scholarly journals Dynamic Adverse Selection: Time-Varying Market Conditions and Endogenous Entry

2015 ◽  
Author(s):  
Pavel Zryumov
Keyword(s):  
Adverse Selection ◽  
Endogenous Entry ◽  
Time Varying ◽  
Market Conditions

Understanding Distressed Residential Transaction Discounts Across Price Segments and Market Conditions

2020 ◽  
Vol 42 (1) ◽  
pp. 151-182
Author(s):  
Ramya Rajajagadeesan Aroul ◽  
J. Andrew Hansz ◽  
Mauricio Rodriguez
Keyword(s):  
Transaction Costs ◽  
Time Varying ◽  
Market Segment ◽  
Market Conditions ◽  
Large Market ◽  
Space And Time ◽  
Wide Range ◽  
Time Periods ◽  
Market Areas

In the literature, there is a wide range of discounts associated with foreclosures. Comparisons across studies are difficult as they use different methodologies across large areas over different time periods. We employ a consistent methodology across space and time. We find modest discounts, within the range of typical transaction costs, in all but the highest priced market segment. Higher priced segments could explain prior findings of substantial discounts. We find that discounts are time-varying, with discounts increasing with market distress. A one-size-fits-all approach is not appropriate when estimating distressed transaction discounts across large market areas or under changing market conditions.

scholarly journals Liquidity Sentiments

2019 ◽  
Vol 109 (11) ◽  
pp. 3813-3848 ◽  
Author(s):  
Vladimir Asriyan ◽  
William Fuchs ◽  
Brett Green
Keyword(s):  
Adverse Selection ◽  
Average Quality ◽  
Coordination Problem ◽  
Market Conditions ◽  
Rational Theory ◽  
Asset Quality

We develop a rational theory of liquidity sentiments in which the market outcome in any given period depends on agents’ expectations about market conditions in future periods. Our theory is based on the interaction between adverse selection and resale considerations giving rise to an intertemporal coordination problem that yields multiple self-fulfilling equilibria. We construct “sentiment” equilibria in which sunspots generate fluctuations in prices, volume, and welfare, all of which are positively correlated. The intertemporal nature of the coordination problem disciplines the set of possible sentiment dynamics. In particular, sentiments must be sufficiently persistent and transitions must be stochastic. We consider an extension with production in which asset quality is endogenously determined and provide conditions under which sentiments are a necessary feature of any equilibrium. A testable implication is that assets produced in good times are of lower average quality than those produced in bad times. (JEL D84, D82, E32, E44, G12)

Financial Cycles and Credit Growth across Countries

2018 ◽  
Vol 108 ◽  
pp. 509-512 ◽  
Author(s):  
Nuno Coimbra ◽  
Hélène Rey
Keyword(s):  
Banking System ◽  
Financial Intermediaries ◽  
Risk Shifting ◽  
Macroeconomic Model ◽  
Endogenous Entry ◽  
Time Varying ◽  
Credit Growth ◽  
Macroeconomic Risk ◽  
Credit Creation ◽  
Financial Cycles

In Coimbra and Rey (2017) we develop a dynamic macroeconomic model with heterogeneous financial intermediaries and endogenous entry. It features time-varying endogenous macroeconomic risk that arises from the risk-shifting behavior of financial intermediaries. We test empirically in a broad panel of countries the implication that credit creation is more elastic to funding costs when the distribution of leverage in the banking system is more positively skewed.

Security Issuances in Hot and Cold Markets

2014 ◽  
Vol 17 (03) ◽  
pp. 1450020 ◽  
Author(s):  
Min Maung
Keyword(s):  
Adverse Selection ◽  
Financial Constraints ◽  
Shareholder Wealth ◽  
Capital Expenditures ◽  
Market Conditions ◽  
Adverse Selection Costs ◽  
Overwhelming Evidence

Overwhelming evidence indicates that firms time market conditions to issue equity. I investigate the motivations for security issuances in hot and cold markets. While it is commonly believed that firms tend to exploit overvaluations to issue equity and overinvest in so-called 'hot' markets, which often results in lower future returns, I show that security issuances in certain periods with lower adverse selection costs are motivated by fundamentals such as capital expenditures and financial constraints, and that these issuances can create shareholder wealth. In contrast, firms that issue equity during periods of high sentiment experience a decline in future returns.

scholarly journals Adaptive Market Hypothesis and Time-varying Contrarian Effect: Evidence From Emerging Stock Markets of South Asia

SAGE Open ◽  
2022 ◽  
Vol 12 (1) ◽  
pp. 215824402110684
Author(s):  
Ali Fayyaz Munir ◽  
Mohd Edil Abd. Sukor ◽  
Shahrin Saaid Shaharuddin
Keyword(s):  
Stock Market ◽  
Emerging Markets ◽  
South Asian ◽  
Stock Markets ◽  
Time Varying ◽  
Market Conditions ◽  
Market Anomalies ◽  
Developed Markets ◽  
Emerging Stock Markets ◽  
Stock Market Anomalies

This study contributes to the growing debate on the relation between varying stock market conditions and the profitability of stock market anomalies. We investigate the effect of changed market conditions on time-varying contrarian profitability in order to examine the presence of the Adaptive Market Hypothesis (AMH) in South Asian emerging stock markets. The empirical findings reveal that a strong contrarian effect holds in all the emerging markets. We also find the stock return opportunities vary over time based on contrarian portfolios. We show that contrarian returns strengthen during the down state of market, higher volatility and crises periods, particularly during the Asian financial crisis. Interestingly, the market state instead of market volatility is the primary predictor of contrarian payoffs, which contradicts the findings of developed markets. We argue that the linkage arises from structural and psychological differences in emerging markets that produce unique intuitions regarding stock market anomalies returns. The overall findings on the time-varying contrarian returns in this study provide partial support to AMH. Another significant outcome of this study implies that investors in South Asian emerging markets, like investors in the developed markets, could not adapt to evolving market conditions. Therefore, contrarian profits often exist, and persistent weak-form market inefficiencies prevail in these markets.

scholarly journals Can Adaptive Market Hypothesis Explain the Existence of Seasonal Anomalies? Evidence from Dhaka Stock Exchange, Bangladesh

2021 ◽  
Vol 15 (2) ◽  
pp. 198-223
Author(s):  
Tahmina Akhter ◽  
Othman Yong
Keyword(s):  
Stock Exchange ◽  
Circuit Breaker ◽  
Time Varying ◽  
Markov Switching Model ◽  
Market Conditions ◽  
Switching Model ◽  
Emerging Stock Markets ◽  
General Index ◽  
Rolling Window ◽  
Stock Market Bubbles

This paper examines the behavior of seasonal anomalies in Dhaka Stock Exchange (DSE) of Bangladesh and whether the time varying nature of the anomalies is in line with Adaptive Market Hypothesis (AMH). With this aim the research investigated whether the changes in market conditions, for example: up and down market states, stock market bubbles and crashes, initiation of automated trading system and circuit breaker system can affect the behavior of calendar anomalies and therefore, can provide justification for the seasonal patterns in DSE. To achieve the stated objectives, this study utilizes daily general index values of DSE from 1993 to 2018, with GARCH (1,1) model, Markov switching model, subsample analysis and rolling window analysis. The findings support the existence of AMH at DSE in the form of time-varying nature of seasonal anomalies. However, not all seasonal anomalies examined in the study were found to grow weaker over time. The most important finding of this study is that the investors in emerging stock markets, for example DSE, may not learn from the past investment experiences and show the adapting ability towards changed market conditions in the same manner like the investors in a developed market.

The Times They Are A-Changing: Experimenting with Dynamic Adverse Selection

2021 ◽  
Vol 13 (4) ◽  
pp. 1-22
Author(s):  
Felipe A. Araujo ◽  
Stephanie W. Wang ◽  
Alistair J. Wilson
Keyword(s):  
Adverse Selection ◽  
Large Majority ◽  
Time Varying ◽  
Dynamic Matching ◽  
Common Value ◽  
Dynamic Setting ◽  
Best Response ◽  
The Times ◽  
Best Responses ◽  
Over Time

We examine a common value dynamic matching environment where adverse selection accrues slowly over time. Theoretical best responses are therefore time varying, and the prior experimental literature suggests that sequential environments might lead to greater understanding of adverse selection in this dynamic setting. However, while a sophisticated minority in our experiment do condition on time and are close to a best response, the majority use a stationary response, even after extended experience. In an environment with persistent uncertainty, our results indicate that sequentiality is insufficient for the large majority of participants to recognize the effects of adverse selection. (JEL C78, C92, D82, D91)

IPO Market Conditions and Timing over the Long Run

2018 ◽  
pp. 174-198
Author(s):  
Chris Yung
Keyword(s):  
Supply Side ◽  
Time Varying ◽  
Demand Side ◽  
High Quality ◽  
Market Conditions ◽  
Full Sample ◽  
Public Firms ◽  
Long Run ◽  
Investment Opportunities ◽  
Entrepreneurial Decision

This chapter examines the determinants of IPO volume in four broad categories: (i) demand side, i.e. contemporaneous investment opportunities; (ii) supply side, reflecting time-varying entrepreneurial diversification incentives; (iii) time-varying overall mispricing; and (iv) strategic pooling of low quality issuers with high-quality issuers. Our evidence is inconsistent with the second and third channels. Time-varying risk does not appear to drive the entrepreneurial decision to go public. While IPOs offer low average returns, there is little evidence that they are mispriced relative to similar public firms, either in the full sample or in hot markets. Instead, IPOs tend to cluster when actors in the economy more broadly are behaving as if investment opportunities are robust.

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