18 research outputs found
High short interest stocks performance during the Covid-19 crisis: an informational efficacy measure based on permutation-entropy approach
No full textPurposeThe author examine the performance of a number of high short interest stocks along with the prices of the GameStop stock and three major stock exchange indices, particularly for the period after the eruption of the Covid-19 crisis.Design/methodology/approachWith the employment of the complexity–entropy causality plane approach, the author categorize the stock prices in terms of the level of informational efficiency.FindingsThe author reported that the efficiency level for the index of the high short interest stocks falls considerably, not only at the onset of the Covid-19 crisis but during the health crisis period at hand. This is translated into proof of less uncertainty in predicting the stock prices of these specific stocks. On the other hand, the GameStop prices exhibit the same behavior as those with the high short interest firms, but change considerably in the middle of the crisis. The reversal of the behavior, by obtaining higher informational efficiency levels, is attributed to the short squeeze frenzy that increased the price of the stock many times over. Among the stock market indices, the Dow Jones Industrial Average and the S&P 500 decreased their efficiency levels marginally, after the surge of the crisis, while the Russell 2000 index kept the level intact. The high and stable degree of randomness could be attributed to the measures taken concurrently by the Federal Reserve and the government immediately after the outbreak of the crisis.Originality/valueThis is one of the few studies that examine the impact of short selling behavior on the efficiency level of certain stocks' prices, particularly during the health public crisis. It provides an alternative approach to measuring quantitatively the degree of inefficiency and randomness.5071570158
Exploring the Dynamic Behavior of Crude Oil Prices in Times of Crisis: Quantifying the Aftershock Sequence of the COVID-19 Pandemic
No full textCrude oil prices crashed and dropped into negative territory at the onset of the COVID-19 pandemic. This extreme event triggered a series of great-magnitude aftershocks. We seek to investigate the cascading dynamics and the characteristics of the series immediately following the oil market crash. Utilizing a robust method named the Omori law, we quantify the correlations of these events. This research presents empirical regularity concerning the number of times that the absolute value of the percentage change in the oil index exceeds a given threshold value. During the COVID-19 crisis, the West Texas Intermediate (WTI) oil prices exhibit greater volatility compared to the Brent oil prices, with higher relaxation values at all threshold levels. This indicates that larger aftershocks decay more rapidly, and the period of turbulence for the WTI is shorter than that of Brent and the stock market indices. We also demonstrate that the power law’s exponent value increases with the threshold value’s magnitude. By proposing this alternative method of modeling extreme events, we add to the current body of literature, and the findings demonstrate its practical use for decision-making authorities—particularly financial traders who model high-volatility products like derivatives
Empirical Distribution of the U.S. Housing Market during the Great Recession: Nonlinear Scaling Behavior after a Major Crash
No full textThis study focuses on the real estate bubble burst in the US housing market during 2007–2008. We analyze the dynamics of the housing market crash and the after-crash sequence during the Great Recession. When a complex system deviates away from its typical path by the occurrence of an extreme event, its behavior is strongly characterized as nonstationary with higher volatility. With the utilization of a robust method, we present the characteristics of the aftershock period and provide useful information about the spatial distribution and the decay process of the aftershock sequence in terms of time. The returns of the housing price indices are well approximated by the empirics of a power law. Although we deal with low-frequency data, a time power-law relaxation pattern is identified. Our findings align with those in geophysics, indicating that the value of the relaxation parameter typically hovers around one and varies across different thresholds
FINANCIAL MARKETS DURING HIGHLY ANXIOUS TIME: MULTIFRACTAL FLUCTUATIONS IN ASSET RETURNS
No full textBuilding on the notion that systems and in particular complex systems such as stock exchange markets reveal their structure better when they are under stress, we analyze the multifractal character and nonlinear properties of four major stock market indices during financial meltdowns by means of the multifractal detrended fluctuation analysis (MF-DFA). The three distinct financial crises under investigation are the Black Monday, the Dot-Com and the Great Recession. Scaling and Hurst exponents are derived as well as the singularity spectra. The results show that all indices exhibit strong multifractal properties. The complexity of the markets is higher under the Black Monday event revealed by the width of the singularity spectrum and the higher [Formula: see text] parameter.</jats:p
Credit market Jitters in the course of the financial crisis: A permutation entropy approach in measuring informational efficiency in financial assets
No full textRevisiting the Relationship between Financial Wealth, Housing Wealth, and Consumption: A Panel Analysis for the U.S.
No full textBased on the seminal paper of Case, Quigley, and Shiller (2013), we investigated the effects of financial and housing wealth on consumption. Using quarterly data from 1975 to 2016 for all states of the U.S. economy, and a different methodology in measuring wealth, we report relatively greater financial effects than housing effects on consumption. Specifically, in our basic utilized model, the calculated elasticity for financial wealth was 0.060, while for housing it was 0.045. The results were not in agreement with the ones obtained by Case, Quigley, and Shiller. In an attempt to investigate this disparity, we proceeded by incorporating the introduction of the Tax Reform Act in 1986, which increased incentives for owner-occupied housing investments. Finally, due to distributional factors at work, and taking into account the pronounced uneven distribution of wealth, we investigated the effects of wealth for eight states that included the metropolitan areas comprising the well-known Case–Shiller 10 City Composite Index. Now the housing effect on consumption was much stronger and larger than the financial effect. Additionally, we forecasted the consumption changes at the time of high rise and large drops in house prices for these states. Forecasts showed a recession from the fall of Lehman Brothers until the fourth quarter of 2011. These forecasts were not verified. Probably, the new techniques used by policies played an important role. We also found that extreme behaviors cannot be predicted
Policy transmission and the consumption-wealth channel
No full textThis study investigates the effects of monetary policy on consumption through the wealth channel. Based on a structural VAR framework it is found that endogenous changes in wealth, due to an increase in the short-term interest rate, have little impact on consumption. This result means that the substantial portion of the real effect of a short-term interest rate shock to consumption is attributable to its effect through channels other than wealth. Also, the above result suggests that wealth is influenced not only by the interest rate but also by the mounting price pressures, to which the Central Bank endogenously responds.
Credit market Jitters in the course of the financial crisis: A permutation entropy approach in measuring informational efficiency in financial assets
No full textWe explore the evolution of the informational efficiency for specific instruments of the U.S. money, bond and stock exchange markets, prior and after the outbreak of the Great Recession. We utilize the permutation entropy and the complexity-entropy causality plane to rank the time series and measure the degree of informational efficiency. We find that after the credit crunch and the collapse of Lehman Brothers the efficiency level of specific money market instruments’ yield falls considerably. This is an evidence of less uncertainty included in predicting the related yields throughout the financial disarray. Similar trend is depicted in the indices of the stock exchange markets but efficiency remains in much higher levels. On the other hand, bond market instruments maintained their efficiency levels even after the outbreak of the crisis, which could be interpreted into greater randomness and less predictability of their yields.49926627
