Search results

Over the last few years, Central and East European economies have become more integrated with the West European economy. In general, these economies have become more market-oriented and restrictions on foreign investment have been relaxed. An important step in this development was the admission of eight East European countries to the European Union (EU) in 2004. As the economic ties between Western, Central and Eastern Europe strengthen, one would naturally expect the financial markets to follow suit and become more integrated as well. A good example is the historical case of the Italian and German government bond markets: Before 1999 these two markets differed markedly in terms of credit quality and price volatility, but since the creation of the Euro zone in 1999 they have become highly similar.

The purpose of this paper is to investigate the pricing of European real estate equities. The study examines the main drivers of real estate equity returns and determines whether loadings on systematic risk factors – the excess market return, small minus big (SMB), HIGH minus low (HML) – can explain cross‐sectional return differences in unconditional as well as in conditional asset pricing tests.

The paper draws upon time‐series regressions to investigate determinants of real estate equity returns. Rolling Fama‐French regressions are applied to estimate time‐varying loadings on systematic risk factors. Unconditional as well as conditional monthly Fama‐MacBeth regressions are employed to explain cross‐sectional return variations.

Systematic risk factors are important drivers of European real estate equity returns. Returns are positively related to the excess market return and to a value factor. A size factor impacts predominantly negatively on real estate returns. The results indicate increasing market integration after the introduction of the Euro. Loadings on systematic risk factors have weak explanatory power in unconditional cross‐section regressions but can explain returns in a conditional framework. Beta – and to a lesser extent the loading on HML – is positively related to returns in up‐markets and negatively in down markets. Equities which load positively on SMB outperform in down markets.

The implementation of a liquidity or a momentum factor could provide further evidence on the pricing of European real estate equities.

The findings could help investors to manage the risk exposure more effectively. Investors should furthermore be able to estimate their cost of equity more precisely and might better be able to pick stocks for time varying investment strategies.

This is the first paper to examine the pricing of real estate equity returns in a pan‐European setting.

Aims to investigate the long‐run and short‐term relationships among four Asian property stock markets of Japan, Hong Kong, Singapore and Malaysia; and four European property stock markets of UK, France, Germany and Italy. Additionally, aims to examine the relationships between equally‐weighted Asian and European regional property stock indices.

The long‐term analysis is undertaken using Johansen multivariate cointegration approach. The degree of short‐term dependence is investigated with an extended EGARCH model for evidence of mean and volatility spillovers across the property stock markets.

The combined findings of minimal cointegration, weak mean transmission and lack of significant evidence of cross‐volatility spillovers among the Asian and European property stock markets imply that investors would benefit from diversifying property stock portfolios internationally in Asia and Europe in the short‐ and long‐run.

This study contributes significantly to the empirical literature on capital asset pricing and on the risk‐return performance of international real estate. In particular, the findings from the study will be useful for European investors to understand better the potential portfolio implications of investing in Asian real estate.

Lowering of investment barriers between European nations has led to increasing integration of their capital markets. Consequently, global investors may be well‐advised to evaluate European stocks, not on the basis of the country of listing, but on the basis of the transnational industrial sector to which the stocks belong. This study utilizes performance measures, grounded in modern portfolio theory, to assess the risk‐adjusted return that has accrued to major transnational industrial sectors in Europe, such as consumer products, technology, utilities and financial services. The empirical documentation generated here can be used by international investors as input in decision making for sectorial allocation of funds in the European component of their global stock portfolios.

The purpose of this paper is to examine the cross-sectional predictive power and the information content of volatility smirks for future stock returns using single stock options.

The study uses Fama-Macbeth procedure and portfolio approach to investigate the predictability and informativeness in a setup when options settlement style is changed from American to European.

The study reports that the volatility smirk of European style options, unlike American style options, predict the underlying cross-sectional equity returns. Firms with steepest volatility smirk underperform firms with flatter volatility smirks, by an average of 3.28 and 4.01 per cent annually for American and European options, respectively. The results are robust to the control of idiosyncratic and systematic risk factors.

The results confirm that a trader with negative information prefers to trade out-of-the-money put options. The more pronounced results of European options designate the trader’s preference to less risky European style stock options. Results are robust and signify the delay of equity market in incorporating information impounded in the volatility smirk.

Very few studies examine smirk and returns relationship and to the best of the authors’ knowledge, no study exists that examine the unique case of change in options style and its role in affecting relationship between smirk and future returns.

This work investigates the volatility spillovers across stock markets and the nature of such spillovers through different periods of crises and tranquility.

Using daily stock return volatility data from June 2003 to June 2021, the generalized forecast error variance decomposition method (based on Diebold and Yilmaz, 2012 approach) is employed to measure the degree of volatility spillovers/connectedness among stock markets of 24 Asia–Pacific and 12 European Union (EU) economies.

The empirical results from static analysis suggested that about 28.1% (63.7%) of forecast error variance in return volatility for Asia–Pacific (EU) markets is due to spillovers. The evidence from dynamic analysis suggested that during mid of the global financial crisis, European debt crisis (EDC) and Covid-19, the gross volatility spillovers for Asia–Pacific (EU) was around 67% (80%), 65% (80%) and 73% (67%), respectively. The degree of net volatility transmission from Singapore (Denmark) to other Asia–Pacific (EU) markets was found to be highest.

The findings have crucial implications for the investors and portfolio managers in assessment of risk and optimum allocation of assets and investment decisions.

This study adds to the literature on risk management by systematically examining the impact of global financial crises, EDC and Covid-19 on the market interactions by capturing the magnitude, duration and pattern of the shock-specific market volatilities for a large sample of Asian and European markets using recent and large data set.

The purpose of this paper is to examine the influence of the political partisanship of government in charges of returns on the European stock markets. The authors found a large body of research investigating this issue for the case of US stock market but less evidence for the European stock markets.

The authors employ a panel data model with fixed-effects and an additional dynamic panel model using the bias-corrected LSDV estimator on a data set consisting of monthly and quarterly data. The data range from 2000 to 2010 and cover 20 European Union (EU) countries. The authors test several hypotheses, and run distinct regressions using political, financial, and economic variables. The authors also divide the data set into two sub-samples in order to reveal the distinctions between advanced and emerging economies in the EU.

The authors find that stock markets perform better under right-wing administrations. The result is consistent for the advanced EU economies, but the authors found no robust evidence in that sense for emerging countries. Additionally, the authors show that European stock market preferences for right/left-wing administrations is not necessarily related to the beliefs about the size of unemployment, inflation, deficit, and/or debt, which opens the field for further research in this area.

The study contributes to existing knowledge. It examines if Wall Street folklore, asserting for many decades that stock markets perform better under right-wing governments, also holds for European stock markets given the distinctions in the political and financial systems between USA and Europe. Moreover, the authors underline the introduction in the analysis of the Central and Eastern European countries.

The assessment of interdependence between stock markets is an important aspect of international portfolio management. The purpose of this paper is to examine and highlight the diversification potential of South Asian stock markets vis-à-vis developed and European stock markets.

The developed stocks markets include USA and UK, and South Asian stock markets include India, Pakistan and Sri Lanka while DJ STOXX 600 index is used to represent the European stock markets. Monthly data are used to examine long-run relationship through ARDL bound testing approach and estimates are obtained using DLOS. Short-term dynamics are captured through vector error correction-based Granger causality.

South Asian stock markets are closely linked with each other; similarly, developed/European markets are interlinked. US stock market not only impacts European stock markets, it also Granger cause South Asian stock markets. The findings suggest increase in comovement of South Asian stock markets with the global markets after financial crises of 2007-2008.

The diversification benefits of South Asian stock markets for international investors are still evident due to their low relationship (in both long and short run) with developed/European stock markets.

Given the emergence of South Asian stock markets, new insight on their relationship with developed stock markets can provide interesting findings for international portfolio diversification. The South Asian equity markets are an important source of investment because of their immense growth and weak correlation with international markets.

Using daily returns from 1980‐2006, we find a significant contemporaneous association between all European Union (EU) equity markets and Germany. There is, however, no significant indication that the German stock market leads or lags the movements in the other EU stock markets. A higher share of imports by Germany from other EU countries, as well as fluctuations and increased volatility in the exchange rate, have negative effects on stock market co‐movements. Conversely, the difference in equity market capitalization with Germany, the greater the foreign direct investment by Germany, and the fact of belonging to the eurozone all contribute to greater stock market co‐movement.

The current paper aims to expand an empirical assessment of correlations of the stock exchange in Poland with other stock markets and foreign economies. The paper attempts to explore international spillover effects during the current financial crisis.

The study builds upon questionnaires and interviews with practitioners associated with the Polish stock market. The interviewees represent both the advanced and emerging European economies. At this point, analyzing the notions of a cross‐section of experts from different geographical regions increases the value of the findings. The interviewees were asked to comment on a wide range of examples mirroring the reaction of the Warsaw Stock Exchange (WSE) to economic and financial information derived from foreign markets in times of the current financial crisis. An empirical model evaluating the cross‐border implications for the Polish stock market was specified. The model encompassed a wide range of variables and events influencing the performance of the Polish stock market and investors' uncertainty during the nascent financial crisis. Semi‐structured interviews complemented the quantitatively obtained findings and allowed for a gap between theory and practice to be bridged. The qualitative approach injected a dose of realism into the empirical model utilized in the paper and contributed to the value of general findings.

The current paper reports initial responses of the WIG20 indexed equity prices to 41 economic and financial information sets, originating from systemically significant markets. The influence of these sets is ranked in accordance with their influential powers. The ranking indicates which information events are more likely to be prioritized by investors associated with the WSE and which news are ignored in times of the current financial crisis. Henceforth, the findings outline the crisis‐induced changes in the uncertainty of equity investors and the implications for investment decision making processes. Comparing the responses to economic and financial information sets among different stock markets and industries delivers insight into the profitability of the international portfolio diversification based on either the country or industry specific factors.

The paper focuses on the Polish stock market, which is relatively under‐researched by the existing body of literate. However, Poland's stock market became a leading central European bourse during the current financial crisis. Reporting a number of useful and important implications for the practitioners associated with the WSE constitutes the core value of the paper.