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Article
Publication date: 6 November 2018

Stephanos Papadamou, Dionisis Philippas, Batnini Firas and Thomas Ntitoras

This paper aims to examine the relationship between abnormal loan growth and risk in Swedish financial institutions by type and borrower using three indicators as proxies…

Abstract

Purpose

This paper aims to examine the relationship between abnormal loan growth and risk in Swedish financial institutions by type and borrower using three indicators as proxies for risks related to loan losses, the ratio of interest income to total loans and solvency perspectives.

Design/methodology/approach

Using a large sample of different types of Swedish financial institutions, this paper uses a panel framework to examine the relationships between abnormal loan growth rates and loan losses, interest income as a percentage of total loans, changes in the equity to assets ratio and changes in z-score.

Findings

The findings show two important points of evidence. First, abnormal lending to retail customers increases loan losses and interest income in relation to total loans. Second, abnormal lending to other credit institutions decreases loan losses and significantly changes the capital structure by increasing the reliance on debt funding and significantly improves the z-score measure.

Research limitations/implications

The findings provide useful implications for the management of loan portfolios for a wide range of Swedish financial institutions, identifying two components: abnormal lending to households may increase loan losses and increase interest income in relation to total loans, and excessive lending to other credit institutions may reduce solvency risk and allow more debt financing for the financial institution.

Originality/value

This is the first study to use a panel framework in analyzing the behavior of different types of Swedish financial institutions in relation to loans granted to retail customers and other credit institutions.

Details

Review of Accounting and Finance, vol. 17 no. 4
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 8 April 2020

Stephanos Papadamou, Costas Siriopoulos and Nikolaos A. Kyriazis

This paper presents an integrated overview of the empirical literature on the impact of all forms of unconventional monetary policy on macroeconomic variables and on markets.

Abstract

Purpose

This paper presents an integrated overview of the empirical literature on the impact of all forms of unconventional monetary policy on macroeconomic variables and on markets.

Design/methodology/approach

This survey covers the findings concerning portfolio rebalancing, signaling, liquidity, bank lending and confidence channels.

Findings

The positive effect of QE announcements on stock and bond prices seems to be unified across studies. A contagion effect from US QE to other emerging markets is identified, while currency devaluation is present in most cases for the country that its central bank adopted such policies. Moreover, impacts of non-conventional practices on GDP, inflation and unemployment are examined. The studies presenting weak instead of strong positive effects on inflation are more, and these studies, also, present weak positive effects on GDP growth.

Originality/value

Based on the large body of research on non-conventional action taking, this is the first survey including effects of each country that adopted quantitative easing (QE) measures and that provides results from every methodology employed in order to estimate unconventional practices' impacts.

Details

Journal of Economic Studies, vol. 47 no. 7
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 21 August 2019

Athanasios Fassas, Stephanos Papadamou and Dionisis Philippas

The purpose of this paper is to examine the spillover effects in international financial markets related to investors’ risk aversion as proxied by the variance premium…

Abstract

Purpose

The purpose of this paper is to examine the spillover effects in international financial markets related to investors’ risk aversion as proxied by the variance premium, and how these relationships were affected by the quantitative easing (QE) announcements by the Federal Reserve.

Design/methodology/approach

The empirical analysis employs a multivariate exponential generalized autoregressive conditionally heteroskedastic (VAR-EGARCH) specification, which includes the USA, the UK, Germany, France and Switzerland.

Findings

Two main findings are raised from the empirical analysis. First, the VAR-EGARCH model identifies statistically significant spillover effects identifying the USA as the leading source driving investors’ risk aversion. Second, unconventional monetary easing announcement by the Fed has had significant effects on investors’ risk perspectives.

Practical implications

Accounting for the dynamic volatility of variance premium inter-dependencies, the authors show that the correlations among variance premia increase during the QE announcements by the Federal Reserve, suggesting a herding behavior that may potentially lead to stock price bubbles and undermine financial stability.

Originality/value

This is an empirical attempt that investigates the unexplored effects of unconventional monetary policy decisions in relation with investors’ attitudes toward risk.

Details

Review of Behavioral Finance, vol. 12 no. 2
Type: Research Article
ISSN: 1940-5979

Keywords

Article
Publication date: 13 November 2017

Stephanos Papadamou, Eleftherios Spyromitros and Panagiotis Tsintzos

The purpose of this paper is to investigate, both theoretically and empirically, the institutional setting of monetary policy making that mitigates the effects of…

Abstract

Purpose

The purpose of this paper is to investigate, both theoretically and empirically, the institutional setting of monetary policy making that mitigates the effects of productive public investment on inflation persistence.

Design/methodology/approach

In the theoretical approach, the authors consider a simple monetary game model à la Barro-Gordon introducing, apart from stochastic output shocks, indexed wage contracts and public investment effects. Then, the authors empirically produce inflation persistence and public investment persistence by estimating a first-order autoregressive model in a fixed rolling window of 36 months for the UK and also use a dummy in order to incorporate the regime switch in monetary policy since 1997, giving a clear increase in the level of central bank independence.

Findings

The theoretical framework suggests that an independent central banker could better manage inflation expectations and therefore inflation persistence despite the occurrence of persistent public investment shocks. From the perspective of fiscal policy, the appointment of a conservative and independent central banker could absorb adverse effects on inflation dynamics resulting from persistent expansionary fiscal policies. Empirical evidence in the UK indicates that the creation of an independent monetary policy committee reduces the positive link between public investment and inflation persistence.

Practical implications

From a monetary policy perspective view, the best response to public investment policies is to increase the degree of independence to alleviate effects on inflation dynamics. From the perspective of fiscal policy, an independent central banker can provide the necessary conditions to undertake a long-run public investment plan, since long-run growth will not be undermined by adverse inflation inertia.

Originality/value

The authors introduce, in the debate of inflation persistence, both theoretically and empirically, the role of public investment and monetary policy design.

Details

Journal of Economic Studies, vol. 44 no. 6
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 20 January 2021

Athanasios Fassas, Stephanos Papadamou and Dimitrios Kenourgios

This study examines the forecasting performance of the professional analysts participating in the Blue Chip Economic Indicators Survey using an alternative methodological…

Abstract

Purpose

This study examines the forecasting performance of the professional analysts participating in the Blue Chip Economic Indicators Survey using an alternative methodological research design.

Design/methodology/approach

This work employs two methodologies, namely a panel specification, with the cross-section being the forecast horizon (from 1-month to 18-months ahead forecasts) and the time period being the time that the forecast was made and a quantile regression technique, which evaluates the hidden nonmonotonic relations between the forecasts and the target variables being forecasted.

Findings

The empirical findings of this study show that survey-based forecasts of certain key macroeconomic variables are generally biased but still efficient predictors of target variables. In particular, we find that survey participants are more efficient in predicting long-term interest rates in the long-run and short-term interest rates in the short run, while the predictability of medium-term interest rates is the least accurate. Finally, our empirical analysis suggests that currency fluctuations are very hard to predict in the short run, while we show that survey-based forecasts are among the most accurate predictors of GDP deflator and growth.

Practical implications

Evaluating the accuracy of economic forecasts is critical since market participants and policymakers utilize such data (as one of several inputs) for making investment, financial and policy decisions. Therefore, the quality of a decision depends, in part, on the quality of the forecast. Our empirical results should have immediate implications for asset pricing models that use interest rates and inflation forecasts as variables.

Originality/value

The present study marks a methodological departure from existing empirical attempts as it proposes a simpler yet powerful approach in order to investigate the efficiency of professional forecasts. The employed empirical specifications enable market participants to investigate the information content of forecasts over different forecast horizons and the temporal evolution of forecast quality.

Details

Journal of Economic Studies, vol. 49 no. 1
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 24 May 2019

Christos Karpetis, Stephanos Papadamou, Eleftherios Spyromitros and Erotokritos Varelas

The purpose of this paper is to investigate, both theoretically and empirically, the relationship between optimism (pessimism) – as reflected by animal spirits – and money…

Abstract

Purpose

The purpose of this paper is to investigate, both theoretically and empirically, the relationship between optimism (pessimism) – as reflected by animal spirits – and money demand by taking into account transaction costs.

Design/methodology/approach

Inspired by the theoretical model of money demand by Teles et al. (2016) the authors incorporate the optimism (pessimism) effects in the money demand. Then, using the consumers’ confidence indicator as a proxy indicator of optimism/pessimism, they estimate the money demand in a panel data framework.

Findings

The theoretical framework suggests that the optimism (pessimism) effects on money demand are positive (negative). Empirical evidence for 11 Eurozone countries divided in two groups (i.e. core and periphery) confirms the theoretical considerations.

Practical implications

It appears that periphery countries with a higher sensitivity to the recent financial crisis present lower real money demand sensitivity to consumption expenditures and higher real money demand sensitivity to consumer confidence index. Moreover, in such countries, money demand changes present higher persistence over time. Thus, the authors observe differing attitudes concerning money demand across Eurozone citizens that should be taken into account by monetary policymakers (i.e. the ECB).

Originality/value

The authors introduce, in the vast literature on money demand, both theoretically and empirically the role of optimism (pessimism). Differences across core and periphery Eurozone countries identified.

Details

Review of Behavioral Finance, vol. 11 no. 1
Type: Research Article
ISSN: 1940-5979

Keywords

Article
Publication date: 3 May 2019

Refk Selmi, Rangan Gupta, Christos Kollias and Stephanos Papadamou

Portfolio construction and diversification is a prominent challenge for investors. It reflects market agents’ behavior and response to market conditions. This paper aims…

Abstract

Purpose

Portfolio construction and diversification is a prominent challenge for investors. It reflects market agents’ behavior and response to market conditions. This paper aims to investigate the stock-bond nexus in the case of two emerging and two mature markets, India, South Africa, the UK and the USA, using long-term historical monthly data.

Design/methodology/approach

To address the issue at hand, copula quantile-on-quantile regression (C-QQR) is used to model the correlation structure. Although this technique is driven by copula-based quantile regression model, it retains more flexibility and delivers more robust and accurate estimates.

Findings

Results suggest that there is substantial heterogeneity in the bond-stock returns correlation across the countries under study point to different investors’ behavior in the four markets examined. Additionally, the findings reported herein suggest that using C-QQR in portfolio management can enable the formation of tailored response strategies, adapted to the needs and preferences of investors and traders.

Originality/value

To the best of the authors’ knowledge, no previous study has addressed in a comparative setting the stock-bond nexus for the four countries used here using long-term historical data that cover the periods 1920:08-2017:02, 1910:01-2017:02, 1933:01-2017:02 and 1791:09-2017:02 for India, South Africa, the UK and the USA, respectively.

Details

Studies in Economics and Finance, vol. 38 no. 3
Type: Research Article
ISSN: 1086-7376

Keywords

Article
Publication date: 9 April 2018

George Papachristou, Stephanos Papadamou and Eleftherios Spyromitros

The purpose of this paper is to investigate the response of investors to the announcements on the inclusion and exclusion of companies from the FTSE-ASE 20 index.

Abstract

Purpose

The purpose of this paper is to investigate the response of investors to the announcements on the inclusion and exclusion of companies from the FTSE-ASE 20 index.

Design/methodology/approach

Data on the inclusion and exclusion of companies from the FTSE-ASE 20 index in the period 2000-2012 were used. The authors performed an event study analysis using a constant return model and a market model. Two different measures of aggregated abnormal returns, namely the cumulating abnormal returns and the buy-and-hold abnormal return, were used in this investigation.

Findings

The results suggest that the exclusion of a company from the index has a significant negative effect on stock returns. Specifically, such a stock takes more than 15 days to recover. However, for a company’s inclusion in the index, the authors observe short-lived positive reactions on stock returns.

Practical implications

Capital market regulators and investors should find the policy implications of this paper meaningful. Investment strategies can be implemented on the basis of the news of exclusion from the index, which can lead to higher performance for investors. As far as authorities are concerned, the decision of inclusion and exclusion to the most significant stock index in the Greek market should be carefully considered because it creates financial instability for a significant time period.

Originality/value

By using a battery of parametric and non-parametric econometric tests, the existence of abnormal returns of the FTSE-ASE 20 index is explored over a long time period, including the recent financial crisis.

Details

Managerial Finance, vol. 44 no. 4
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 3 April 2017

Stephanos Papadamou and Trifon Tzivinikos

This paper aims to investigate the effects of contractionary fiscal policy shocks on major Greek macroeconomic variables within a structural vector autoregression…

1075

Abstract

Purpose

This paper aims to investigate the effects of contractionary fiscal policy shocks on major Greek macroeconomic variables within a structural vector autoregression framework while accounting for debt dynamics.

Design/methodology/approach

The sign restriction approach is applied to identify a linear combination of government spending and government revenue shock simultaneously while accounting for debt dynamics. Additionally, output and unemployment responses to fiscal shocks under different scenarios concerning the amalgamation of austerity measures are considered.

Findings

The results indicate that a contractionary consumption policy shock, namely, a 1 per cent decrease in government consumption and a 1 per cent increase in indirect taxes, is preferred, as it produces a minor decrease in output and substantially decreases public debt, while a contractionary wage policy shock is suitable only when the government aims to sharply reduce public debt, as the consequences for the economy are harsh. A contractionary investment policy shock is not recommended, as it triggers a rise in unemployment and a fall in output, while the effect on the public debt is minor.

Practical implications

Policymakers should focus their efforts on reducing unproductive government consumption on the expenditure side. Concerning revenues, the reinforcement of tax administration is recommended to ensure that indirect taxes will be collected.

Originality/value

This paper contributes to the existing literature by providing a disaggregated analysis of the effects of fiscal policy actions in Greece by implementing several fiscal policy scenarios and accounting for the level of public debt. All scenarios are in the vein of the economic adjustment programs guidelines.

Details

Journal of Financial Economic Policy, vol. 9 no. 1
Type: Research Article
ISSN: 1757-6385

Keywords

Book part
Publication date: 21 June 2014

Christos Kollias and Stephanos Papadamou

Terrorist events are unforeseen and have the potential to shake and rattle markets and investors. The purpose of this study is to examine whether major terrorist incidents…

Abstract

Purpose

Terrorist events are unforeseen and have the potential to shake and rattle markets and investors. The purpose of this study is to examine whether major terrorist incidents have affected the Economic Sentiment Indicator (ESI) in four European countries.

Methodology/approach

An index is constructed that weights the severity of each event and then used to evaluate through the use of vector autoregressive and impulse response analysis estimation techniques whether or not and to what extent the ESI has been affected.

Findings

Effects were more pronounced and evident in the case of France and Germany while the ESI in Spain and Great Britain did not appear to be particularly affected by terrorist incidents.

Research limitations/implications

The effects of terrorism on economic sentiment in other countries will provide additional evidence that will allow more robust and conclusive statistical inferences.

Originality/value of the chapter

The impact of terrorist activity on the ESI for the four European countries studied here has not been examined before using VAR and impulse response analysis.

Details

Understanding Terrorism
Type: Book
ISBN: 978-1-78350-828-0

Keywords

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