Institut Européen de données financières

ABSTRACT We build an equilibrium model to explain why stock return predictability concentrates in bad times. The key feature is that investors use different forecasting models, and hence assess uncertainty differently. As economic conditions deteriorate, uncertainty rises and investors' opinions polarize. Disagreement thus spikes in bad times, causing returns to react to past news. This phenomenon creates a positive relation between disagreement and future returns. It also generates time‐series momentum, which strengthens in bad times, increases with disagreement, and crashes after sharp market rebounds. We provide empirical support for these new predictions.

ABSTRACT We use the introduction of a financial transaction tax (FTT) in France in 2012 to test competing theories on its impact. We find no support for the idea that an FTT improves market quality by affecting the composition of trading volume. Instead, our results are in line with the hypothesis that a lower trading volume reduces liquidity and in turn market quality. Consistent with theories of asset pricing under transaction costs, we document a shift in security holdings from short‐term to long‐term investors. Finally, we find that moderate aggregate effects on market quality can mask large adjustments made by individual agents.

Abstract In non‐financial firms, higher risk taking results in lower dividend payout ratios. In banking, public guarantees may result in a positive relationship between dividend payout ratios and risk taking. I investigate the interplay between dividend payout ratios and bank risk‐taking allowing for the effect of charter values and capital adequacy regulation. I find a positive relationship between bank risk‐taking and dividend payout ratios. Proximity to the required capital ratio and a high charter value reduce the impact of bank risk‐taking on the dividend payout ratio. My results are robust to different proxies for the dividend payout ratio and bank risk‐taking.

L’objet de cet article est d’analyser la dynamique du comportement moutonnier (ou de herding) des investisseurs individuels. Dans ce but, nous introduisons une mesure originale de herding permettant un suivi individuel de ce comportement. Sur la base de l’analyse de 8 millions de transactions, réalisées par 87 373 investisseurs individuels sur la période 1999 - 2006, nous mettons en lumière la persistance temporelle de ce comportement ainsi que le rôle prépondérant joué par les performances passées des portefeuilles et la sophistication des investisseurs. La mesure proposée nous permet en outre de répondre à une question peu abordée dans la littérature : le comportement de herding est-il profitable à l’investisseur ? Nos résultats indiquent que les portefeuilles des investisseurs les moins moutonniers présentent d’avantage de rendements extrêmes et de plus faibles couples rendement/risque que les autres investisseurs.

Recent history shows that the scope of government varies substantially across countries and through time. Privatization phases alternate with nationalization episodes. The post WWII nationalization policies in Europe gave way to a privatization wave in the 1980s and are now followed by a return to nationalization in the context of the current financial crisis. Theories of privatization or nationalization typically compare, in a static framework, the economic or political efficiency of private and state ownership, either in general, or for a list of specific goods and services. They do not explain, however, why the privatization phenomenon occurred at about the same time in many countries, and why not before, nor can they account for changes in these policies and especially the policy reversals. We model the fluctuating allocation of property rights in firms between private investors and the state, as the outcome of a competitive bidding for ownership in which the private investors value shareholders wealth, and the government values political support and survival, obtained through the transfer of the firms' cash flow to various political clienteles. The investors who value the firm most get the rights of control - a privatization or a nationalization according to which type of investor has the lowest cost of funds. Recent data on 15 years of privatization in 8 countries lend support to our theory.

On testing the impact of stock market liberalization on weak form market efficiency in emerging market countries, previous studies often provide divergent results. This paper revisits this empirical literature by using a time-varying parameter model which enables us to handle the gradual effects induced by stock market liberalization on informational efficiency. The model also corrects for both the serial correlation in return structure and volatility risk premium of local markets. First, we show that while some markets tend to converge to more efficient markets in the aftermath of stock market liberalization, others moved away from efficient state. For markets which were already efficient before financial liberalization implementations, the informational efficiency appears to be more apparent in recent years. Second, although we document significant effects of stock market liberalization on efficiency after controlling for economic and political perspectives, the direction of effects remains inconclusive because empirical results tend to be country-specific. Finally, it is worth noting that conditional stock market volatility has no significant impact on the expected returns.

Nous utilisons le modèle de Grossman & Stiglitz (1980) pour construire un portefeuille de référence pour les investisseurs non informés et nous utilisons ce portefeuille pour évaluer la performance des fonds communs de placement en actions, gérés activement. Nous proposons une méthodologie empirique pour construire ce portefeuille de référence en utilisant des informations sur les prix des actions et l’offre en titres. Nous montrons alors que les fonds communs de placement fournissent, en moyenne, un alpha non significatif de 23 points de base par an lorsque l’on considère ce portefeuille comme référence. Avec l’indice du marché comme proxy du portefeuille de marché, le alpha moyen des fonds est négatif et hautement significatif (-128 points de base par an). Les résultats sont identiques lorsque l’on considère différents sous-ensembles de fonds en fonction de leurs caractéristiques et de leur degré de sélectivité. En accord avec les modèles d’équilibre à anticipations rationnelles considérant des investisseurs différemment informés et des prix d’équilibre partiellement révélateurs, nos résultats indiquent que la gestion active des fonds mutuels est performante du point des investisseurs non informés. Classification JEL G11, G12, G14

Nous contestons l’opinion selon laquelle les différences persistantes de précision entre les différents analystes sont la preuve que les analystes se distinguent par leur capacité à prévoir les cours des actions. Nous montrons que ces différences persistantes de précision sont plutôt dictées par la volatilité des rentabilités des titres. En s’appuyant sur la théorie des options, nous construisons une mesure de la qualité de prévision qui prend en compte la volatilité des rentabilités et l’horizon de prévision. Contrairement aux études antérieures qui ne tenaient pas correctement compte des différences de volatilité, notre analyse empirique révèle que les analystes ne se distinguent pas par leur capacité à prévoir les prix futurs des actions. Nous montrons que la précision d’une prévision de prix dépend fortement de la volatilité des rentabilités et de l’horizon de prévision.

Abstract We derive closed-form solutions for asset prices and portfolio holdings when agents have asset-specific information and/or information about common components that affect many assets. Our solutions are general, encompass existing information structures, and are used to analyze new structures. A given investor’s portfolio can exhibit highly disperse holdings—e.g., portfolio weights may vary significantly from market capitalization weights. Our model also generates large ranges of asset prices due to information asymmetries. We help explain why US investors (e.g.) may underweight German stocks (e.g.) on average, but overweight a particular German stock relative to its market capitalization weight.

ABSTRACT We show that retail trading activity has a positive effect on the volatility of stock returns, which suggests that retail investors behave as noise traders. To identify this effect, we use a reform of the French stock market that raises the relative cost of speculative trading for retail investors. The daily return volatility of the stocks affected by the reform falls by 20 basis points (a quarter of the sample standard deviation of the return volatility) relative to other stocks. For affected stocks, we also find a significant decrease in the magnitude of return reversals and the price impact of trades.

In this study, we analyze the impact of a trading compartment switch on price, liquidity, and risk. We examine a sample of seventy one firms which transferred their common stocks from a non (or less) regulated compartment to a more regulated one of the French market (NYSE-Euronext Paris) between 1995 and 2007. Our results show a positive market's reaction around the transfer announcement and an improvement of the liquidity level of transferred stocks after the announcement. After admission in the new market section, the market's reaction weakens strongly. Our results also reveal the existence of a link between stock price reaction to a compartment transfer and their pre-transfer liquidity level. Indeed, the market's reaction and liquidity improvement are stronger if the firms' stocks were relatively less liquid before the announcement. Finally, our study highlights that this kind of transfer reduces the returns volatility of the switched stocks and also reduces their specific risk, but has no significant effect on their systematic risk.

We use the Grossman \& Stiglitz (1980) framework to build a reference portfolio for uninformed investors and employ this portfolio to assess the performance of actively managed equity mutual funds. We propose an empirical methodology to construct this reference portfolio using the information on prices and supply. We show that mutual funds provide, on average, an insignificant alpha of 23 basis points per year when considering this portfolio as a reference. With the stock market index as a proxy for the market portfolio, the average fund alpha is negative and highly significant, --128 basis points per year. The results are robust when considering various subsets of funds based on their characteristics and their degree of selectivity. In line with rational expectations equilibrium models considering asymmetrically informed investors and partially revealing equilibrium prices, our study supports that active management adds value for uniformed investors.

We challenge the view that persistent differences in accuracy across analysts are proof that analysts differ in their ability to forecast stock prices. We show that these persistent differences in accuracy are driven instead by stock return volatility. Building upon option pricing theory, we construct a measure of forecast quality that controls for stock return volatility and forecast horizon. Contrary to previous studies, which failed to properly account for differences in stock return volatility, our empirical analysis reveals that analysts do not exhibit differences in their ability to forecast stock prices. We show that the accuracy of a target price strongly depends on the stock return volatility and the forecast horizon.

Out of the many evils that e-mail suffers from, phishing is like smallpox: rare, shameful, but unfortunately devastating.However: SPF, DKIM, DMARC, etc. The IETF is not lacking in RFCs to improve confidence in the messaging system. The aim of this multi-layer of several hundred pages is to combat illegitimate messages using the "default mistrust" method. In short, it gives us a free hand to reject messages, even legitimate ones. Since the ARC RFC introduces the notion of selective trust, the relevance of filtering can be further improved.The purpose of this article is to (re)present these RFCs to you and show how they work together. Our community can defeat phishing if: - they are implemented on a large scale; - we converge our filtering policies.Although we have conducted experiments that we would like to share, this article will not give you a complete solution. We want collaboration within the community to begin here at the JRES. Everyone is here, so now is the time to speak.So come along if: * you want to know more about the latest RFCs; * you have ideas about the collective improvement of e-mail; * you want to take part in a collective effort that is not too demanding in a friendly atmosphere; * you are responsible for marketing in an optical fibre box and don't know where to take a nap.

International audience

We find that the pre-documented factors influence debt maturity contingent upon credit accessibility and economic conditions. Firms reliant on bank loans avoid employing short-maturity debts even though they face severe information and agency problems. By contrast, firms with sufficient access use very short debt maturities to mitigate agency issues. When credit condition deteriorates, the former has no choice but borrow at the very short end of the maturity spectrum, whereas the latter evades refinancing risk more readily by borrowing at the end. Taken together, these findings indicate a vital role of capital supply in determining debt maturity.

The goal of this paper is to determine the exchange rates consistent with an equilibrium in the international assets and goods markets. We present a wealth model of a two-country economy where financial assets and goods are traded. We consider the case where the agents are risk neutral, a very common assumption in finance in order to have explicit solutions for prices, and, in particular, in international finance for exchange rates using the non-null Pareto optima. We show that the Pareto optima in the international assets and goods markets are found to coincide with the net trade allocations. More notably, under a no-arbitrage condition in the assets markets, we can define an exchange rates system for which PPP holds. We provide conditions to have a non-null Pareto optimum to compute the exchange rates. We give an example with a non-null Pareto optimum associated with the determination of the exchange rate.

Par comparaison avec la littérature sur les fusions-acquisitions nationales, celles sur les fusions-acquisitions transfrontalières (Cross-Border Mergers & Acquisitions, CBM&A) est relativement récente. En particulier, nous avons encore très peu d’études sur les fusions-acquisitions entre les entreprises des pays développés et émergents. Cette thèse considère trois questions rarement abordées jusqu’à présent. 1) Est-ce que la diversification industrielle peut expliquer les fusions-acquisitions entre les entreprises européennes et des marchés émergents? 2) Est-ce que le marché valorise plus dans ces opérations les actions de diversification industrielle? 3) Quelles sont les modalités de paiement préférées dans ce type d’opérations ? Parallèlement, nous avons comparé ces opérations de fusions-acquisitions à celles ayant lieu en France et à l’intérieur de l’Union Européenne. Fondés sur 2406 fusions-acquisitions en France, 7628 à l’intérieur de l’Union Européenne et 1857 entre des entreprises européennes et des marchés émergents sur la période 1992(1998)-2012, nos résultats sont les suivants. Premièrement, conformément à ce qui est observé dans les fusions-acquisitions entre des entreprises des pays développés mais contrairement à ce que laisse entendre la littérature théorique sur les investissements dans les marchés émergents, les fusions-acquisitions entre les entreprises européennes et de pays émergents sont plutôt des opérations de spécialisation industrielle. Nous constatons également que la relation entre la diversification internationale et la diversification industrielle est négative. Deuxièmement, les effets d'annonce des CBM&A entre les pays de l’'Union Européenne et les marchés émergents se traduisent par une augmentation de richesse des actionnaires des entreprises européennes acquéreuses. Cependant, par rapport aux fusions et acquisitions réalisées entièrement à l'intérieur de l'Union Européenne et en France, les effets d’annonces sont beaucoup moins positifs. Troisièmement, les marchés financiers sous-évaluent les entreprises européennes lors des fusions-acquisitions avec des entreprises de pays émergents. Nos résultats démontrent que les entreprises acquéreuses payent moins en espèces dans les fusions-acquisitions avec des entreprises des marchés émergents qu’avec d’autres entreprises européennes. En revanche, les primes payées ne sont pas significativement différentes. Nos résultats suggèrent aussi que les dirigeants des entreprises Européennes ne jouent pas sur le « market timing » lors de leurs décisions de paiement. Cette thèse a des implications importantes pour des futurs acquéreurs d’entreprises de pays émergents. Compte tenu des résultats obtenus sur la fin de notre période d’analyse, elle révèle que la diversification industrielle dans les fusions et acquisitions d’entreprises de pays industrialisés avec des entreprises de marchés émergents est plus importante ces dernières années, et qu’elle a un impact positif. Nous pensons que les résultats peuvent être attribuables soit à la crise financière soit à une meilleure intégration des marchés émergents dans l'économie mondiale. Elle met aussi en évidence qu'il existe des conflits d'intérêts clairs entre les investisseurs et les dirigeants lors de fusions-acquisitions entre des entreprises européennes et de pays émergents.

CAHIERS DE RECHERCHE n°2014-01 E2

We study the performance of actively managed US equity mutual funds using traditional models and, as in previous studies, find that they perform negatively. At the same time, we note that the investments in mutual funds increase each year. It thus doesn’t seem realistic to admit that mutual fund clients would continually accept negative performances. We put forth the idea that traditional measures of performance are misleading from a client’s point of view. Expenses are justified by managers as part of their information acquisition activity. If managers are successful, clients believe to be protected (at least partially) against information risk. It follows that, from the client’s point of view, the performance should be calculated as the mutual fund net realized return minus an expected return which only accounts for traditional risk premia factors (like systematic, size, book to market and momentum factors) and not for any information risk factor. We show in this paper that traditional mutual fund performance models are not in line with this idea because the traditional factors used in these models (market, size, book-to-market, momentum) embed an information risk premium. Based on the Merton (1987) model and on the Firm Specific Return Variation variable of Durnev et al. (2004), we compute an information risk factor. We then show that the traditional mutual funds performance models undervalue the funds alpha since they control the fund net realized return for an information risk premium when they shouldn’t from the client’s point of view. Finally, we propose a new methodology for measuring the mutual funds performance from the client’s perspective. We conclude with this new methodology that the performance of the US equity mutual funds is well explained.