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This paper aims to investigate possibility of statistical detection of market completeness for continuous time diffusion stock market models.

The paper uses theory of forecasting to find criteria of predictability of market parameters such as volatilities and the appreciation rates.

It is known that the market completeness is not a robust property: small random deviations of the coefficients convert a complete market model into an incomplete one. The paper shows that market incompleteness is also non-robust: for any incomplete market from a wide class of models, there exists a complete market model with arbitrarily close paths of the stock prices and the market parameters.

The paper results lead to a counterintuitive conclusion that the incomplete markets are indistinguishable in the terms of the market statistics.

Based on an uncertainty model with an infinite horizon, this chapter analyzes how financial development and monetary policy in two countries can impact international trade and capital flows and influence individual behavior and welfare. Our study shows that differences in capital market development are the major contributing factors for trade imbalance and investment among countries. We also find that monetary policies are important factors affecting the trade balance, consumption, and investment. Countries with one-sided, pegging exchange rate policies tend to buy more bonds and enjoy larger trade surpluses. This effect is closely related to the level of capital market development: in these two countries, at higher stages of development, the effects of idiosyncratic monetary policy on imbalance are amplified.

The turbulent decade of the 1980s completely restructured the financial system of the 1990s. Deregulation and rising competition led to record numbers of failures among depository institutions in the U.S., especially savings and loan associations. These failures have caused tremendous taxpayer losses, which are estimated at around $200 billion in present value terms. Financial markets became increasingly volatile, with increased price movements in bond, stock, and currency markets. These events triggered both public and private sector responses, including increased regulatory standards for safety and soundness and financial innovation. Additionally, the fall of communism in Eastern Europe and the former Soviet Union, now known as the New Independent States (NIS), as well as the trend toward trading blocks, including the continuing process of European unification and the North American Free Trade Agreement (NAFTA) between the U.S., Canada, and Mexico, have greatly increased the demand for growth capital in a global sense.

The purpose of this paper is to investigate the relationship between option’s implied volatility smirk (IVS) and excess returns in the Germany’s leading stock index Deutscher-Aktien Index (DAX) 30.

The study defines the IVS as the difference in implied volatility derived from out-of-the-money put options and at-the-money call options. This study employs the ordinary least square regression with Newey-West correction to analyse the relationship between IVS and excess DAX 30 index returns in Germany.

The authors find that the German market adjusts information in an efficient way. Consequently, there is no information linkage between option volatility smirk and market index returns over the nine years sample period after considering the control variables, global financial crisis dummies, and the subsample test.

This study finds that the option market and the DAX 30 index are informationally efficient. Implications of the findings are that the investors cannot profit from the information contained in the IVS since the information is simultaneously incorporated into option prices and the stock index prices. The findings of this study are applicable to other markets with European options and for market participants who seek to exploit short-term market divergence from efficiency.

The relationship between IVS and stock price changes has not been investigated sufficiently in academic literature. This study looks at this relationship in the context of European options using high-frequency transactions data. Prior studies look at this relationship for only American options using daily data. Pricing efficiency of the European option market using high-frequency data have not been studied in the prior literature. The authors find different results for the German market based on this high-frequency data set.

Based on social capital theory and the institutional theory, this paper aims to explain how a firm’s business ties and political ties affect contractual governance in an interfirm cooperation, and under which institutional conditions they can play a better role.

This study tests conceptual model using questionnaire survey data collected from 227 firms in China. Hierarchical regression analysis is used to test the hypotheses.

This study finds that business ties have significant effect on contract completeness, while political ties have significant effect on contract enforcement. Moreover, these effects are contingent on some institutional factors. Market information transparency strengthens the effect of business ties on contract completeness and weakens the effect of political ties on contract completeness. Legal system completeness weakens the effect of political ties on contract enforcement.

This study suggests that managers could actively and selectively use their managerial ties to enhance contractual governance in an interfirm cooperation.

This study adds to the current understanding of how an interfirm cooperation is shaped by the firm’s social capital derived from external network relationships and extends the research on what social antecedents affect contractual governance. Moreover, this study sheds new light on when managerial ties can play a more beneficial role in emerging economies.

The option pricing model of Black and Scholes (1973) shows that an option contract is redundant in a complete market as it can be completely replicated by its underlying assets and risk free assets. However, in a real world of incomplete markets, many studies have shown that option contracts are not redundant and can affect prices and trade volume of underlying assets as they contribute to the market completeness. Thus, this paper examines whether this holds for ELWs (Equity-Linked Warrants) in Korean stock market, which are well known to have the same function as option contracts. To do this, we analyze the effects of ELW listings on underlying stocks’ prices, trade volume, and volatilities, and test whether ELWs contribute to market completeness. Using the daily trading data of 5,799 ELWs on individual stocks from December 2005 to September 2011, we find that underlying stocks show significantly positive cumulative abnormal returns (CAARs) and abnormal trade volume after ELW listing dates, implying that the ELW listing affects significantly positive effects on prices and trade volume of underlying stocks. The volatility of underlying stocks is significantly decreasing after the ELW listing. The systematic risk measured as beta, however, does not change over the event window. This result indicates that the decrease in volatility of underlying stocks comes from the decrease of unsystematic risks, and the correlations between returns of market index and underlying stocks are increasing after the ELW listing. The result that ELW listing can have significant effects on the underlying market implies that current stock market is incomplete, and thus, it is natural to ask whether ELWs can contribute to market completeness. Using the method suggested by Buraschi and Jackwerth (2001), we examine whether ELWs are necessary to replicate the pricing kernel used in asset pricing. We select risk-free asset, underlying stock and ELW as reference assets to replicate the pricing kernel, and find that the pricing kernel cannot be replicated completely without ELWs. This result implies that ELWs are not redundant financial assets and are necessary to increase the market completeness in Korean stock market.

The conclusions on the importance of corporate response timing to a crisis have remained inconsistent. Some studies suggest that active response may reduce negative impacts, whereas managers argue that issuing official response frustrates stakeholders and thus decreases the firm value. The purpose of this paper is to investigate the role of external media in the response timing strategy and the consequent stock market reaction.

Based on 130 corporate crises that befell publicly listed firms in China from 2007 to 2014, this paper uses the Baidu News Search Engine and Chinese Lexical Analysis System to construct the variables of the media characteristics. A structural equation model is established to test the hypotheses.

The results of this paper suggest that media coverage drives response timing after a crisis. Although an official response is a burden for firms, the timing strategy has multidimensional benefits including effectively alleviating negative effects (defined as buffering effects) and repairing the market (defined as restoring effects). Moreover, the buffering effects of response timing are stronger when completeness of response is low.

This study mainly contributes to crisis communication literature by introducing the role of media in prompting managers to make timing decisions. The findings of this study provide empirical support for the importance of timing response strategy.

For companies that intend to respond to the modern conscious consumers' needs, a great competitive advantage is played on the ability to incorporate sustainability messages in marketing communications. The aim of this paper is to address this important priority in the web context, building a semantic algorithm that allows content managers to evaluate the quality of sustainability web contents for search engines, considering the current semantic web development.

Following the Design Science (DS) methodological approach, the study develops the algorithm as an artefact capable of solving a practical problem and improving the operation of content managerial process.

The algorithm considers multiple factors of evaluation, grouped in three parameters: completeness, clarity and consistency. An applicability test of the algorithm was conducted on a sample of web pages of the Google blog on sustainability to highlight the correspondence between the established evaluation factors and those actually used by Google.

Studying content marketing for sustainability communication constitutes a new field of research that offers exciting opportunities. Writing sustainability contents in an effective way is a fundamental step to trigger stakeholder engagement mechanisms online. It could be a positive social engineering technique in the hands of marketers to make web users able to pursue sustainable development in their choices.

This is the first study that creates a theoretical connection between digital content marketing and sustainability communication focussing, especially, on the aspects of search engine optimization (SEO). The algorithm of “Sustainability-contents SEO” is the first operational software tool, with a regulatory nature, that is able to analyse the web contents, detecting the terms of the sustainability language and measuring the compliance to SEO requirements.

This paper investigates the effects of introducing equity-linked warrants (ELWs) on the stock price, trading volume, volatility, and systematic risk (beta) by using the event study methodology. The study defines the event date as the announcement date as well as the listing date. In addition, whereas previous research has investigated only call ELWs, this study analyzes the effects of introducing both call and put ELWs.

The results provide no evidence of hedging effects of issuers before the announcement dates and information effects after the announcement dates. In addition, we can't find any significant changes of variables associated with the market completeness hypothesis near the listing dates.

However, the trading volume of the stock tends to increase in the days immediately following the listing of call ELWs, which may be due to the “informed trading effect”. The empirical results also provide support for the “diminishing short-sales restrictions” hypothesis related to the listing of put ELWs, which implies that short-sale restrictions can be reduced because put ELWs can provide investors with short positions in the underlying stock.