We explore the link between the default risk and equity prices for the U.S. aggregate banking sector over the last 30 years using a regime switching methodology which allows for changes in regulation and the recent financial crisis. We reveal that the default risk exercises a causal effect on...

This study examines the time-varying correlations between oil prices shocks of different types (supply-side, aggregate demand and oil-market specific demand as per Kilian (2009) who highlighted that “Not all oil shocks are alike”) and stock market returns, using a Scalar-BEKK model. For this...

We investigate whether the effect of liquidity on equity returns can be attributed to the liquidity level, as a stock characteristic, or a market wide systematic liquidity risk. We develop a CAPM liquidity-augmented risk model and test the characteristic hypothesis against the systematic risk...

In this paper we re-examine the relationship between non-trading frequency and portfolio return autocorrelation. We show that in portfolios where security specific effects have not been completely diversified, portfolio autocorrelation will not increase monotonically with increasing non-trading,...

In this paper we investigate the bond price effect upon the information arrival of firm-specific idiosyncratic risk. We consider idiosyncratic dispersion and idiosyncratic volatility that capture, respectively, the direction of information and the magnitude of idiosyncratic risk. We find that...

This study investigates the impact of FTSE100 index revisions on firms’ systematic liquidity risk and the cost of equity capital. We show that index membership enhances all aspects of liquidity, whereas stocks that leave the index exhibit no significant liquidity change. We also show that the...

This study examines the volatility spillovers between the foreign exchange rate markets of three of the USA’s major trading partners and the US stock market, utilizing the forecast-error variance decomposition framework of a VAR model proposed by Diebold and Yilmaz (2009). The empirical...

We examine the information environments of firms following large, non-recurring charges (“baths”). We test competing hypotheses about the consequences of a bath—a bath either improves the information environment (the transparency hypothesis) or degrades it (the opacity hypothesis)....

In this article we present a new approach to estimate the change of the present value of a given cashflow pattern caused by an interest rate shift. Our approximation is based on analysing the evolution of the present value function through a linear differential equation. The outcome is far more...

We examine the returns to UK government bonds before, during and between the phases of quantitative easing to identify the side effects for the market itself. We show that the onset of QE led to a sustained reduction in the costs of trading and removed some return regularities. However,...