A popular interpretation of the Rational Expectations/Efficient Markets hypothesis states that, if the hypothesis holds, then market valuations must follow a random walk. This postulate has frequently been criticized on the basis of empirical evidence. Yet the assertion itself incurs what we...

Based on criteria of mathematical simplicity and consistency with empirical market data, a stochastic volatility model is constructed, the volatility process being driven by fractional noise. Price return statistics and asymptotic behavior are derived from the model and compared with data....

We use weekly survey data on short-term and medium-term sentiment of German investors in order to study the causal relationship between investors' mood and subsequent stock price changes. In contrast to extant literature for other countries, a tri-variate vector autoregression for short-run...

Alan Greenspan's paper (March 2010) presents his retrospective view of the crisis. His theme has several parts. First, the housing price bubble, its subsequent collapse and the financial crisis were not predicted either by the market, the FED, the IMF or the regulators in the years leading to...

This paper provides micro-econometric evidence on the relevance of non-market interaction for the timing of initial public offerings (IPOs) in the French and German primary equity markets. The surge of IPO volume in the late 1990s appears to be consistent with rational expectations, not with...

In this paper, we develop a financial stress index for France that can be used as a real-time composite indicator for the state of financial stability in France. We take 17 financial variables from different market segments and extract a common stress component using a dynamic approximate factor...

In this paper we empirically investigate potential determinants of allowance (EUA) price dynamics in the European Union Emission Trading Scheme (EU ETS) during Phase II. In contrast to previous papers, we analyze a significantly longer time series, place particular emphasis on the importance of...

We study the link between underpricing of initial public offerings (IPOs) and index excess returns in secondary markets. We use a theoretical model to argue that underpricing of IPOs raises investors’ attention and, thereby, triggers investments in secondary markets. Our theoretical model...

We study return predictability of stock indexes of blue chip firms and smaller hightechnology firms in Germany, France, and the United Kingdom during the second half of the 1990s. We measure return predictability in terms of first-order autocorrelation coefficients, and find evidence for return...

This paper uses a microstructure approach to analyze the effectiveness of capital controls introduced in Brazil to counter an appreciation of the Real. Based on a rich data set from the Brazilian foreign exchange market, we estimate a reduced-form VAR to characterize the interaction of the...