daily data from the stock and foreign exchange markets during the period 2005–2017, the study shows (1) both coups in 2006 and in 2014 exert short-run impact on Thailand’s stock and foreign exchange markets; (2) however, the direction and magnitude of impact are different and opposite in the two coups; and (3) in the long run, the coups exhibit minimal impact on the currency market, but induce better market performance (positive return and decrease in the return volatility) despite an increase in liquidity risk of the stock market. Against common beliefs about negative consequences of the coup d’états, this study suggests that the uncertainty surrounding coups can bring good investment opportunities for investors to earn abnormal profits. Moreover, in the long term, the coup can drive the country to better stability and development.

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