Realizing the volatility impacts of sovereign credit ratings information on equity and currency markets: Evidence from the Asian Financial Crisis

We examine the effects of different types of sovereign rating announcements on realized stock and currency market volatilities and cross-asset correlations around periods of financial crises. Using intraday market data and sovereign ratings data for nine sample countries in the Asia-Pacific region over 1997-2001, we find that currency and stock markets react somewhat heterogeneously to various rating announcements and that stock markets are more responsive to rating news than currency markets. We find new evidence that ratings events have significant and asymmetric impacts on intraday market data and that national market attributes influence rating impacts during financial crises

Impact of hedging pressure on implied volatility in Financial Times and London Stock Exchange (FTSE) market

This paper examines the impact of net buying pressure and the event of 9/11 on the implied volatility of the U.K. FTSE 100 (Financial Times and the London Stock Exchange) index options. Our findings indicate that when effects such as financial leverage, information flow and mean reversion are held constant, the net buying pressure of the out-of-the-money put options plays a dominant role in determining the shape of the implied volatility function. Further, the event of 9/11 has a transitory influence on the implied volatility change. Our results also support the notion that hedging pressure can help explain the difference between implied volatility and realized volatility

How does trading volume affect financial return distributions?

© 2014 Elsevier Inc.All rights reserved. We assess investors' reaction to new information arrivals in financial markets by examining the relationships between trading volume and the higher moments of returns in 18 international equity and currency markets. Our volume-volatility results support extant information theories and further contribute new evidence of cross market relations between volume and volatility. We also find that the direct impact of volume on the level of negative skewness is less significant for more diversified regional portfolios. Furthermore, the negative interaction between volume and kurtosis can be explained by the differences of opinion in financial markets. We observe stronger interdependence among higher moments in reaction to significant events, but the strength is dampened by trading volume. This result is consistent with trading volume being a source of heteroskedasticity in asset returns

The effects of sovereign rating drifts on financial return distributions: Evidence from the European Union

We develop a framework that allows a multivariate system of long memory processes to be conditional on specific regimes to investigate the effects of credit rating agencies' (CRAs) sovereign credit re-ratings on European stock and currency return distributions over the period from 1996 to 2012. We find evidence across rating regimes to support the usefulness of our proposed model in accommodating both long memory and regime switching features. Furthermore, we reveal that the total effects (both direct and indirect forces) of sovereign credit assessments on the first four realized moments of return distributions can be different to their direct effects on individual moments. Thus, we find the rank orders among the three major CRAs to differ for each realized moment and asset market. © 2013 Elsevier Inc

Good coups, bad coups: Evidence from Thailand's financial markets

This study investigates the short-run and long-run impact on Thailand's financial markets. Using daily data from the stock and foreign exchange markets during the period 2005 - 2017, the study shows (1) both coups in 2006 and in 2014 exert short-run impact on Thailand's stock and foreign exchange markets; (2) however, the direction and magnitude of impact are different and opposite in the two coups; and (3) in the long run, the coups exhibit minimal impact on the currency market, but induce better market performance (positive return and decrease in the return volatility) despite an increase in liquidity risk of the stock market. Against common beliefs about negative consequences of the coup d’états, this study suggests that the uncertainty surrounding coups can bring good investment opportunities for investors to earn abnormal profits. Moreover, in the long term, the coup can drive the country to better stability and development