The effect of lenders’ credit risk transfer activities on borrowing firms’ equity returns

Although innovative credit risk transfer techniques help to allocate risk more optimally, policymakers worry that they may detrimentally affect the effort spent by financial intermediaries in screening and mo-nitoring credit exposures. This paper examines the equity market’s response to loan announcements. In common with the literature it reports a significantly positive average excess return – the well known ‘bank certification’ effect. However, if the lending bank is known to actively manage its credit risk ex-posure through large-scale securitization programmes, the magnitude of the effect falls by two thirds. The equity market does not appear to place any value on news of loans extended by banks that are known to transfer credit risk off their books.bank loans; credit derivatives; bank certification

An analysis of the performance of European foreign exchange forecasters

A database of individual forecasters' exchange rate predictions is analyzed. We demonstrate that only a small minority can be classed as rational, that most forecasts are inferior to easily available alternatives, and that relatively good performance in one period is not a reliable indicator of relatively good performance in subsequent periods

Currency spillovers and tri-polarity : a simultaneous model of the US dollar, German mark and Japanese yen

This paper presents a simultaneous model of exchange rates between the three major countries. In addition to incorporating long-run equilibria and short-run dynamics, the model is designed to capture complex interactions between currencies not normally considered in exchange rate models. These interactions are shown to be important via generalised impulse response analysis, and the model as a whole to be an economically and statistically superior forecasting tool over relatively short horizons

A panel-based investigation into the relationship between stock prices and dividends

This paper investigates the presence of cointegration between stock prices and dividends for a panel of 56 large UK companies. Using new techniques which account for integrated processes in a panel context we demonstrate that stock prices and dividends are cointegrated, with an implied common discount rate of 5.8%

How do UK-based foreign exchange dealers think their market operates?

This paper summarises the results of a survey of UK based foreign exchange dealers conducted in 1998. It addresses topics in three main areas: The microeconomic operation of the foreign exchange market; the beliefs of dealers regarding the importance, or otherwise, of macroeconomic fundamental factors in affecting exchange rates; microstructure factors in FX. We find that heterogeneity of traders’ beliefs is evident from the results but that it is not possible to explain such disagreements in terms of institutional detail, rank or trading technique (e.g. technical analysts versus fundamentalists). As expected, nonfundamental factors are thought to dominate short horizon changes in exchange rates, but fundamentals are deemed important over much shorter horizons that the mainstream empirical literature would suggest. Finally, market ‘norms’ and behavioural phenomena are very strong in the FX market and appear to be key determinants of the bid-ask spread

High-frequency information content in end-user foreign exchange order flows

This article considers the impact of foreign exchange (FX) order flows on contemporaneous and future stock market returns using a new database of customer order flows in the euro-dollar exchange rate market as seen by a leading European bank. We do not find clear contemporaneous relationships between FX order flows and stock market changes at high frequencies, but FX flows do appear to have significant power to forecast stock index returns over 1–30 min horizons, after controlling for lagged exchange rate and stock market returns. The effects of order flows from financial customers on future stock market changes are negative, while the effects of corporate orders are positive. The latter results are consistent with the premise that corporate order flows contain dispersed, passively acquired information about fundamentals. Thus, purchases of the dollar by corporate customers represent good news about the state of the US economy. Importantly, though, there also appears to be extra information in corporate flows which is directly relevant to equity prices over and above the impact derived from stock prices reacting to (predicted) exchange rate changes. Our findings suggest that financial customer flows only affect stock prices through their impact on the value of the dollar

Testing a model of antecedents and consequences of defensive pessimism and self-handicapping in school physical education

There has been very limited research on the use of self-worth protection strategies in the achievement context of school physical education (PE). Thus, this study aimed to examine some antecedents and consequences of defensive pessimism and self-handicapping. The sample comprised 534 (females n = 275; males n = 259) British pupils recruited from two schools who responded to established questionnaires. Results of structural equation modelling analysis indicated that self-handicapping and defensive pessimism were positively predicted by fear of failure and negatively predicted by competence valuation. In addition, defensive pessimism was negatively predicted by physical self-concept. In turn, defensive pessimism negatively predicted enjoyment in PE and intentions to participate in future optional PE programs. Self-handicapping did not predict enjoyment or intentions. Results from multi-sample structural equation modelling showed the specified model to be largely invariant across males and females. The findings indicate that although both strategies aim to protect one’s self-worth, some of their antecedents and consequences in PE may differ

Order flow and central bank intervention: An empirical analysis of recent Bank of Japan actions in the foreign exchange market

This paper examines the behaviour of end-user order flows in the foreign exchange market around periods of intense and large-scale intervention activity by the Bank of Japan. First, we find very limited evidence that corporate customers are more than usually likely to be net sellers of yen on days when the Bank of Japan is intervening to sell yen. However, there is somewhat stronger evidence that financial customers are more likely to be net buyers of yen on the same days. Second, we find very clear evidence that intervention matters in a microstructure analysis. The strong contemporaneous correlation between order flows and exchange rate changes essentially disappears on days in which the Bank of Japan intervene