Investors' Trading Behaviour and Stock Market Volatility During Crisis Periods PDF Download

Author: Guglielmo Maria Caporale
Publisher:
ISBN:
Category :
Languages : en
Pages :

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This study examines the impact of investors' buy and sell trades on Korean stock market volatility across two crisis events, the Asian crisis of 1997 and the 2008 global financial crash. We investigate the trading behaviour of domestic vs. foreign and institutional vs. individual investors. Our results suggest that the buy and sell trades have an asymmetric effect on volatility that depends on the type of investor trading and on the phase of the business cycle. Buy orders appear to be more informative than sell orders since they mostly lower volatility in the pre-crisis periods, while sell and post-crisis buy trades affect volatility positively regardless of who trades (institutional or individual investors) and on what information (member, non-member). Most importantly, decomposing total buy and sell trades into trader-type categories reveals that some institutional investors are more informed traders that stabilize the market compared to individuals that always increase volatility. Foreign investors reduce volatility with their purchases and total trading activity in the whole Asian crisis sample, but only in the pre-crisis period before the recent global financial turmoil.

Author: Fotini Economou
Publisher: Academic Press
ISBN: 0128112530
Category : Business & Economics
Languages : en
Pages : 516

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Book Description
The Handbook of Investors' Behavior during Financial Crises provides fundamental information about investor behavior during turbulent periods, such the 2000 dot com crash and the 2008 global financial crisis. Contributors share the same behavioral finance tools and techniques while analyzing behaviors across a variety of market structures and asset classes. The volume provides novel insights about the influence and effects of regional differences in market design. Its distinctive approach to studies of financial crises is of key importance in our contemporary financial landscape, even more so since the accelerated process of globalization has rendered the outbreak of financial crises internationally more commonplace compared to previous decades. Encompasses empirical, quantitative and regulation-motivated studies Includes information about retail and institutional investor behavior Analyzes optimal financial structures for the development and growth of specific regional economies

Author: Sushil Bikhchandani
Publisher:
ISBN:
Category : Capital market
Languages : en
Pages : 38

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Author: Greg N. Gregoriou
Publisher: CRC Press
ISBN: 1420099558
Category : Business & Economics
Languages : en
Pages : 654

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Up-to-Date Research Sheds New Light on This Area Taking into account the ongoing worldwide financial crisis, Stock Market Volatility provides insight to better understand volatility in various stock markets. This timely volume is one of the first to draw on a range of international authorities who offer their expertise on market volatility in devel

Author: Larry Connors
Publisher: John Wiley & Sons
ISBN: 1118239458
Category : Business & Economics
Languages : en
Pages : 198

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Book Description
For years, traders and investors have been using unproven assumptions about popular patterns such as breakouts, momentum, new highs, new lows, market breadth, put/call ratios and more without knowing if there is a statistical edge. Common wisdom holds that the stock markets are ever changing. But, as it turns out, common wisdom can be wrong. Offering a comprehensive look back at the way the markets have acted over the last two decades, How Markets Really Work: A Quantitative Guide to Stock Market Behavior, Second Edition shows that nothing has changed, that the markets behave the same way today as they have in years past, and that understanding this puts you in a prime position to profit. Written by two top financial experts and filled with charts and graphs that illustrate the market concepts they develop, the book takes a sometimes contrarian view of everything from market edges to historical volatility, and from volume to put/call ratio, giving you all that you need to truly understand how the markets function. Fully revised and updated, How Markets Really Work, Second Edition takes a level-headed, data-driven look at the markets to show how they function and how you can apply that information intelligently when making investment decisions.

Author: Vijay Singal
Publisher: Financial Management Association Survey and Synthesis Series
ISBN: 9780195304220
Category : Business & Economics
Languages : en
Pages : 388

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In an efficient market, all stocks should be valued at a price that is consistent with available information. But as financial expert Singal points out, there are circumstances under which certain stocks sell at a price higher or lower than the right price. Here he discusses ten such anomalous prices and shows how investors might--or might not--be able to exploit these situations for profit.

Author: Anwer S. Ahmed
Publisher:
ISBN:
Category :
Languages : en
Pages : 36

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Book Description
Financial crises are typically marked by substantial increases in ambiguity where prices appear to decouple from fundamentals. Consistent with ambiguity-based asset pricing theories, we find that ambiguity concerns are more severe for firms with higher pre-crisis earnings volatility, causing investors to demand a higher ambiguity premium for such firms. While there is no relation between earnings volatility and stock returns under normal conditions, there is a significant negative relation between crisis-period stock returns and prior earnings volatility. In other words, during economic turmoil, investors punish stocks whose past earnings volatility was higher despite that they do not perceive these stocks to be riskier under stable economic conditions. Our findings indicate that a firm's past earnings volatility predicts its stock price performance during crisis periods. We also find that this relation is stronger in firms with low institutional ownership and low analyst-following, consistent with ambiguity concerns being more important for firms with a greater proportion of unsophisticated investors. Our results are robust to controlling for firm-level characteristics as well as industry-fixed effects. Our evidence suggests that earnings stability helps mitigate ambiguity-concerns during a financial crisis.

Author: Wing-Keung Wong
Publisher: Mdpi AG
ISBN: 9783036530802
Category : Business & Economics
Languages : en
Pages : 232

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The Efficient Market Hypothesis believes that it is impossible for an investor to outperform the market because all available information is already built into stock prices. However, some anomalies could persist in stock markets while some other anomalies could appear, disappear and re-appear again without any warning. A Special Issue on "Efficiency and Anomalies in Stock Markets" will be devoted to advancements in the theoretical development of market efficiency and anomaly in the Stock Market, as well as applications in Stock Market efficiency and anomalies.

Author:
Publisher:
ISBN:
Category :
Languages : en
Pages : 125

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This dissertation focuses on volatility in financial markets, with a special concern for: (i) volatility transmission between different financial markets and asset categories and, (ii) the effect of macroeconomic announcements on the returns, volatility and correlation of stock markets. These issues are analysed taking into account the phenomenon of asymmetric volatility and incorporating the period of financial turmoil caused by the Global Financial Crisis. The study focuses the attention on the emerging markets of the region of Southeast Asia. The asymmetric behaviour of volatility refers to the empirical evidence according to which a negative return shock (unexpected drop in the value of the stock) generates an increase in volatility higher than a positive return shock (unexpected increase in the value of the stock) of the same size. In the financial literature two explanations of the asymmetric effect of news on stock return volatility have been put forward. The analysis of financial assets volatility is important to academics, policy makers, and financial market participants for several reasons. First, prediction of financial assets volatility is crucial to economic agents because it helps them make rational portfolio risk management decisions. Volatility is critically important to economic agents because it represents a measure of risk exposure in their investments. Furthermore, from a theoretical perspective, volatility occupies a central stage in pricing of derivative securities. For example, to price an option we need to know, as a risk measure, the volatility of the underlying asset from now until the option expires. Moreover, in a market risk context, it is vital to know the volatility of an asset in order to calculate the Value-at-Risk of a portfolio selection. Finally, volatility is important for the economy as a whole. Policy makers often rely on market estimates of volatility as a barometer for the vulnerability of the financial markets and the economy. Regarding the Asian markets, it is worth mentioning that in recent years, the interrelations between the US and the Asian markets have raised due to the increasing financial relations. One typical portfolio diversification strategy consists of investing in similar asset classes in multiple markets (international diversification). In order to make appropriate risk management strategies it is vital to know the characteristics of the markets of the different geographical areas and how the markets co-move. Likewise, it is very important to analyse which factors can influence the behaviour of the assets in the financial markets. Within Asian markets, this thesis distinguishes between mature and emerging countries. Japan represents the mature market and the emerging economies are divided into three groups: the Asian Tigers (tigers hereafter), the Asian Tiger Cub (cubs hereafter) economies and, finally, China. The objectives of this thesis are threefold. First, to explore volatility spillovers and the time-varying behaviour of the correlation between the US and the Asian stock markets. Second, to analyse how the macroeconomic events in the US affect the Asian stock market returns, volatility and correlation. Finally, to investigate volatility spillovers between equity and currency markets in Asia. Throughout these analyses, this dissertation aims to establish behaviour patterns depending on the level of development of the emerging country analysed. Furthermore, the sample period used in the analyses incorporates the period of the recent financial turmoil originated by the subprime mortgage market in the United States in the summer of 2007, with the aim of studying the effect of the Global Financial crisis on the patterns found. In general, the results of the three analyses of this dissertation show some interesting visions. While the volatility transmission pattern between the US and the Asian stock markets is mostly observed when the degree of development of the Asian country is higher, the effect of US macroeconomic news releases on these Asian markets is greater as the Asian market analysed is less developed. It is worth mentioning that China arises as a general exception of the three analyses, performing in an independent way with respect to the other Asian economies analysed. The reason of this behaviour can be due, on the one hand, to the fact that in the past decades China has been reaching market-based financial system and has been trying to open it up towards the international financial markets. In spite of these efforts, its financial market is still not entirely open to other countries worldwide. All in all, the results suggest that emerging Asian financial markets have thus far suffered only limited impact from the Global Financial crisis. However, heightened risk perception and declining investor confidence could trigger a sudden reversal of financial flows from these region's capital markets, pushing down asset prices and intensifying financial market volatility. The results of this dissertation may be useful for analysts, traders and portfolio managers. In an asset allocation framework, it is crucial to diversify the assets of a portfolio to diminish its risk. Considering international diversification, before composing a portfolio, it is very useful to know volatility spillovers across countries and asset classes. In this regard, it is vital to take into account the role of the currency market, not only because of the effect of exchange rate in foreign investments, but also for the relationship between the stocks in which to invest and the exchange rate of the related country. Likewise, macroeconomic news releases play a significant role in the stocks markets, hence it is very important to know the effect of the arrival of macroeconomic announcements on the returns, volatility and correlations of the stocks markets in which we want to invest. Finally, it is remarkable that the results of this thesis suggest that exchange rate policies should not be implemented without considering the repercussions on the stock market, and vice versa.

Author: Nicola Gennaioli
Publisher: Princeton University Press
ISBN: 0691182507
Category : Business & Economics
Languages : en
Pages : 264

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How investor expectations move markets and the economy The collapse of Lehman Brothers in September 2008 caught markets and regulators by surprise. Although the government rushed to rescue other financial institutions from a similar fate after Lehman, it could not prevent the deepest recession in postwar history. A Crisis of Beliefs makes us rethink the financial crisis and the nature of economic risk. In this authoritative and comprehensive book, two of today’s most insightful economists reveal how our beliefs shape financial markets, lead to expansions of credit and leverage, and expose the economy to major risks. Nicola Gennaioli and Andrei Shleifer carefully walk readers through the unraveling of Lehman Brothers and the ensuing meltdown of the US financial system, and then present new evidence to illustrate the destabilizing role played by the beliefs of home buyers, investors, and regulators. Using the latest research in psychology and behavioral economics, they present a new theory of belief formation that explains why the financial crisis came as such a shock to so many people—and how financial and economic instability persist. A must-read for anyone seeking insights into financial markets, A Crisis of Beliefs shows how even the smartest market participants and regulators did not fully appreciate the extent of economic risk, and offers a new framework for understanding today’s unpredictable financial waters.