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Published Articles for Year 2018
Multinational Finance Journal, 2018, vol. 22, no. 3/4, pp. 211-254
Yuriy Zabolotnyuk , Carleton University, Canada    Corresponding Author

Abstract:
This paper employs meta-analysis methodology to reconcile the diverse international empirical evidence on the effects of bond rating announcements on the stock prices of the issuing firms. The random-effects model meta-analysis of 53 published studies and 421 sub-samples of data covering a range of countries and 44,713 bond rating announcements reveals an average cumulative abnormal stock return of -1.64% associated with the bond downgrades and an average cumulative abnormal stock return of 0.28% associated with the bond upgrades. Factors such as initial bond rating, issuer location, announcement period, and rating change size have significant effects on the size of the abnormal stock returns around the rating announcement dates.

Keywords : bond rating announcements; wealth effects; meta-analysis; information asymmetry
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Multinational Finance Journal, 2018, vol. 22, no. 3/4, pp. 173-210
Elyas Elyasiani , Temple University, USA
Luca Gambarelli , University of Modena and Reggio Emilia, Italy
Silvia Muzzioli , University of Modena and Reggio Emilia, Italy    Corresponding Author

Abstract:
The aim of this paper is to propose a simple and unique measure of risk that subsumes the conflicting information contained in volatility and skewness indices and overcomes the limitations of these indices in accurately measuring future fear or greed in the market. To this end, the concept of upside and downside corridor implied volatility, which accounts for the asymmetry in the risk-neutral distribution, is exploited. The risk-asymmetry index is intended to capture the investors’ pricing asymmetry towards upside gains and downside losses. The results show that the proposed risk-asymmetry index can play a crucial role in predicting future returns, at various forecast horizons, since it subsumes the information embedded in both the volatility and skewness indices. Furthermore, the risk-asymmetry index is the only index that, at very high values, possesses the ability to clearly highlight a risky situation for the aggregate stock market.

Keywords : risk-asymmetry; corridor implied volatility; risk-neutral moments; risk measures; return predictability
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Multinational Finance Journal, 2018, vol. 22, no. 1/2, pp. 1-33
Panayiotis Alexakis , National and Kapodistrian University of Athens, Greece
Gikas Hardouvelis , University of Piraeus & Ex Minister of Finance of Greece, Greece
Dean Paxson , University of Manchester, UK
Gordon Sick , University of Calgary, Canada
Lenos Trigeorgis , University of Cyprus, Cyprus & King’s College London & MIT, UK    Corresponding Author

Abstract:
This article addresses certain key issues of the Greek sovereign debt crisis and its broader economic distress and growth implications for the Euro Area. It also offers a number of remedies, including growth indexed bonds, fiscal balances over the growth cycle, structural reforms, and the use of real option analysis in relevant public policy areas involving either inefficient or growth sectors of the economy.

Keywords : greek sovereign debt; eurozone financial crisis; GDP-linked bonds; structural reforms; real options
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Multinational Finance Journal, 2018, vol. 22, no. 3/4, pp. 119-172
Abdulilah Ibrahim Alsheikhmubarak , Royal Holloway, University of London, UK    Corresponding Author
Evangelos Giouvris , Royal Holloway, University of London, UK

Abstract:
Modelling the volatility (or kurtosis) of the implied volatility is an important aspect of financial markets when analysing market consensus and risk strategies. The purpose of this study is to evaluate the ability of symmetric and asymmetric GARCH systems to model the volatility of the FTSE 100 Implied Volatility Index (IV). We use GARCH, EGARCH, GJR-GARCH and GARCH-MIDAS to model variance. We also introduce FTSE 100 returns and several macroeconomic variables (UK industrial production, 3M LIBOR, GBP effective exchange rate and unemployment rate) to investigate whether they explain variance. Our results show that market returns is a major explanatory factor besides macroeconomic variables. Also, GARCH (1,1) outperforms other asymmetric models unless there is exceptionally high volatility such as the crisis of 2008 in which case EGARCH performs better. GJR-GARCH is outperformed by all other models. GARCH-MIDAS shows that both macroeconomic variables and market returns are useful when estimating IV.

Keywords : FTSE 100 implied volatility index (IV); GARCH; EGARCH; GJR-GARCH; GARCH-MIDAS; FTSE 100 index returns; macroeconomic variables
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Multinational Finance Journal, 2018, vol. 22, no. 1/2, pp. 35-62
Anastasios G. Malliaris , Loyola University Chicago, USA    Corresponding Author

Abstract:
This paper links the bursting of the housing asset price bubble around 2007 in the U.S. to the instability that arose in financial markets with the bankruptcy of Lehman Brothers in September 2008, and both of these to the Great Recession and the unconventional monetary policy that followed. Similar narratives about the Stock Market Crash of 1929, the Crash of 1987 and the Internet Bubble of 2000 are briefly presented to show their evolving financial nature, describe the financial instabilities produced by them and their costs and, finally examine the responses initiated, primarily, by monetary policy. This analytical synopsis of the four best-known U.S. asset bubble crashes guides us to an articulation of a few basic lessons learned.

Keywords : asset price bubbles; financial instability; monetary policy; financial crises; the great recession
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Multinational Finance Journal, 2018, vol. 22, no. 1/2, pp. 63-118
Scott Brown , University of Puerto Rico, USA
Demetra Demetriou , Cyprus University of Technology, Cyprus
Panayiotis Theodossiou , Cyprus University of Technology, Cyprus    Corresponding Author

Abstract:
The economy of Cyprus was barely affected by the U.S. subprime mortgage debacle. The economic crisis in Cyprus was initially driven by fiscal mismanagement and subsequently by the failure of the government and its regulatory branches to monitor the imprudent behavior and risky investment actions of top executives in the banking sector. That is, banking executives run amok due to poor monitoring leading to severe agency problems in the Cypriot banking industry. The economic effects of the first capital-controlled bail-in in the EU in 2013 temporarily hobbled the real economy and the banking sector of Cyprus. Nevertheless, in less than five years, the economy of Cyprus recovered almost fully. This paper provides an economic analysis of the macroeconomic, banking and political events that led to the economic collapse in Cyprus. We also cover the interim period between collapse and recovery. The Cyprus case is an opportunity for European economic agents and regulators to learn how to avoid bail-in and welfare bloat. Studying Cyprus helps the reader see the most troubling cracks in the foundations of the European Fortress.

Keywords : n/a
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