Nikolaos T. Milonas

Price spread and convenience yield behaviour in the international oil market

This paper examines the price and volatility behaviour of two similar commodities (Brent Crude Oil and West Texas Intermediate) and attempts to identify the variables that affect their relative price differential. Price spreads and convenience yields are estimated in an effort to test a number of hypotheses relating to market segmentation, seasonality and maturity effect. Cash and futures price data covering the period 1991–1995 reveal that: convenience yields are significant and about 2.5% of cash prices on the average; convenience yields exhibit strong yearly and monthly seasonalities due to supply/demand imbalances; convenience yield is a negative function of the level of stocks and behaves like a call option; as maturity of futures contracts nears, their convenience yields get smaller, an indication that the maturity effect exists in futures prices, and crude oil price spreads are affected by convenience yields which act as surrogates for demand/supply conditions and market price behaviour.

The Role of Financial Institutions in the Corporate Governance of Listed Chinese Companies

This paper explores the role of Chinese financial institutions in the corporate governance of listed companies through interviews with both senior managers of financial institutions and board directors of listed companies. Our results show that, while most securities companies are passive investors, a good proportion of the active mutual funds help their portfolio companies prepare financial forecasts, standardize their operations, raise external funds, strengthen their company image in the capital markets, and sometimes intervene in corporate issues. This limited role can be attributed to a number of factors specific to the Chinese context including highly concentrated state ownership, an immature regulatory environment, inadequate transparency and disclosure of financial information, and weak corporate governance within financial institutions themselves. It could also be affected by several other factors that are considered to cause institutional passivity in developed countries such as conflicts of interest, monitoring costs and lack of expertise.

Market integration and price dispersion in the European electricity market

This paper assesses the degree of market integration across eight mature electricity wholesale markets in Central and Western Europe (APX UK, APX, Powernext, Belpex, EEX, EXAA, Nord Pool, Omel) and the determinants of their price fluctuation by using advanced econometric methods. Our dataset consists of base-load, peak and off-peak wholesale prices for the period 2006–2009. Results suggest that electricity spot prices converge over time, an indication of market integration. In particular, price convergence seems to be stronger during periods of high demand (peak hours compared to off-peak hours, winter and summer compared to spring and autumn) Furthermore, price convergence is stronger in interconnected markets of neighboring countries. Finally, we found that there is a negative impact of oil price fluctuations on electricity market integration, as its increase favors the production of electricity with indigenous sources, the mix of which is different across countries.

Dual Offerings of ETFs on the Same Stock Index: U.S. vs. Swiss ETFs

According to the law of one price, two identical securities traded in different places at the same time should command the same price. This law applies not only on original securities but on any other synthetic, derivative, or portfolio of securities. In particular, with regard to multiple offerings of the same security this law further implies that their returns should be similar for all investors as long as differential transaction costs are not imposed. Differences in transaction cost lead investors to abandon the overvalued securities in favor of the undervalued ones causing the extinction of the former. This article examines the characteristics of numerous pairs of U.S. and Swiss ETFs written on the same stock index. Focusing on the institutional characteristics of the U.S. and Swiss markets the authors show that expense ratio, volume of trading, and trading frequency differ markedly between the two markets. The results also show that the U.S. ETF market dominates the Swiss ETF market in all cases in the sample. This finding supports the argument that dual or multiple offerings originated in countries with differences in institutional characteristics, in currencies, and in time zones are likely to differ.

Similarly traded securities: Greek common vs. preferred stock

This paper examines the price spread between voting (common) and non-voting (preferred) stocks during the period 1990-1995 for a sample of 55 Greek companies. Because in Greece preferred stocks are not essentially different from common stocks, a number of hypotheses were tested to explain the observed differences. The data reveal an average spread of 27.5% for the entire period which, however, varies across years considerably. In cross-sectional regressions it was found that the volatility of common stock returns, the liquidity of common shares relative to preferred shares, the ownership concentration, and the minimum dividend yield guaranteed to preferred stockholders explain a significant portion of the spread.

Fund Management and its Effect in the Greek Social Security System

Economic and demographic slowdown has put under strain public pension systems around the globe. In this paper, we discuss the characteristics of the Greek social security system and investigate the issue of pension fund management. Our empirical analysis focuses on whether flexible investment rules (including equity investment) could have taken the pressure off the Greek public pension system while reducing the risks associated with such flexibility. The empirical results of the paper suggest that efficient management of reserves can result in additional significant revenues at acceptable levels of financial risk. However, pension fund management flexibility cannot by itself resolve the problem of social security system.

Does intervalling effect affect ETFs

Purpose - This paper aims to investigate the intervalling effect bias in ETFs systematic risk expressed by beta. The authors findings reveal the existence of a significant intervalling effect on ETFs beta obtained by the ordinary least squares method (OLS). Also investigated is the impact of ETFs capitalization on beta. Results provide evidence that small cap ETFs have greater betas than large cap ETFs. Results also reveal that the OLS beta of all ETFs increases when the return interval is lengthened regardless of capitalization. The impact of ETFs trading activity on systematic risk is assessed too. Findings give evidence that the OLS betas of the ETFs that trade infrequently are biased downwards while the beta of the frequently traded ETFs is biased upwards. Finally, the paper reveals a strong intervalling effect on ETFs tracking error. Design/methodology/approach - The authors employ a sample of 40 broad-based ETFs listed on Nasdaq Stock Exchange to test whether beta estimates change when the return interval measurement changes. Their data cover a maximum period of ten years starting from September 16, 1998 using daily, weekly and monthly return data. The authors estimate beta applying three alternative methods: the market model applied with the OLS method, the Scholes and Williams model (SW beta) and the Dimson model (Dim beta). Findings - Results indicate that the average beta of ETFs derived by the OLS method increases when the return interval increases. The differences among the daily, weekly and monthly OLS betas are statistically significant at the 1 per cent level. This finding implies a strong intervalling effect bias in ETFs OLS beta. On the other hand, the authors did not find any statistically significant differences in daily, weekly and monthly Scholes and Williams and Dimson betas. Moreover, results show that the daily and weekly OLS and Scholes and Williams betas and weekly OLS and Dimson betas are significantly different from each other. Originality/value - In this paper using a sample of 40 broad-based ETFs listed on Nasdaq Stock Exchange, the authors have examined various issues concerning: the intervalling effect bias in ETFs systematic risk, the relation between beta and capitalization of ETFs, the relation between beta and trading frequency of ETFs and, finally, the intervalling effect bias in ETFs tracking error. While the literature on intervalling effect on securities beta and the relation between systematic risk and market value and trading activity is voluminous, this is the first attempt to examine these issues with respect to ETFs.

The performance of German fixed-income ETFs in the presence of the debt crisis

espanolLos bonos del Estado aleman atraen inversores en renta fija como si fueran un cielo seguro en el que se busca refugio de la degradada deuda publica de otros paises de la eurozona. Se aprovecha esta tendencia para diagnosticar el rendimiento de los fondos cotizados de renta fija alemana en linea con las oportunidades de inversion de los inversores en bonos. A partir de una muestra de 38 fondos cotizados de bonos alemanes durante el periodo comprendido entre su constitucion y diciembre de 2010, se encuentra que: 1) los mencionados fondos no proporcionan un rendimiento superior al del mercado, lo que persiste en una base trimestral; estan asociados con alfas negativos, 3) tamano pequeno y efecto momentum, y 4) un tracking error, estadisticamente significativo, del 0,06%, persistente en una base trimestral. En general, los resultados que se obtienen constituyen la primera evidencia empirica sobre el comportamiento de los fondos cotizados de bonos alemanes en relacion a los benchmarks o referencias, obteniendose que los inversores en renta fija que negocian con ellos deberian utilizar estrategias de asignacion para beneficiarse los efectos tamano y momentum encontrados en esta investigacion. EnglishThe German government bonds attract fixed income investors as a safe heaven seeking refuge from the downgraded debt of other Eurozone countries. We exploit this tendency to diagnose the performance behavior of German fixed income Exchange Traded Funds (hereafter ETFs) in line to investment opportunities facing bond investors. In a sample of 38 German bond ETFs during the period from their inception to the end of 2010, we find: 1) ETFs fail to deliver any positive excess return with respect to the market return and this persist on a quarterly basis, 2) ETFs are associated with negative alphas, 3) a small size and a momentum effect on bond ETF returns, and 4) a statistically significant tracking error of 0.06% which is persistent on a quarterly basis. Overall, our results provide the first empirical evidence on how German bond ETFs behave with respect to the benchmarks and imply that fixed income investors using German bond ETFs should apply allocation strategies to benefit from the size and momentum effects found

On Improving the Greek Social Security System via Equity Investment

Economic and demographic slowdown has put under strain public pension systems around the globe. The actuarial balance of the PAYG system can only be restored by reshuffling its parameters and by attaining a higher return on its reserves. In this paper we investigate the extent to which an acceptable use of stock market opportunities could have relieved the pressure off the Greek public pension system while reducing the risks associated with such an exercise.

Company Management and Capital Market Development in the Transition.

Property rights, company organization and governance in the transition, Marvin Jackson privatization, company management and performance - a comparative study of privatization methods in the Czech Republic, Hungary, Poland and Slovakia, Valentijn Bilsen financial intermediation and comapny management - the case of the Czech Republic, Miroslav Hrncir financial structure, performance and the banks, Alena Buchtikova and Ales Capek state-owned enterprises in transition - prospects amidst crisis, Jan Mujzel delayed privatization, financial development and management in Romania during the transition, Irina Dumitriu and Teodor Nicolaescu delayed privatization and financial development in Bulgaria, Ognian Panov impediments to financial restructuring of Hungarian enterprises, Istvan Abel and Kristofer Prander privitization anc capital markets, Andras Giday and Agnes Sari-Simko perspectives on financial systems and enterprise efficiency in the transition economies of Central and Southeastern Europe, Stavros Thomadakis.