RESEARCH
PUBLICATIONS
The profits vs protests: Corporate value dynamics amidst activist uproar with French, J., and Gurdgiev, C. (Financie Research Letters, 2024)
We examine the impact of student protests on the firms targeted for divestment during the 2023-2024 Israel-Hamas conflict. Utilizing event study methodology, we analyze cumulative abnormal returns (CARs) across key conflict periods. We find positive CARs for targeted firms at the onset of the conflict, but significant negative CARs as student protests escalated. This provides evidence of the tangible impacts of public pressure campaigns on market valuations in the short-run. However, we observe positive CARs after student protests subsided which suggests potential limitations to the sustained impact of activism and shows the market's capacity to normalize extraordinary events over time.
Uncertainty and international fund flows: A cross-country analysis with French, J., and Gurdgiev, C., and Naka, A. (International Review of Financial Analysis, 2024)
This paper investigates the impacts of uncertainty on international portfolio allocation decisions and returns across 27 countries. Using panel structural vector autoregressive analysis, a positive link between both country-level and global uncertainty with equity fund flows is uncovered, highlighting the role of investor sentiment in capital allocation decisions. Findings also support the portfolio rebalancing theory, revealing the negative influence of past returns on fund flows. Results show that the VIX demonstrates a positive association with fund flows, particularly during periods of elevated global uncertainty. Moreover, this research analyzes differences between developed and emerging markets in their sensitivity to uncertainty shocks.
Trade agreements and financial market integration in Latin America and the US with Izaguirre, O., and Zirek, D. (Journal of Risk and Financial Management, 2024)
The primary objective of this study is to examine the extent of financial integration between Latin American and US financial markets, particularly in light of recent efforts to foster integration through trade agreements. Spanning from 1 January 1990 to 31 December 2019, the sample focuses on major market indices and key sectors. Financial integration is quantified using a DCC multivariate GARCH model, incorporating a smooth transition model, structural breaks, and regression-based approaches. Results indicate increased comovement with the US for main market indices in Argentina, Chile, Colombia, Mexico, and Peru, while Brazil shows a decrease. Similar trends are observed in sectoral analyses. This study also reveals heightened correlation post-trade agreements. Structural break analysis highlights significant shifts in dynamic correlations for countries with US free trade agreements. These findings support the argument of increased financial integration, bearing significance for portfolio diversification and international policy formulation.
Policy uncertainty and idiosyncratic volatility on Nikkei 225 stocks with Naka, A., and Wang, L. (Applied Economics Letters, 2024)
The main purpose of this study is to empirically examine the relationship between policy uncertainty and idiosyncratic volatility in Nikkei 225 stocks. We conclude that there is a positive relationship between economic policy uncertainty and idiosyncratic volatility. After examining additional uncertainty measures, we find similar positive relationships between monetary, fiscal, and trade policy uncertainty measures and idiosyncratic volatility except exchange rate policy. Industry analysis reveals much detailed information about how each Japanese industry responds to uncertainty, and the results emphasize the critical roles of government officers and policymakers in the stock markets.
Uncertainty, financial markets, and fund flows to South Africa with Chatterjee, U., French, J., and Ocran, M. (Journal of Developing Areas, 2024)
Economic growth in South Africa over the last decade has been disappointing. Even before the emergence of the Covid-19 pandemic, the economy was underperforming. South Africa needs high and sustained growth to reduce the rate of unemployment, which has remained stubbornly high at over 30% for many years. Fund flows may provide capital to spur this needed growth. Fund flows are a critical issue in emerging markets like South Africa as sudden reversals have also been associated with severe destabilizing effects. These concerns and the substantial growth in fund flows to South Africa in the past two decades motivate this study. We examine the relationships among fund flows, uncertainty measures, economic indicators, and financial market variables in South Africa. We estimate several vector autoregressions to account for the inherent feedback among fund flows and economic and financial variables. We find that the term structure of interest rates (TERM) is negatively related to equity fund flows (EFF) while positively related to bond fund flows (BFF). While BFF and EFF are both negatively related to most uncertainty measures, BFF is more sensitive to downside risk indictors than EFF. We show that the economic and financial development of South Africa is impacted by fund flows with GDP being more strongly impacted by BFF while stock returns are impacted by both BFF and EFF. We also uncover evidence that commodity prices increase BFF. Next, we show that the volatility of the South African equity market immediately reduces equity prices which attracts EFF after a two-to-three-month lag. Finally, we uncover convincing evidence that illiquidity as measured by effective spread reduces EFF to South Africa. The ability to better predict the direction EFF and BFF will allow policy makers to impose circuit breakers to mitigate the adverse impacts of sudden investment reversals. This is particularly relevant to the current situation where additional financial uncertainty due to the energy crisis in South Africa coupled with political instability may increase the likelihood of such reversals.
When doing the right thing doesn’t pay: Impact of corporate decisions on Russian market participation in the wake of the Ukraine-Russia war with French, J., and Gurdgiev, C. (Finance Research Letters, 2023)
This study investigates how the stock returns of firms that took corporate action against Russia following the onset of Ukraine-Russian war were impacted. We use traditional event-study methodologies to analyze the data. The findings indicate that the firms that opted to act against Russia in the wake of the onset of Ukraine-Russian war experienced a downward trend in cumulative abnormal returns (CARs) on average. Furthermore, we find that the stronger the action taken against Russia the more negative the average CARs. These findings are contrary to the idea that investors reward strong firm-level ESG actions and are robust to the choice of firms and event windows.
Dynamics of mining markets: Equilibrium implications for professional and casual miners with Pezzo, L., Wang, L., and Zirek, D. (Global Finance Journal, 2023)
We design a simple equilibrium model to analyze the dynamics of the mining market in the presence of professional and casual miners. The model endogenously recovers two major unobservable drivers: the supply of computing power, and the dynamics of the fixed costs of mining. We calibrate the model to the market of Bitcoin and Ethereum and find that positive shocks to the supply of computing power (technological enhancements) translate into positive price shocks, and the benefits of these hikes are creamed off by professional miners. We also find that fixed costs are inversely related to technological enhancements, decrease at an exponential rate (which is twice as big for Bitcoin), and are the smallest during periods when professional miners have a monopoly.
Idiosyncratic volatility and interruption mechanisms in South Korean stock markets with Naka, A., and Alsunbul, A. (International Journal of Emerging Markets, 2023)
The purpose of this study is to examine how the volatility interruption (VI) mechanisms affect idiosyncratic volatilities in Korean stock markets. Collecting the South Korea Stock Market (KOSPI) data from June 15, 2015 to March 31, 2019, we collect each residual from three different estimated models: CAPM, FF3, and FF5. To estimate the conditional idiosyncratic volatility, we employ two conditional time-varying measurements: GARCH and TGARCH. Our results show that the conditional idiosyncratic volatility increases when stock prices reach the upper and lower static limits, indicating the implementation of adopting static VI mechanism neither stabilize market conditions nor reduce excess volatility along with the existence of price limits. Although market regulators and policymakers improve market conditions with the advanced volatility interruption mechanism, our empirical results show the adverse effect of the mechanism. Not allowing investors to earn above average returns without accepting above average risks makes Korean stock markets inefficient along with advanced volatility interruption mechanisms.
What drives cryptocurrency adoption? Exploring the role of psychological traits and environmental orientation with Choi, S. (Journal of Applied Marketing Theory, 2023)
Cryptocurrency is gaining worldwide recognition. This research examines the psychological determining factors of consumers’ cryptocurrency adoption behavior based on the theory of planned behavior. 452 samples are collected from U.S consumers and the data are analyzed by PLS-SEM. The findings reveal that consumer innovativeness has positive influences on the attitude and perceived behavioral control for cryptocurrency and in turn affects the intention to use cryptocurrency. Subjective norm is a significant predictor of cryptocurrency intention and the LOHAS lifestyle moderates the influence of attitude on the intention. This research offers theoretical and practical implications for the cryptocurrency market.
WORKING PAPERS
Sailing the stormy seas: Energy hedge funds strategy innovation, and market uncertainties with French, J., Gurdgiev, C., and Lucey, B.
Rewriting the ESG playbook: How the Russia-Ukraine war upended sustainable investing norms with French, J., and Gurdgiev, C.
Equity ETFs flows and volatility of net assets value: Evidence from Chinese markets with Tian, J., and Naka, A.
Volatility guards: exploring idiosyncratic risk with Alsunbul, S., and Naka, A.
Does ETFs coskewness improve their performance and decrease ambiguity at market and ETF levels? Evidence from ETF return, ambiguity in U.S. with Tian, J., and Naka, A.
Price limits, idiosyncratic volatility, and policy uncertianty in Chinese markets with French, J., and Gurdgiev, C.
Does ETFs coskewness improve their performance and decrease ambiguity at market and ETF levels? Evidence from ETF return, ambiguity in U.S. with Tian, J., and Naka, A.
An overall evaluation and exploration in the Japanese ETFs with Tian, J., and Naka, A.
Is cryptocurrency a safe haven against equity market investment in emerging economies?, Single-authored.
WORK IN PROGRESS
US presidential elections and market movements: The role of political uncertainty with French, J., and Gurdgiev, C.
Investor intention and behavior in cryptocurrency market with Wang, L., McGovern, E., and Choi, S.
Financial market integration between Latin America and the US with Izaguirre, O., and Zirek, D.
RESEARCH AWARDS
Loras College
Ahlgren Summer Research Award, 2022
RESEARCH PROJECTS
AD-HOC JOURNAL REVIEWS
Finance Research Letters
International Review of Financial Analysis
Journal of International Money and Finance
International Review of Economics and Finance
International Journal of Emerging Markets
Research in International Business and Finance
Eurasian Business Review