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Sentiment matters: the effect of news-media on spillovers among cryptocurrency returns The European Journal of Finance (IF 1.903) Pub Date : 2024-03-11 Erdinc Akyildirim, Ahmet Faruk Aysan, Oguzhan Cepni, Özge Serbest
This paper explores the relationship between news media sentiment and spillover effects in the cryptocurrency market. By employing a time-varying parameter vector autoregressive model, we initially...
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Do social media sentiments drive cryptocurrency intraday price volatility? New evidence from asymmetric TVP-VAR frequency connectedness measures The European Journal of Finance (IF 1.903) Pub Date : 2024-03-11 Suwan (Cheng) Long, Ioannis Chatziantoniou, David Gabauer, Brian Lucey
In this paper, we investigate interdependencies between cryptocurrencies and investor sentiment by introducing the asymmetric TVP-VAR frequency connectedness approach. Our empirical results provide...
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Model scan of factors in U.K. stock returns The European Journal of Finance (IF 1.903) Pub Date : 2024-02-06 Jonathan Fletcher, Andrew Marshall, Michael O’Connell
We use the Bayesian model scan approach of Chib, S., X. Zeng, and L. Zhao. 2020. ‘On Comparing Asset Pricing Models.’ The Journal of Finance 75 (1): 551–577. https://doi.org/10.1111/jofi.12854, and...
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Hedging, optimal capital structure and incentives for risk-shifting with preferences for liquidity The European Journal of Finance (IF 1.903) Pub Date : 2024-02-06 Pengfei Luo, Ting Lu, DanDan Song, Jinglu Jiang
We develop a dynamic incomplete-markets model of entrepreneurial firms and demonstrate the implications of preferences for liquidity to entrepreneur's interdependent consumption, portfolio allocati...
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Let me sleep on it: sleep and investor reactions to earnings surprises The European Journal of Finance (IF 1.903) Pub Date : 2024-01-29 Angelica Gonzalez, Xuhao Li
We explore if sleep deprivation affects how investors react to relevant news. Using the transition to Daylight Saving Time (DST) in spring as a disruption to sleeping patterns, we show that investo...
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Investor sentiment and stock market returns: a story of night and day The European Journal of Finance (IF 1.903) Pub Date : 2024-01-24 Wenzhao Wang
Some financial relations have been confirmed to be different overnight and intraday due to different clienteles. In this paper, we assess the impact of investor sentiment on stock market returns in...
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Persistence or reversal? The effects of abnormal trading volume on stock returns The European Journal of Finance (IF 1.903) Pub Date : 2024-01-22 Mingyi Li, Xiangkang Yin, Jing Zhao
Having established that portfolios derived from the extreme deciles of Abnormal Trading Volume (ATV) generate positive (negative) returns in the short (long) run, we devise a measure of Persistence...
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The benefits of return smoothing in insurer's cover funds – analyzes from a client's perspective The European Journal of Finance (IF 1.903) Pub Date : 2024-01-18 Jochen Ruß, Stefan Schelling, Mark Benedikt Schultze
Traditional life insurance typically uses some mechanism that is aimed at smoothing the returns of the (collective) assets in the insurer's so-called cover fund. We consider a generic smoothing mec...
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The role of board age diversity in the performance of publicly listed Fintech entities The European Journal of Finance (IF 1.903) Pub Date : 2023-12-24 Paraskevi Katsiampa, Paul B. McGuinness, Hanxiong Zhang
The present study addresses the important demographic of director age in relation to the performance of the constituent firms of Fintech-focused Exchange Traded Funds (ETFs). While private Fintech ...
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The influence of cultural norms on international equity allocation The European Journal of Finance (IF 1.903) Pub Date : 2023-12-18 Alexandru Todea, Cristina Harin
We investigate the effect of cultural tightness-looseness on foreign bias in international equity allocation using data for 29 home investor countries and 37 destination countries for the period 20...
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Crash risk connectedness in commodity markets The European Journal of Finance (IF 1.903) Pub Date : 2023-12-13 Najaf Iqbal, Muhammad Abubakr Naeem, Sitara Karim, Muhammad Haseeb
In contrast to the extant literature on returns, volumes, and volatility spillovers, we examine the crash risk connectedness of 13 commodity markets in the energy, metal, and agricultural sectors, ...
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Cryptocurrency research: future directions The European Journal of Finance (IF 1.903) Pub Date : 2023-12-13 Andrew Urquhart, Larisa Yarovaya
Since Bitcoin was first proposed in late 2008 and went live in 2009, hundreds of research papers have been published trying to understand the behaviour of cryptocurrencies and their impact on finan...
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Internationalization and zero leverage The European Journal of Finance (IF 1.903) Pub Date : 2023-11-14 Eleni Chatzivgeri, Panagiotis Dontis-Charitos, Sheeja Sivaprasad, Jonathan Williams
Despite growing attention on the role of internationalization in capital structure and the increasing adoption of zero-leverage policies by multinationals (MNC), no study examines the effect of int...
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Measuring the differentiation and decentralization of managers' risk attention and their impacts The European Journal of Finance (IF 1.903) Pub Date : 2023-11-09 Ling Zhou, Zongrun Wang, Jianxin Wang
Managers' attention to different risk factors conveys important information to investors. This paper examines the association between managers' risk attention allocation schemes and the performance...
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Financial network structure and systemic risk The European Journal of Finance (IF 1.903) Pub Date : 2023-10-31 Chuangxia Huang, Yanchen Deng, Xiaoguang Yang, Yaqian Cai, Xin Yang
For systemic risk, the impact of the financial network's characteristics remains imperfectly understood at best, even if the view that network structure is closely related to systemic risk has beco...
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Interpretable image-based deep learning for price trend prediction in ETF markets The European Journal of Finance (IF 1.903) Pub Date : 2023-11-01 Ruixun Zhang, Chaoyi Zhao, Guanglian Lin
Image-based deep learning models excel at extracting spatial information from images but their potential in financial applications has not been fully explored. Here we propose the channel and spati...
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Industry volatility spillover and aggregate stock returns The European Journal of Finance (IF 1.903) Pub Date : 2023-10-25 Yaojie Zhang, Mengxi He, Danyan Wen
We propose an industry volatility spillover index and find that this new predictor has an impressive in-sample and out-of-sample predictability of aggregate stock returns. A one-standard-deviation ...
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Labor unions and debt covenant violations* The European Journal of Finance (IF 1.903) Pub Date : 2023-10-10 Guangzi Li, Yili Lian, Yi Zhang
This study examines the relationship between labor unions and firms’ decisions to violate debt covenants. We find that firms with high unionization rates are more likely to violate debt covenants t...
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Corporate dividend policy, managerial overconfidence, myopia, and investor irrationality: a complex concoction The European Journal of Finance (IF 1.903) Pub Date : 2023-09-15 Abdullah AlGhazali, Richard Fairchild, Yilmaz Guney
Corporate dividend policy is a puzzle, especially when considering the effects of economic and behavioural factors. We develop a theoretical analysis of corporate dividend policy in order to analyse the effects of the complex mix of managerial moral hazard, overconfidence, and myopia on managerial incentives to increase or decrease dividends. Furthermore, we consider the effect of investor irrationality
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Indigenous corporate responsibility and financial performance The European Journal of Finance (IF 1.903) Pub Date : 2023-09-13 Marie Racine
The impact of Corporate Social Responsibility with respect to Indigenous (CSRI) initiatives and issues on financial performance was studied using several CSRI metrics, both innovated (where necessary) and pre-existing (where possible). We find that CSRI initiatives based on dollar expenditures and firm website scores are positively associated with financial performance while increase to reputation
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Sustainable finance and governance: an overview The European Journal of Finance (IF 1.903) Pub Date : 2023-09-13 Stylianos Asimakopoulos, Chardin Wese Simen, Andrew Vivian
We are currently facing great challenges around balancing environmental and social issues with economic development. This article provides an overview and insight into these challenges from a Finance perspective. It then introduces contemporary research that address specific points of interest.
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An enhanced investor sentiment index* The European Journal of Finance (IF 1.903) Pub Date : 2023-09-05 Sze Nie Ung, Bartosz Gebka, Robert D. J. Anderson
We propose an enhancement to the well-known market-based investor sentiment index by Baker, M., and J. Wurgler. (2006. “Investor Sentiment and the Cross-Section of Stock Returns.” The Journal of Finance 61 (4): 1645–1680). The low forecasting power of that index for future aggregate stock market returns has long been a puzzle, and we demonstrate that its ability to empirically capture latent investor
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The impact of the global financial crisis and the European sovereign debt crisis on the capital structure of firms in Europe: do SMEs, and listed firms respond the same? The European Journal of Finance (IF 1.903) Pub Date : 2023-09-05 Tinashe C. Bvirindi, Ode-Ichakpa Inalegwu
This study examines the evolution of the capital structure of European firms during the global financial crisis and European debt crisis. We compare the experiences of SMEs, listed firms and private firms in different industries and investigate the role of country and institutional factors in affecting capital structure. We find that SMEs, private firms, and non-listed firms experience lower declines
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Bank market power and interest rate setting: why consolidated banking data matter The European Journal of Finance (IF 1.903) Pub Date : 2023-09-04 Théo Nicolas
The literature on the effects of bank market power on access to credit has produced many results that are sometimes contradictory. Yet, all of these studies are based on unconsolidated data that ignore the national market power of banking groups. This results in an underestimation bias that this paper proposes to correct. Using a panel of more than 55,000 French firms covering the period 2006–2017
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Brexit and coronavirus: financial perspectives and future prospects The European Journal of Finance (IF 1.903) Pub Date : 2023-08-30 Rakesh K. Bissoondeeal, Jane M. Binner, Costas Milas
The economic landscape of the UK has been significantly shaped by the intertwined issues of Brexit, COVID, and their interconnected impacts. The disruptions caused by Brexit and the COVID pandemic have created uncertainty and upheaval for both businesses and individuals. Whilst the effects of COVID are now receding, Brexit is still dominating headlines seven years after the referendum and is likely
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Portfolio allocation and borrowing constraints The European Journal of Finance (IF 1.903) Pub Date : 2023-08-24 Raslan Alzuabi, Sarah Brown, Daniel Gray, Mark N. Harris, Christopher Spencer
Using the US Survey of Consumer Finances, we explore the empirical relationship between borrowing constraints and financial portfolio allocation by American households. To help motivate our empirical analysis we initially draw insights from a mean-variance model of optimal portfolio allocation with three tradable asset classes defined by increasing risk, and establish a link between borrowing restrictions
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Risk in the cryptocurrency markets: the role of structural breaks and fat-tailed distributions in estimating value-at-risk and expected shortfall The European Journal of Finance (IF 1.903) Pub Date : 2023-08-02 Saswat Patra, Neha Gupta
Cryptocurrencies have gained much attention in recent times with investors, speculators, and regulators showing a keen interest in the cryptocurrency markets. However, not much attention has been paid to quantifying their risk measures. This paper estimates the risk in the cryptocurrency markets using Value-at-Risk and Expected Shortfall. We use Johnsons Su distribution to model the innovations in
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Trading patterns in the bitcoin market The European Journal of Finance (IF 1.903) Pub Date : 2023-08-02 Anqi Liu, Hossein Jahanshahloo, Jing Chen, Arman Eshraghi
ABSTRACT Despite the growing literature on Bitcoin and other cryptocurrencies, we know relatively little about who are involved in trading, transacting and using these assets and how they behave. Examining millions of Bitcoin transaction records, we show that less than 1% of Bitcoin users contribute to more than 95% of the market volumes. These ‘whales’ are often associated with strategic trading/transaction
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The impact of corruption on investment and financing in the European Union: new insights The European Journal of Finance (IF 1.903) Pub Date : 2023-08-02 Jorge Farinha, Oscar López-de-Foronda
Corruption is a phenomenon that is not just restricted to less developed nations, but also touches developed countries like those in the European Union, often seen as one of the least corrupt econo...
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Hedging quantitative easing The European Journal of Finance (IF 1.903) Pub Date : 2023-07-27 Adrian Melia, Xiaojing Song, Mark Tippett, John van der Burg
Arguably the greatest concern surrounding quantitative easing is its potential for expanding the money supply at a rate which outstrips the rate of growth in national output. This will almost surel...
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Optimal intertemporal liquidation of institutional investors with cash requirements and viable loans The European Journal of Finance (IF 1.903) Pub Date : 2023-07-05 Dongyeol Lee, Woo Chang Kim
This study examines the optimal intertemporal liquidation strategies to meet the cash requirements of large institutional investors in the presence of permanent and temporary price impacts. We cons...
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Culture and integration of Eurozone life insurance markets The European Journal of Finance (IF 1.903) Pub Date : 2023-07-04 María Rubio-Misas
This paper provides the first evidence on the role of national culture in the integration of Eurozone life insurance markets. It analyzes seven markets over a sixteen-year sample period that includ...
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People and investor attention to climate change The European Journal of Finance (IF 1.903) Pub Date : 2023-06-25 Mauro Aliano, Giuseppe Galloppo, Viktoriia Paimanova
The paper analyses whether people’s attention to climate change emergency contributes to the stock market returns by accounting for the mitigation role of the corporate social performance proxied b...
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The cost of fragmentation: lessons from initial public offerings* The European Journal of Finance (IF 1.903) Pub Date : 2023-06-13 Moez Bennouri, Sonia Falconieri, Daniel Weaver
This paper investigates both theoretically and empirically the impact of market structure on the price discovery process at the opening of trading of IPOs. Some papers suggest that IPO value uncertainty is not fully resolved at the offering but continues into the aftermarket. Our model predicts that this ex-post uncertainty, i.e. the residual uncertainty about the firm value in the aftermarket, is
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A reality check on the GARCH-MIDAS volatility models The European Journal of Finance (IF 1.903) Pub Date : 2023-06-08 Nader Virk, Farrukh Javed, Basel Awartani, Stuart Hyde
We employ a battery of model evaluation tests for a broad set of GARCH-MIDAS models and account for data snooping bias. We document that inferences based on standard tests for GM variance component...
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Memory-enhanced momentum in commodity futures markets The European Journal of Finance (IF 1.903) Pub Date : 2023-06-06 Julia S. Mehlitz, Benjamin R. Auer
Motivated by the deteriorating performance of traditional cross-sectional momentum strategies in commodity futures markets, we propose to resurrect momentum by incorporating autocorrelation information into the asset selection process. Put differently, we introduce measures of short and long memory (variance ratios and Hurst coefficients, respectively) telling us whether past winners and losers are
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Informational inefficiency on bitcoin futures The European Journal of Finance (IF 1.903) Pub Date : 2023-05-28 Shimeng Shi, Jia Zhai, Yingying Wu
This paper investigates the dynamics and drivers of informational inefficiency in the Bitcoin futures market. To quantify the adaptive pattern of informational inefficiency, we leverage two groups ...
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UK or the Eurozone: which common currency area can work for Northern Ireland after Brexit? The European Journal of Finance (IF 1.903) Pub Date : 2023-05-26 Jane Binner, Sajid M. Chaudhry, James L. Swofford, Meng Tong
Brexit and the controversy concerning an Irish border makes the issue of whether Northern Ireland is a common currency area with the rest of UK or the Eurozone topical. We test the microeconomic fo...
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International music preferences as a measure of culture: evidence from cross-border mergers The European Journal of Finance (IF 1.903) Pub Date : 2023-05-25 Antonios Siganos
This paper introduces the significance of international music preferences as a determinant of cross-border mergers. We argue that international music preferences capture the distance in culture bet...
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Profitability of insider trading in Turkey The European Journal of Finance (IF 1.903) Pub Date : 2023-05-24 S. Burcu Avci
This study presents the first comprehensive evidence of insider trading patterns and abnormal profits in the Turkish stock market using almost 65,000 insider transactions for the period of 2008–201...
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The impact of uncertainty on money demand in the UK, US and Euro area The European Journal of Finance (IF 1.903) Pub Date : 2023-05-23 Rakesh K. Bissoondeeal, Jane M. Binner, Michail Karoglou
We estimate money demand functions for the UK, the Euro area and the US using Divisia monetary aggregates and investigate the extent to which the uncertainty caused by Brexit and Covid have affected these relationships. Our cointegrated VAR analysis shows that for all three economies Brexit and/or Covid have had some impact on the stability of money demand functions. We find that including a measure
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What drives the performance and causality of green bond indices? The European Journal of Finance (IF 1.903) Pub Date : 2023-05-17 Konstantinos N. Baltas, Robert Mann
This paper empirically assesses the performance of green bond indices and the causality of that performance using a range of financial and commodity data. We present new insights from the novel app...
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The new challenges of global banking and finance The European Journal of Finance (IF 1.903) Pub Date : 2023-05-11 Winifred Huang, Philip Molyneux, Steven Ongena, Ru Xie
The economic downturn caused by the Covid-19 pandemic has brought unprecedented uncertainty to the global banking system. Banks are facing critical market challenges driven by uncertain monetary policies, deterioration in credit quality, and regulation and compliance pressures. These challenges highlight the importance of better understanding the new role of financial intermediations in facilitating
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Disentangling prefectural similarities in the capital structure of Japanese SMEs through pairwise testing The European Journal of Finance (IF 1.903) Pub Date : 2023-05-10 Huseyin Ozturk, Yukihiro Yasuda
We investigate the capital structure of small- and medium-sized enterprises in Japan during 2007–2019 to identify whether firm-specific determinants of leverage exhibit locational differences among Japanese prefectures. To do so, we propose a testing scheme that disentangles potential similarities across prefecture pairs. When we apply the proposed testing scheme by creating 1081 prefecture pairs,
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A new channel for global volatility propagation The European Journal of Finance (IF 1.903) Pub Date : 2023-05-11 Shuning Chen, Jianxin Wang
We compare two channels for global impact on local volatility: the direct channel in which global variables affect the expected value of local volatility, and a new channel in which they affect loc...
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Finally, it seems to be working – the evolving valuation effect of the European Union’s emissions trading system The European Journal of Finance (IF 1.903) Pub Date : 2023-05-11 Benjamin Lynch, Martha O’Hagan-Luff
This research examines the market reaction to the publication of firm-specific environmental news for participating firms in the European Union’s Emissions Trading System (EU ETS) during its third ...
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Do dividend policies of privately held firms follow a life cycle? The European Journal of Finance (IF 1.903) Pub Date : 2023-05-01 Jovana Cadenovic, Marc Deloof, Ine Paeleman
We investigate whether the dividend policies of privately held firms follow a predictable pattern that parallels their life cycles. Our analyses are based on a large sample of 113,599 Belgian priva...
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Natural disasters and corporate innovation The European Journal of Finance (IF 1.903) Pub Date : 2023-04-27 Huong Le, Tung Nguyen, Andros Gregoriou, Jerome Healy
We examine how natural disasters affect corporate innovation. Using a comprehensive sample of U.S. firms and inventors, we find that natural disasters significantly drop innovation quantity and quality. The results are robust to include a broad set of regional characteristics, matching analysis, and alternative proxies for innovation. These effects persist for up to three years after the disaster.
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Pricing credit-risky bonds using recovery rate uncertainty and macro-regime switching The European Journal of Finance (IF 1.903) Pub Date : 2023-04-24 Son-Nan Chen, Pao-Peng Hsu, Kuo-Yuan Liang
A proposed model is used to account for both the recovery rate and regime-switching uncertainties for pricing credit-risky bonds. A two-factor hazard rate model (TFHRM) is also considered, where th...
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Valuation of spread options under correlated skew Brownian motions The European Journal of Finance (IF 1.903) Pub Date : 2023-04-20 Shiyu Song, Xingchun Wang, Xiaowen Zhang
In this paper, we employ correlated skew Brownian motions to describe the dynamics of the two assets underlying the spread option. In the pricing model, the two underlying assets are exposed to exogenous risks captured by the same Brownian motion, and their endogenous risks are also assumed to be correlated with each other. We obtain an approximate pricing formula of spread options and calibrate model
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Risk taking in the context of financial advice: does gender interaction matter? The European Journal of Finance (IF 1.903) Pub Date : 2023-04-20 Jerome Monne, Janette Rutterford, Dimitris P. Sotiropoulos
This study tests a gender threat hypothesis whereby having a financial advisor of the opposite gender results in gender stereotypical risk attitudes in portfolio choice. We employ a unique dataset ...
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The impact of government borrowing on corporate acquisitions: international evidence The European Journal of Finance (IF 1.903) Pub Date : 2023-03-27 Azizjon Alimov
This study examines how variation in government borrowing affects corporate acquisition activity around the world. Using a large sample of firms and deals from 50 countries between 1991 and 2017, the paper finds that government debt issuance is strongly negatively associated with acquisition activity at the firm and aggregate levels. An instrumental variable approach corroborates these findings, thus
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The pricing of unexpected volatility in the currency market The European Journal of Finance (IF 1.903) Pub Date : 2023-03-22 Wenna Lu, Laurence Copeland, Yongdeng Xu
Many recent papers have investigated the role played by volatility in determining the cross-section of currency returns. This paper employs two time-varying factor models: a threshold model and a M...
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The information content of currency option-implied volatilities: implications for ex-ante forecasts of global equity correlations The European Journal of Finance (IF 1.903) Pub Date : 2023-03-21 Antonio Figueiredo, Ali M. Parhizgari, Brice Dupoyet
We use existing currency models, global capital flows, international parity, the Taylor rule, and some simplifying assumptions to derive and empirically test a link between the information containe...
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Improving financial volatility nowcasts* The European Journal of Finance (IF 1.903) Pub Date : 2023-03-16 Robinson Kruse-Becher, Yuze Liu
ABSTRACT Recently, a simple nowcasting model for volatility has been proposed by Breitung and Hafner [2016. A Simple Model for Now-Casting Volatility Series. International Journal of Forecasting 32 (4): 1247–1255. doi:10.1016/j.ijforecast.2016.04.007]. They suggest a model in which today's volatility is not only driven by past returns, but also by the current information from the same day. Empirical
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Capital ideas: optimal capital accumulation strategies for a bank and its regulator The European Journal of Finance (IF 1.903) Pub Date : 2023-03-01 Kristoffer J. Glover, Paul V. Johnson, Geoffrey W. Evatt, Mingliang Cheng
We formulate a continuous-time model of a deposit taking bank, operating subject to capital adequacy regulation, and where the bank's loans are exposed to default risk. The bank maximises its marke...
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The impact of corporate social responsibility on corporate financialization The European Journal of Finance (IF 1.903) Pub Date : 2023-02-16 Kun Su, Yue Lu
We examine the impact of corporate social responsibility (CSR) on corporate financialization. Corporate financialization refers to the phenomenon where managers divert corporate resources from the ...
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Country corruption and corporate cash holdings: the mediating effect of firm’s anti-bribery policy The European Journal of Finance (IF 1.903) Pub Date : 2023-02-16 Teresa Elvira-Lorilla, Inigo Garcia-Rodriguez, M. Elena Romero-Merino, Marcos Santamaria-Mariscal
The literature about the influence of country corruption on corporate cash holdings is not conclusive as there are studies supporting both a positive and negative relationship. To better explain th...
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The stable tail dependence and influence among the European stock markets: a score-driven dynamic copula approach The European Journal of Finance (IF 1.903) Pub Date : 2023-02-01 William A. Barnett, Xue Wang, Hai-Chuan Xu, Wei-Xing Zhou
This paper studies the time-varying tail dependence among the European stock markets and assesses the influence of individual financial markets. By utilizing two generalized autoregressive score (GAS) copulas, we compute the tail dependence for 11 European stock indexes and 1 American stock index over the last 16 years. Notably, it is found that the dependencies among European stock indexes are generally
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The combined effects of economic policy uncertainty and environmental, social, and governance ratings on leverage The European Journal of Finance (IF 1.903) Pub Date : 2023-01-05 Panagiotis Asimakopoulos, Stylianos Asimakopoulos, Xinyu Li
This paper examines the combined effects of Economic Policy Uncertainty (EPU) and Environmental, Social, and Governance (ESG) ratings on the level of leverage and its speed of adjustment (SOA). We find that both the EPU and ESG ratings are negatively associated with leverage when assessed separately. However, when EPU and ESG ratings are combined, we show that ESG ratings mitigate the detrimental impact