Stock-bond co-movements and cross-country linkages

This paper shows empirically that the level of stock-bond correlation depends more on crosscountry influences than on stock and bond market interaction. The study examines the relation of cross-country and cross-asset stock and bond market linkages for eight developed countries and finds that (i) stock market returns primarily depend on the US stock market and (ii) bond market returns primarily depend on the US bond market. Recursive Granger causality tests further show that the dominance of the US stock and bond market has increased in recent years and that there is both Granger causality from stocks to bonds and from bonds to stocks in several periods. We argue that the relatively low level of stock-bond correlations is due to an increased cross-country interdependence of financial markets leading to more frequent portfolio reallocations between stocks and bonds in order to compensate for lower cross-country diversification benefits.financial market integration, stock market co-movements, bond market co-movements, stock-bond linkages, flight-to-quality, contagion

The benefits of financial markets: a case study of European football clubs

This study analyses the performance of European football clubs which undergo an initial public offering (IPO). We use a unique panel dataset consisting of domestic and international performance data to develop an event study to investigate the effects on a football club’s on-field performance before and after the IPO. The study follows from the observation that, as financial markets are expected to exhibit a positive influence on the economy as a whole, football clubs who access these markets should benefit as well. However, the conclusions of our study are similar to those in the corporate finance literature, where firms who undertake an IPO underperform similar firms in the medium term. Using our metric, football clubs have diminished domestic and international performance after the stock market listing

Endogenous contagion – a panel data analysis

This paper proposes a panel data model to analyze contagion in a multivariate framework. The model distinguishes between vulnerability and contagion, and provides a time series of contagion. The most important feature of the model is the endogenous determination of contagion without an a priori and potentially arbitrary specification of the crisis period. In addition, the model can distinguish between positive and negative contagion, and no assumption needs to be made about the source of the crisis. Eleven stock markets from the Asian region are analyzed during the Asian financial crisis, and contagion is found to be significant in four broad periods. These episodes are split equally between positive and negative movements. Anecdotal evidence is matched to the significant incidences of contagion, and it is found that events surrounding Hong Kong equity markets are key drivers of contagion

A Realistic Solvable Model for the Coulomb Dissociation of Neutron Halo Nuclei

As a model of a neutron halo nucleus we consider a neutron bound to an inert core by a zero range force. We study the breakup of this simple nucleus in the Coulomb field of a target nucleus. In the post-form DWBA (or, in our simple model CWBA (``Coulomb Wave Born Approximation'')) an analytic solution for the T-matrix is known. We study limiting cases of this T-matrix. As it should be, we recover the Born approximation for weak Coulomb fields (i.e., for the relevant Coulomb parameters much smaller than 1). For strong Coulomb fields, high beam energies, and scattering to the forward region we find a result which is very similar to the Born result. It is only modified by a relative phase (close to 0) between the two terms and a prefactor (close to 1). A similar situation exists for bremsstrahlung emission. This formula can be related to the first order semiclassical treatment of the electromagnetic dissociation. Since our CWBA model contains the electromagnetic interaction between the core and the target nucleus to all orders, this means that higher order effects (including postacceleration effects) are small in the case of high beam energies and forward scattering. Our model also predicts a scaling behavior of the differential cross section, that is, different systems (with different binding energies, beam energies and scattering angles) show the same dependence on two variables x and y.Comment: to appear in the Proceedings of ENAM2001, 3rd Internation Conference on Exotic Nuclei and Atomic Masse

A Minimum Distance Estimator for Dynamic Conditional Correlations

The crucial problem in estimating dynamic conditional correlation models is the need to guarantee a positive-definite covariance matrix. In order to avoid any violation of this property, many estimators impose strong restrictions on the model. In addition, many models do not parameterize the correlations directly but the covariance. This paper avoids this problem in proposing a minimum distance estimator (MDE) to estimate dynamic conditional correlations or multivariate GARCH models. The model allows full flexibility in the estimation. Violations of the positive-definiteness of the covariance matrices are part of the specification tests. A simulation study shows the performance of the estimator and the empirical section compares estimates of the MDE with the DCC estimator of Engle (2002). This paper does not only demonstrate an alternative estimator but also outlines how this model can be used to analyze the influence of the restrictions on the estimates in multivariate GARCH models.JRC.G.9-Econometrics and statistical support to antifrau

Does the Mobility of Football Players Influence the Success of the National Team?

This paper is motivated by the observation that there is a large discrepancy among football nations regarding the number of football players that play in the national team and also in their home league. Two extreme examples are Argentina and Italy : Almost all members of the national team of Argentina play in a foreign football league and all national team players of Italy play in their home league. We focus on the question whether a country's success in international competitions significantly depends on the mobility of its football players. More specifically, we analyze whether a country's success is influenced (i) by the number of national team players that do not play in the home league and (ii) by the number of national team players from other countries that play in the home league. Our study is based on data of all 32 national football teams qualified for the FIFA World Cup in Germany 2006 including more than 700 players with a total estimated market value of almost four billion Euros. The main finding is that a country's success crucially depends on both imports and exports. This suggests that all countries that qualified for the World Cup gain from trade.football, international trade, transfer market

House Prices and Economic Risks - Are Irish Households Rational?

This study analyzes the evolution of house prices in Ireland and investigates the question of whether Irish households are overexposed to certain economic risks rendering the decision to buy a house too risky and hence irrational. We use a simple theoretical framework to demonstrate the investment options of a typical household and derive the risk factors associated with the purchase of a house with respect to other types of investment. Irish households hold the majority of their investments in property, specifically in their own houses. The empirical results illustrate that this wealth is exposed to inflation, interest rate changes and the business cycle. This exposure, while not problematic in times of low interest rates, moderate inflation and economic expansion, amplifies the risk to the value of households’ investments if inflation increases, interest rates rise or the economy is in recession. We argue that the adoption of the euro has increased this risk because interest rates are exogenous to the Irish economy which could lead to a situation of deteriorating economic conditions and rising interest rates. Our findings indicate that Irish households potentially underestimate the risk of buying a house. Viewing the purchase of a house as a risky investment could help reduce private debt in the future.