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Impact of the crises on the efficiency of the financial market : evidence from the SDMFakhry, Bachar January 2015 (has links)
The efficient market hypothesis has been around since 1962, the theory based on a simple rule that states the price of any asset must fully reflect all available information. Yet there is empirical evidence suggesting that markets are too volatile to be efficient. In essence, this evidence seems to suggest that the reaction of the market participants to the information or events that is the crucial factor, rather than the actual information. This highlights the need to include the behavioural finance theory in the pricing of assets. Essentially, the research aims to analyse the efficiency of six key sovereign debt markets during a period of changing volatility including the recent global financial and sovereign debt crises. We analyse the markets in the pre-crisis period and during the financial and sovereign debt crises to determine the impact of the crises on the efficiency of these financial markets. We use two GARCH-based variance bound tests to test the null hypothesis of the market being too volatile to be efficient. Proposing a GJR-GARCH variant of the variance bound test to account for variation in the asymmetrical effect. This leads to an analysis of the changing behaviour of price volatility to identify what makes the market efficient or inefficient. In general, our EMH tests resulted in mixed results, hinting at the acceptance of the null hypothesis of the market being too volatile to be efficient. However, interestingly a number of 2017 observations under both models seem to be hinting at the rejection of the null hypothesis. Furthermore, our proposed GJR-GARCH variant of the variance bound test seems to be more likely to accept the EMH than the GARCH variant of the test.
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[en] INFORMATIONAL SPILLOVERS IN THE PRE-1914 LONDON SOVEREIGN DEBT MARKET / [pt] INFORMATIONAL SPILLOVERS NO MERCADO LONDRINO DE DÍVIDA SOBERANA PRÉ-1914ANTONIO CARLOS DE AZEVEDO SODRE 06 November 2007 (has links)
[pt] Nesta pesquisa documenta-se um novo canal de contágio
internacional.
Estuda-se o mercado de dívida soberana de Londres no
período pré-1914, no qual,
dada a ausência de agências internacionais de
monitoramento e altos custos de
coleta de informação, a intermediação financeira
representou um papel importante
na transmissão de informações aos investidores. A partir
da análise de dois
eventos de crise financeira - o Funding Loan brasileiro em
1898 e o Funding loan
grego em 1893 - mostra-se que os preços de títulos
públicos de países sem
ligações econômicas com os países em que as crises se
originaram, mas que
mantinham relacionamento com os mesmos intermediários
financeiros, sofreram
uma significante redução relativa logo após a ciência dos
investidores sobre as
crises. Este resultado sugere que os investidores
extraíram informação sobre a
qualidade do crédito dos países com base na existência de
relações credorintermediário
financeiro. Este spillover é, em essência, informativo e
não derivado
de fundamentos econômicos em comum ou regras de
realinhamento de portfólio. / [en] In this research I document a novel type of international
financial contagion,
whose driving force is shared financial intermediary. I
study the London
peripheral sovereign debt market the pre-1914 period, in
which, given the absence
of international monitoring agencies and substantial
agency costs, financial
intermediation played a major informational role to
investors. Analyzing two
events of financial distress - the Brazilian Funding Loan
of 1898 and the Greek
Funding Loan of 1893 - I find that the bond prices of
countries with no
meaningful commercial relations with the distressed
countries, but which shared
the same financial intermediary, suffered a reduction
relative to the rest of the
market just after the market learned about the crises,
evidencing that investor were
extracting information about the soundness of a debtor
based on the financial
intermediate which vouched the issued. This spillover is
informational in essence,
and arises as the flip-side of the relational lending
coin: the same reason which
explains why relational finance (in this case,
underwriting) helps alleviate
informational and incentive problems also produce
contagion.
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