Henry Aray

The January effect across volatility regimes

Using a Markov regime switching model, this article presents evidence of the well-known January effect on stock returns. The specification allows a distinction to be drawn between two regimes: one with high volatility and another with low volatility. We obtain a time-varying January effect that is, in general, positive and significant in both volatility regimes. However, this effect is larger in the high-volatility regime. In sharp contrast with most of the previous literature, we find two major results: (1) the January effect exists for all sizes of portfolio; (2) the negative correlation between the magnitude of the January effect and portfolio size fails across volatility regimes. Moreover, our evidence supports a slight decline in the January effect for all sizes of portfolio except the smallest, for which it is even larger.

Subsidies and awards in movie production.

This article analyses the effect of subsidies and awards on the Spanish motion picture industry. We estimate a Cobb–Douglas production function using regional data and show that Spanish motion picture industry exhibits constant returns to scale and that awards positively affect movie production whereas subsidies have no effect. In fact, awards affect the productivity of the sector as they allow for an increase in the output, which is not explained by an increase in inputs.

Partisan Alignment Effects on Total Factor Productivity

Aray H. Partisan alignment effects on total factor productivity, Regional Studies. Unlike the literature on political effects on real economy that suggests that partisan effects accrue through aggregate demand, it is hypothesized that such effects could also accrue through aggregate supply. Using panel data for the Spanish regions over the 1986–2010 period, the main results are: (1) partisan alignment effects only arise when central government enjoys a majority; (2) there exist a positive contemporaneous effect and negative lagged effects; and (3) in absolute value, such effects vanish over time. Results are robust to different specifications and measures of total factor productivity (TFP) and methods of estimation.

Financial Social Accounting Matrix: a useful tool for understanding the macro-financial linkages of an economy

ABSTRACT This article extends the traditional methodology of social accounting by building a Financial Social Accounting Matrix (FSAM) and a corresponding Satellite Asset–Liability Matrix for Spain. In so doing, the difficulties that typically arise in consolidating data from the National Bureau of Statistics (INE) and the Bank of Spain (BdE) were overcome. This is the first FSAM for the Spanish economy and might provide new tools to deepen the analysis of the financial sector and of the determinants of financial vulnerability associated with interactions with other sectors of the economy. As a novel contribution to the literature, this paper incorporated a structural path analysis grounded in the FSAM multiplier to identify the principal paths through which financial shocks are transmitted.

Calendar Effects on Stock Returns Across Multiple States

We test calendar effects on stock returns considering business and presidential cycles and volatility regimes and show evidence for eight financial market states. We jointly consider four types of seasonality: the day-of-the-week effect (DWE), the macroeconomic announcement effect (MAE), the January effect (JE) and the macroeconomic announcement-January effect (MAJE). Our approach enables us to determine in which states the efficient-market hypothesis (EMH) does not hold. Most of the evidence found is for the DWE, which arises mainly under low volatility regimes and in contraction periods in both Democratic and Republican administrations.

Effects Of Macroeconomic Announcements On Stock Returns Across Volatility Regimes

AbstractThis article presents evidence on the effects of macroeconomic announcements on individual stocks returns across two volatility regimes: one with high volatility and the other with low volatility. At 5% level of significance, the response of stock returns to macroeconomic announcements is much stronger in the low volatility regime. However, the effects of the Fama-French factors is unambiguously significant in both regimes.

Does Latin America affect the Spanish stock market

Using a simple Markov regime switching model, a time-varying measure of the effect of the return on a Latin American portfolio on the Spanish stock returns is obtained. The evidence can be summarised as follows. First, the effect is positive but not very large. However, it has increased since the mid-1990s. Second, evidence for the returns on size portfolios shows that most of the effect accrues indirectly through common risk factors. The portfolio comprising stocks with low capitalisation is affected most. Nevertheless, the relative effect of Latin America respect to the effect of the whole world only increases for the portfolio comprising stocks with high capitalisation since the mid-1990s. Third, evidence for the returns on sectoral portfolios shows that telecommunications and banking are affected most. Fourth, in relative terms, there is no clear relationship between β-risk and flows of foreign direct investment.