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Financial Economics
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Financial Economics

A special issue of International Journal of Financial Studies (ISSN 2227-7072).

Deadline for manuscript submissions: closed (31 December 2018) | Viewed by 69357

Special Issue Editor

Dr. Pascal Stiefenhofer

E-Mail Website
Guest Editor
Brighton Business School, Moulsecoomb, Brighton BN2 4AT, UK
Interests: financial economics; mathematical economics; decisions of firms under uncertainty; general equilibrium theory; incomplete financial assets; differential equations; catastrophe theory

Special Issue Information

Dear Colleagues,

Financial economics is a vibrant field of research emerging from a synergy between mathematical economics and mathematical finance. The main goal of this Special Issue of the International Journal of Financial Studies is to encourage theoretical and applied research in the intersection of finance and economics, which is of interest to both academics and practitioners.

For this purpose, this Special Issue on “Financial Economics” invites papers on topics, such as, but not limited to: General equilibrium, monetary and fiscal policy, public finance, incomplete financial assets, corporate finance, asset pricing, exchange rate modeling, production under uncertainty, dynamic programing, and financial markets.

Dr. Pascal Stiefenhofer
Guest Editor

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. International Journal of Financial Studies is an international peer-reviewed open access quarterly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1800 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • Financial markets
  • Monetary and fiscal policy
  • Public finance
  • General equilibrium (DGE, SDGE, Arrow-Debreu)
  • Corporate finance
  • Risk allocation
  • Capital asset pricing

Published Papers (14 papers)

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Research

15 pages, 559 KiB  
Article
Impacts of Financial Market Shock on Bank Asset Allocation from the Perspective of Financial Characteristics of Banks
by Kun Huang, Qiuge Yao and Chong Li
Int. J. Financial Stud. 2019, 7(2), 29; https://doi.org/10.3390/ijfs7020029 - 12 Jun 2019
Cited by 2 | Viewed by 2741
Abstract
Given ongoing financial disintermediation and the need for central banks to establish interest rate corridors, commercial banks have increasingly enriched their asset allocation choices, forming an allocation pattern that combines traditional credit assets (loans) and financial assets (interbank and securities investment). Due to [...] Read more.
Given ongoing financial disintermediation and the need for central banks to establish interest rate corridors, commercial banks have increasingly enriched their asset allocation choices, forming an allocation pattern that combines traditional credit assets (loans) and financial assets (interbank and securities investment). Due to the long-standing dual interest rate system in China, the yields of credit assets and financial assets have differed, which means the latter has greater volatility. Using the quarterly panel data of 23 listed commercial banks in China from 2002 to 2017, the empirical results of this paper show that the fluctuation of the return rate of the two types of assets will affect the asset allocation of banks. Specifically, on the one hand, when the price of financial assets falls, which leads to the narrowing of the credit spread between the two types of assets, banks reduce transaction demand to prevent loss and reduce their holdings of financial assets, thus increasing the ratio of their credit assets to financial assets. On the other hand, rising benchmark lending rates leads to the increase in the credit financing cost of demanders, reducing the willingness of demanders to lend, forcing the demander to obtain funds through other channels. This results in the decrease in the ratio of credit assets to financial assets. Furthermore, the financial characteristics of banks also influence the dynamic adjustment range of asset allocation. That is, the lower the reserve ratio and capital adequacy ratio, the smaller the impact of financial asset yield volatility on bank asset allocation. Full article
(This article belongs to the Special Issue Financial Economics)
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16 pages, 296 KiB  
Article
Flobsion—Flexible Option with Benefit Sharing
by Nikolay Khabarov, Ruben Lubowski, Andrey Krasovskii and Michael Obersteiner
Int. J. Financial Stud. 2019, 7(2), 22; https://doi.org/10.3390/ijfs7020022 - 19 Apr 2019
Cited by 2 | Viewed by 3295
Abstract
Global environmental goals and the Paris agreement declared the need to avoid dangerous climate change by reducing emissions of greenhouse gases with an ultimate goal to transform today’s policies and reach climate neutrality before the end of the century. In the medium to [...] Read more.
Global environmental goals and the Paris agreement declared the need to avoid dangerous climate change by reducing emissions of greenhouse gases with an ultimate goal to transform today’s policies and reach climate neutrality before the end of the century. In the medium to long-term, climate policies imply rising CO 2 price and consequent financial risk for carbon-intensive producers. In this context, there is a need for tools to buffer CO 2 prices within the period of transition to greener technologies when the emission offsetting markets expose high volatility. Contracts for optional future purchase of carbon credits could provide emitters with a cost-efficient solution to address existing regulatory risks. At the same time, this would help to create much needed financing for the projects generating carbon credits in the future. This work presents the concept of a flobsion—a flexible option with benefit sharing—and demonstrates its advantages in terms of risk reduction for both seller and buyer as compared to both a “do nothing” strategy (offsetting at future market price) and a traditional option with a fixed strike price. The results are supported analytically and numerically, employing as a benchmark the dataset on historical CO 2 prices from the European Emission Trading Scheme. Flobsion has the potential to extend the traditional option in financial applications beyond compliance markets. Full article
(This article belongs to the Special Issue Financial Economics)
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16 pages, 690 KiB  
Article
Explanatory Power of Pre-Issue Financial Strength for Long-Term Market Performance: Evidence from Initial Equity Offerings on an Emerging Market
by Leszek Czapiewski and Joanna Lizińska
Int. J. Financial Stud. 2019, 7(1), 16; https://doi.org/10.3390/ijfs7010016 - 12 Mar 2019
Viewed by 2883
Abstract
This study tests possible sources of long-term risk-adjusted returns on initial public offerings (IPO) in Poland under the calendar-time portfolio (CTP) approach. The moment of going public still remains a puzzle in many areas. Poland’s status as an emerging market has been indisputable [...] Read more.
This study tests possible sources of long-term risk-adjusted returns on initial public offerings (IPO) in Poland under the calendar-time portfolio (CTP) approach. The moment of going public still remains a puzzle in many areas. Poland’s status as an emerging market has been indisputable for many years, though improvements in capital market infrastructure have led to its recent reclassification as a developed country. It is an important European equity market. Thus, research on IPO pricing explanation for Poland is important for both investors and academics. In this study, we estimate risk premiums and run regressions on four asset pricing models, including the latest innovation, which is the Fama-French 5-factor model. We also check the robustness. The research documents the existence of the long-run underperformance for Polish IPOs independently of the specification of the calendar-time portfolio approach as alphas range from −9.6% to −13.2% annually. We show that the underperformance is mainly driven by IPOs in a position of weak pre-issue financial health. More profitable IPOs experience less negative long-term returns and the underperformance is even absent in some specifications. Full article
(This article belongs to the Special Issue Financial Economics)
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13 pages, 1170 KiB  
Article
Valuation of Digital Platforms: Experimental Evidence for Google and Facebook
by Bodo Herzog
Int. J. Financial Stud. 2018, 6(4), 87; https://doi.org/10.3390/ijfs6040087 - 17 Oct 2018
Cited by 3 | Viewed by 5085
Abstract
This article investigates the fundamental value of digital platforms, such as Facebook and Google. Despite the transformative nature of digital technologies, it is challenging to value digital services, given that the usage is free of charge. Applying the methodology of discrete choice experiments, [...] Read more.
This article investigates the fundamental value of digital platforms, such as Facebook and Google. Despite the transformative nature of digital technologies, it is challenging to value digital services, given that the usage is free of charge. Applying the methodology of discrete choice experiments, we estimated the value of digital free goods. For the first time in the literature, we obtained data for the willingness-to-pay and willingness-to-accept, together with socio-economic variables. The customer’s valuation of free digital services is on average, for Google, 121 € per week and Facebook, 28 €. Full article
(This article belongs to the Special Issue Financial Economics)
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15 pages, 242 KiB  
Article
Development Initiatives, Micro-Enterprise Performance and Sustainability
by Wan Nurulasiah binti Wan Mustapa, Abdullah Al Mamun and Mohamed Dahlan Ibrahim
Int. J. Financial Stud. 2018, 6(3), 74; https://doi.org/10.3390/ijfs6030074 - 27 Aug 2018
Cited by 13 | Viewed by 4824
Abstract
Towards improving the socio-economic condition of low-income households, development organizations offer a repertoire of initiatives. This study focused on the impacts of access to working capital and enterprise development training programs, on the performance and sustainability of micro-enterprises owned and managed by low-income [...] Read more.
Towards improving the socio-economic condition of low-income households, development organizations offer a repertoire of initiatives. This study focused on the impacts of access to working capital and enterprise development training programs, on the performance and sustainability of micro-enterprises owned and managed by low-income households, in the state of Kelantan, Peninsular Malaysia. The data of 450 micro-entrepreneurs, was randomly selected from the participants’ list of three development organizations servicing Kelantan: Amanah Ikhtiar Malaysia (AIM); National Entrepreneurs Economic Group Fund (TEKUN); and Malaysia Fisheries Development Board (LKIM). This study revealed several participation indicators (i.e., years of participation, total number of trainings, total number of training hours received, and number of center meetings or discussions attended, etc.), which have a positive effect on micro-enterprise performance and sustainability. However, the findings were inconclusive as one of the key participation indicators, ‘total amount of economic loans received’, showed a negative (not statistically significant) effect on micro-enterprise performance and sustainability. This study expanded the limited literature on micro-enterprise performance and sustainability, and the role of working capital and enterprise development training programs; thus providing a clearer understanding of the effectiveness of current development initiatives. Full article
(This article belongs to the Special Issue Financial Economics)
19 pages, 351 KiB  
Article
How Macro Transactions Describe the Evolution and Fluctuation of Financial Variables
by Victor Olkhov
Int. J. Financial Stud. 2018, 6(2), 38; https://doi.org/10.3390/ijfs6020038 - 29 Mar 2018
Cited by 3 | Viewed by 2856
Abstract
The description of the dynamics and fluctuations of macro variables remains one of the most exciting problems of financial economics. This paper models macro variables via the description of transactions between agents. We use risk ratings x of agents as their coordinates in [...] Read more.
The description of the dynamics and fluctuations of macro variables remains one of the most exciting problems of financial economics. This paper models macro variables via the description of transactions between agents. We use risk ratings x of agents as their coordinates in the economic space. Transactions like buy–sell, investment, credits, etc., between agents change their extensive financial and economic variables. Aggregates of transactions between all agents with risk ratings x and y define the macro transactions between points x and y. Macro transactions determine the evolution of macro variables. Interactions between different transactions outline their dynamics and fluctuations. We model macro transactions and the interactions between them by economic hydrodynamic-like equations in the economic space. As an example, for simple model interactions between credit–loans and loans–repayment transactions we derive economic hydrodynamic-like equations and wave equations for near perturbations of macro transactions and study simple wave solutions and their consequences. Waves of macro transactions in the economic space propagate from high to low risk agents or vice versa and define the fluctuations of macro financial variables. The existence and diversity of waves and fluctuations of macro transactions in simple models clarifies the importance of wave processes for macro financial modeling and forecasting. Full article
(This article belongs to the Special Issue Financial Economics)
17 pages, 452 KiB  
Article
Hidden Markov Model for Stock Trading
by Nguyet Nguyen
Int. J. Financial Stud. 2018, 6(2), 36; https://doi.org/10.3390/ijfs6020036 - 26 Mar 2018
Cited by 37 | Viewed by 16356
Abstract
Hidden Markov model (HMM) is a statistical signal prediction model, which has been widely used to predict economic regimes and stock prices. In this paper, we introduce the application of HMM in trading stocks (with S&P 500 index being an example) based on [...] Read more.
Hidden Markov model (HMM) is a statistical signal prediction model, which has been widely used to predict economic regimes and stock prices. In this paper, we introduce the application of HMM in trading stocks (with S&P 500 index being an example) based on the stock price predictions. The procedure starts by using four criteria, including the Akaike information, the Bayesian information, the Hannan Quinn information, and the Bozdogan Consistent Akaike Information, in order to determine an optimal number of states for the HMM. The selected four-state HMM is then used to predict monthly closing prices of the S&P 500 index. For this work, the out-of-sample R OS 2 , and some other error estimators are used to test the HMM predictions against the historical average model. Finally, both the HMM and the historical average model are used to trade the S&P 500. The obtained results clearly prove that the HMM outperforms this traditional method in predicting and trading stocks. Full article
(This article belongs to the Special Issue Financial Economics)
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17 pages, 1618 KiB  
Article
Dynamic Relationships between Price and Net Asset Value for Asian Real Estate Stocks
by Kim Hiang LIOW and Sherry YEO
Int. J. Financial Stud. 2018, 6(1), 28; https://doi.org/10.3390/ijfs6010028 - 06 Mar 2018
Cited by 5 | Viewed by 4295
Abstract
This paper examines short- and long-term behavior of the price-to net asset value ratio in six Asian public real estate markets. We find mean-reverting behavior of the ratio and spillover effects, where each of the examined public real estate markets correlates with other [...] Read more.
This paper examines short- and long-term behavior of the price-to net asset value ratio in six Asian public real estate markets. We find mean-reverting behavior of the ratio and spillover effects, where each of the examined public real estate markets correlates with other markets. Additionally, the unexpected shock correlating with the price-to-net asset value ratio in one market has a positive or negative correlation with the ratios of other markets. Our results offer fresh insights to portfolio managers, policymakers, and academic researchers into the regional and country market dynamics of public real estate valuation and cross-country interaction from the long-term and short-term perspectives. Full article
(This article belongs to the Special Issue Financial Economics)
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10 pages, 192 KiB  
Article
Tests of Racial Discrimination in a Simple Financial Market: Managers in Major League Baseball
by Rodney Paul, Andrew Weinbach and Justin Mattingly
Int. J. Financial Stud. 2018, 6(1), 24; https://doi.org/10.3390/ijfs6010024 - 01 Mar 2018
Cited by 1 | Viewed by 4090
Abstract
This study tests for racial discrimination against minority managers in Major League Baseball using financial-market imbalances as it relates to the wagering marketplace for the sport. Using detailed betting data on the percentage bet on the favorite from Sports Insights, we test for [...] Read more.
This study tests for racial discrimination against minority managers in Major League Baseball using financial-market imbalances as it relates to the wagering marketplace for the sport. Using detailed betting data on the percentage bet on the favorite from Sports Insights, we test for prejudice against minority mangers using an ordinary least squares multiple regression model. The results reveal that bettors have a clear preference for the favored team as the percentage bet on the favorite increases with the odds on the favorite. In addition, they prefer road favorites by an even greater margin. In terms of minority managers, there is no evidence of discrimination against minorities. In fact, bettors prefer to wager on minority managers by a statistically significant margin when they are favorites. This finding suggests that either the participants in this financial marketplace are not prejudiced against minority managers or the financial incentives inherent in the market drive out discrimination against the minority managers. Full article
(This article belongs to the Special Issue Financial Economics)
13 pages, 226 KiB  
Article
Foreign Exchange Speculation: An Event Study
by Rob Hayward
Int. J. Financial Stud. 2018, 6(1), 22; https://doi.org/10.3390/ijfs6010022 - 17 Feb 2018
Cited by 8 | Viewed by 7007
Abstract
Does speculation facilitate price discovery or instability? If it is price discovery, it is beneficial and should be encouraged; if it is instability, welfare is enhanced by its reduction. This paper seeks to distinguish between these two characteristics by analysing those times when [...] Read more.
Does speculation facilitate price discovery or instability? If it is price discovery, it is beneficial and should be encouraged; if it is instability, welfare is enhanced by its reduction. This paper seeks to distinguish between these two characteristics by analysing those times when speculation in the foreign exchange market is most extreme. A series of event studies are conducted on the extremes of speculative sentiment and speculative activity. If speculation is noise, extreme sentiment and extreme positions should lead to overshooting and increase risk of subsequent reversals. The finding that speculative extremes do not provide information about subsequent returns implies that speculation is part of the process of price discovery and that efforts to reduce it would reduce the informational efficiency of financial markets. Full article
(This article belongs to the Special Issue Financial Economics)
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17 pages, 592 KiB  
Article
Integrated Supervision of the Financial Market without the UK?
by Michal Janovec
Int. J. Financial Stud. 2018, 6(1), 20; https://doi.org/10.3390/ijfs6010020 - 09 Feb 2018
Viewed by 3834
Abstract
This paper analyses the integration of financial market supervision at international level, particularly focusing on EU law and the actual processes taking place in this area considering Brexit as its part. Current legislative action at EU level has a significant impact on legislation [...] Read more.
This paper analyses the integration of financial market supervision at international level, particularly focusing on EU law and the actual processes taking place in this area considering Brexit as its part. Current legislative action at EU level has a significant impact on legislation in all member countries of European Union. This paper seeks, among other things, to find the causes of the increasingly ongoing process of integration of financial market supervision and determine whether or not the direction in which the international integration is going is the right one. The objective of this paper is to determine whether or not the process of integration increases the efficiency of financial market supervision itself and helps to develop the European single market, while simultaneously reducing systemic risk to financial market stability. Full article
(This article belongs to the Special Issue Financial Economics)
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1559 KiB  
Article
Goodness-of-Fit versus Significance: A CAPM Selection with Dynamic Betas Applied to the Brazilian Stock Market
by André Ricardo de Pinho Ronzani, Osvaldo Candido and Wilfredo Fernando Leiva Maldonado
Int. J. Financial Stud. 2017, 5(4), 33; https://doi.org/10.3390/ijfs5040033 - 04 Dec 2017
Cited by 4 | Viewed by 3502
Abstract
In this work, a Capital Asset Pricing Model (CAPM) with time-varying betas is considered. These betas evolve over time, conditional on financial and non-financial variables. Indeed, the model proposed by Adrian and Franzoni (2009) is adapted to assess the behavior of some selected [...] Read more.
In this work, a Capital Asset Pricing Model (CAPM) with time-varying betas is considered. These betas evolve over time, conditional on financial and non-financial variables. Indeed, the model proposed by Adrian and Franzoni (2009) is adapted to assess the behavior of some selected Brazilian equities. For each equity, several models are fitted, and the best model is chosen based on goodness-of-fit tests and parameters significance. Finally, using the selected dynamic models, VaR (Value-at-Risk) measures are calculated. We can conclude that CAPM with time-varying betas provide less conservative VaR measures than those based on CAPM with static betas or historical VaR. Full article
(This article belongs to the Special Issue Financial Economics)
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1041 KiB  
Article
A Study of Perfect Hedges
by Stoyu I. Ivanov
Int. J. Financial Stud. 2017, 5(4), 28; https://doi.org/10.3390/ijfs5040028 - 14 Nov 2017
Cited by 3 | Viewed by 3634
Abstract
In this study, we attempt to identify the asset which has the best hedging characteristics against inflation. We study stock, bond, commodity, real estate and oil indexes. We also study these indexes tracking exchange traded funds (ETFs) to determine the most beneficial tradable [...] Read more.
In this study, we attempt to identify the asset which has the best hedging characteristics against inflation. We study stock, bond, commodity, real estate and oil indexes. We also study these indexes tracking exchange traded funds (ETFs) to determine the most beneficial tradable asset in addition to the more theoretical index for inflation hedging. We find that, in our sample, oil is the best hedge against inflation, even though three in total are a good hedge—oil, gold and corn—with corn and oil being complete hedges, while gold is a partial hedge. Two assets have conflicting results depending on whether we examine the index or the ETF: the real estate index is a hedge, whereas real estate ETF is the opposite of a hedge. Similarly, the bond index is not related to inflation, whereas bond ETF is the opposite of a hedge. We find that stocks, soy and beef are not hedges against inflation. Full article
(This article belongs to the Special Issue Financial Economics)
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249 KiB  
Article
The Effect of Stock Return Sequences on Trading Volumes
by Andrey Kudryavtsev
Int. J. Financial Stud. 2017, 5(4), 20; https://doi.org/10.3390/ijfs5040020 - 01 Oct 2017
Cited by 4 | Viewed by 4119
Abstract
The present study explores the effect of the gambler’s fallacy on stock trading volumes. I hypothesize that if a stock’s price rises (falls) during a number of consecutive trading days, then the gambler’s fallacy may cause at least some of the investors to [...] Read more.
The present study explores the effect of the gambler’s fallacy on stock trading volumes. I hypothesize that if a stock’s price rises (falls) during a number of consecutive trading days, then the gambler’s fallacy may cause at least some of the investors to expect that the stock’s price “has” to subsequently fall (rise), and thus, to increase their willingness to sell (buy) the stock, resulting in a stronger degree of disagreement between the investors and a higher-than-usual stock trading volume on the first day when the stock’s price indeed falls (rises). Employing a large sample of daily price and trading volume data, I document that following relatively long sequences of the same-sign stock returns, on the days when the sign is reversed, the trading activity in the respective stocks is abnormally high. Moreover, average abnormal trading volumes gradually and significantly increase with the length of the preceding return sequence. The effect is slightly more pronounced following the sequences of negative stock returns, and remains significant after controlling for other potentially influential factors, including contemporaneous and lagged actual and absolute stock returns, historical stock returns and volatilities, and company-specific events, such as earnings announcements and dividend payments. Full article
(This article belongs to the Special Issue Financial Economics)
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