Financial market volatility: informative in predicting recessions

It is commonly agreed that the term spread and stock returns are useful in predicting recessions. We extend these empirical findings by examining interest rate and stock market volatility as additional recession indicators. Both risk-return analysis and the theory of investment under uncertainty provide a rationale for this extension. The results for the United States, Germany and Japan show that interest rate and stock return volatility contribute significantly to the forecasting of future recessions. This holds in particular for short term predictions.business cycles; stock market volatility; interest rate volatility; probit model

Do Vietnamese state-dominated listed firms face finance constraints?

Using accounting data of listed firms on the Vietnamese stock market this study documents that listed Vietnamese firms still face finance constraints, even after the introduction and rapid growth of the equity markets and the privatization wave that started since 1992. Contrary to most of the existing literature, especially large state-dominated firms were documented to be significantly more financially constrained.The cash flow sensitivity differences between the statedominated and private firms are economically large but statistically not significant.These findings are still consistent for both stock exchanges of Vietnam (HOSE and HNX)

Financieel Rekenen met Microsoft Excel ©

Dit boek brengt op een zo eenvoudig mogelijke manier de meest gebruikte financiële rekentechnieken samen en past ze toe via Microsoft Excel ©. We gaan hierbij uit van een minimale basiskennis van Microsoft Excel © en herleiden het aantal gebruikte formules tot een minimum. We geven echter telkens de toepasbare Microsoft Excel © financiële functies. We behandelen dagtel- en interestconventies. We berekenen de toekomstige en huidige waarde van één kasstroom en van een reeks van kasstromen en berekene rendementen. We passen deze technieken toe op afschrijvingen, investeringsprojecten en waarderen eveneens obligaties

Does the Compass Rose pattern matter for testing normality?

Some years ago, Crack and Ledoit (1996) discovered a strikingly geometric structure when plotting US stock returns against themselves. Since this pattern, in which lines radiating from the origin pop up, resembles the navigating tool it was named “Compass Rose”. Although authors differ in opinion when explaining the causes of the phenomenon, discreteness of price jumps is unanimously indicated as driver of the structure. This paper first documents the presence of a Compass Rose Structure within the illiquid Belgian stock market, looking at both individual stocks and stock indices. We then examine whether the presence of a Compass Rose, i.e. the discreteness of prices, affects normality tests. Based on simulated Brownian Motions with rounded price increments, we notice that two commonly used normality tests react differently to discreteness in the underlying data. As the tick size increases, the popular Jarque-Bera test is not able to detect the deviations from normality. The Lilliefors test, however, clearly rejects the normality assumption when the data exhibit tick/volatility ratios in excess of 2.5.

Inter-temporal Stability of the European Credit Spread Co-movement Structure

Corporate bonds expose the investor to credit risk, which will be reflected in the credit spread. Based on the EMU Broad Market indices, we study the inter-temporal stability of the covariance and correlation matrices of credit spread changes. Within a multivariate framework, the Box and Jennrich tests are most commonly used test statistics in the literature. However, we show that for small samples these tests are not well specified when the normality assumption is relaxed. A bootstrap-based statistical inference provides evidence that correlations between various (investment grade) credit spread changes remain stable over the 1998-2000 period. Covariances on the other hand, turn out to be time-varying over that period

To Be or Not Be …'Too Late': The Case of the Belgian Semi-annual Earnings Announcements

In this study, we demonstrate that the average reporting lag of Belgian interim reports is large but has decreased slightly over the years 1991-1998. Contrary to US findings, we show that the disclosure of interim reports containing bad (good) news is not systematically delayed (speeded up). Interim reports are value relevant since good (bad) news, according to a naïve earnings expectations model, induces positive (negative) abnormal returns. The 'short term' timeliness of the information disclosure, however, seems not to matter at all. Copyright Blackwell Publishers Ltd 2002.