Athanasios Koulakiotis

Extreme Risk and Value-at-Risk in the German Stock Market

Abstract Extreme Value Theory methods are used to investigate the distribution of the extreme minima in the German stock market over the period 1973 to 2001. Innovative aspects of this paper include (i) a wide set of distributions considered, (ii) L-moment diagrams employed to identify the most appropriate distribution/s, (iii) ‘probability weighted moments’ used to estimate the parameters of these distribution/s and (iv) the Anderson–Darling goodness of fit test employed to test the adequacy of fit. The ‘generalized logistic’ distribution is found to provide adequate descriptions of the extreme minima of the German stock market over the period studied. VaR analysis results show that the EVT methods used in this study can be particularly useful for market risk measurement since they produce estimates that outperform those derived by traditional methods at high confidence levels.

Exploring the interaction between stock price index and exchange rates: an asymmetric threshold approach

This article examines the impact of stock market news on the foreign exchange markets of USA, Canada and UK, employing an innovative extension of the asymmetric threshold model of Apergis and Miller (2006). Under this framework we can disentangle the reaction of foreign exchange market to bad or good news and small or large news of stock returns. Our comprehensive daily data-set spans the period from January 1990 to June 2014. Using a cointegration and error correction model, we document the existence of a causal relationship between stock market and foreign exchange markets. Most interestingly, our results derived from the asymmetric threshold model confirm that the relationship between stock and foreign exchange markets is sensitive to short-term good or bad news and short-term small or large news. Our findings entail significant implications for policymakers, governments, risk managers and international investors.

The impact of cross‐listings on the UK and the German stock markets

Purpose - The purpose of this paper is to examine volatility transmissions between portfolios of cross-listed equities and exchange rate differences and also the volatility persistence for home, foreign equities, and exchange rate differences in the UK and German markets. Design/methodology/approach - A primary focus of this paper is to see if there is an impact first on the volatility persistence for foreign equities that are listed in the UK and German markets, second on the respective home portfolios of cross-listed equities, and third on the exchange rate differences. In addition, whether there are any bilateral spillovers between the following equity portfolios: foreign cross-listed equities, home cross-listed equities, and also local or global exchange rate differences are investigated. Findings - The paper finds that the volatility persistence is more prominent than error persistence from cross-listed equities, foreign or home, and the exchange rate differences. Furthermore, the transmission mechanism indicates a bilateral integration process in some of the cases that were examined. Based on these results, it is concluded that in the UK market the foreign cross-listings affect less the domestic equities compared to the German market. Originality/value - This paper examines the interdependence of portfolios of home and foreign equities for cross-listings that belong to the same stock exchange with two exchange rates, a local and a global one in order to provide more evidence in this area of literature.

Measuring the forecasting accuracy of models: evidence from industrialised countries

This paper uses the approach suggested by Akrigay (1989), Tse and Tung (1992) and Dimson and Marsh (1990) to examine the forecasting accuracy of stock price index models for industrialised markets. The focus of this paper is to compare the Mean Absolute Percentage Error (MAPE) of three models, that is, the Random Walk model, the Single Exponential Smoothing model and the Conditional Heteroskedastic model with the MAPE of the benchmark Naive Forecast 1 case. We do not evidence that a single model to provide better forecasting accuracy results compared to other models.

Reverse takeovers: an alternative to the IPO?

We examine the stock price behaviour of 23 Reverse Takeovers (RTs) that took place in the UK. A RT refers to a private company that acquires a publicly traded company in the stock exchange that is generally a cash shell. We examine the effects of the RTs on the wealth of public companys shareholders and we find that the stock price reaction of the public firm around the announcement date does not provide any evidence of systematic pattern. The only pattern observed is the disappearance of negative Abnormal Returns (ARs) for the target after the takeover.

Feedback Trading Strategies: The Case of Greece and Cyprus

Abstract This paper examines whether or not feedback trading strategies are present in the Athens (ASE) and Cyprus Stock Exchanges (CSE). The analysis employs two econometric models: the feedback trading strategy model, introduced by Sentana and Wadhwani (1992), and the exponential autoregressive model, proposed by LeBaron (1992). These two theoretical frameworks, separately, were joined with the FIGARCH (1, d, 1) approach. Both models assume two different groups of traders - the “rational” investors that build their portfolio by following the firms’ fundamentals and the “noise” speculators that ignore stock fundamentals and focus on a positive (negative) feedback trading strategy. The empirical results revealed that negative feedback trading strategies exist in the two underlying stock markets

Transmission of News in Eurozone Bank Holdings and European Bank Markets in the Light of the Greek Debt Crisis

This article examines the interdependence of European bank sectors under two different aspects. First, we investigate the symmetric transmission mechanism between six Eurozone countries’ (Germany, France, Greece, Ireland, Italy and Spain) bank holdings in order to uncover the volatility and error interrelationship of these holdings and their impact on the Greek bank holdings. Also, we analyse the impact from the Greek bank holdings on the other Eurozone countries’ bank holdings. In addition, we examine the impact of the Greek bank holdings on the transmission mechanism among all six cross-country bank indices. Second, we investigate the interrelationship of Greek bank market with two emerging cross-country bank indices and two developed ones. The two groups concern Greece, France and Germany and Greece, Poland and Czech Republic, respectively. We find very strong volatility and error spillovers for five Eurozone countries’ (Germany, Greece, Ireland, Italy and Spain) bank holdings, whereas French bank holdings are less integrated with the other five ones. Moreover, the results indicated that the Greek bank market is integrated better with the two emerging bank indices rather than the two developed ones. In addition, the Greek debt crisis seemed to play an important role on the volatility transmission mechanism since the volatility and error spillovers are larger in magnitude in the after-crisis period than in the pre-crisis period for both groups of countries. Based on the results regarding the degree of volatility persistence, the number of days that the innovations in the post-crisis period last is larger than the number of days of the pre-crisis period for both groups of countries under study. JEL Classification: G15, G20, C61, C3

A comparison between the recent financial crisis of 2008 and the crisis of 1999 in the Athens Stock Market

This paper examines the two financial crises of the Athens Stock Market during the last decade, in order to help investors and academics to understand better its attitude in periods of crises. In this analysis, it was employed a Quandt-Andrews Test, a GJR-GARCH model with two diagnostic tests and a BDS independence test. The results have showed that in the most recent crisis the asymmetries were almost similar as they were in the crisis of 1999, however, the magnitude of volatility in 2008, which was specifically created by big negative shocks, was higher. Contrasting the above results with the estimation of the middle period, it was found that in the middle period there was a positive size bias, while on the contrary in the periods of crises there was a negative one. Finally, we point out the existence of chaotic autocorrelations in both crises, affecting the ASE index non-linearly.

The impact of foreign cross‐listings on the home Dutch equities

Purpose –This paper develops the approach suggested by Howe et al. to examine the impact of cross-listings on stock price volatility in Europe. Design/methodology/approach - A modified generalized autoregressive conditional hetero-skedasticity (GARCH) modeling approach as suggested by Li and Engle is used taking into account different regulatory structures across the range of markets using LaPorta et al.s stock market regulatory classification. Findings - It is found that information spillover effects are important for the Dutch market for cross-listed equities and that a different regulatory environment may have a noteworthy impact on symmetric information spillovers. Research limitations/implications- The focus is 11 cross-listing equities and on an event window of 12 years. This implies that the results may be biased on the data sample and the length of the period that used. Practical implications- The findings are important for the shareholders of cross-listed companies as the various impacts of regulatory differences between markets (as a result of low and high shareholder protection rules) from foreign markets to the Dutch home market are identified. Originality/value - A primary focus of this paper is to provide a different methodology than the one adopted by Howe et al. using a modified GARCH modeling approach as suggested by Li and Engle, to examine the impact of the cross-listings of Dutch firms on symmetric volatility spillovers. The analysis also takes into account the influence of different regulatory structures across the range of markets where Dutch firms are cross-listed. In particular, we use LaPorta et al.s stock market regulatory classification is used to analyze the magnitude and persistence of symmetric volatility spillovers from the foreign listing to the home equity of cross-listed companies in the Dutch stock exchange.