An Empirical Assessment of COVID-19 Pandemic on Asset Market Responses in India

The study investigates the financial market’s response during the period of last nine months starting from the day when first COVID-19 case was confirmed in India. This paper attempts to gauge the impact of rise in COVID-19 confirmed number of cases on stock market as well as commodities market returns. A multi-model approach is used in the current research to assess the relationship between daily number of confirmed cases of COVID-19 and movement of asset returns from January 2020 to September 2020. The findings reveal that though financial markets exhibited asymmetric volatility clustering, it could not be traced to COVID-19 pandemic for the period under study in India.

Trade and Resource Sustainability with Asset Markets

Trade changes incentives to protect an open-access natural resource independently of its effect on the resource price. General equilibrium linkages cause resource policy to affect the price of privately owned assets regardless of whether they are used in the resource sector. In the closed economy, the asset market in our overlapping generations setting creates incentives for currently living agents to protect the natural resource. The interplay of the asset market and general equilibrium effects causes trade to reverse these incentives. Trade liberalization and the establishment of formal property rights are policy complements: the former makes the latter more important.

Interdependence dynamics of corporate equity and public real estate markets

PurposeWith growing interdependence between financial markets, the goal of this paper is to examine the dynamic interdependence between corporate equity and public real estate markets for the USA and a select group of seven European developed economies under a cross-country framework in crisis and boom market conditions. Dynamic interdependence is related to four measures of market linkages of “correlation, spillover, connectedness and causality”.Design/methodology/approachThis study adopts a four-step investigation. The authors first estimate “time-varying variance–covariance spillovers and implied correlations” modeled with the bivariate BEKK-MGARCH methods. Second, the methods of Diebold and Yilmaz (2012, 2014) measure the conditional volatility spillover-connectedness effects across the corporate equity and public real estate markets based on a decomposition of the forecast error variance. Third, the authors implement nonlinear bivariate and multivariate causality tests to understand the lead-lag dynamics of the two asset markets' returns, volatilities and net directional volatility connectedness across different sample periods. Finally, the authors conclude the study by providing a portfolio hedging analysis.FindingsThe authors find that corporate equity and public real estate are moderately interdependent to the extent that their diversification benefits increases in the longer term. Moreover, the authors find increased corporate equity-public real estate causal dependence of the market groups of the European and international portfolios during the GFC and INTERCRISIS periods. The nonlinear causality test findings indicate that the joint information of asset markets can be a useful source of prediction for future innovation of market risks. Additionally, policy makers may also be able to employ conditional volatility and volatility connectedness as two other measures to manage market stability in the cross-asset market dependence during highly volatile periods.Research limitations/implicationsOne major take away from this academic research is since international portfolio investors are not only concerned the long-term price relationship but also the correlation structure and volatility spillover-connectedness, the conditional BEKK modeling, generalized risk connectedness analysis and nonlinear causal dependence explorations from this multi-country study can shed fresh light on the nature of market interdependence and magnitude of volatility connectedness effects in a multi-portfolio framework.Practical implicationsThe hedging performance analysis for portfolio diversification and risk management indicates that industrial stocks (“pure” equities) are valuable assets that can improve the hedging performance of a well-diversified corporate equity-public real estate portfolio during crisis periods. For policymakers, the findings provide important information about the nature of causal links and predictability during the crisis and asset-market boom periods. They can then equip with this information to manage and coordinate market stability in cross corporate equity-real estate relationships effectively.Originality/valueAlthough traditional research has in general reported at least a moderate degree of relationship between the two asset markets, investors' knowledge of stock-public real estate market linkage is somewhat inadequate and confine mostly to broad stocks (i.e. stocks that are exposed to public real estate influence) in a single-country context. In this paper, the authors examine the interdependence dynamics in a multi-country (multi-portfolio) context. A clear understanding their changing market relationships in a multi-country context is of crucial importance for portfolio investors, financial institutions and policy makers. Moreover, since the authors use an orthogonal stock market index, the authors allow global investors to understand the potential diversification benefits from stock markets that are beyond the public real estate market under different market conditions.

Cross-section instability in financial markets: impatience, extrapolation, and switching

This paper presents a stylized model of interaction among boundedly rational heterogeneous agents in a multi-asset financial market to examine how agents’ impatience, extrapolation, and switching behaviors can affect cross-section market stability. Besides extrapolation and performance based switching between fundamental and extrapolative trading documented in single asset market, we show that a high degree of ‘impatience’ of agents who are ready to switch to more profitable trading strategy in the short run provides a further cross-section destabilizing mechanism. Though the ‘fundamental’ steady-state values, which reflect the standard present-value of the dividends, represent an unbiased equilibrium market outcome in the long run (to a certain extent), the price deviation from the fundamental price in one asset can spill-over to other assets, resulting in cross-section instability. Based on a (Neimark–Sacker) bifurcation analysis, we provide explicit conditions on how agents’ impatience, extrapolation, and switching can destabilize the market and result in a variety of short and long-run patterns for the cross-section asset price dynamics.

Virtual assets market infrastructure

Analyses the virtual assets market infrastructure. It was found that the uncertainty about the definition of the virtual assets market infrastructure makes it impossible to identify the infrastructure elements. Given that, it is necessary to propose the definition of virtual assets market infrastructure, identify the elements of the mentioned infrastructure, and make proposals for the development of the legal regulation regarding the virtual assets market. Thus, it was given the definition of the virtual assets market infrastructure as a set of elements that provide, regulate and create conditions for the normal, efficient and smooth functioning of this market. The article considers scientific approaches to the classification of the market infrastructure elements into general elements and special elements. General elements could be considered as infrastructure elements in all kinds of markets. But special elements are functioning only on the virtual assets market. For this study, it was proposed to identify only the special elements of the virtual assets market infrastructure. According to the research, special elements include: 1) service providers related to the circulation of virtual assets; 2) issuers (miners); 3) self-regulatory organizations. At the same time, it was grounded that the market users could not be considered as an element of the virtual assets market infrastructure. It was substantiated that the virtual assets market is at its early stage of formation, and therefore new elements of the market infrastructure may emerge. Besides, it was grounded that the definition of virtual asset market infrastructure should be enshrined in the law governing the relations on the virtual assets market.