scholarly journals Price response functions and spread impact in correlated financial markets

2021 ◽  
Vol 94 (4) ◽  
Author(s):  
Juan C. Henao-Londono ◽  
Sebastian M. Krause ◽  
Thomas Guhr
Keyword(s):  
Financial Markets ◽  
Stock Prices ◽  
Signal Strength ◽  
Price Formation ◽  
Response Functions ◽  
Trading Costs ◽  
Research Focus ◽  
Data Set ◽  
Price Response ◽  
The Impact

AbstractRecent research on the response of stock prices to trading activity revealed long-lasting effects, even across stocks of different companies. These results imply non-Markovian effects in price formation and when trading many stocks at the same time, in particular trading costs and price correlations. How the price response is measured depends on data set and research focus. However, it is important to clarify how the details of the price response definition modify the results. Here, we evaluate different price response implementations for the Trades and Quotes (TAQ) data set from the NASDAQ stock market and find that the results are qualitatively the same for two different definitions of time scale, but the response can vary by up to a factor of two. Furthermore, we show the key importance of the order between trade signs and returns, displaying the changes in the signal strength. Moreover, we confirm the dominating contribution of immediate price response directly after a trade, as we find that delayed responses are suppressed. Finally, we test the impact of the spread in the price response, detecting that large spreads have stronger impact.

scholarly journals Do Company Related Newspaper Articles Have an Impact on the Share Prices? The Case of the German Market

2019 ◽  
Vol 11 (3) ◽  
pp. 32
Author(s):  
Jyoti Gupta ◽  
Benjamin Graubner
Keyword(s):  
Stock Prices ◽  
Data Set ◽  
German Market ◽  
Share Prices ◽  
Thomson Reuters ◽  
New Information ◽  
Java Program ◽  
Using Data ◽  
The Impact ◽  
Newspaper Articles

The paper looks at the impact of information on stock prices within the context of the German Market. Using data set from the Thomson Reuters, a new platform using a self-written Java Program, between the time period of 27 August and 29 September 2013, we analysed the impact of information on stock prices in the German Market. We developed an Information Based Return Model (IBRM) to analyse how information drive stock prices. We counted certain words within newspaper articles to understand their meaning. We analyse the impact of those word-clusters on different trading intervals. Our Information Based return Model shows that stock prices anticipate news from the non-trading time within the first minute of trading. We also analysed the time drifts between news release and personal reception. Our results show that the German Market anticipates new information as effectively as the US Market. 

scholarly journals The Shape of Eurozone’s Uncertainty: Its Impact and Predictive Value on GDP

2020 ◽  
Vol 7 (6) ◽  
pp. 1
Author(s):  
Ralf Fendel ◽  
Nicola Mai ◽  
Oliver Mohr
Keyword(s):  
Standard Deviation ◽  
Business Cycle ◽  
Financial Markets ◽  
Impulse Response ◽  
Two Dimensions ◽  
Point Estimate ◽  
Impulse Response Functions ◽  
Response Functions ◽  
The Business Cycle ◽  
The Impact

This paper examines the role of uncertainty in the context of the business cycle in the euro area. To gain a more granular perspective on uncertainty, the paper decomposes uncertainty along two dimensions: First, we construct the four different moments of uncertainty, including the point estimate, the standard deviation, the skewness and the kurtosis. The second dimension of uncertainty spans along three distinct groups of economic agents, including consumers, corporates and financial markets. Based on this taxonomy, we construct uncertainty indices and assess the impact on real GDP via impulse response functions and further investigate their informational value in rolling out-of-sample GDP forecasts. The analysis lends evidence to the hypothesis that higher uncertainty expressed through the point estimate, a larger standard deviation among confidence estimates, positive skewness and a higher kurtosis are all negatively correlated with the business cycle. The impulse response functions reveal that in particular the first and the second moment of uncertainty cause a permanent effect on GDP with an initial decline and a subsequent overshoot. We find uncertainty in the corporate sector to be the main driver behind this observation, followed by financial markets’ uncertainty whose initial effect on GDP is comparable but receding much faster. While the first two moments of uncertainty improve GDP forecasts significantly, both the skewness and the kurtosis do not augment the forecast quality any further.

scholarly journals THE GLOBAL ECONOMIC IMPACT OF THE COVID-19 OUTBREAK

2020 ◽  
Author(s):  
Khakim Gayurov ◽  
◽  
Munira Toshmatova ◽  
Keyword(s):  
Financial Markets ◽  
Stock Prices ◽  
Global Economy ◽  
World Health ◽  
Bond Yields ◽  
Chinese City ◽  
The World ◽  
Health Organization ◽  
The Impact ◽  
Do So

According to the World Health Organization, the new coronavirus, which first appeared in the Chinese city of Wuhan in December last year, infected more than 110,000 people in at least 110 countries and territories of the world. The virus outbreak has become one of the most serious threats to the global economy and financial markets. Large institutions and banks have reduced their forecasts for the global economy, and the Organization for Economic Co-operation and Development is one of the last countries to do so. Meanwhile, concerns about the impact of coronavirus on the global economy have stirred markets around the world: stock prices and bond yields have plummeted. The continued spread of the new coronavirus has become one of the biggest threats to the global economy and financial markets.

scholarly journals The relationship between corporate governance and stock prices in the GCC financial markets

2020 ◽  
Vol 17 (2) ◽  
pp. 57-64 ◽  
Author(s):  
Muneer Mohammed Saeed Al Mubarak
Keyword(s):  
Corporate Governance ◽  
Financial Markets ◽  
Stock Prices ◽  
Financial Management ◽  
Stock Price ◽  
Financial Statements ◽  
Management Literature ◽  
Relationship Of ◽  
The Impact ◽  
The Relationship

The study investigates the impact of corporate governance characteristics on stock prices in the Gulf Cooperation Council (GCC) financial markets. It covers the financial markets of four (GCC) countries with a sample of 237 firms for the period of 2013-2017. The study was based on the GCC financial markets’ database, financial statements and ancillary notes which include corporate governance, stock prices by Bloomberg and share location. A multi-regression model was used. The independent variables were four corporate governance characteristics and the dependent variable was the stock price, in addition to using a number of control variables. A positive relationship was found between corporate governance and return on stock. The Gulf companies that have increased levels of corporate governance have increased returns to their shares, indicating that these companies are working to reduce the agency’s cost and eliminate the conflict between shareholders and directors. Few studies have focused on the relationship of corporate governance characteristics on stock prices in the GCC financial markets. The existing study contributes to the financial management literature by providing further evidence on such a relationship, especially in emerging countries. It serves as a guide to investors looking for the best investments in reliable companies in the region

scholarly journals Analyst Downgrades, Short Sale Constraints, And Intra-Day Stock Price Efficiency

2015 ◽  
Vol 31 (4) ◽  
pp. 1343
Author(s):  
Kevin Zhao
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Price Efficiency ◽  
Price Response ◽  
Short Sale Constraints ◽  
Short Sale ◽  
New Information ◽  
After Hours ◽  
And Control ◽  
The Impact

This paper studies the impact of short sale constraints on stock price efficiency upon arrival of analyst downgrades. Examining the speed of which stock price response to analyst downgrades for pilot (short sale non-constrained) stocks and control (short sale constrained) stocks in an intra-day setting, I find evidence supporting the hypothesis that short sale constrains hamper intra-day stock price efficiency. For after-hours downgrades, pilot stocks respond quickly, with virtually all of the price response incorporated by the following open, while control stocks take an extra five minutes after opening to fully reflect the new information. For during-hour downgrades, the negative information is partially incorporated into pilot stock prices up to two hours before the recommendation is released, while control stocks take up to an hour and a half after the release to impound the information into stock price, confirming that short sale constraints lower stock price efficiency.

scholarly journals Effect of covid-19 on financial markets: Evidence from Pakistan, India and Italy

2021 ◽  
Vol 6 (2) ◽  
pp. 1-10
Author(s):  
Muhammad Sohail Khalil ◽  
Usman Ullah
Keyword(s):  
Financial Markets ◽  
Stock Prices ◽  
Economic Status ◽  
Efficient Market Hypothesis ◽  
Investment Behavior ◽  
The Novel ◽  
Significant Relation ◽  
Simple Regression Model ◽  
The Impact ◽  
Simple Regression

The novel corona virus called as covid-19 spread worldwide affecting the health and economic status of countries all over the globe. The major aim of this study was to analyze the stock prices during the covid-19 pandemic. The sample of the study is taken from 15 May to 15 June 2020, stock prices as well as the covid-19 confirmed cases of three countries Pakistan, India and Italy. This study has both practical and theoretical implications. Investment behavior, efficient market hypothesis and the prediction of stock prices during the anticipated 2nd wave of covid-19 are some of the main points this study has covered. Further study is needed to examine pre, mid and post lockdown impact on stock prices. This study applied simple regression model to examine the impact of covid-19 on financial markets from 15 May to 15 June 2020 in Pakistan, India & Italy. The study findings were intriguing. The study findings indicate that there is positive significant relation among these variables (Positive cases and stock prices) on that period of time (15 May to 15 June 2020 in Pakistan, India & Italy). This research suggests that covid-19 confirmed positive cases had significant impact on financial markets during 15 May to 15 June 2020 on these three stock indices of Pakistan, India and Italy (KSE-100, SENSEX & FTSE Italia).

The impact of COVID-19 outbreak on Borsa Istanbul: an event study method

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yunus Karaömer ◽  
Songül Kakilli Acaravcı
Keyword(s):  
Financial Markets ◽  
Event Study ◽  
Stock Prices ◽  
Significant Contribution ◽  
Event Data ◽  
Content Type ◽  
Unusual Event ◽  
Event Study Method ◽  
Research Gap ◽  
The Impact

PurposeThis study aims to research how the outbreak of coronavirus disease 2019 (COVID-19) impacts the selected sector price indices in Borsa Istanbul (BIST), Turkey.Design/methodology/approachThe authors use the event study method because it is a useful method as stock prices and market instantly reflect the effect of such an unusual event. Data are retrieved from the https://www.investing.com/.FindingsThe authors find that selected sectors are impacted by the COVID-19 outbreak. The banking and transportation sectors, on the announcement of first death, were impacted negatively, while the telecommunication and food –beverage sectors were impacted positively. The transportation and banking sectors experience an obvious downturn after the spread of COVID-19, while the food–beverage and telecommunication sectors experience an obvious upturn after the spread of COVID-19. Besides, the most adversely impacted sector is banking.Originality/valueThis study bridges the research gap and adds significant insights to the existing literature. The main contribution of this study to the existing literature is the unexpected outbreak impacts on financial markets, especially on BIST. It is also expected that this study will make a significant contribution to analysts, researchers and policymakers.

The causality link between political risk and stock prices

2019 ◽  
Vol 11 (3) ◽  
pp. 338-367 ◽  
Author(s):  
Huiqiang Wang
Keyword(s):  
Financial Markets ◽  
Risk Premium ◽  
Stock Prices ◽  
Political Risk ◽  
Data Driven ◽  
Synthetic Control ◽  
Political Uncertainty ◽  
Content Type ◽  
Data Driven Approach ◽  
The Impact

Purpose Prior studies have paid close attention to the impact of political risk on financial markets. Following this strand of literature, this paper aims to focus on the causality link between political shocks and their impacts on emerging stock markets. Design/methodology/approach This paper highlights an innovative counterfactual model for political risk assessment. Based on a natural experiment, i.e. the Taiwan Strait Crisis in 1995-1996, this study utilizes one data-driven approach, e.g. the synthetic control methods (SCMs), to estimate causal impact of this political shock on Taiwan’s stock market. Findings Major findings in this study are consistent with existing literature on the price of political risk, e.g. political uncertainty commands a risk premium. The SCM estimations suggest that Taiwan’s stock prices dramatically underperformed its newly industrialized peers and other developed markets during the crisis. The SCM results are statistically significant and robust to various cross-validation tests. Research limitations/implications Findings in this study indicate that political risks could generate enormous impacts on emerging financial markets. In particular, political uncertainty following new geopolitical dynamics requires proper identification and assessment. Originality/value To the author’s knowledge, this paper is the first rigorous counterfactual study to the causality relationship between political uncertainty and stock prices in emerging markets. This paper is distinct from previous studies in applying a data-driven approach to combine the features of learning from others (cross-sectional) and learning from the past (time series).

scholarly journals Information Flow from COVID-19 Pandemic to Islamic and Conventional Equities: An ICEEMDAN-Induced Transfer Entropy Analysis

Complexity ◽  
2021 ◽  
Vol 2021 ◽  
pp. 1-20
Author(s):  
Ahmed Bossman
Keyword(s):  
Financial Markets ◽  
Information Flow ◽  
Portfolio Management ◽  
Short Term ◽  
Data Set ◽  
Fund Managers ◽  
Steady Growth ◽  
Management Techniques ◽  
The Impact

With the steady growth in the data set on the COVID-19 pandemic, empirical works that employ novel and yet appropriate statistical techniques to corroborate previous findings of the pandemic and its consequences on financial markets are necessary. This paper examined the impact of COVID-19 information flow on the Islamic and conventional equities within the short-, mid-, and long-term horizons to assess possible diversification prospects in the era of the pandemic. To the studied equities markets, a novel technique based on a denoised frequency-domain entropy paradigm was applied. The operability of entrenched market dynamics in the long-term horizon of the COVID-19 pandemic period is reinforced by the results. The findings divulge diversification opportunities between Islamic and conventional equities in the short- and mid-term periods of the COVID-19 pandemic. The risks on equities from Japan or Bahrain could be diversified by equities from Jordan in the short-term, while in the intermediate-term stocks from Japan could diversify with the UAE and USA equities. The results imply that it is imperative for investors and fund managers to employ portfolio management techniques that show how to use benefits together with risk prevention and management across distinct time scales.

The role of the expectations channel in the quantitative easing in the Eurozone

2019 ◽  
Vol 46 (2) ◽  
pp. 372-382 ◽  
Author(s):  
Nicholas Apergis
Keyword(s):  
Financial Markets ◽  
Labor Markets ◽  
Stock Prices ◽  
Methodological Approach ◽  
Quantitative Easing ◽  
Data Set ◽  
Content Type ◽  
Economic Productivity ◽  
Financial Variables ◽  
Switching Dynamic

Purpose The purpose of this paper is to explore the direct and exclusive effects of this rather unconventional monetary policy on financial markets, economic activity and labor markets across the Eurozone. Design/methodology/approach Using a range of variables, the analysis employed the Markov-switching dynamic regression methodological approach. Findings The findings provided evidence in favor of the reduction of short- and log-term credit spreads, increased stock prices, improved market expectations, recovered labor market conditions and economic productivity, while the primary transmission channel of the quantitative easing policy is the expectations channel. Originality/value The novelties of this paper are twofold: it makes use of a wide data set to investigate the effect of economic and financial variables on productivity, labor markets, bond markets and equity markets in the Eurozone; and the analysis focuses on the direct effects of monetary base increases on the Eurozone economy, as well as on Eurozone financial markets.

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