Socially Responsible Investments: An International Empirical Study Of Time-Varying Risk Premiums

This paper empirically analyses the performance of Socially Responsible Investments (SRI) by applying an asymmetric BEKK GARCH model which estimates conditional systematic risk and varying risk premiums. We evaluate the performance of SRI from an international perspective, comparing sustainable indexes with conventional indexes, and we apply our model to three regions: the USA, Europe, and Asia Pacific. We respectively compare the Dow Jones Sustainability United States Index, the Dow Jones Sustainability Europe Index, and the Dow Jones Sustainability Asia/Pacific Index with conventional indexes, namely the Dow Jones Industrial Average, the Dow Jones Europe Index, and the Dow Jones Asia/Pacific Index. Our model estimations are based on weekly data from January 2004 to November 2013. Our results show that sustainable indexes exhibit lower risk premiums than conventional ones. However each of the three regions studied has its own specificity in terms of investor behavior toward SRI, including the impact of the subprime mortgage crisis

The Effects Of Regulation And Supervision On European Banking Profitability And Risk: A Panel Data Investigation

This paper studies the effects of regulatory and supervisory policies on profitability and risk-taking for European banks over the period 2005 to 2011. As these effects may vary according to the banks, we apply the Generalized Method of Moments (GMM) for dynamic panels to capture further heterogeneous supervision effects before and after the subprime crisis. Accordingly, our findings provide three interesting results. First, strengthening regulations and supervision improves profitability and boosts the stability of European banking systems. Second, our findings highlight a positive correlation between capital adequacy, deposit insurance systems, and banks’ profitability. Third, we note that stepping up supervisors’ powers reduces risk-taking and promotes banking stability

Do environmental and social practices matter for the financial resilience of companies? Evidence from US firms during the COVID-19 pandemic

This paper contributes to the understanding of the relation between the environmental and social positioning of companies and the financial resilience in the specific context of the COVID-19 crisis. Resilience is measured through two dimensions based on stock price data: the severity of loss which captures the stability and the duration of recovery which captures the flexibility dimension. Using a sample of 1508 US based firms, we provide evidence that firms with high environmental and social (ES) rating were more resilient than low ES rating firms during the COVID-19 pandemic by lessening the severity of price drop and recovering faster. This effect is enhanced by using a non-linear approach based on quantiles. Further, we provide evidence that the effect of ES on resilience is focused on the environmental and social components. Interestingly, we show that management and shareholders sub-categories of the governance rating, have no impact on firm’s time to recovery during pandemic crisis

Do the US trends drive the UK-French market linkages?: empirical evidence from a threshold intraday analysis

International audienceThis article investigates the impact of US stock market openings on linkages between the UK and French markets. Using intraday data over the period December 2004 to March 2009, we find significant time-varying dependence between the UK and French stock returns, which alter according to the state of the US market. Indeed, not only does the opening of the US market itself significantly affect the UK stock dependency, but such linkages also seem to be closely dependent on bearish or bullish US market trends. Interestingly, the estimation of a two-regime Threshold Autoregressive (TAR) model indicates that the bearish US trends are a source of minor linkage (lower regime), whereas the bullish US trends involve higher interdependency (upper regime). This finding is particularly interesting as following the US trend expectations enables us to better forecast future European stock prices and to calculate the level of their potential contagion effects

Time-Varying Risk Premiums in the Framework of Wine Investment

AbstractThis article examines the time-varying risk premium with reference to investments in fine wines. Unlike previous studies, our article focuses on this issue within the context of the financial crisis. To do this, we propose the use of a conditional capital asset pricing model and a multivariate generalized autoregressive conditional heteroskedasticity model on several appellation wines worldwide. We find that Bordeaux fine wines were more volatile during the financial crisis and are less volatile in non-crisis periods. In addition, while the volatility of Burgundy wines is second only to Bordeaux wines, non-French fine wines (Australia, Italy, and USA) exhibit inverse volatility trends to French fine wines. (JEL Classifications: C50, G01, G11, Q13

When did global warming start? A new baseline for carbon budgeting

International audienceThe global temperatures over the period 1850–1900 are widely used by academia and policymaker as a pre-industrial baseline to assess global warming, but there remains a clear need for a statistical study. Using Berkeley Earth Surface Temperature (BEST) and the Met Office Hadley Centre Central England Temperature (HadCET) records, this study builds a stochastic disorder model to determine the pre-industrial periods for regional and global warming. We find that warming in HadCET emerged in 1866–1872 and the average HadCET has increased by 0.48 °C thereafter. Warming in BEST began in 1905–1909 and the average BEST has subsequently climbed by 0.8096 °C. The comparative analysis demonstrates that our results minimize the risk of false detection. These results will help to improve carbon budgeting and facilitate sustainable development planning

On Oil-US Exchange Rate Volatility Relationships: an Intradaily Analysis

The paper investigates the dynamics of oil price volatility by examining interactions between the oil market and the US USD/EUR exchange rate. To this end, we use recent intradaily data to measure realised volatility and to investigate the instantaneous intradaily linkages between different types and proxies of oil price and US$/euro volatilities. We specify the drivers of oil price volatility through a focus on extreme US$ exchange rate movements (intradaily jumps). Accordingly, we find a negative relationship between the US USD/EUR and oil returns, indicating that a US $ appreciation decreases oil price. Second, we note the presence of a volatility spillover from the US exchange market to the oil market. Interestingly, this spillover effect seems to occur through intradaily jumps in both markets