Global ETF News Older than One Year
Additions to Market Indices and the Comovement of Stock Returns Around the World IMF Working paper
March 4, 2011--Using newly-constructed data covering the last decade, we document that, in most of forty markets, when added to the main index, firms’ returns experience an increase in comovement with the rest of the index, reflected in higher beta and greater explanatory power of the market return.
Stock turnover and analyst coverage also typically increase upon inclusion. Using various tests, we find the demand-based view of comovement (the category/habitat theories of Barberis, Shleifer and Wurgler, 2005) to provide a good explanation for many of our findings. Some results, though, suggest that information-related factors are also important in explaining the increased comovement.
Additions to Market Indices and the Comovement of Stock Returns Around the World-IMF Working paper
Source: IMF
Fiscal Expectations Under the Stability and Growth Pact: Evidence from Survey Data IMF Working paper
March 4, 2011--The paper uses survey data to analyze whether financial market expectations on government budget deficits changed in France, Germany, Italy, and the United Kingdom during the period of the Stability and Growth Pact (SGP).
Our findings indicate that accuracy of financial expert deficit forecasts increased in France. Convergence between the European Commission's and market experts’ deficit forecasts also increased in France, Italy, and the United Kingdom, particularly during the period after SGP’s reform in 2005. Yet, convergence between markets’ forecasts and those of the French, German, and Italian national fiscal authorities seems not to have increased significantly during the SGP.
Source: IMF
New Growth Drivers for Low-Income Countries - The Role of the BRICs
March 4, 2011--The emergence of BRICs—Brazil, Russia, India, and China—is reshaping low-income countries’ (LICs) international economic relations. While industrial countries remain LICs’ dominant development partners, LIC-BRIC ties have increased so rapidly over the past decade that BRICs have become new growth drivers for LICs.
Trade with BRICs is already close to half of the value of combined trade with the European Union and the United States, and larger than with other emerging market economies. BRIC FDI and development financing are making a significant impact in some key areas despite their relatively small volumes compared with those from advanced countries. Beyond the increased flows of goods and capital, BRICs have brought new dynamics in LICs’ economic relations with the rest of the world, complementing as well as competing with OECD partners. Nevertheless, while potential benefits from the LIC-BRIC ties are enormous, there are challenges and risks in realizing such benefits.
view report New Growth Drivers for Low-Income Countries - The Role of the BRICs
Source: IMF
IOSCO survey results on implementation of securitization recommendations
April 4, 2011--The Technical Committee of the International Organization of Securities Commissions (IOSCO) has published the results of a survey on the implementation of its September 2009 recommendations with respect to securitisation and credit default swap markets – Task Force on Unregulated Markets and Products – Implementation Report.
The report shows that all jurisdictions surveyed by the Task Force had at least one, if not multiple initiatives in progress to implement the recommendations on: disclosure; the retention of economic interest (skin in the game); investor suitability, and international coordination; and regulatory cooperation. Most measures are expected to be implemented in 2010 and 2011.
The Technical Committee, based on the survey responses and subsequent discussions, has made two further recommendations:
TFUMP Recommendation 1 – IOSCO recommends regulators encourage improvements in disclosure standards for private or wholesale offerings of securitised products; and
TFUMP Recommendation 2 – IOSCO recommends regulators engage in international cooperation toward convergence of national regulations, where desirable, and review progress regularly.
view the Task Force on Unregulated Financial Markets and Products Implementation Report
Source: IOSCO
Anger as exchanges raise closing auction fees
March 4, 2011--Two of Europe’s largest exchanges have raised the fees they charge for traders dealing during the end-of-day auction, provoking an outcry among banks and brokers that are their biggest customers.
The moves by NYSE Euronext, which operates bourses in Amsterdam, Paris, Brussels and Lisbon, and Nasdaq OMX, which runs exchanges in Sweden, Denmark, Finland and Iceland, come as exchanges have been forced to lower fees amid stiff competition from rival platforms such as Chi-X and BATS.
Source: FT.com
UN warns on oil as food prices spike
MArch 3, 2011-- Global food prices hit a record high in February, the United Nations said on Thursday, warning that surprise oil price spikes induced by Middle East unrest would affect already volatile cereal markets.
Rising food prices are a fast-growing global concern, partly fuelling the protests which toppled the rulers of Tunisia and Egypt in January and February, which in turn unleashed unrest in North Africa and the Middle East from Algeria to Yemen.
The UN Food and Agriculture Organisation's (FAO's) Food Price Index hit its second straight record last month, further passing peaks seen in 2008 when prices sparked riots in several countries, driven by rising grain costs and tighter supply.
Source: FIN24
EDHEC-Risk Institute receives Eurex support for new research on volatility derivatives
March 3, 2011--EDHEC-Risk Institute (London, Nice, Singapore) has announced it will be conducting new research exploring the uses of volatility derivatives in equity portfolio management with the support of leading derivatives exchange Eurex. The research project’s emphasis will be on optimising access to the equity risk premium while controlling for downside risk and will be co-managed by Stoyan Stoyanov, head of research at EDHEC Risk Institute–Asia and Lionel Martellini, scientific director of EDHEC-Risk Institute.
According to Professor Stoyanov: “In 2008, worldwide equity markets collapsed and assets which conventional investment wisdom regarded as effective equity diversifiers also experienced dramatic falls. Meanwhile, equity volatility skyrocketed causing long positions in equity volatility derivatives to rally. These events dashed the exaggerated hopes placed in traditional forms of diversification and created interest in the possible use of volatility derivatives as diversifiers for traditional and alternative portfolios in general, and equity positions in particular. Against this backdrop, this new research project will look at how investors can use volatility derivatives to design equity portfolios with attractive downside-risk properties.”
Peter Reitz, member of the Executive Board of Eurex, said: “Eurex has been supporting worldwide academic research since 2003 and EDHEC-Risk Institute was one of the first and most active European institutions we have supported. As EDHEC-Risk Institute celebrates its tenth anniversary and develops into Asia, we are delighted to renew our partnership and sponsor new research into the uses of volatility derivatives.”
“The global financial crisis and stricter regulatory constraints have focused the attention of professional investors on the volatility and downside risk of their equity holdings, whetting their appetite for instruments that can help them manage their exposure. We believe that volatility derivatives are one suitable instrument and are looking forward to seeing academic research on this issue,” he added.
Source: EDHEC-Risk Institute
The Real Effects of Financial Sector Interventions During Crises-IMF Working Paper
March 2, 2011--Summary: We collect new data to assess the importance of supply-side credit market frictions by studying the impact of financial sector recapitalization packages on the growth performance of firms in a large cross-section of 50 countries during the recent crisis. We develop an identification strategy that uses the financial crisis as a shock to credit supply and exploits exogenous variation in the degree to which firms depend on external financing for investment needs, and focus on policy interventions aimed at alleviating the bank capital crunch.
We find that the growth of firms dependent on external financing is disproportionately positively affected by bank recapitalization policies, and that this effect is quantitatively important and robust to controlling for other financial sector support policies. We also find that fiscal policy disproportionately boosted growth of firms more dependent on external financing. These results provide new evidence of a quantitatively important role of credit market frictions in influencing real economic activity.
view the The Real Effects of Financial Sector Interventions During Crises IMF Working paper
Source: IMF
Sovereign Credit Ratings and Spreads in Emerging Markets: Does Investment Grade Matter?
March 1, 2011--Sovereign investment grade status is often associated with lower spreads in international markets. Using a panel framework for 35 emerging markets between 1997 and 2010, thispaper finds that investment grade status reduces spreads by 36 percent, above and beyond what is implied by macroeconomic fundamentals.
This compares to a 5-10 percent reduction in spreads following upgrades within the investment grade asset class, and no impact formovements within the speculative grade asset class, ceteris paribus. While global financial conditions play a central role in determining spreads, market sentiment improves with lower external public debt to GDP levels and higher domestic growth rates.
Source: IMF
Oil jumps on Mideast unrest
March 1, 2011--Brent crude oil prices pushed back above $114 a barrel on Tuesday as the potential supply disruptions and unrest in the Middle East and North Africa kept investors on edge.
Clashes between opposition supporters and Iran's security forces in Tehran reported by an opposition website added to investor concerns about the security of oil supplies in the region
Source: FIN24
