We study the impact of foreign institutional investor (FII) flows on stock returns in India. We exploit stock-level daily trading data for FII purchases and FII sales during 2006-2011 to separate stocks into those experiencing abnormally high and low FII flow innovations. We find that stocks with high innovations are associated with a coincident price increase that is permanent, whereas stocks ...

We present an empirical study of the subordination hypothesis for a stochastic time series of a stock price. The fluctuating rate of trading is identified with the stochastic variance of the stock price, as in the continuous-time random walk (CTRW) framework. The probability distribution of the stock price changes (log-returns) for a given number of trades N is found to be approximately Gaussia...

Article history: Received 21 May 2010 Received in revised form 24 January 2012 Accepted 28 January 2012 Available online 10 February 2012 We employ high frequency data to study extreme price changes (i.e., price jumps) in the Prague, Warsaw, Budapest, and Frankfurt stock market indexes from June 2003 to December 2010. We use the price jump index and normalized returns to analyze the distributio...

Financial Globalization and Monetary Policy* The process of financial globalization has significantly altered the environment in which national monetary policy authorities operate. What implications does this have for the design of monetary policy? The question can be properly addressed only in the context of a model where monetary policy interacts with financial market efficiency. This paper i...

Prediction markets are low volume speculative markets whose prices offer informative forecasts on particular policy topics. Observers worry that traders may attempt to mislead decision makers by manipulating prices. We adapt a Kyle-style market microstructure model to this case, adding a manipulator with an additional quadratic preference regarding the price. In this model, when other traders a...

Using the threshold structural VAR model, this paper examines the multiheterogeneity impacts of international oil price shocks on Chinese stock market in the background of financialization. The research finds: (1) the effects of oil price shocks on stock returns are different across sectors and the responses of stock returns are larger in bear markets. The nonlinear effects of oil supply shocks...

Hou and Moskowitz (2005) document that common stocks with more price delay in reflecting information yield higher returns and that the delay premium cannot be explained by the CAPM, Fama-French three-factor model, or Carhart’s four-factor model. It cannot be explained by conventional liquidity measures either. They contend that the premium is attributable to inadequate risk sharing arising from...

This paper analyzes 4,750 mergers from 1963 to 1998 to characterize the risk and return in risk arbitrage. Results indicate that risk arbitrage returns are positively correlated with market returns in severely depreciating markets but uncorrelated with market returns in f lat and appreciating markets. This suggests that returns to risk arbitrage are similar to those obtained from selling uncove...

This paper uses the term structure of interest rates to explain the variations of stock prices and stock returns. It shows that interest rates have an important impact on stock returns, especially at long horizons. The hypothesis that expected stock returns move one-for-one with ex ante interest rates, which has been rejected in other studies using short horizon nominal asset returns, is suppor...