Financial Integration of the European Frontier Emerging Markets

This study investigates financial integration of the European frontier emerging markets. The purpose of the study is two-fold. First, the study investigates whether the European frontier emerging stock markets have become integrated into the world capital markets. As the second, the interdependences across the frontier emerging markets and their linkages to the three largest developed markets in Europe are examined. The sample includes five European frontier emerging markets (Croatia, Estonia, Romania, Slovakia and Slovenia) and the three largest developed markets in Europe (United Kingdom, France and Germany). The data consist of the MSCI World equity index and daily stock indices. The sample extends from September 1997 to September 2007. Vector autoregressive modeling applied on the index return time series is used as an econometric framework of analysis including the following techniques: Granger causality test, impulse response function and variance decomposition. The empirical findings indicate that the stock markets of Croatia, Estonia and Slovenia show considerable degree of financial integration with respect to the world market portfolio as well as to the three largest European stock markets, while on contrary the stock markets of Romania and Slovakia appear to be segmented relative to both, the world market and three major European stock markets. Furthermore, the results reveal a significant interdependence between Croatia and Slovenia, as well as a leading role of France and Estonia among investigated stock markets. In addition, a significant upward trend in stock indices of the European frontier emerging markets starting at the end of 2001 was observed. The results of this study suggest potential benefits from international portfolio diversification through investing in the frontier emerging markets in Europe. This study contributes to the existing literature by investigating one special subcategory of emerging markets, namely frontier emerging markets.fi=Opinnäytetyö kokotekstinä PDF-muodossa.|en=Thesis fulltext in PDF format.|sv=Lärdomsprov tillgängligt som fulltext i PDF-format

Essays on the co-movement dynamics of frontier/emerging and developed financial markets

fi=vertaisarvioitu|en=peerReviewed

Essays on the co-movement dynamics of frontier/emerging and developed financial markets

fi=vertaisarvioitu|en=peerReviewed

Fundamental indexation for developed, emerging, and frontier government bond markets

We examine the risk and return characteristics of fundamental weighting schemes for developed, emerging, and frontier government bond markets; and compare these to market capitalization weighted indexes. We document positive excess returns for the investment grade sample only when currency risks are not hedged, suggesting that fundamentals might be more important for currency rather than bond returns. For emerging and frontier markets, we find positive excess returns for fundamental weighting schemes, although not always statistically significant. The excess returns from fundamental weighting schemes for government bonds can be explained by standard factors from equity, currency, or bond markets.fi=vertaisarvioitu|en=peerReviewed

First offshore bond issuances and firm valuation

Does the first offshore bond initial public offering (BIPO) affect firm valuation? By using a sample of US firms we document the dynamics of the firm valuation in response to initial offshore bond issuance. We find that offshore BIPOs have a positive short-term effect on US firms' valuations. The effect varies in firm characteristics, timing, and the location of the issue. Positive valuation effect is further confirmed by using difference-in-differences analysis approach, where offshore bond issuers are compared with their domestic counterparts. Additionally, firms with a strong need for external funds and growth prospects accelerate their offshore public debt market entry.© 2022 The Authors. Published by Elsevier Inc. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).fi=vertaisarvioitu|en=peerReviewed

The structure and degree of dependence in government bond markets

Our study provides new evidence on asymmetric dependencies in international government bond markets, by examining bonds from developed, emerging, and frontier countries, using a quantile regression methodology. We find that the dependence structure for emerging and frontier markets significantly changes during financial crisis periods, which we show has important implications for international diversification of investment strategies. Moreover, we also examine in detail stock–bond correlations and uncover several instances of decoupling. In contrast, developed markets exhibit a more stable dependence pattern. In addition, we document that the degree and structure of dependence vary when foreign currencies are hedged or unhedged, and across bond maturity segments.© 2021 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY licence (http://creativecommons.org/licenses/by/4.0/).fi=vertaisarvioitu|en=peerReviewed

Future directions in international financial integration research. A crowdsourced perspective

This paper is the result of a crowdsourced effort to surface perspectives on the present and future direction of international finance. The authors are researchers in financial economics who attended the INFINITI 2017 conference in the University of Valencia in June 2017 and who participated in the crowdsourcing via the Overleaf platform. This paper highlights the actual state of scientific knowledge in a multitude of fields in finance and proposes different directions for future research

Did mega-regional trade agreements reshuffle the financial influence of the US, China, and Japan in ASEAN? Evidence from the volatility-spillover effects

The Trans-Pacific Partnership (TPP) and the succeeding Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) were widely viewed as trade agreements aiming at containing the influence of China and raising that of the US and Japan in Asia. This study utilizes the outward volatility-spillover effect of the equity market as a proxy for a country’s financial influence and analyzes whether the signing of the TPP and CPTPP reshuffled the financial influence of the US, China, and Japan in the Association of Southeast Asian Nations (ASEAN). The study finds that the TPP and CPTPP did boost the financial influence of the US and Japan in some ASEAN countries; however, there is no evidence that they have reduced the financial influence of China in ASEAN.©2023 Elsevier. This manuscript version is made available under the Creative Commons Attribution–NonCommercial–NoDerivatives 4.0 International (CC BY–NC–ND 4.0) license, https://creativecommons.org/licenses/by-nc-nd/4.0/fi=vertaisarvioitu|en=peerReviewed

Impact of the 2008–2009 financial crisis on the external and internal linkages of European frontier stock markets

This study investigates the impact of the 2008–2009 financial crisis on (i) external linkages of European frontier stock markets (Croatia, Estonia, Romania, Slovakia and Slovenia) with the developed equity markets (the US, the UK, and Germany) and (ii) internal linkages within the frontier markets. The results demonstrate that both long- and short-run external linkages were strengthened during the crisis. The analysis of internal linkages reveals strong relationship only between the Croatian and Slovenian markets. However, the other frontier markets in the group were weakly linked, implying that European frontier stock markets may constitute a good alternative source of diversification benefits during crises periods.fi=vertaisarvioitu|en=peerReviewed

Unconventional monetary policy and international equity capital flows to emerging markets

This paper examines the relationship between monetary policies pursued by three major central banks (U.S. Federal Reserve, European Central Bank and Bank of Japan) and net equity capital flows to emerging markets (EMs) by global investment funds. We focus on two aspects of central bank policy: The growth of central bank assets and the surprise element of asset growth. We find, first, positive, economically large and statistically significant spillovers from the U.S. Federal Reserve asset growth to EM equity inflows following the adoption of unconventional monetary policies. Second, U.S. Federal Reserve and (to a lesser extent) European Central Bank asset growth surprises are negatively related to EM capital flows