Exchange Rate Expectations and the Pricing of Chinese Cross-listed Stocks
Stefan Eichler
Journal of Banking and Finance,
No. 2,
2011
Abstract
I show that the price discounts of Chinese cross-listed stocks (American Depositary Receipts (ADRs) and H-shares) to their underlying A-shares indicate the expected yuan/US dollar exchange rate. The forecasting models reveal that ADR and H-share discounts predict exchange rate changes more accurately than the random walk and forward exchange rates, particularly at long forecast horizons. Using panel estimations, I find that ADR and H-share investors form their exchange rate expectations according to standard exchange rate theories such as the Harrod–Balassa–Samuelson effect, the risk of competitive devaluations, relative purchasing power parity, uncovered interest rate parity, and the risk of currency crisis.
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Currency Crises and the Stock Market: Empirical Evidence for Another Type of Twin Crisis
Stefan Eichler, Dominik Maltritz
Applied Economics,
No. 29,
2011
Abstract
We explore the dependency between currency crises and the stock market in emerging economies. Our focus is two-fold. First, the risk of a currency crisis rises as the foreign stake in the domestic stock market increases. Successful economies with high capital flows into their booming stock markets especially are prone to stock market-induced currency crises. Second, we apply the dividend growth model to show that stock markets crash in the run-up to a currency crisis. This new type of twin crisis is empirically tested by employing a logit framework using quarterly data for 33 emerging economies for 1994Q1–2007Q4.
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Do Banks Benefit from Internationalization? Revisiting the Market Power-Risk Nexus
Claudia M. Buch, C. T. Koch, Michael Koetter
Abstract
Recent developments on international financial markets have called the benefits of
bank globalization into question. Large, internationally active banks have
acquired substantial market power, and international activities have not
necessarily made banks less risky. Yet, surprisingly little is known about the
actual link between bank internationalization, bank risk, and market power.
Analyzing this link is the purpose of this paper. We jointly estimate the
determinants of risk and market power of banks, and we analyze the effects of
changes in terms of the number of foreign countries (the extensive margin) and
the volume of foreign assets (the intensive margin). Our paper has four main
findings. First, there is a strong negative feedback effect between risk and market
power. Second, banks with higher shares of foreign assets, in particular those held
through foreign branches, have higher market power at home. Third, holding
assets in a large number of foreign countries tends to increase bank risk. Fourth,
the impact of internationalization differs across banks from different banking
groups and of different size.
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Klimarisikomanagement mit dem CO2-Navigator
Edeltraud Günther, C. Manthey, G. Weber, M. Nowack, Wilfried Ehrenfeld, Henry Dannenberg
HMD - Praxis der Wirtschaftsinformatik,
2010
Abstract
Die Software CO2-Navigator wendet den Realoptionsansatz und den Risikomanagementprozess auf den unternehmerischen Umgang mit dem Klimawandel an. Er richtet sich in erster Linie an emissionsintensive, kleine und mittlere Unternehmen ist jedoch auch in größeren Unternehmen, die beispielsweise eine eigene „Sustainability“-Abteilung unterhalten, anwendbar. Der Wertbeitrag des Softwaretools besteht darin, dass es die Aspekte Klimastrategie, quantitative Bewertung von Klimaschutzinvestitionen sowie Emissionsrechtemanagement vereint. Es kann im Unternehmen in Bereichen strategisches Management, regulatorisches Management, Energie- und Umweltmanagement, Technologiemanagement sowie Controlling Anwendung finden. Der spezielle Wertbeitrag dieses Artikels liegt in der Verknüpfung von Klimarisikomanagement und Realoptionsansatz sowie in der Darstellung des CO2-NAVIGATORs vor dem Hintergrund seiner Entwicklung im Sinne konstruktionsorientierter Forschung.
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Cross-border Exposures and Financial Contagion
Hans Degryse, Muhammad Ather Elahi, Maria Fabiana Penas
International Review of Finance,
No. 2,
2010
Abstract
Integrated financial markets provide opportunities for expansion and improved risk sharing, but also pose threats of contagion risk through cross-border exposures. This paper examines cross-border contagion risk over the period 1999–2006. To that purpose we use aggregate cross-border exposures of 17 countries as reported in the Bank for International Settlements Consolidated Banking Statistics. We find that a shock that affects the liabilities of one country may undermine the stability of the entire financial system. Particularly, a shock wiping out 25% (35%) of US (UK) cross-border liabilities against non-US (non-UK) banks could lead to bank contagion eroding at least 94% (45%) of the recipient countries' banking assets. We also find that since 2006 a shock to Eastern Europe, Turkey and Russia affects most countries. Our simulations also reveal that the ‘speed of propagation of contagion’ has increased in recent years resulting in a higher number of directly exposed banking systems. Finally, we find that contagion is more widespread in geographical proximities.
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The Extreme Risk Problem for Monetary Policies of the Euro-Candidates
Hubert Gabrisch, Lucjan T. Orlowski
Abstract
We argue that monetary policies in euro-candidate countries should also aim at mitigating excessive instability of the key target and instrument variables of monetary policy during turbulent market periods. Our empirical tests show a significant degree of leptokurtosis, thus prevalence of tail-risks, in the conditional volatility series of such variables in the euro-candidate countries. Their central banks will be well-advised to use both standard and unorthodox (discretionary) tools of monetary policy to mitigate such extreme risks while steering their economies out of the crisis and through the euroconvergence process. Such policies provide flexibility that is not embedded in the Taylor-type instrument rules, or in the Maastricht convergence criteria.
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Should We Trust in Leading Indicators? Evidence from the Recent Recession
Katja Drechsel, Rolf Scheufele
Abstract
The paper analyzes leading indicators for GDP and industrial production in Germany. We focus on the performance of single and pooled leading indicators during the pre-crisis and crisis period using various weighting schemes. Pairwise and joint significant tests are used to evaluate single indicator as well as forecast combination methods. In addition, we use an end-of-sample instability test to investigate the stability of forecasting models during the recent financial crisis. We find in general that only a small number of single indicator models were performing well before the crisis. Pooling can substantially increase the reliability of leading indicator forecasts. During the crisis the relative performance of many leading indicator models increased. At short horizons, survey indicators perform best, while at longer horizons financial indicators, such as term spreads and risk spreads, improve relative to the benchmark.
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Stochastic Income Statement Planning and Emissions Trading
Henry Dannenberg, Wilfried Ehrenfeld
Abstract
Since the introduction of the European CO2 emissions trading system (EU ETS), the
development of CO2 allowance prices is a new risk factor for enterprises taking part in this system. In this paper, we analyze how risk emerging from emissions trading can be considered in the stochastic profit and loss planning of corporations. Therefore we explore which planned figures are affected by emissions trading. Moreover, we show a way to model these positions in a planned profit and loss account accounting for uncertainties and dependencies. Consequently, this model provides a basis for risk assessment and investment decisions in the uncertain environment of CO2 emissions trading.
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Human Capital and Fertility in Germany after 1990: Evidence from a Multi-Spell Model
Marco Sunder
IWH Discussion Papers,
No. 22,
2009
Abstract
We analyze the timing of birth of the first three children based on German panel
data (GSOEP) within a hazard rate framework. A random effects estimator is
used to accommodate correlation across spells. We consider the role of human
capital – approximated by a Mincer-type regression – and its gender-specific
effects on postponement of parenthood and possible recuperation at higherorder
births. An advantage of the use of panel data in this context consists in
its prospective nature, so that determinants of fertility can be measured when
at risk rather than ex-post, thus helping to reduce the risk of reverse causality.
The analysis finds evidence for strong recuperation effects, i.e., women with
greater human capital endowments follow, on average, a different birth history
trajectory, but with negligible curtailment of completed fertility.
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