We investigate the effect of a stock market liberalization on industry growth in emerging markets. Consistent with the view that liberalization reduces financing constraints, we find that industries that are more externally dependent and face better growth opportunities grew faster following liberalization. However, this growth increase appears to come from an expansion in the size of existing ...

Article history: Received 9 March 2007 Accepted 9 July 2008 Available online 12 October 2008 We examine four European stock indices and the prices of eight major German stocks for indications of psychological barriers. The frequency, (expected) returns, intraday volatility and trading volume of these assets are studied contingent on whether the prices lie within a certain range around round num...

The finance literature documents the relation between labor income and the crosssection of stock returns. A possible explanation is the hedging of investors with relative wealth concerns who pay a premium for securities that help them to keep up with their peers. Relative wealth concerns imply a local effect and a negative risk premium associated with the risk factor, since investors are willin...

In this analysis the interdependence between foreign exchange markets and stock markets for selected accession and cohesion countries is discussed. This includes basic theoretical approaches. Monthly data for the nominal stock market indices and nominal exchange rates are used, where Ireland, Portugal, Spain, Greece, Poland, Czech Republic, Slovenia, and Hungary are included in the analysis. Fr...

We introduce habit formation in a model that studies the link between international trade in financial assets, economic growth, and welfare. As with time separable preferences asset trade increases the mean growth rate, but it also increases growth-volatility. We demonstrate that the welfare gain from asset trade is lower with habit persistence in consumption. This reflects that the habit-formi...

The paper deals with the valuation and the hedging of non path-dependent European options on one or several underlying assets in a model of an international economy allowing for both, interest rate risk and exchange rate risk. Using martingale theory and in particular the change of numeraire technique we provide a unified and easily applicable approach to pricing and hedging exchange options on...

Internationally operating firms naturally face the decision whether or not to hedge the currency risk implied by foreign investments. In a recent paper, Bos, Mahieu and van Dijk (2000) evaluate the returns from optimal and alternative currency hedging strategies, for a series of 7 models, using Bayesian inference and decision analysis. The models differ in the way time-varying means, variances ...

We look at two countries that have independent fundamentals, but share the same group of investors. Each country might face a self-fulfilling crisis: Agents withdrawing their investments fearing that others will. A crisis in one country reduces agents’ wealth. This makes them more averse to the strategic risk associated with the unknown behavior of other agents in the second country, increasing...

Using data from publicly traded South Korean corporations for the period 1980-94, this paper finds evidence that increases in financial liberalization that accompanied the more general process of financial globalization have significantly reduced the maturity structure of corporate debt contracts, thus lending partial empirical support to the idea that financial liberalization can be well descr...

This paper examines the level of integration of European stock markets. We estimate a conditional asset pricing model, which allows for a time-varying degree of integration that measures the importance of EU-wide risk relative to country-speci c risk. The model accounts for intra-European currency risk, time-varying quantities and prices of risk. The results indicate that the degree of integrat...