Have European Stocks Become More Volatile? An Empirical Investigation of Idiosyncratic and Market Risk in the Euro Area

2006 ◽  
Author(s):  
Colm Kearney ◽  
Valerio Potì
Keyword(s):  
Euro Area ◽  
Empirical Investigation ◽  
Market Risk

MONETARY POLICY SWITCHING IN THE EURO AREA AND MULTIPLE STEADY STATES: AN EMPIRICAL INVESTIGATION

2016 ◽  
Vol 21 (5) ◽  
pp. 1175-1188 ◽  
Author(s):  
Gilles Dufrénot ◽  
Guillaume A. Khayat
Keyword(s):  
Steady State ◽  
Euro Area ◽  
European Central Bank ◽  
Empirical Investigation ◽  
Standard Assumption ◽  
Demand Shock ◽  
Liquidity Trap ◽  
European Central ◽  
Parameter Values ◽  
Policy Function

This paper investigates, in the case of the euro area, the standard assumption that the liquidity trap steady state, which arises from the existence of the zero lower bound on the nominal interest rate, is locally unstable. We show that the policy function of the European Central Bank (ECB) is described by a nonlinear Taylor rule. Then, using our estimations, we show that around the liquidity trap steady state the equilibrium is locally determinate for most plausible parameter values. Finally, we find that an inflation shock is more efficient than a demand shock to escape the liquidity trap steady state.

Credit in the euro area: An empirical investigation using aggregate data

2006 ◽  
Vol 46 (2) ◽  
pp. 211-226 ◽  
Author(s):  
Alessandro Calza ◽  
Marta Manrique ◽  
João Sousa
Keyword(s):  
Euro Area ◽  
Empirical Investigation ◽  
Aggregate Data

Strategic Risk Shifting and the Idiosyncratic Volatility Puzzle: An Empirical Investigation

2020 ◽  
Author(s):  
Zhiyao Chen ◽  
Ilya A. Strebulaev ◽  
Yuhang Xing ◽  
Xiaoyan Zhang
Keyword(s):  
Stock Returns ◽  
Risk Premium ◽  
Empirical Investigation ◽  
Empirical Support ◽  
Idiosyncratic Risk ◽  
Market Risk ◽  
Idiosyncratic Volatility ◽  
Risk Shifting ◽  
Market Risk Premium ◽  
Strategic Risk

We find strong empirical support for the risk-shifting mechanism to account for the puzzling negative relation between idiosyncratic volatility and future stock returns. First, equity holders take on investments with high idiosyncratic risk when their firms are in distress and receive less monitoring from institutional holders as well as when the aggregate economy is in a bad state. Second, the strategically increased idiosyncratic volatility decreases equity betas, particularly in bad states when the market risk premium is high. The negative covariance between the equity beta and the market risk premium causes low and negative returns and alphas in firms with high idiosyncratic volatility. This paper was accepted by Tomasz Piskorski, finance.

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