scholarly journals Heterogeneous Beliefs, Wealth Distribution, and Asset Markets with Risk of Default

2012 ◽  
Vol 102 (3) ◽  
pp. 156-160 ◽  
Author(s):  
Viktor Tsyrennikov
Keyword(s):  
Financial Markets ◽  
Trading Volume ◽  
Wealth Distribution ◽  
Asset Returns ◽  
Heterogeneous Beliefs ◽  
Asset Markets ◽  
Financial Assets ◽  
Asset Trading ◽  
Arrow Securities ◽  
The Rich

We study asset markets and wealth dynamics in the economy with heterogeneous beliefs and risk of default. Agents can trade a full set of Arrow securities but are allowed to default on their delivery promises. Financial markets rationally subject agents to the endogenous “no-default” borrowing limits. Because of the rich menu of financial assets traded in the market speculation opportunities are plentiful. Financial wealth is volatile and the endogenous borrowing limits are always active. Variance of the asset returns is amplified. The asset trading volume is substantial and volatile.

scholarly journals Trade clustering and power laws in financial markets

2020 ◽  
Vol 15 (4) ◽  
pp. 1365-1398
Author(s):  
Makoto Nirei ◽  
John Stachurski ◽  
Tsutomu Watanabe
Keyword(s):  
Financial Markets ◽  
Trading Volume ◽  
Power Laws ◽  
State Model ◽  
Equilibrium Volume ◽  
Private Signals ◽  
Asset Value ◽  
Asset Trading ◽  
Stock Volume ◽  
Two State Model

This study provides an explanation for the emergence of power laws in asset trading volume and returns. We consider a two‐state model with binary actions, where traders infer other traders' private signals regarding the value of an asset from their actions and adjust their own behavior accordingly. We prove that this leads to power laws for equilibrium volume and returns whenever the number of traders is large and the signals for asset value are sufficiently noisy. We also provide numerical results showing that the model reproduces observed distributions of daily stock volume and returns.

scholarly journals Common risk factors in the returns on digital assets: evidence from cryptocurrency market

2021 ◽  
pp. 3-21
Author(s):  
Dmitry А. Endovitsky ◽  
Viacheslav V. Korotkikh
Keyword(s):  
Risk Factors ◽  
Trading Volume ◽  
Intrinsic Value ◽  
Asset Markets ◽  
Price Formation ◽  
Financial Assets ◽  
Market Anomalies ◽  
Market Capitalization ◽  
Grouping Method ◽  
Common Risk Factors

Introduction. Digital financial assets are a relatively new phenomenon. More and more, they include virtual currencies, and in particular cryptocurrencies. Both regulators and financial market players are becoming increasingly interested in such assets. Cryptocurrencies have no intrinsic value, and this encourages scientific studies on the problem of price formation and risk management associated with cryptocurrency operations. Most papers on the problem lack a systematic ap-proach and do not provide solutions to a large number of fundamental issues. Purpose. The purpose of our study was to develop a method for the risk analysis of operations with digital financial assets, namely cryptocurrencies. Methodology. In our study, we used parametric methods of data analysis and ma-chine learning methods, description, analysis, synthesis, induction, deduction, comparison, and grouping method. The sample was accumulated between April 2013 and April 2021 and included cryptocurrencies with the market capitalization of over 1 million USD. Results. The study determined the common risk factors for the cryptocurrency market. The risk factors are presented as linear combinations of returns of subsets of cryptocurrencies with dynamically changing weight coefficients. The risk factors were formed based on the market information, which included the price of the cryptocurrency, the trading volume, and its market capitalization. Conclusions. The study demonstrated that the cryptocurrency market is suscepti-ble to market anomalies common to traditional financial asset markets. In addition to the risk factors based on the market capitalization of cryptocurrencies (the size) and their aggregate profitability (the momentum), the article presents statistically relevant risk factors which reflect the growth rate of the market capitalization and the level of illiquidity of cryptocurrencies. In order to explain the market anomalies and the arbitrary strategies based on them, the article presents several factor models of cryptocurrency price formation. These models can be used to develop an in-tegrated approach to the risks associated with operations with digital financial as-sets.

Konsep Distribusi Pendapatan Dalam Islam

2016 ◽  
Vol 1 (1) ◽  
pp. 85-97
Author(s):  
Moh. Ah. Subhan ZA
Keyword(s):  
Property Rights ◽  
Social Life ◽  
Private Property ◽  
Wealth Distribution ◽  
The State ◽  
Private Property Rights ◽  
Job Opportunities ◽  
The Rich ◽  
The Difference ◽  
Distribution Of Income

The main problem of social life in the community is about how to make the allocation and distribution of income well. Inequality and poverty basically arise not because of the difference of anyone’s strength and weakness in getting livelihood, but because of inappropriate distribution mechanism. With the result that wealth treasure just turns on the rich wealthy, which is in turn, results in the rich get richer and the poor get poorer.Therefore, a discussion on distribution becomes main focus of theory of Islamic economics. Moreover, the discussion of the distribution is not only related to economic issues, but also social and political aspects. On the other side, the economic vision of Islam gives priority to the guarantee of the fulfillment of a better life. Islam emphasizes distributive justice and encloses, in its system, a program for the redistribution of wealth and prosperity, so that each individual is guaranteed with a respectable and friendly standard of living. Islam recognizes private property rights, but the private property rights must be properly distributed. The personal property is used for self and family livelihood, for investment of the working capital, so that it can provide job opportunities for others, for help of the others through zakat, infaq, and shodaqoh. In this way, the wealth not only rotates on the rich, bringing on gap in social life.The problem of wealth distribution is closely related to the welfare of society. Therefore, the state has a duty to regulate the distribution of income in order that the distribution can be fair and reaches appropriate target. The state could at least attempt it by optimizing the role of BAZ (Badan Amil Zakat) and LAZ (Lembaga Amil Zakat) which has all this time been slack. If BAZ and LAZ can be optimized, author believes that inequality and poverty over time will vanish. This is because the majority of Indonesia's population is Muslim.

scholarly journals Valuing Peace: The Effects of Financial Market Exposure on Votes and Political Attitudes

Econometrica ◽  
2019 ◽  
Vol 87 (5) ◽  
pp. 1561-1588 ◽  
Author(s):  
Saumitra Jha ◽  
Moses Shayo
Keyword(s):  
Financial Markets ◽  
Financial Market ◽  
Political Attitudes ◽  
Peace Process ◽  
Superior Performance ◽  
Financial Assets ◽  
Material Incentive ◽  
Nonfinancial Information ◽  
Political Messages ◽  
Economic Risks

Can participation in financial markets lead individuals to reevaluate the costs of conflict, change their political attitudes, and even their votes? Prior to the 2015 Israeli elections, we randomly assigned Palestinian and Israeli financial assets to likely voters and incentivized them to actively trade for up to 7 weeks. No political messages or nonfinancial information were included. The treatment systematically shifted vote choices toward parties more supportive of the peace process. This effect is not due to a direct material incentive to vote a particular way. Rather, the treatment reduces opposition to concessions for peace and changes awareness of the broader economic risks of conflict. While participants who were assigned Palestinian assets are more likely to associate their assets' performance with peace, they are less engaged in the experiment. Combined with the superior performance of Israeli stocks during the study period, the ultimate effects of Israeli and Palestinian assets are similar.

scholarly journals EQUILIBRIUM ASSET RETURNS IN FINANCIAL MARKETS

2019 ◽  
Vol 22 (02) ◽  
pp. 1850063 ◽  
Author(s):  
DILIP B. MADAN ◽  
WIM SCHOUTENS
Keyword(s):  
Financial Markets ◽  
Fixed Points ◽  
Asset Prices ◽  
Asset Returns ◽  
Expected Returns ◽  
Response Functions ◽  
Limit Laws ◽  
Return Distributions ◽  
Equilibrium Distributions ◽  
The Cost

Return distributions in the class of pure jump limit laws are observed to reflect numerous asymmetries between the upward and downward motions of asset prices. The return distributions are modeled by self-decomposable parametric laws with all parameters continuously responding to each other. Fixed points of the response functions define equilibrium distributions. The equilibrium distributions that can arise in practice are constrained by the level of return acceptability they may attain. As a consequence, expected returns are equated to risk measured by the cost of purchasing the negative of the centered return. The asymmetries studied include differences in scale, speed, power variation, excitation and cross-excitation.

scholarly journals Do Cash Holdings Differ in Europe and Asia Pacific?

2019 ◽  
Vol 7 (2) ◽  
pp. 1-32
Author(s):  
Ummar Aftab ◽  
Waseem Akhter Qureshi ◽  
Attiya Yasmin Javid
Keyword(s):  
Financial Markets ◽  
Cash Holdings ◽  
Cash Flows ◽  
Negative Influence ◽  
Asia Pacific ◽  
Cash Holding ◽  
Financial Assets ◽  
Dividend Payment ◽  
Financial Strength ◽  
Cash Reserves

This paper identifies the determinants that contribute towards the variation in financial assets that make up a firm’s total cash reserves, specifically in two important regions of the world i.e. Asia Pacific and Europe. The findings of the research reveal that firms in the region of Asia Pacific have slightly higher cash holdings, as compared to firms in Europe. Moreover, the study also identifies that the elevated cash holdings in Asia Pacific are not a result of the agency problem, as is generally viewed, rather, the shareholder power hypothesis is a more appropriate measure to elucidate this elevation in the level of cash holdings in the region. When shedding light on to the firm specific cash holding determinants, the findings of the research reveal that leverage, dividend payment, profitability, growth and net working capital, cash flows and financial strength, influence cash reserves in both the regions, exactly in the same manner. This shows the application of transaction, and precautionary motives in both the regions. The study further identifies that size, and investments have a varying effect in both the regions that are taken into consideration. Again, this difference may be attributed to Shareholders’ Power Hypothesis, specifically for Asia Pacific and the Agency View, specifically for Europe. Shareholders’ Right Index influences cash reserves in Asia Pacific in a positive manner, while in Europe, the same index shows a negative influence. The development in the financial markets has a negative negatively influence on cash holdings in Asia Pacific, and a positive one in Europe.

Fractal Properties of Financial Assets and Forcasting Financial Crisis

2018 ◽  
pp. 23-41 ◽  
Author(s):  
Inna Nekrasova ◽  
Oxana Karnaukhova ◽  
Oleg Sviridov
Keyword(s):  
Fractal Dimension ◽  
Financial Markets ◽  
Future Development ◽  
Small Time ◽  
Practical Significance ◽  
Financial Assets ◽  
Time Intervals ◽  
Price Fluctuations ◽  
Fractal Properties ◽  
Fractal Index

The chapter is aimed at identification of criteria to select financial assets for investment; observing price fluctuations at small time intervals (up to one week) as possible predictors of the future of a significant increase in the price fluctuations amplitude; determining a fractal dimension of the financial markets on the basis of R/S-analysis; constructing a fractal index indicator to identify a bifurcation point, which gives birth to a possibility of crisis phenomena in economy. Therefore, the practical significance of the chapter lies in the idea of equipping academics and practitioners with new methods and tools for analysis and forecasting future development and dynamics of the financial markets.

Financial markets as commensurating machines

2019 ◽  
Vol 58 (4) ◽  
pp. 539-565
Author(s):  
Barbara Kuchler
Keyword(s):  
Financial Markets ◽  
Capital Markets ◽  
Capital Market ◽  
Capital Flows ◽  
Financial System ◽  
Financial Assets ◽  
Financial Instruments ◽  
Black Scholes ◽  
Derivatives Markets

Ever since the crisis of 2008, the dynamism and self-referentiality of financial markets have puzzled observers. This article argues that this dynamism is the product of a long process of commensuration, by which ever more heterogeneous financial assets and financial instruments have come to be compared with, substituted for, and valuated relatively to one another, and have thereby been condensed into a highly interconnected financial system. This trajectory can be found both in the long-term historical emergence of financial markets from ancient origins and in the more recent transformations of the financial system since the 1970s, including (i) the rise of derivatives markets, and (ii) the rise of capital markets as against bank-intermediated capital flows. The rise of derivatives markets was triggered by the commensuration of basic securities (such as stock, bond) and derivatives (such as options, futures), established by the Black-Scholes-Merton theory of option pricing. The rise of capital markets was rooted in the commensuration – and hence, competition and substitution – of bank products (such as loans, deposits) and non-bank products (capital market securities).

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