This study investigates the day of the week effect on the volatility of major stock market indexes for the period of 1988 through 2002. Using a conditional variance framework, we find that the day of the week effect is present in both return and volatility equations. The highest volatility occurs on Mondays for Germany and Japan, on Fridays for Canada and the United States, and on Thursdays for...

Article history: Received 8 August 2012 Received in revised form 18 June 2014 Accepted 1 July 2014 Available online 9 July 2014 This paper examines how stock market liquidity and commonality in liquidity are impacted by real-time output gap and inflation, as these macroeconomic variables have been shown to be the main drivers of monetary policy according to the Taylor rule. We show that an incr...

This paper studies the consequences of opening asset markets more often for the properties of asset prices and social welfare. For all reasonable parameter values, increasing trading hours lowers average asset prices, increases unconditional asset price volatility at a given point in time, and decreases unconditional asset price volatility when averaged over the period of time that includes the...

This paper attempts to elucidate whether firm performance and macroeconomic conditions play a significant role in explaining credit default swap (CDS) spreads. Our panel dataset covers 112 reference entities in four markets (South Korea, Hong Kong, France, and Germany) for the period 2001-12. Overall, our results suggest that market value indicators (Tobin’s Q, stock market returns, and the int...

We derive a general expression for the value of information to a price-taking investor in a dynamic environment and provide a framework for its estimation from option prices. We study the value of both private and public information and break it down into its instrumental and psychic parts. We apply this framework and estimate that a consumer-investor with commonlyused preference parameters wou...

Financial markets witness high levels of activity at certain times, but remain calm at others. This makes the flow of physical time discontinuous. Therefore using physical time scales for studying financial time series, runs the risk of missing important activities. An alternative approach is the use of an event-based time that captures periodic activities in the market. In this paper, we use a...

We study the dynamic relation between aggregate mutual fund flow and market-wide volatility. Using daily flow data and a VAR approach, we find that market volatility is negatively related to concurrent and lagged flow. A structural VAR impulse response analysis suggests that shock in flow has a negative impact on market volatility: An inflow (outflow) shock predicts a decline (an increase) in v...

This paper examines the relationship between stock returns and inflation. We focus on various econometric techniques to test this relationship, using monthly values of the Athens Stock Exchange Price index and the Greek Consumer Price index over the period 1988-2002. The results from a simple OLS model show evidence of a positive but not significant relationship, while when we consider a system...

An electronic limit order book is resilient when it reverts to its normal shape promptly after large trades. This paper suggests a continuous-time impulse response function based on intensities, which formalizes resiliency in terms of a timeframe and probability of order book replenishment. This is then estimated for trading on an LSE order book, using an appropriate parametric model which view...

Quantification techniques are popular methods in empirical research for aggregating the qualitative predictions at the microlevel into a single figure. In this paper, we analyze the forecasting performance of various methods that are based on the qualitative predictions of financial experts for major financial variables and macroeconomic aggregates. Based on the Centre of European Economic Rese...