Alfeus, M & Nikitopoulos, CS 2022, 'Forecasting volatility in commodity markets with long-memory models', Journal of Commodity Markets, vol. 28, pp. 100248-100248.
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Commodities are the most volatile markets, and forecasting their volatility is an issue of paramount importance. We examine the dynamics of commodity markets volatility by employing three typical long-memory models: fractional integrated generalized autoregressive conditional heteroscedastic (FIGARCH), fractional stochastic volatility (FSV), and heterogeneous autoregressive (HAR) models. Based on a high-frequency futures price dataset of 22 commodities, we confirm that the volatility of commodity markets is rough, and volatility components over different horizons are economically and statistically significant. Long memory with anti-persistence is evident across all commodities, with weekly volatility dominating in most commodity markets and daily volatility for oil and gold markets. HAR models display a clear advantage in forecasting performance compared to the two other models for short horizons, while fractional volatility models yield comparative better forecasts for longer horizons.
Bohmann, MJM & Patel, V 2022, 'Informed options trading prior to FDA announcements', Journal of Business Finance & Accounting, vol. 49, no. 7-8, pp. 1211-1236.
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AbstractWe find that pre‐announcement implied volatility spreads and options trading activity are abnormally elevated and can predict Food and Drug Administration (FDA) announcement date stock returns. The effect is more pronounced in firms with higher levels of information asymmetry and lower‐quality corporate governance suggesting that some options traders are informed in advance of the details that affect the stock price impact of the FDA news. We provide the first examination of informed options trading prior to FDA announcements during a 21‐year period. Our findings have implications for regulators, investors and relevant firms.
Casavecchia, L, Hambusch, G & Hitchen, J 2022, 'The impact of analyst forecast errors on fundamental indexation: the Australian evidence', Journal of Asset Management, vol. 23, no. 5, pp. 400-418.
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AbstractEvidence from many developed markets suggests that fundamental indices outperform capitalisation-weighted indices. Existing studies suspect a story of market mispricing, yet a mechanism has not been identified. Using Australian data, we study the relation between analyst forecast errors and the performance of various fundamental indices. We find that fundamental indices contain a relatively higher exposure to stocks with low analyst long-term growth forecasts. Valuations for these stocks are ex ante overly pessimistic and drive the statistical significance of alphas produced by fundamental indexation. We show how hedging against analyst forecast errors can generate additional alpha for investors using fundamental indexation.
Choi, S & Xu, J 2022, 'What do boards consider in CEO performance evaluation? Evidence from executive turnover', Finance Research Letters, vol. 50, pp. 103214-103214.
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This study investigates whether CEOs are rewarded for actively making changes. We construct a comprehensive executive dataset from SEC filings and use non-CEO executive turnover to proxy for changes. We find that after executive turnovers, CEOs are less likely to be dismissed, and the change is not temporary. In addition, firm performance improves after executive turnovers. The results suggest that when boards of directors evaluate CEOs, they consider whether CEOs can overcome inertia and initiate changes.
Collender, S, Gan, B, Sklibosios Nikitopoulos, C, Richards, K-A & Ryan, LS 2022, 'Climate Transition Risk in Sovereign Bond Markets', Global Finance Journal, vol. 57, pp. 100868-100868.
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Is climate transition risk factored into sovereign bond markets? We find that carbon dioxide emissions, natural resources rents, and renewable energy consumption—as measures of transition risk—significantly affect yields and spreads. Countries with lower carbon emissions incur lower borrowing costs. Advanced countries with reduced earnings from natural resources rents and increased renewable energy consumption are associated with lower borrowing costs, which differ from the effects in developing countries. Given the threat that climate change poses to the global economy and the fast materialization of transition risk, we advocate an increase in the significance of climate transition risk factors as determinants in sovereign bond markets.
De Angelis, T, Ekström, E & Glover, K 2022, 'Dynkin Games with Incomplete and Asymmetric Information', Mathematics of Operations Research, vol. 47, no. 1, pp. 560-586.
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We study the value and the optimal strategies for a two-player zero-sum optimal stopping game with incomplete and asymmetric information. In our Bayesian setup, the drift of the underlying diffusion process is unknown to one player (incomplete information feature), but known to the other one (asymmetric information feature). We formulate the problem and reduce it to a fully Markovian setup where the uninformed player optimises over stopping times and the informed one uses randomised stopping times in order to hide their informational advantage. Then we provide a general verification result that allows us to find the value of the game and players’ optimal strategies by solving suitable quasi-variational inequalities with some nonstandard constraints. Finally, we study an example with linear payoffs, in which an explicit solution of the corresponding quasi-variational inequalities can be obtained.
Glover, K & Hulley, H 2022, 'Financially constrained index futures arbitrage', Journal of Futures Markets, vol. 42, no. 9, pp. 1688-1703.
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AbstractWe develop two models for index futures arbitrage that take the financing constraints faced by real‐world arbitrageurs into account. Our models predict that the price of an index futures contract and the value of its underlying index should deviate further from their theoretical cost‐of‐carry relationship when (a) the contract has a long time to go before expiry, and (b) volatility is high. The fact that these predictions enjoy considerable empirical support highlights the importance of financing constraints for explaining index futures mispricing.
GLOVER, K & HULLEY, H 2022, 'SHORT SELLING WITH MARGIN RISK AND RECALL RISK', International Journal of Theoretical and Applied Finance, vol. 25, no. 02, pp. 1-33.
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To investigate the effect of short-selling constraints on investor behavior, we formulate an optimal stopping model in which the decision to cover a short position is affected by two short sale-specific frictions — margin risk and recall risk. Margin risk is introduced by assuming that a short seller is forced to close out their position involuntarily if they cannot fund margin calls (since short sales are collateralized transactions). Recall risk is introduced by permitting the lender to recall borrowed stock at any time, once again triggering an involuntary close-out. Examining the effect of these frictions on the optimal close-out strategy and associated value function, we finding that the optimal behavior can be qualitatively different in their presence. Moreover, these frictions lead to a substantial loss in value, relative to the first-best situation without them (a reduction of approximately 17% for our conservative base-case parameters). This significant effect has important implications for many familiar no-arbitrage identities, which are predicated on the assumption of unfettered short selling.
Hasan, MM, Habib, A & Zhao, R 2022, 'Corporate reputation risk and cash holdings', Accounting & Finance, vol. 62, no. 1, pp. 667-707.
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AbstractWe investigate the extent to which corporate reputation risk influences cash holdings for US listed firms over the period 2007–2018. Our results show that firms having a high reputation risk hold significantly more cash. This documented relationship persists even after controlling for other determinants of cash holdings, including corporate social responsibility performance, explicitly. Using a series of analyses, we show that this relationship is not driven by endogeneity problems. Further, we find that the positive relationship between reputation risk and cash holdings is more pronounced for firms with more financing constraints and agency problems, and for growth, mature and shake‐out firms. In an additional test, we show that firms having a low reputation risk are associated with a higher marginal value of cash than are their high reputation risk counterparts. Overall, we provide robust evidence that reputation risk matters for corporate cash holdings.
Katona, K, Sklibosios Nikitopoulos, C & Schlögl, E 2022, 'A Hyperbolic Bid Stack Approach to Electricity Price Modelling', Risks, vol. 11, no. 8, pp. 147-147.
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Modelling the energy price in the Australian National Electricity Market (NEM) requires features that are not well reflected in existing models. We present a semi-structural, multi-regional model wherein bidding is not required to be cost-based, renewable fuels and storage technology are structurally integrated, and network constraints are often binding in optimal dispatch. Available fuel capacity then does not necessarily sum to registered bid capacity, as-bid fuel costs do not dependably follow input fuel prices, and cross-regional interconnectedness requires modelling trade. Furthermore, modelling the NEM spot price path must admit price negativity and price spikes. Extending previous work in the literature, the present paper proposes a hyperbolic bid stack approach to price modelling under these conditions.
Liu, Q & Wang, J 2022, 'Spatial agglomeration and firm productivity: Does trade status matter?', Regional Science Policy & Practice, vol. 14, no. S2, pp. 5-18.
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AbstractThis study uses micro‐level panel data from Chinese manufacturing firms to investigate the impact of spatial agglomeration on firm productivity, taking a firm’s engagement in international trade into consideration. Embracing firm heterogeneity in trade status, we find that non‐exporters benefit from urban agglomeration through manufacturing specialization, whereas little effect of local specialization on productivity is found among exporters. The findings are driven mainly by processing exporters involved in straightforward assembly. These findings increase the understanding of heterogeneous productivity gains from urban agglomeration and the spatial economy in China.
Liu, S, Qiu, M & Zhang, S 2022, 'Customer Concentration and Corporate Real Estate Holdings', The Journal of Real Estate Finance and Economics, vol. 65, no. 3, pp. 492-523.
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Luong, TM & Scheule, H 2022, 'Benchmarking forecast approaches for mortgage credit risk for forward periods', European Journal of Operational Research, vol. 299, no. 2, pp. 750-767.
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Michayluk, D, Neuhauser, K & Walker, S 2022, 'When no news is good news: failing to increase dividends', International Journal of Managerial Finance, vol. 18, no. 1, pp. 138-155.
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PurposeThe study's purpose is to examine market returns around dividend announcements that contrast with a pattern of prior dividend announcements.Design/methodology/approachThe paper identifies firms that have a smooth dividend pattern of once-a-year dividend increases but at some point break that pattern and announce an unchanged dividend. The sample design allows the opportunity to investigate the market reaction to unchanged dividend announcements when an increase was likely to have been expected.FindingsThe results indicate that failing to increase the dividend is associated with significantly positive abnormal returns that are greater in magnitude for more entrenched dividend-increase records, supporting a contrast-effect hypothesis.Originality/valueThe results indicate that dividends are interpreted not only relative to the immediate dividend amount but also how the decision contrasts with dividends over a prolonged period. This finding suggests that the information content of the announcement of an unchanged dividend can vary according to the prior dividend pattern.
Payzan-LeNestour, E, Doran, J, Pradier, L & Putniņš, TJ 2022, 'Harnessing Neuroscientific Insights to Generate Alpha', Financial Analysts Journal, vol. 78, no. 2, pp. 79-95.
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Payzan-LeNestour, E, Pradier, L & Putniņš, TJ 2022, 'Biased volatility perceptions: Evidence from the laboratory and financial markets'.
Saengchote, K, Putniņš, TJ & Samphantharak, K 2022, 'Does DeFi Remove the Need for Trust? Evidence From a Natural Experiment in Stablecoin Lending'.
Verhoeven, D, Musial, K, Hambusch, G, Ghannam, S & Shashnov, M 2022, 'Net effects: examining strategies for women’s inclusion and influence in ASX200 company boards', Applied Network Science, vol. 7, no. 1, pp. 1-26.
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AbstractConventional approaches to improving the representation of women on the boards of major companies typically focus on increasing the number of women appointed to these positions. We show that this strategy alone does not improve gender equity. Instead of relying on aggregate statistics (“headcounts”) to evaluate women’s inclusion, we use network analysis to identify and examine two types of influence in corporate board networks: local influence measured by degree centrality and global influence measured by betweenness centrality and k-core centrality. Comparing board membership data from Australia’s largest 200 listed companies in the ASX200 index in 2015 and 2018 respectively, we demonstrate that despite an increase in the number of women holding board seats during this time, their agency in terms of these network measures remains substantively unchanged. We argue that network analysis offers more nuanced approaches to measuring women’s inclusion in organizational networks and will facilitate more successful outcomes for gender diversity and equity.
Wang, J 2022, 'Market distraction and near-zero daily volatility persistence', International Review of Financial Analysis, vol. 80, pp. 102022-102022.
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Wang, J, Sun, F, Lv, K & Wang, L 2022, 'Industrial agglomeration and firm energy intensity: How important is spatial proximity?', Energy Economics, vol. 112, pp. 106155-106155.
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Understanding the underlying determinants of energy intensity in countries with intensive energy consumption, such as China, is essential for addressing carbon emissions and global climate change. This study investigates the impact of spatial agglomeration on manufacturers' energy consumption behaviour using large-scale firm-level data compiled from complementary data sources in China. We create a circle around each firm instead of measuring agglomeration by aggregating economic activities in a predetermined administrative unit. In this way, we accurately capture the geographic range of concentration within a specific radius. We find that refined spatial agglomeration plays a mitigating role in shaping a firm's energy intensity. Meanwhile, agglomeration economies quickly attenuate with distance when we extend the radius. Heterogeneity analysis suggests that manufacturers' energy efficiency presents a diversified pattern across ownership and trade status. These results have important implications for researchers to understand energy efficiency heterogeneity and are beneficial for policymakers.
Chhaochharia, V, Sen, R & Xu, J 1970, 'Regulation-induced CSR', 2022 FIRN Women Annual Conference, Hybrid.
Chhaochharia, V, Sen, R & Xu, J 1970, 'Regulation-induced CSR', Indian School of Business Summer Research Conference 2022, Hyderabad, India.
Dyhrberg, A, Felez Vinas, E, Foley, S & Putnins, T 1970, 'How should we ring the closing bell? Determining optimal closing auction design', Financial Research Network (FIRN) Annual Conference, Hamilton Island.
Felez Vinas, E 1970, 'Effects of market fragmentation on resiliency', FMA European Conference, Lyon, France.
Marupanthorn, P, Nikitopoulos Sklibosios, C, Ofosu-hene, E, Peters, G & Richards, K-A 1970, 'Mechanisms to Incentivise Fossil Fuel Divestment and Implications on Portfolio Risk and Returns', 11th International Conference Financial Engineering and Banking Society, Portsmouth, United Kingdom.
Marupanthorn, P, Nikitopoulos Sklibosios, C, Ofosu-hene, E, Peters, G & Richards, K-A 1970, 'Mechanisms to Incentivise Fossil Fuel Divestment and Implications on Portfolio Risk and Returns', Institute and Faculty of Actuaries Conference, London, United Kingdom.
Marupanthorn, P, Sklibosios Nikitopoulos, C, Ofosu-Hene, E, Peters, GW & Richards, K-A 1970, 'Mechanisms to Incentivize Fossil Fuel Divestment and Implications on Portfolio Risk and Returns', Commodity and Energy Markets Annual Meeting, Chicago, USA.
Mwampashi, M, Nikitopoulos Sklibosios, C, Konstadatos, O & Rai, A 1970, 'Large Scale and Rooftop Solar Generation in the NEM: A Tale of Two Renewable Strategies', 4th Australasian Commodity Markets Conference, Sydney, Australia.
Sklibosios Nikitopoulos, C, Thomas, A & Wang, J-X 1970, 'Liquidity provision channels and oil price volatility', 4th Australasian Commodity Markets Conference, Sydney, Australia.
Xu, J 1970, 'Regulation-induced CSR', Asian Finance Association Annual Conference, Hong Kong, China.
Aliyev, N, Allahverdiyeva, I & Putniņš, TJ 2022, 'Is public distrust to the finance sector warranted? Evidence from the extent of financial adviser misconduct'.
Aspris, A, Dyhrberg, AH, Putniņš, TJ & Foley, S 2022, 'Digital Assets and Markets: A Transaction-Cost analysis of market architectures'.
Brogaard, J, Nguyen, H & Putniņš, TJ 2022, 'Noisy Stock Prices and Capital Allocation Efficiency'.
Cai, T, Liu, L, Zein, J & Zhang, H 2022, 'Is ESG a Managerial Style?', SSRN.
Casavecchia, L & Matthys, T 2022, 'Estimating Asset Liquidity Risk in Money Market Funds'.
Dyhrberg, A, Felez Vinas, E, Foley, S & Putnins, T 2022, 'How should we ring the closing bell? Determining optimal closing auction design'.
Easley, D, Michayluk, D, O'Hara, M, Patel, V & Putniņš, TJ 2022, 'Information Flows and Systematic Risk'.
Felez Vinas, E, Hagstromer, B & Werner, I 2022, 'Regulating dark trading: a shift in investors trading strategies?'.
Félez-Viñas, E, Johnson, L & Putniņš, TJ 2022, 'Insider Trading in Cryptocurrency Markets'.
Liu, C, Low, A & Putniņš, TJ 2022, 'Spiraling Downward: The Real Impacts of Public Short Campaigns on Product Innovation'.
Marupanthorn, P, Sklibosios Nikitopoulos, C, Ofosu-Hene, E, Peters, G & Richards, K-A 2022, 'Mechanisms to Incentivise Fossil Fuel Divestment and Implications on Portfolio Risk and Returns', SSRN.
Matthys, T & Scheule, H 2022, 'Bank Concentration and Consumer Protection'.
Mwampashi, MM, Sklibosios Nikitopoulos, C & Rai, A 2022, 'From 30- to 5-Minute Settlement Rule in the NEM: An Early Evaluation'.
Sklibosios Nikitopoulos, C, Thomas, A & Wang, J-X 2022, 'Liquidity Provision Channels and Oil Price Volatility', SSRN.