Market Dynamics in the Financial Industry - Essays on Interdependence and Market Timing

The global financial crisis and the subsequent sovereign crisis are painful reminders of how the standards of financial markets are profoundly challenged in times of crisis. The main lesson is that the structural changes and the increased risk of shock transmissions require a more accurate risk assessment that captures the complexity of market dynamics. Based on an empirical approach, this thesis aims at loosening a priori assumptions common in literature in order to develop new methodologies that are more robust and more flexible to the dynamics of changing market conditions. The first aspect of market dynamics addressed in this thesis is the dependence structure of financial markets. The connectedness of the banking and sovereign sectors is dynamically assessed on the basis of daily CDS spreads using complex networks. We turn away from the traditional linear correlation measures and use copula theory to account for extreme events and tail dependence, which is crucial when studying credit and default risk. Through the calculation of minimum spanning trees, our methodology evaluates the transmission pattern of shocks over time and their propagation across geopolitical borders. Going beyond the analysis of simple interdependence, we apply a structural break analysis to measure a contagion index that captures increased co-movements in the network. This thesis tackles a second aspect of market dynamics which relates to major events in the life of a company affecting a company’s market value. By means of operational loss events and cross-listing decisions, we illustrate our refined event study technique that overcomes the drawback of a priori assumptions about the event date. In addition to the reaction magnitude, our approach investigates the point in time when most of the market reaction takes place by highlighting two variables: the start and the length of stock markets' responses.

Grantor dc:publisher

ULiège - Université de Liège

Year dc:date

2016

Author dc:creator

• Biell, Elisabeth

Contributors dc:contributor

• Muller, Aline

• Business & economic sciences
• Finance
• Sciences économiques & de gestion

Statement dc:rights

• restricted access
• info:eu-repo/semantics/restrictedAccess

Licence

• http://purl.org/coar/access_right/c_16ec

Language dc:language

en

Identifier

info:hdl:2268/188650

OAI identifier oai:identifier

oai:orbi.ulg.ac.be:2268/188650