Signal-herding in cryptocurrencies

The paper examines the influence of informative signals derived from exogenous factors on herding intensity in the cryptocurrency market. We propose a novel approach whereby extracted signals are endogenized in investors’ decision-making. The signals may induce investors to converge towards (depart from) the market consensus, contributing to herding amplification (dampening). The findings reveal substantial asymmetries with respect to the intensity of herding stemming from exogenous influences. We conclude that the evidenced diversity is indicative of the value that investors attach to the information embedded in the different external signals they receive

A Multivariate Analysis of United States and Global Real Estate Investment Trusts

Using daily data for the period February 2006 to July 2013 we examine the return and volatility linkages between the two main United States REIT sub-sectors and global linkages between the Americas, Europe and the Asia Pacific regions using the BEKK-GARCH and the DCC-GARCH models. We find that there is no evidence of any volatility spillovers between the US sub-sectors. By contrast, we find evidence of volatility spillovers between the Asia Pacific and the Americas, the Asia Pacific and Europe but no spillovers between the United States and Europe. Our results suggest that the REIT market is becoming increasingly globalized and that investors need to consider time varying volatility and correlations across different regions of the world when forming their optimal portfolio-allocations

Banking risk as an epidemiological model: an optimal control approach

The process of contagiousness spread modelling is well-known in epidemiology. However, the application of spread modelling to banking market is quite recent. In this work, we present a system of ordinary differential equations, simulating data from the largest European banks. Then, an optimal control problem is formulated in order to study the impact of a possible measure of the Central Bank in the economy. The proposed approach enables qualitative specifications of contagion in banking obtainment and an adequate analysis and prognosis within the financial sector development and macroeconomy as a whole. We show that our model describes well the reality of the largest European banks. Simulations were done using MATLAB and BOCOP optimal control solver, and the main results are taken for three distinct scenarios.publishe

Stock markets and effective exchange rates in European countries: threshold cointegration findings

© 2015, Eurasia Business and Economics Society. The nexus between stock markets and exchange rates is examined in the case of eight European countries. The sample consists of four economies with national currencies and four that have adopted the euro. Thus, if differences between the two groups in the relationship governing the two markets exist, they will be unveiled. To this effect, a threshold cointegration methodology is adopted that allows for more reliable inferences to be drawn for both the short and long run nexus between the two markets. Monthly data is used covering the period 01/2000–12/2014. The findings reported herein offer support in favor of the portfolio approach thesis over the recent economic crisis period, but this finding is not the case for the entire sample. Bidirectional causality is found for Norway and the UK, pointing to a currency effect on stock markets. In view of the findings reported herein, policies aiming at reducing uncertainty in the stock markets can exert beneficial effects on currency markets

The role of leverage in quantitative easing decisions: Evidence from the UK

The paper analyses the implications arising from the impulses and responses of the banking sector in the UK, through the banks’ portfolio balance sheet information, when determined by the quantitative easing implementation. In a panel vector autoregressive framework, we examine the effects of Bank of England's asset purchases on disaggregated leverage and bank profitability for different types of financial institutions, which reflect differences in the sequencing of the quantitative easing strategy. We find that the transmission channel of QE to the growth of economic activity depends on the degree of financial leverage, the holdings of securities and lending rates but with diverging magnitude for the different types of UK financial institutions. © 2018 Elsevier Inc

Investors’ risk aversion integration and quantitative easing

Purpose: The purpose of this paper is to examine the spillover effects in international financial markets related to investors’ risk aversion as proxied by the variance premium, and how these relationships were affected by the quantitative easing (QE) announcements by the Federal Reserve. Design/methodology/approach: The empirical analysis employs a multivariate exponential generalized autoregressive conditionally heteroskedastic (VAR-EGARCH) specification, which includes the USA, the UK, Germany, France and Switzerland. Findings: Two main findings are raised from the empirical analysis. First, the VAR-EGARCH model identifies statistically significant spillover effects identifying the USA as the leading source driving investors’ risk aversion. Second, unconventional monetary easing announcement by the Fed has had significant effects on investors’ risk perspectives. Practical implications: Accounting for the dynamic volatility of variance premium inter-dependencies, the authors show that the correlations among variance premia increase during the QE announcements by the Federal Reserve, suggesting a herding behavior that may potentially lead to stock price bubbles and undermine financial stability. Originality/value: This is an empirical attempt that investigates the unexplored effects of unconventional monetary policy decisions in relation with investors’ attitudes toward risk. © 2019, Emerald Publishing Limited