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Marion Kohler - One of the best experts on this subject based on the ideXlab platform.
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housing wealth Stock Market wealth and consumption a panel analysis for australia
2007Co-Authors: Nikola Dvornak, Marion KohlerAbstract:Using a panel of Australian States, we estimate how changes in household wealth affect consumption expenditure. Both housing and Stock Market wealth have a significant effect on consumption: a permanent $A1 increase in Stock Market wealth increases long-run annual consumption by 6-9 cents; the same increase in housing wealth increases annual consumption by around 3 cents. With households' housing assets more than three times that of Stock Market assets, a 1 per cent increase in housing wealth has an effect on consumption at least as large as that of a 1 per cent increase in Stock Market wealth. Copyright © 2007 The Economic Society of Australia.
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housing wealth Stock Market wealth and consumption a panel analysis for australia
2007Co-Authors: Nikola Dvornak, Marion KohlerAbstract:Using a panel of Australian States, we estimate how changes in household wealth affect consumption expenditure. Both housing and Stock Market wealth have a significant effect on consumption: a permanent $A1 increase in Stock Market wealth increases long-run annual consumption by 6–9 cents; the same increase in housing wealth increases annual consumption by around 3 cents. With households’ housing assets more than three times that of Stock Market assets, a 1 per cent increase in housing wealth has an effect on consumption at least as large as that of a 1 per cent increase in Stock Market wealth.
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housing wealth Stock Market wealth and consumption a panel analysis for australia
2003Co-Authors: Nikola Dvornak, Marion KohlerAbstract:This paper addresses the question of how changes in Stock Market wealth and housing wealth affect consumption expenditure in Australia. We approach the problem using a panel of Australian states, for which we construct data on housing and Stock Market wealth. We estimate the link between consumption and the components of wealth using panel-data estimation techniques, including fixed-effects instrumental variable and panel DOLS estimators. Unlike previous studies, we find that both housing wealth and Stock Market wealth have a significant effect on Australian consumption. We estimate that a permanent increase in households’ Stock Market wealth of one dollar increases annual consumption by 6 to 9 cents in the long run while a permanent increase in housing wealth of one dollar is estimated to increase long-run annual consumption by around 3 cents. However, given that households’ housing assets are more than three times as large as Stock Market assets, our estimates imply that a one per cent increase in housing wealth has an effect on aggregate consumption that is at least as large as that of a one per cent increase in Stock Market wealth.
Ross Levine - One of the best experts on this subject based on the ideXlab platform.
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Stock Market development and long run growth
1996Co-Authors: Ross Levine, Sara ZervosAbstract:The authors empirically evaluate the relationship between Stock Market development and long-term growth. The data suggest that Stock Market development is positively associated with economic growth. Moreover, instrumental variables procedures indicate a strong connection between the predetermined component in the long run. While cross-country regressions imply a strong link between Stock Market development and economic growth, the results should be viewed as suggestive partial correlations that stimulate additional research rather than as conclusive findings. Careful case studies might help identify causal relationships and further research could be done on the time-series property of such relationships.
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Stock Market development and financial intermediaries stylized facts
1995Co-Authors: Asli Demirguckunt, Ross LevineAbstract:World Stock Markets are booming. Between 1982 and 1993, Stock Market capitalization grew from $2 trillion to $10 trillion, an average 15 percent a year. A disproportionate amount of this growth was in emerging Stock Markets, which rose from 3 percent of world Stock Markets capitalization to 14 percent in the same period. Yet there is little empirical evidence about how important Stock Markets are to long-term economic development. Economists have neither a common concept nor a common measure of Stock Market development, so we know little about how Stock Market development affects the rest of the financial system or how corporations finance themselves. The authors collected and compared many different indicators of Stock Market development using data on 41 countries from 1986 to 1993. Each indicator has statistical and conceptual shortcomings, so they used different measures of Stock Market size, liquidity, concentration, and volatility, of institutional development, and of international integration. Their goal: to summarize infromation about a variety of indicators for Stock Market development, in order to facilitate research into the links between Stock Markets, economic development, and corporate financing decisions. They highlight certain important correlations: (i) In the 41 countries they studied, there are enormous cross-country differences in the level of Stock Market development for each indicator. The ratio of Market capitalization to the gross domestic product (GDP), for example, is greater than 1 in five countries and less than 0.10 in five others. (ii) There are intuitively appealing correlations among indicators. For example, big Markets tend to be less volatile, more liquid, and less concentrated in a few Stocks. Internationally integrated Markets tend to be less volatile. And institutionally developed Markets tend to be large and liquid. (iii) The three most developed Markets are in Japan, the United Kingdom, and the United States. The most underdeveloped Markets are in Colombia, Nigeria, Venezuela, and Zimbabwe. Malaysia, the Republic of Korea, and Switzerland seem to have highly developed Stock Market, whereas Argentina, Greece, Pakistan and Turkey have underdeveloped in richer countries, but many Markets commonly labeled"emerging"(for example, in Korea, Malaysia,and Thailand) are systematically more developed than Markets commonly labeled"developed"(for example, in Australia, Canada, and many European countries). (iv) Between 1986 and 1993, some Markets developed rapidly in size, liquidity, and international integration. Indonesia, Portugal, Turkey, and Venezuela experienced explosive development, for example. Case studies on the reasons for (and economic consequences of) this rapid development could yield valuable insights. (v) The level of Stock Market development is highly correlated with the development of banks, nonbank financial institutions (finance companies, mutual funds, brokerage houses), insurance companies, and private pension funds.
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Stock Market development and financial intermediaries stylized facts
1995Co-Authors: Asli Demirguckunt, Ross LevineAbstract:The three most developed Stock Markets are in Japan, the United Kingdom, and the United States, and the most underdeveloped Markets are in Colombia, Nigeria, Venezuela, and Zimbabwe. Markets tend to be more developed in richer countries, but some Markets commonly labeled emerging (for example, in Malaysia, the Republic of Korea, and Thailand) are systematically more developed than some Markets commonly labeled developed (for example, in Australia, Canada, and many European countries). World Stock Markets are booming. Between 1982 and 1993, Stock Market capitalization grew from $2 trillion to $10 trillion, an average 15 percent a year. A disproportionate amount of this growth was in emerging Stock Markets, which rose from 3 percent of world Stock Market capitalization to 14 percent in the same period. Yet there is little empirical evidence about how important Stock Markets are to long-term economic development. Economists have neither a common concept nor a common measure of Stock Market development, so we know little about how Stock Market development affects the rest of the financial system or how corporations finance themselves. Demirguc-Kunt and Levine collected and compared many different indicators of Stock Market development using data on 41 countries from 1986 to 1993. Each indicator has statistical and conceptual shortcomings, so they used different measures of Stock Market size, liquidity, concentration, and volatility, of institutional development, and of international integration. Their goal: To summarize information about a variety of indicators for Stock Market development, in order to facilitate research into the links between Stock Markets, economic development, and corporate financing decisions. They highlight certain important correlations: In the 41 countries they studied, there are enormous cross-country differences in the level of Stock Market development for each indicator. The ratio of Market capitalization to GDP, for example, is greater than 1 in five countries and less than 0.10 in five others. There are intuitively appealing correlations among indicators. For example, big Markets tend to be less volatile, more liquid, and less concentrated in a few Stocks. Internationally integrated Markets tend to be less volatile. And institutionally developed Markets tend to be large and liquid. The three most developed Markets are in Japan, the United Kingdom, and the United States. The most underdeveloped Markets are in Colombia, Nigeria, Venezuela, and Zimbabwe. Malaysia, the Republic of Korea, and Switzerland seem to have highly developed Stock Markets, whereas Argentina, Greece, Pakistan, and Turkey have underdeveloped Markets. Markets tend to be more developed in richer countries, but many Markets commonly labeled emerging (for example, in Korea, Malaysia, and Thailand) are systematically more developed than Markets commonly labeled developed (for example, in Australia, Canada, and many European countries). Between 1986 and 1993, some Markets developed rapidly in size, liquidity, and international integration. Indonesia, Portugal, Turkey, and Venezuela experienced explosive development, for example. Case studies on the reasons for (and economic consequences of) this rapid development could yield valuable insights. The level of Stock Market development is highly correlated with the development of banks, nonbank financial institutions (finance companies, mutual funds, brokerage houses), insurance companies, and private pension funds. This paper - a product of the Finance and Private Sector Development Division, Policy Research Department - is part of a larger effort in the department to study Stock Market development. The study was funded by the Bank's Research Support Budget under the research project Stock Market Development and Financial Intermediary Growth (RPO 678-37).
Peter Blair Henry - One of the best experts on this subject based on the ideXlab platform.
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Stock Market liberalization economic reform and emerging Market equity prices
2000Co-Authors: Peter Blair HenryAbstract:A Stock Market liberalization is a decision by a country's government to allow foreigners to purchase shares in that country's Stock Market. On average, a country's aggregate equity price index experiences abnormal returns of 3.3 percent per month in real dollar terms during an eight-month window leading up to the implementation of its initial Stock Market liberalization. This result is consistent with the prediction of standard international asset pricing models that Stock Market liberalization may reduce the liberalizing country's cost of equity capital by allowing for risk sharing between domestic and foreign agents. A Stock Market liberalization is a decision by a country's government to allow foreigners to purchase shares in that country's Stock Market. Standard international asset pricing models (JAPMs) predict that Stock Market liberalization may reduce the liberalizing country's cost of equity capital by allowing for risk sharing between domestic and foreign agents (Stapleton and Subrahmanyan (1977), Errunza and Losq (1985), Eun and Janakiramanan (1986), Alexander, Eun, and Janakiramanan (1987), and Stulz (1999a, 1999b)). This prediction has two important empirical implications for those emerging countries that liberalized their Stock Markets in the late 1980s and early 1990s. First, if Stock Market liberalization reduces the aggregate cost of equity capital then, holding expected future cash flows constant, we should observe an increase in a country's equity price index when the Market learns that a Stock Market liberalization is going to occur. The second implication is
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Stock Market liberalization economic reform and emerging Market equity prices
2000Co-Authors: Peter Blair HenryAbstract:A Stock Market liberalization is a decision by a country's government to allow foreigners to purchase shares in that country's Stock Market. On average, a country's aggregate equity price index experiences abnormal returns of 3.3 percent per month in real dollar terms during an eight-month window leading up to the implementation of its initial Stock Market liberalization. This result is consistent with the prediction of standard international asset pricing models that Stock Market liberalization may reduce the liberalizing country's cost of equity capital by allowing for risk sharing between domestic and foreign agents.
Karin Loch - One of the best experts on this subject based on the ideXlab platform.
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Anticipating Long-Term Stock Market Volatility
2012Co-Authors: Christian Conrad, Karin LochAbstract:We investigate the relationship between long-term U.S. Stock Market risks and the macroeconomic environment using a two component GARCH-MIDAS model. Our results provide strong evidence in favor of counter-cyclical behavior of long-term Stock Market volatility. Among the various macro variables in our dataset the term spread, housing starts, corporate profits and the unemployment rate have the highest predictive ability for Stock Market volatility . While the term spread and housing starts are leading variables with respect to Stock Market volatility, for corporate profits and the unemployment rate expectations data from the Survey of Professional Forecasters regarding the future development are most informative. Our results suggest that macro variables carry information on Stock Market risk beyond that contained in lagged realized volatilities, in particular when it comes to long-term forecasting.
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Anticipating Long-Term Stock Market Volatility
2012Co-Authors: Christian Conrad, Karin LochAbstract:We investigate the relationship between long-term U.S. Stock Market risks and the macroeconomic environment using a two component GARCH-MIDAS model. Our results show that macroeconomic variables are important determinants of the secular component of Stock Market volatility. Among the various macro variables in our dataset the term spread, housing starts, corporate profits, and the unemployment rate have the highest predictive ability for long-term Stock Market volatility. While the term spread and housing starts are leading variables with respect to Stock Market volatility, for industrial production and the unemployment rate expectations data from the Survey of Professional Forecasters regarding the future development are most informative.
Valery Polkovnichenko - One of the best experts on this subject based on the ideXlab platform.
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limited Stock Market participation and the equity premium
2004Co-Authors: Valery PolkovnichenkoAbstract:Abstract In this paper I study the implications of limited Stock Market participation for the equity premium. Earlier research suggested that limited Stock Market participation may potentially explain the high equity premium. This paper argues to the contrary and shows how the size of the equity premium in a limited participation economy depends on the assumptions about the structure of nonfinancial endowments. I calibrate a model of an exchange economy where all agents receive labor income and some agents are restricted from participating in the equity Market. The key feature of the model is that, consistent with the data for the USA, Stockholders derive a substantial fraction of their endowment from labor income. Due to limited risk sharing, the equity premium in such an economy is higher, but only slightly higher, than in an otherwise similar economy with full participation. I conclude that limited Stock Market participation does not play a significant role in explaining the equity premium puzzle.
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limited Stock Market participation and the equity premium
2001Co-Authors: Valery PolkovnichenkoAbstract:In this paper I study the implications of limited Stock Market participation for the equity premium. If all agents are receiving labor income and there is a small fixed cost of trading equities, then those agents with relatively low labor income choose not to participate in equity Market. Because of limited risk sharing, the equity premium is higher, but only slightly higher, than in a model without frictions and full equity Market participation. Thus, limited Stock Market participation does not resolve the equity premium puzzle.
