Excess demand and equilibration in multi-security financial markets: the empirical evidence

2003 ◽  
Vol 6 (1) ◽  
pp. 1-21 ◽  
Author(s):  
Elena Asparouhova ◽  
Peter Bossaerts ◽  
Charles Plott
Keyword(s):  
Financial Markets ◽  
Empirical Evidence ◽  
Excess Demand

Trust and Household Portfolios

2021 ◽  
pp. 78-97
Author(s):  
Diego Lubian
Keyword(s):  
Financial Markets ◽  
Empirical Evidence ◽  
Financial Literacy ◽  
Risky Assets ◽  
Financial Decisions ◽  
Portfolio Decisions ◽  
Financial Decision ◽  
Financial Portfolio ◽  
Socio Demographic Factors ◽  
The Relationship

This article provides empirical evidence on the existence and the extent of the influence of trust in financial decisions using individual data on Italian households from the Survey on Household Income and Wealth, 2010. This article studies the relationship between, trust in people, trust in banks and more detailed previously unexplored dimensions of trust, and household financial portfolio decisions. The article provides empirical evidence that trust in people and trust in banks affect both participation in financial markets, the share of risky assets and the diversification of the financial portfolio, controlling socio-demographic factors, risk aversion, and financial literacy as well. The article finds that trust is important for individuals with a lower level of education who have limited possibilities to acquire and process information on financial markets need to rely in trustworthy relationship to define their financial portfolio. Further, we present evidence that the main channel by which trust affects financial decision making and determines too little participation, a lower share of risky assets in the financial wealth and poorly diversified portfolios is trust in family and friends.

Behavioral Finance Market Hypotheses

2017 ◽  
Author(s):  
Alex Plastun
Keyword(s):  
Financial Markets ◽  
Empirical Evidence ◽  
Behavioral Finance ◽  
Efficient Market Hypothesis ◽  
Efficient Market ◽  
New Concepts ◽  
Overreaction Hypothesis ◽  
Fractal Market Hypothesis ◽  
Behavioral Perspective

Although the efficient market hypothesis (EMH) is the leading theory describing the behavior of financial markets, researchers have increasingly questioned its efficacy since the 1980s because of its inconsistencies with empirical evidence. This challenge to EMH has resulted in the development of new concepts and theories. These new concepts reject the assumption of investor rationality. The most promising and convincing among these are the adaptive markets hypothesis, overreaction hypothesis, underreaction hypothesis, noisy market hypothesis, functional fixation hypothesis, and fractal market hypothesis. The chapter provides a brief description of these theories and proposes using a behavioral perspective to analyze financial markets.

scholarly journals Exploitation of Information as a Trading Characteristic: A Causality-Based Analysis of Simulated and Financial Data

Entropy ◽  
2020 ◽  
Vol 22 (10) ◽  
pp. 1139
Author(s):  
Catherine Kyrtsou ◽  
Christina Mikropoulou ◽  
Angeliki Papana
Keyword(s):  
Financial Markets ◽  
Empirical Evidence ◽  
Information Flow ◽  
Diffusion Mechanism ◽  
Trading Strategies ◽  
Financial Data ◽  
Financial Products ◽  
Resulting Effect ◽  
Causality Tests ◽  
Multivariate Systems

In financial markets, information constitutes a crucial factor contributing to the evolution of the system, while the presence of heterogeneous investors ensures its flow among financial products. When nonlinear trading strategies prevail, the diffusion mechanism reacts accordingly. Under these conditions, information englobes behavioral traces of traders’ decisions and represents their actions. The resulting effect of information endogenization leads to the revision of traders’ positions and affects connectivity among assets. In an effort to investigate the computational dimensions of this effect, we first simulate multivariate systems including several scenarios of noise terms, and then we apply direct causality tests to analyze the information flow among their variables. Finally, empirical evidence is provided in real financial data.

Does the short squeeze lead to market abnormality and antileverage effect? Evidence from the Gamestop case

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Evangelos Vasileiou
Keyword(s):  
Time Series ◽  
Financial Markets ◽  
Stock Returns ◽  
Empirical Evidence ◽  
Abnormal Returns ◽  
Abnormal Behavior ◽  
Garch Models ◽  
Content Type ◽  
Intraday Data ◽  
The Asymmetry

PurposeThis study examines the Gamestop (GME) short squeeze in early 2021. Using intraday data for the period 4/1/2021–5/2/2021, the author provides empirical evidence that the GME stock price exhibited abnormal behavior.Design/methodology/approachThe author uses the popular Runs test to show that the GME returns were not randomly distributed, which is an indication of a violation of the Efficient Market Hypothesis (EMH). The main objective of the paper is to provide new quantitative evidence that stock returns are abnormal when short squeeze conditions emerge. The author employs the asymmetry Generalized AutoRegressive Conditional Heteroskedasticity (GARCH) models (the Exponential GARCH (EGARCH) and the Threshold GARCH (TGARCH)) and provides evidence that an exceptional time series feature emerged during the examined period: the antileverage effect.FindingsThe results show that the GME returns were not randomly distributed during the examined period and the asymmetry GARCH models indicate that, in contrast to what the time series normally show, volatility increased when the GME prices increased.Research limitations/implicationsThis paper presents a new/alternative approach for the study of EMH and abnormal returns in financial markets. Further studies on market performance during similar short squeeze conditions should be carried out in order to obtain empirical evidence for the antileverage effect abnormality.Practical implicationsThis paper could be useful for scholars who examine the EMH in financial markets because it suggests an additional method for testing abnormalities. It also presents a useful tool that allows practitioners to monitor for indications of abnormality in the stock market during a short squeeze, since the emergence of the antileverage abnormality could function as such an indication. Additionally, the outcome of this analysis could be useful for regulators because coordination among investors is easier than ever in the Internet era and such events may happen again in the future; even under normal (not short squeeze) conditions and lead to market instability.Originality/valueThis research differs from other studies that examine the GME case because it presents a new way to quantitatively present the abnormal performance of the stock markets for reasons that could be linked with the emergence of short squeeze conditions.

scholarly journals Restructuring Sovereign Debt

2003 ◽  
Vol 17 (4) ◽  
pp. 75-98 ◽  
Author(s):  
Barry Eichengreen
Keyword(s):  
Collective Action ◽  
Financial Markets ◽  
Empirical Evidence ◽  
Sovereign Debt ◽  
Emerging Market ◽  
International Community ◽  
Collective Action Clauses ◽  
Debt Crises ◽  
New Evidence ◽  
The Way

This paper provides new empirical evidence relevant to the debate over the desirability of reforms to the way that financial markets and the international community deal with sovereign debt crises. In particular, given the ongoing opposition of investors and some sovereigns to greater use of collective action clauses (CACs) in emerging market bonds, we present new evidence on the way that financial markets have priced the use or non-use of CACs.

scholarly journals Growth and Capital Flows with Risky Entrepreneurship

2014 ◽  
Vol 6 (3) ◽  
pp. 102-123 ◽  
Author(s):  
Damiano Sandri
Keyword(s):  
Developing Countries ◽  
Financial Markets ◽  
Numerical Simulations ◽  
Empirical Evidence ◽  
Current Account ◽  
Productivity Growth ◽  
Capital Flows ◽  
Investment Risk ◽  
Risky Investment ◽  
A Current

We show that the behavior of entrepreneurs facing incomplete financial markets and risky investment can explain why accelerations of productivity growth in developing countries tend to be associated with current account improvements. Under uninsurable investment risk, entrepreneurs have to largely rely on self-financing so that, when productivity growth rises, entrepreneurs increase saving to finance new investment. The key insight is that saving has to increase more than investment to also allow for the accumulation of precautionary assets that entrepreneurs hold for self-insurance against investment risk. Numerical simulations show that this net saving increase can generate a current account improvement in line with the empirical evidence. (JEL E21, E22, F32, F41, F43, G32, L26)

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