Information Flow, Social Interactions and the Fluctuations of Prices in Financial Markets

We model how excess demand or excess supply can be generated in the presence of a social network of interactions, where agents are subject to external information and individual incentives. In this context we study price fluctuations in financial markets under equilibrium. In particular, we isolate the role of these different factors in the determination of price fluctuations and describe non trivial sensitivities to changes in equilibrium due to the existence of social interactions. We characterize equilibrium and distinguish between stable and unstable equilibrium. Crashes or bubbles are seen as out-of-equilibrium situations, preceeded by unstable equilibrium. Fluctuations under unstable equilibrium are shown to be abnormal and particulary large. Also, we show how fluctuations of the external information flows affect the fluctuations of the return process. In all cases we explain the well-known phenomena that prices do not fluctuate upwards in the same way as they fluctuate downwards. This asymmetry of price fluctuations is due to asymmetries in the price elasticity of demand and supply curves at the level defining equilibriumsocial network, excess demand, excess supply, price fluctuations

Super-replicating Bounds on European Option Prices when the Underlying Asset is Illiquid

We derive super-replicating bounds on European option prices when the underlying asset is illiquid. Illiquidity is taken as the impossibility of transacting the underlying asset at some points in time, generating market incompleteness. We conclude that option price bounds follow a Black-Scholes partial differential equation where the volatility term is adjusted to reflect different levels of illiquidity.

Consuming durable goods when stock markets jump: a strategic asset allocation approach

Agents derive their utilities from consumption over time. In this paper we consider an agent that invests in thefinancial market and in consumption goods. The agent has an infinite time horizon and a utility that depends on consumption at each point in time, consuming both a durable good and a perishable good. There are costs for transacting the durable good. We show that an agent who does not consider the impact of jumps in the return process of risky assets will make suboptimal decisions, not only regarding the fraction of wealth invested in the stock market, but also with respect to the timing for trading on the durable good.Optimal asset allocation, durable consumption good, transaction costs.

The Exact Value for European Options on a Stock Paying a Discrete Dividend

In the context of a Black-Scholes economy and with a no-arbitrage argument, we derive arbitrarily accurate lower and upper bounds for the value of European options on a stock paying a discrete dividend. Setting the option price error below the smallest monetary unity, both bounds coincide, and we obtain the exact value of the option.Comment: 14 pages,3 figure

Stresse e burnout nos profissionais de emergência médica pré-hospitalar

Tese de dout., Psicologia, Faculdade de Ciências Humanas e Sociais, Univ. do Algarve, 2010Os profissionais de emergência médica pré-hospitalar estão diariamente sujeitos a diferentes tipos de factores stressantes. Cientes desta realidade surge esta investigação que possui como principal objectivo estudar o stresse e o burnout nos profissionais de emergência médica pré-hospitalar. Foi delineada uma pesquisa tendo por base uma metodologia de triangulação, constituída por dois momentos de pesquisa, em que no primeiro momento foi efectuado um estudo do tipo exploratório e descritivo baseado numa metodologia do tipo quantitativa, procurandose a influência de algumas variáveis psicológicas mediadoras na vulnerabilidade ao stresse e no burnout, tendo sido utilizada uma amostra constituída por 161 profissionais de emergência médica pré-hospitalar. O segundo momento de pesquisa pretendeu identificar as competências e as estratégias utilizadas para lidar com o stresse e com o burnout em doze sujeitos de estudo que apresentavam menor ou maior vulnerabilidade ao stresse previamente seleccionados, tendo sido efectuadas entrevistas semi-estruturadas, numa metodologia qualitativa. Os resultados encontrados permitem verificar que, de uma forma geral, os sujeitos de estudo não se apresentam vulneráveis ao stresse apresentando valores médios inferiores a 43, assim como apresentam valores baixos a nível do burnout. Através de equações estruturais, foi desenvolvido um modelo depurado que demonstra uma associação negativa entre a satisfação com as actividades sociais, as competências e habilidades pessoais e sociais (I am/I can) e a vulnerabilidade ao stresse e, uma associação positiva entre a vulnerabilidade ao stresse e a satisfação com a família e o escape. Os sujeitos de estudo que não praticam exercício fisico apresentam maior vulnerabilidade ao stresse, assim como os que não possuem duplo emprego, enquanto aqueles que não possuem alterações do sono possuem menor vulnerabilidade ao stresse. A vulnerabilidade ao stresse associa-se positivamente com a exaustão emocional e serve de mediadora a algumas variáveis protectoras. A maioria dos sujeitos considera as competências para lidar com o stresse como fundamentais, valorizando os conhecimentos técnico-científicos adequados, referindo também que as competências desaparecem com o tempo. Referem que as estratégias que possuem para lidar com o stresse são adequadas e que os programas de gestão de stresse devidamente adaptados à sua realidade são importantes

Debt, information asymmetry and bankers on board

We provide evidence that the presence of bankers in the board of directors reduce information asymmetry between credit markets and firms. We show that the impact of the presence of bankers on leverage is driven by firms with low level of debt. This effect is amplified the more connected the bankers are to the corporate world. Additionally the results are more pronounced for less transparent firms. Our findings suggest that the connectedness of bankers play a key role in reducing information asymmetry.N/

The Equilibrium Dynamics for an Endogeneous Bid-Ask Spread in a Monopolistic Financial Market

This paper presents an endogeneous model for the stochastic dynamics of the bid-ask spread of prices of financial assets. The model is derived introducing an intermediary and inventory costs in the setting of equilibrium financial markets as described by Platen and Rebolledo (1996).N/

Fearful asymmetry: an analysis of pre-earnings abnormal returns

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and EconomicsIn this paper we study the returns on a set of different strategies, which are based on the sign and magnitude of the pre-earnings announcement return for a group of US stocks and for some international markets which provides an additional measure of robustness. We also propose a new methodology for the evaluation of abnormal returns. Evidence is found that stocks with negative abnormal returns on the days prior to the earnings announcement have a subsequent higher return on the days following the announcement. A trading strategy based on these findings is then reproduced and its results are analyzed