Giovanna Zanotti

Equity Markets Do Not Fit All: An Analysis of Public‐To‐Private Deals in Continental Europe

Concentration of family-based ownership and recent development of private equity companies in Continental Europe suggest that the motivations and results of public-to-private (PTP) deals may differ from well-studied cases in the USA and the UK. We overview the PTP market and measure the cumulative abnormal returns (CARs) of 106 PTP deals concluded in Continental Europe from 2000 to 2005, introducing a model to explain the abnormal returns. Our results partially confirm findings of previous studies, namely, that undervalued and smaller firms register higher CARs. We additionally find that deals promoted by family owners register higher abnormal returns, whereas financial investors and private operating firms show no impact.

Climate Variables and Weather Derivatives: Gas Demand, Temperature and Seasonality Effects in the Italian Case

Weather derivatives are financial instrument that allow to hedge weather risk that is the financial gain or loss due to variability in climatic conditions. The market originated in 1998 when the US power community realised that the high volatility of revenues due to weather variability could be controlled and, since then, has grown rapidly both in terms of number of contracts concluded and notional value and in terms of variety of industry applications. The purpose of this study is to analyse the real hedging capabilities of weather derivatives on the Italian energy sector. This is achieved through the investigation of the existence of a robust statistically significant relation between energy, more specifically, gas consumption, and climate parameters. We investigate such a relation applying different models. The first is a simple regression where we estimate gas consumption, as the dependent variable, and temperature, rain, humidity and pressure as explicative variables. In the second model we introduce a derived temperature variable, the heating degree day function, in order to better capture the non linearity behaviour of gas consumption. In the third model we implement lagged, other than present, weather variables. In the fourth model we apply dummy variables in order to consider, daily, monthly and holiday patterns in gas consumption. In the fifth model, finally, we introduce an autoregressive structure in the error term. The paper is organised in five session. The first one summarises methodology and results of previous studies on this topic. Session three describes data. Session four presents methodology and results and session five reports our main conclusions.

Founder family influence and foreign exchange risk management

Purpose - The purpose of this study is to explore the influence of founder families in medium-sized manufacturing firms and to investigate the impact of such influence on risk management – more specifically foreign exchange hedging and speculation. Design/methodology/approach - This empirical study uses survey data and publicly available data for descriptive analysis and ordinary least squares/ordered regression analysis. Findings - The authors find that two thirds of medium-sized manufacturing firms are founder family firms in which the founder of the firm or members of his/her family are active in the management team, are members of the board of directors, and/or are shareholders of the firm. The study finds no difference between such founder family firms and other firms in terms of the use/non-use decision related to foreign exchange derivatives but a marked difference in terms of the extent decision. Thus, founder family firms tend not only to hedge but also to speculate more extensively than other firms. Research limitations/implications - The findings are based on medium-sized manufacturing firms in Denmark. Originality/value - This study provides empirical evidence on the influence of founder families in medium-sized firms and adds to the sparse literature on the impact of founder family influence on risk management.

Demutualization and the Globalization of Stock Markets

The stock market globalization process has produced historic changes in the structure of stock markets, the effects of which are evident throughout the world. Despite these transformations, there are relatively few sources examining the connections between the globalization process currently under way and previous periods of stock market globalization. This seminal volume fills that gap.

On the Role of Behavioral Finance in the Pricing of Financial Derivatives: The Case of the S&P 500

The object of this study was to investigate some implications of the tenets of behavioral finance on the pricing of financial derivatives. In particular, based on the work by Wolff, et al (2009) we have investigated how prospect theory (Kahneman and Tversky, 1979) can be intregrated into the Black and Scholes (1973) option pricing framework. We have then used the resulting “behavioral version” of the Black-Scholes equation to price market quoted options. As an empirical test we have calibrated three-month market-quoted call options on the Standard & Poor’s 500 index (SPX) at the Chicago Board of Options Exchange (CBOE) during the period January to December 2007. As a comparison, we have also calibrated the Heston (1993) stochastic volatility option pricing model to the same contracts. Our results show that during the period of study the market option prices are captured better by the behavioral version of the Black-Scholes equation than by the Heston stochastic volatility model. Further work is required to investigate if this is the case for other option types and under different market conditions.

Emission Trading Scheme and the Price of Energy

This research analyzes the relationship between the carbon and the energy market. These two markets are linked together on a regulatory and on a structural basis. The energy sector is the most important industry within the European Emission Trading Scheme (EU ETS): as main producers of carbon emissions they are also the main users of carbon allowances. The question we address here is if there is a direct link between the carbon spot market and the energy spot market. We investigate the correlation, called pass through rate (PTR) between the energy and carbon market. Our findings show that the PTR is extremely volatile, and it depends on time frame and purposes of the energy market players. This leads to an intervention by policy makers and regulators to define the rules framework of the EU ETS.