On Financial Contagion Through ETFs

This chapter investigates the impact of the Global Financial Crisis and the European Sovereign Debt Crisis in ETFs across regions and segments. In particular, two tests are taking place, with the first one to examine if there is evidence of contagion effect and the second one to test the affection of risks in each pair of ETFs. The evidence across the stable period and the two crisis periods suggests the existence of the transmission of shocks from the Global Financial ETF to regional and sectoral ETFs. However, there is evidence that some of the ETFs remain less unaffected during both crises and some of them are immune. Moreover, the authors examine the impact of several control variables, which represent various risks, to the correlation of each pair of ETFs and the results show the influence of the interest rate risk and interbank liquidity risk during the Global Financial Crisis and the European Sovereign Debt Crisis.

Islamic Finance

The Islamic finance industry is estimated around $1.7 trillion with substantial growth momentum in the past decades. It is now too important to be ignored, particularly in the Middle and Far East. This chapter reviews the most salient features of Islamic finance that distinguish it from the rest of the conventional financial universe. A significant volume of research focuses on the comparative performance of Islamic and conventional banks across a wide range of metrics, such as profitability, risk, and efficiency. Islamic stock and bonds markets are also an important segment of the related comparative literature and we reviews these studies, too. This chapter provides a comprehensive and up-to-date review of the extant literature, useful for academics and practitioners with little or significant experience in the Islamic finance sector.

Innovation Finance Beyond Bitcoin

Over the past two decades, the diffusion of technological innovations introduced to the finance industry has been inconceivable. Internet, at the end of the 20th century, brought e-commerce, later e-payments, and more recently, e-money. Such innovations in digital world increase the impact on the business world, and so might do cryptocurrencies, currently spreading out across the globe. To this end, this chapter builds up an across-the-board synthesis of current investment trends and analysis, aiming to lead a way forward for research on this uncharted breed of alternative finance assets looming anew.

Algorithmic Trading and Transaction Costs

“Algos” are algorithmic trading strategies that are meant to optimize the execution quality of the trades in terms of transaction costs and market-timing. This chapter presents the transaction costs taxonomy and popular algorithmic execution strategies. Authors empirically examine a dataset of hedge fund transactions. Our results suggest that implicit transaction costs are characterized by a significant buy-sell asymmetry. To get some insight about the possible determinants of Implicit Transaction Costs, authors investigate the algo type and stock characteristics such as market capitalization, relative volume, inverse prior close, price momentum, buy indicator and trade duration. Both in-sample and out-of-sample tests show that a significant portion of transaction costs can be anticipated before the trade execution. Results show that high-level execution strategies can be constructed to optimize the algo choice.

Gold's Price and Advanced Stock Markets

Traditionally, the gold has been approved as a safe-haven investment after the collapse of Breton Woods. The global investors especially prefer to rebalance their portfolios by purchasing gold or its derivatives during financial crises. This research explores realized dynamic linkages between gold and the advanced stock market indices, after the end of the 2008 economic recession. This chapter used the fractionally co-integrated ECM by utilizing intraday data from 2013 and thereafter. The empirical outcomes support that there is a negative-realized dynamics between the advanced stock markets and the gold's price in the short and in the long run. Specifically, the short-term dynamics of gold's price seems to be higher on the French and Japanese stock market indices. Lastly, the long-term dynamics of gold's price seems to be higher on the Dow Jones and the FTSE100.

Crowdfunding

Crowdfunding is an innovative fin-tech mechanism for financing sustainable development. As this chapter demonstrates, crowdfunding can prove to be a powerful tool for financial inclusion, as it opens up funding possibilities for stakeholders, activities, and projects which would not be able to tap funding through the banking system or traditional credit and/or equity providers. This chapter provides a review of the most important recent European crowdfunding initiatives and critically evaluates the present Greek crowdfunding mechanism and its extension into a loan-based and equity-based funding system. By identifying the institutional and functional factors that constrain its use, it provides recommendations for their alleviation. The development of a grant-based crowdfunding platform in Greece has proven to be a powerful innovative tool to meet urgent financial needs in the course of the recent crisis as well as a tool for financial inclusion.

Spillover Volatility Between Fuel Mix and Electricity Prices

Regulators were the only institution who set the electricity prices, including costs of transmission, distribution, and generation. Nowadays, this has changed. Electricity prices are determined by the fundamental economic rule of supply and demand. The forthcoming work examines a potential relationship between electricity price and fuel mix. The authors use the Nordic System's electricity prices and generation. They conclude that hydropower and nuclear power plays a vital role in the futures energy mix and in the stability of electricity prices. A spillover effect is detected between electricity prices and fuel mix, but a need for further research is recommended.

The Impact of Unconventional Monetary Policies on Unique Alternative Investments

This chapter investigates the impact of central banks' unconventional monetary policies on sectors of unique and traditional alternative investments beyond the stock market. More specifically, authors examine how quantitative easing (QE) programs, imposed by the FED and the ECB during the financial crisis, affected the fine wine market and rare coins in comparison with real estate, commodities, and crude oil. The methodology used in this chapter includes multiple regression analysis. As dependent variables, the LVX 50 Index, the Rare Coin Values Index, the REIT Index, the CRB Commodity Index and the Crude Oil Futures Index, are used for each sector respectively. Our empirical analysis shows that the QE programs applied had different outcomes between our sample markets. Thus, investors should evaluate the signals associated with the announcements of prospective monetary policies in their attempt to achieve a sufficient portfolio diversification and to harvest superior returns at the same time.

FED's Unconventional Monetary Policy and Correlation Dynamics Among Conventional and Alternative Investments

This chapter investigates the correlations between conventional and alternative investments during the quantitative easing (QE) programs launched by the U.S. Federal Reserve. Authors focus on different asset classes to examine the dynamics on their correlations and to highlight alternative investment options for rational investors and policy makers. Their analysis covers the period from January 3, 2005 to March 16, 2018. Research has significant policy implications and the empirical findings indicate a ripple effect of QE across conventional and alternative investments and suggest that their correlations differ by QE periods. Researchers also confirm the effectiveness of the portfolio rebalance channel pictured on specific assets' correlation sign, as well as the existence of specific patterns. UMP programs create portfolio rebalance since investors followed the required path set by the Fed.

The Return Performance of Real Estate Investment Trusts (REITs) and Portfolio Diversification Benefits

This study describes the emergence and the structure of Real Estate Investment Trusts (REITs) and investigates whether European REITs provide higher risk-adjusted returns and portfolio diversification benefits relative to the market portfolio. The top public listed companies of five (5) established (Belgium, France, Germany, Netherlands, UK), three (3) emerging (Italy, Spain, Ireland) and one (1) nascent (Greece) European REIT markets, are considered over period 2007 – 2018. The empirical findings denote poor performance of most European REITS over the Global Financial Crisis period but strong risk adjusted returns, overall, outperforming the equivalent European stock market indices and bonds over the first years of post - GFC period. In the recent period (2015 – 2018), most European REITs continued to deliver positive but modest risk adjusted returns relative to the previous period. The analysis provides evidence of poor portfolio diversification benefits and weak cross country diversification benefits among the European REITs.