Contemporary Trends and Challenges in Finance (eBook)

Krzysztof Jajuga is a professor of Finance. He holds the chair of the Department of Financial Investments and Risk Management at Wroclaw University of Economics. He obtained his doctoral degree in Economics from Wroclaw University of Economics in 1982 and became a full professor in 1992. At the beginning of his scientific carrier he was awarded a Fulbright grant at Stanford University, Department of Statistics. He was visiting professor at many universities in USA, as well as in Europe and China. His field of scientific interest is financial econometrics, capital markets and risk analysis and management. He is the author of numerous international and national publications, including 18 books. He holds a number of positions including president of CFA Society Poland. Hermann Locarek-Junge has been a professor of Finance and Financial Services at TU Dresden’s Faculty of Management and Economics since 1995. After graduating in the field of Business and Economics in 1983 and earning his PhD at the University of Augsburg, Germany, in 1987, he studied Business Informatics and was appointed professor in that field at Essen University in 1991. Since then, he has been visiting professor and research fellow at a number of international institutions and universities. During his academic career, he undertook research work for several banks, including the Deutsche Bank, Dresdner Bank, Sparkasse Dresden, Union Investment, and the German National Research Foundation (DFG). Lucjan T. Orlowski is a Professor of Economics and Finance and a Director of the Doctor of Business Administration in Finance Program at Sacred Heart University, USA. His research interests include monetary economics, financial markets and institutions, and financial stability. He has authored numerous books, chapters in edited volumes and articles in scholarly journals. He has been visiting professor and research fellow at many prominent international institutions and universities and served in an advisory role for many governments and financial institutions including Polish Ministry of Finance and National Bank of Poland. He has worked with the European Commission Economic and Finance Committee on the post-crisis policy responses to extreme risks in financial markets. He is collaborating with Chicago Mercantile Exchange Group on analyzing the volatility of financial futures and its impact on real economy.  He is a Doctor Honoris Causa recipient from Wrocław University of Economics.

Preface 6
Contents 9
About the Editors 12
Part I: Econometrics of Financial Markets 13
Information Asymmetry, Liquidity and the Dynamic Volume-Return Relation in Panel Data Analysis 14
Introduction 14
The Model 15
Liquidity Measures 17
Empirical Results 19
References 21
Density Forecasts of Emerging Markets´ Exchange Rates Using Monte Carlo Simulation with Regime Switching 23
Introduction 23
State of the Art and the Proposed Forecasting Algorithm 24
Calculation and Evaluation of Density Forecasts 26
Coverage Rates 27
Knüppel (2015) Test 28
Log Predictive Density Scores 28
Results and Discussion 29
References 30
Determination of the Own Funds Requirements for the Risk of Binary Options 32
Introduction 32
Bounding Legislation 33
Binary Cash-or-Nothing Option Under Assumptions of the Black-Scholes Model 33
Calculation of the Delta and Non-delta Equivalents on the Basis of the Legal Regulations Currently in Force in the EU 34
Considered Approaches 35
Numerical Examples 37
Summary 40
Legal Acts 41
References 41
Part II: Stock Market Investments 42
Relationships Between Returns in EU Equity Markets in 2005-2016: Implications for Portfolio Risk Diversification 43
Introduction 43
Selected Diversification Measures 44
Relationships Between EU Markets and Their Impact on the Diversification: Empirical Analysis 46
Summary 50
References 50
The Relationships Between Beta Coefficients in the Classical and Downside Framework: Evidence from Warsaw Stock Exchange 52
Introduction 52
Downside Risk Measures 53
Relationships Between Beta Coefficients 54
Relationships Between Beta Coefficients in the Mean-Variance Framework 54
Relationships Between Beta Coefficients in the Mean-Semivariance Framework 54
Data 55
Results 56
Conclusions 59
References 60
Intraday Trading Patterns on the Warsaw Stock Exchange 61
Introduction 61
Model 62
Results 67
Conclusion 67
References 71
Testing Stability of Correlations Between Liquidity Proxies Derived from Intraday Data on the Warsaw Stock Exchange 73
Introduction 73
Selected Liquidity Proxies Derived from Intraday Data 74
Testing Stability of Correlations Between Liquidity Proxies 78
Data Description and Empirical Results on the WSE 79
Summarized Results of Basic Correlation Analyses on the WSE 79
Stability of Correlations Between Liquidity Proxies Based on Intraday Data on the WSE 82
Conclusion 83
References 84
Validating Downside Accounting Beta: Evidence from the Polish Construction Industry 86
Introduction 86
Downside Accounting Beta 88
Application of DAB to the Construction Company Sector 89
Conclusions 91
References 92
Part III: International Finance 93
Application of S-curve and Modified S-curve in Transition Economies´ GDP Forecasting. Visegrad Four Countries Case 94
Introduction 94
Empirical Application: Smoothing and Forecasting 97
The References Section (See Key Style Points 1.0, pp. 9-10) 99
References 100
Financialization of Commodity Markets 102
Introduction 102
Financial Investors´ Activity on Commodity Markets 103
The Phenomenon of Financialization in the Research Context 105
Financialization and Commodity Prices 107
Conclusion 110
References 111
Part IV: Banking 112
The Production or Intermediation Approach?: It Matters 113
Introduction 113
Production and Intermediation Approach in Banking 115
Methodology and Results 115
Conclusions 119
References 121
Competitiveness and Concentration of the Banking Sector as a Measure of Banks´ Credit Ratings 123
Introduction 124
Methodology and Data Description 125
Findings About the Impact of the Concentration and the Competitiveness of Banks on Their Credit Ratings 126
Conclusions 134
References 135
Different Approaches to Regulatory Capital Calculation for Operational Risk 137
Introduction 137
Different Aspects for Operational Risk Measurement 138
Calculations 142
Towards Basel IV 143
References 145
Assessment of Systemic Risk in the Polish Banking Industry 146
Introduction 146
Systemic Risk Measures 147
Conditional Value at Risk 148
Conditional Value at Risk Estimation 149
Quantile Regression 149
GARCH Approach 150
Composite Indicator of Financial Ratios 151
Empirical Results 153
Conclusions 156
References 158
Contemporary Challenges in the Asset Liability Management 160
Introduction 160
ALM of the Banking Book 161
Numerical Optimization Methods: General Concepts 162
Optimization Process 164
Conclusion 167
References 167
Part V: Corporate Finance 168
Does It Pay off to Change the CEO? Changes in Operating Performance: Preliminary Results 169
Introduction 169
Literature Review and Hypotheses Development 171
Sample Selection and Data 173
Measures of Abnormal Operating Performance 173
Results 175
Conclusions 177
References 180
The Capitalistic Firm as a System that Produces Economic and Social Values 182
Introduction 182
The Business Value-creating Organizations 183
The System of Financial Performance 184
Concise Financial Performance Measures: EVA, DOE and EVF 185
From the Financial Report to the Sustainability Report 187
Conclusion 188
References 189
Corporate Cash Holdings and Tax Changes: Evidence from Some CEE Countries 190
Introduction 190
Changes in Taxation and Cash Holdings: Hypothesis 191
Data and Methodology 193
Results 194
Conclusion 196
References 197
Determinants of Capital Structure Across European Countries 198
Introduction 198
Literature Review 199
Data and Methodology 201
Results 203
Conclusions 206
References 207
Profitability of Serial Acquirers on the Polish Capital Market 209
The Essence of Serial Acquisitions 209
Selected Studies on Serial Acquisitions Around the World 210
Research on Serial Acquirers Listed on WSE 211
Conclusions 215
References 215
Failure Models for Insolvency and Bankruptcy 217
Introduction 217
Hypothesis Development 218
Dataset and Reference Model 218
Results and Discussion 219
Conclusion 222
References 222
Part VI: Personal Finance 224
Parental Influence on Financial Knowledge of University Students 225
Introduction 225
Methods 227
Results and Analysis 228
Conclusions 232
Limitations 232
References 233
Does Households´ Financial Well-being Determine the Levels of Their Sight Deposits Under Turmoil? 235
Introduction 235
Related Literature 236
Data and Methodology 238
The Results 241
Conclusions 245
References 247