No Place To Hide: The Global Crisis in Equity Markets in 2008/09

This paper provides a broad analysis of the effect of the current financial crisis on global equity markets and their major components. We also examine the magnitude of the crisis in terms of value destruction in comparison to other market crashes. In brief, upon looking at return performance across an array of regions, countries, and sectors, broad market averages are down approximately 40% on their end of 2006 levels. While deterioration started in most markets in early to mid 2008, the crisis period of mid September to the end of October 2008 is responsible for the lion's share of the collapse with just about all indices falling 30 - 40% in this short period. Financial sectors have taken a bigger hit than non-financials over the period, though they both suffered similarly during the peak of the crisis. Due to larger rises in 2007 the emerging markets drop more in 2008 than developed markets but in large part end up at the same level as the other markets. The global nature of the crisis is also apparent from the high correlations between markets and investment styles that further increased during the crisis. As a result, diversification provided little help to investors when needed most as markets dropped in tandem.Equity market, financial crisis, shareholder value, performance, international finance

The Exchange Rate Exposure Puzzle

Based on basic financial models and reports in the business press, exchange rate movements are generally believed to affect the value of nonfinancial firms. In contrast, the empirical research on nonfinancial firms typically produces fewer significant exposures estimates than researchers ex-pect, independent of the sample studied and the methodology used, giving rise to a situation known as “the exposure puzzle”. This paper provides a survey of the existing research on the exposure phenomenon for nonfinancial firms. We suggest that the exposure puzzle may not be a problem of empirical methodology or sample selection as previous research has suggested, but is simply the result of the endogeneity of operative and financial hedging at the firm level. Given that empirical tests estimate exchange exposures net of corporate hedging, both, firms with low gross exposure that do not need to hedge, as well as firms with large gross exposures that employ one or several forms of hedging, may exhibit only weak exchange rate exposures net of hedging. Consequently, empirical tests yield only small percentages of firms with significant stock price exposures in almost any sample.Exposure, risk management, derivatives, corporate finance, exchange rates

Derivatives Usage in Risk Management by US and German Non-Financial Firms: A Comparative Survey

This paper is a comparative study of the responses to the 1995 Wharton School survey of derivative usage among US non-financial firms and a 1997 companion survey on German non-financial firms. It is not a mere comparison of the results of both studies, but a comparative study, drawing a comparable subsample of firms from the US study to match the sample of German firms on both size and industry composition. We find that German firms are more likely to use derivatives than US firms, with 78% of German firms using derivatives compared to 57% of US firms. Aside from this higher overall usage, the general pattern of usage across industry and size groupings is comparable across the two countries. In both countries, foreign currency derivative usage is most common, followed closely by interest rate derivatives, with commodity derivatives a distant third. In contrast to the similarities, firms in the two countries differ notably on issues such as the primary goal of hedging, their choice of instruments, and the influence of their market view when taking derivative positions. These differences appear to be driven by the greater importance of financial accounting statements in Germany than the US and stricter German corporate policies of control over derivative activities within the firm.

Crossing the Lines: The Conditional Relation between Exchange Rate Exposure and Stock Returns in Emerging and Developed Markets

This paper examines the importance of exchange rate risk in the return generating process for a large sample of non-financial firms from 37 countries. We argue that the effect of exchange rate exposure on stock returns should be conditional and show evidence of a significant return premium to firm-level currency exposures when conditioning on the exchange rate change. The return premium is directly related to the size and sign of the subsequent exchange rate change, suggesting fluctuations in exchange rates themselves as a source of time-variation in currency risk premia. For the entire sample the return premium ranges from 1.2 - 3.3% per unit of currency exposure. The premium is larger for firms in emerging markets, while in developed markets it is statistically significant only for local currency depreciations. Overall, the results indicate that exchange rate exposure plays an important role in generating cross-sectional return variation. Moreover, we show that the impact of exchange rate risk on stock returns is predominantly a cash flow effect as opposed to a discount rate effect.Exchange rate exposure, exchange rate risk, return premia, international finance

Estimating Exchange Rate Exposures: Some "Weighty" Issues

From a sample of 910 U.S. firms over the period 1977 1996, we find that structure of the empirical model has significant impacts on resulting estimates of exchange rate exposures from equity returns. While lengthening the return horizon has minimal impact on exposure estimates, the inclusion of a market portfolio in the specification results in significant changes to the exposure estimates. We further demonstrate that different definitions of the market portfolio result in important differences in the overall distribution of exposure estimates and the interpretations of the sign, size, and significance of many firms' exposures. The source of the exposure differences across market portfolios is due to a strong size-exposure relation for U.S. firms. Surprisingly, this size-exposure relation does not appear to be driven by an underlying correlation between size and foreign cash flow position of the firms. An alternative model specification using matched CRSP capital-based size portfolios as controls for market movements in the exposure model produces firm-level exposures with a stronger relation to foreign cash flows and less of a correlation with firm size.

Cross-Border Valuation: The International Cost of Equity Capital

How does a firm in one country evaluate an investment in a firm in another country, or how does it evaluate a foreign project that the firm itself is undertaking? The firm must estimate future free cash flows just as in a domestic project, but choosing an appropriate discount rate is a particular challenge. This study examines the determinants of the discount rate for an international acquisition or project by examining the sources of risk in an international setting. These risks include stock-market price risk measured with various versions of the capital asset pricing model, as well as exchange rate risk and political risk. To measure stock market risk, both segmented and integrated models of the world equity markets are considered. The emphasis of the study is on some of the practical aspects of estimation, particular for markets where no comparable investments exist on which to base estimates of risk premiums. To show how each of these risks might be measured, the study reports estimates for a representative French firm, Thals. The estimates range widely depending on whether or not the equity market is globally integrated.

About the coexistence of psychological science and psychological practice in the modern world

There are scientific and non-scientific psychological view, and there is a corresponding psychological practice. But if scientific theoretical construct of the psychological community, in General, easily distinguished from non-scientific, this is not true of the distinction between psychological practices. The article discusses the circumstances, the presence of practical scientific psychology, and their absence leads to its degeneration into shamanism. Discusses one new direction of practical psychology as an example of the expansion of modern pseudo-scientific obscurantism under the guise of psychological help.Есть научные и ненаучные психологические представления, и есть соответствующие им психологические практики. Но если научные теоретические построения психологическое сообщество, в целом, без труда-отличает от ненаучных, то этого не скажешь о различении психологических практик. В статье обсуждаются обстоятельства, наличие которых делает практическую психологию научной, а их отсутствие ведет к вырождению ее в шаманство. Обсуждается одно новое направление практической психологии как пример экспансии современного наукообразного мракобесия под видом психологической помощи

Writing and Reading antiferromagnetic Mn2_2Au: N\'eel spin-orbit torques and large anisotropic magnetoresistance

Antiferromagnets are magnetically ordered materials which exhibit no net moment and thus are insensitive to magnetic fields. Antiferromagnetic spintronics aims to take advantage of this insensitivity for enhanced stability, while at the same time active manipulation up to the natural THz dynamic speeds of antiferromagnets is possible, thus combining exceptional storage density and ultra-fast switching. However, the active manipulation and read-out of the N\'eel vector (staggered moment) orientation is challenging. Recent predictions have opened up a path based on a new spin-orbit torque, which couples directly to the N\'eel order parameter. This N\'eel spin-orbit torque was first experimentally demonstrated in a pioneering work using semimetallic CuMnAs. Here we demonstrate for Mn$_2$Au, a good conductor with a high ordering temperature suitable for applications, reliable and reproducible switching using current pulses and readout by magnetoresistance measurements. The symmetry of the torques agrees with theoretical predictions and a large read-out magnetoresistance effect of more than $\simeq 6$~$\%$ is reproduced by ab initio transport calculations.Comment: 5 pages, 4 figure