Applied Finance Letters (E-Journal - Auckland Centre for Financial Research)
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149 research outputs found
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IS BITCOIN IMMUNE TO THE COVID-19 PANDEMIC?
Full text linkThis study examines how Bitcoin’s trading characteristics react to the COVID-19 pandemic, using detailed futures trading data from the Chicago Mercantile Exchange. The results show that volume-weighted Bitcoin futures return responds positively to the spikes of public interest. Meanwhile, the surges of pandemic information do not harm market quality. Volume, bid-ask spread, and trading frequency remain stable, indicating that the positive price reaction is not a result of a few small uninformed trades. Bitcoin's conditional beta on the S&P 500 index drops to near zero, while the conditional beta on gold more than doubles. These results indicate that traders have been using Bitcoin as a safe-haven asset after the pandemic outbreak
COVID-19 IS DEADLY! LONG LIVE THE KING, CORPORATE CASH HOLDINGS!
Full text linkCovid-19 has adversely affected the human race. With human race confined to their houses, the level of consumption has gone down and it has significant negative impact on the cash flows of the existing businesses. In this study, using different scenarios and stress level, we try to predict the impact on businesses cash flows and establish the role of corporate cash holdings in avoiding illiquidity of businesses
DO ECONOMIC FORECASTERS BELIEVE THE STOCK MARKET IS EFFICIENT? EVIDENCE FROM GERMANY
Full text linkThe perception of market efficiency is quite different from the reality of market efficiency. We show using a large survey of German market forecasters that few respondents consistently believe that the stock market is currently efficient and will remain so. Past volatility tends to erode the view that the market is efficient and strengthen the belief that the market is inefficient. 
REVISITING GOLD'S SAFE HAVEN STATUS WITH THE UTILIZATION OF THE INDEX OF IMPLIED VOLATILITY AND VALUES OF EXCHANGE TRADED FUNDS
Full text linkThe coronavirus pandemic is a health and economic crisis which has placed an immense strain on the world’s financial system. Hence, amidst the (still ongoing) Covid-19 pandemic, the objective of this work is to investigate the role of gold as as a hedge or safe haven with the use of exchange traded funds. The present work employs the implied volatility index of gold share options (GVZ), the net asset value of the price per share of the US Oil Fund options (USO) and the value of the Currency Share Euro Trust (FXE). The statistical tool utilized is the quantile regressions methodology. Data are daily observations from June 2008 to December 2018. The empirical results reveal that gold's implied volatility decreases significantly (or it is not statistically different than zero), under changes in the average returns and/or under extreme market declines in FXE and USO. According to the aforementioned findings, gold could be an investment vehicle to serve as a hedge and or a safe haven asset. The present study is the first one to employ quantile regressions (QR) along with gold's implied volatility and the prices of exchange traded funds (ETFs) in order to investigate gold's hedge and/or safe haven properties
FINANCIAL RISKS AND STOCK MARKET CRASHES: AN EMPIRICAL ANALYSIS OF THE TUNISIAN STOCK MARKET
Full text link This study aims to investigate the effect of financial risks on the stock market crashes occurrence from 1999 to 2020. Using the windows method, we detect two stock market crises in the Tunisian stock market. Based on the probit model, we find evidence that low stock return risk, low EUR/TND exchange rate risk, high interest rate risk, high credit risk and high liquidity risk increase the occurrence probability of stock market crashes. Our results suggest that the decrease in volatility, particularly in equity and exchange market, the increase in volatility in interest rate, the credit rating downgrades issued by Moody’s and the low liquidity market contribute to crashes in the Tunisian stock market. In summary, financial risks, which are the market risks, the credit risk and the liquidity risk could be leading indicators of crashes in the Tunisian stock market.
Keywords: Stock market crashes; Liquidity risk; Credit risk; Market risks
AN ANOMALY WITHIN AN ANOMALY: THE HALLOWEEN EFFECT IN THE LONG-TERM REVERSAL ANOMALY
Full text linkIn this paper, we investigate the presence of the Halloween effect in the long-term reversal anomaly in the US. When we examine the cross-sectional returns of winner-minus-loser portfolios formed on prior returns over the time period of 1931-2021, we find evidence of stronger returns during winter months versus summer months. In particular, the effect appears to be driven by very strong winter-summer seasonality in the portfolio of small-capitalisation losers, and lack of Halloween effect in the portfolio of large-capitalisation winners. Our finding is robust to alternative measures of long-term reversal, differing sub-periods, the inclusion of the January effect and outlier considerations, as well as within small and large-sized companies.  
ARE STABLECOINS SAFE HAVENS FOR TRADITIONAL CRYPTOCURRENCIES? AN EMPIRICAL STUDY DURING THE COVID-19 PANDEMIC
Full text linkWe investigate whether stablecoins are safe havens for traditional cryptocurrencies with fresh evidence from the recent crisis period of the COVID-19 pandemic. Our results support the safe-haven properties of Tether for both before and during the pandemic. For Digix, a gold-backed stablecoin with relatively small market capitalization, we find a change in characteristics before and during the pandemic, but do not find statistically significant evidence for its safe-haven properties. Furthermore, we document that, when considering the economic benefits and costs of adding safe-haven assets into cryptocurrency portfolios, the one with Tether outperforms both a naked portfolio and the portfolio with a traditional safe-haven asset such as gold
THE DAVIDS AND THE GOLIATHS: INVESTMENT DYNAMICS AND PERFORMANCE DIFFERENTIALS OF SMALL FIRMS AND FAMILY-CONTROLLED LARGE FIRMS IN FOUR SECTORS OF THE INDIAN MARKET
Full text linkThis study focuses on investment structures and performances of family-controlled and non-affiliated publicly traded firms on the Indian market. While many influential, family-controlled firms dominate a large part of the Indian industry today, this study finds that a considerable fraction of the non-affiliated firms are able to maintain stable financial performance by forging strategic ties with other non-affiliated firms in transactional supply-chains modes. This study contributes to the understanding of the question concerning how investment structures of firms might be governed through interfirm ties of coordinated and cooperative investments. The results have important implications for the markets of emerging economies in the Asia-Pacific and the Southeast Asian regions
RELATION BETWEEN NEGATIVE TONE IN NEWS RELEASES OF WHO AND INDUSTRY RETURNS DURING THE COVID-19 PANDEMIC
Full text linkWe analyze the relationship between the negative tone in news releases issued by the WHO and industry returns during the Covid-19 pandemic. We construct our news tone measure as the ratio of negative words to the total number of words present in news releases of WHO. The news tone shows to be significantly associated with returns for the majority of industries. Bad news announced by the WHO translates into good news for consumer nondurables, telecommunications, and healthcare sectors. Negative tone in news releases of WHO is on average bad news for consumer durables, manufacturing, energy, and other industries. Our findings suggest that the news tone-return relation varies significantly throughout our Covid-19 sample. 
PRESENCE OF ANALYSTS BEFORE IPO AND UNDERPRICING: A META-ANALYSIS
Full text linkThe effect of analyst presence on underpricing has shown a contrasting result. By synthesizing the result using meta-analysis for twelve studies with more than 20400 firms we found conclusive evidence of the relation between analyst presence and underpricing of IPOs. With the increase in analyst presence by 1% the IPO underpricing increases by 4.9%. Moreover, meta-regression between effect size and moderator variables found the significant and positive role of the reputed underwriter to increase underpricing when the IPO has coverage of analysts. Our results are striking for the US market IPOs in which reputed underwriters as moderator affect underpricing significantly and positively which shows reputation increase information asymmetry. Whereas in emerging markets IPOs reputed underwriters increase market efficiency and information symmetry