European Stock Research Articles

Global financial risk and market connectedness: An empirical analysis of COVOL and major financial markets

This study presents a novel investigation into the dynamic connectedness between the recently developed global risk measure, COVOL, created by Engle and Campos-Martins (2023), and the major international stock, gold, and crude oil markets in China, the US and Europe. Applying conditional and aggregated connectedness approaches, we systematically uncover the multi-dimensional interlinkages to understand volatility transmissions within these markets. Results reveal that COVOL predominantly receives volatility transmissions, with the US and European stock markets acting as principal transmitters of shocks across all three regional systems. The research also highlights the crucial role of significant events, such as the Global Financial Crisis, the Chinese stock market crash, and the COVID-19 pandemic, when increasing the intensity of connectedness. The volatility transmission of the COVOL-gold pairing is comparatively weaker than the COVOL-stock and COVOL-oil pairs. At the same time, the US and Europe consistently transmit stronger shocks to global financial risk, contributing significantly to the global risk transmission channel, whereas, in contrast, China’s financial markets transmit less international uncertainty. Robustness testing verifies these findings.

Heterogeneous Market Hypothesis in Major European Stock Exchanges

The aim of this study is to investigate heterogeneous market efficiency in European stock exchanges using Augmented HAR-RV model. According to the heterogeneous market efficiency hypothesis, investors create portfolios according to different time horizons and different market situations may arise in the reflection of information on price. We find evidence of the validity of the heterogeneous market efficiency model in European stock exchanges. Investors interpret information differently at different time horizons. Medium- and long-term investment decisions are a major influence. These results help explain the volatility that may occur in different time horizons. Portfolio diversification should also be made according to different investments in different horizons. Short-term global volatility shock has been effective on European stock markets.

The Volatility Character of European Renewable Energy Stocks: A Study on the ERIX Index

Yenilenebilir enerji iklim değişikliği ile mücadele ve enerji güvenliğini sağlamak için stratejik öneme sahip bir sektördür. Avrupa 2020’li yıllara gelindiğinde toplam enerji tüketiminin %20’sinden fazlasını yenilenebilir enerjiden sağlamaktadır ve Avrupa Birliğinin nihai amacı tam olarak fosil yakıtlardan arınmaktır. Bu amaç doğrultusunda yenilenebilir enerji firmaları kilit rol oynamaktadır ve yenilenebilir enerji şirketlerinin finansal performansı mutlaka iyi anlaşılmalıdır. Bu çalışmanın amacı da Avrupa yenilenebilir enerji şirketlerinin hisse senedi performansının volatilite karakterini ortaya koymaktır. Avrupa yenilenebilir enerji şirketlerini analiz etmek amacıyla en büyük yenilenebilir enerji firmalarından oluşan ERIX (European Renewable Energy Index) kullanılmıştır. Endeksin volatilite karakterini incelemek için GARCH (1,1), TGARCH ve EGARCH modelleri kullanılmıştır. Çalışma sonucunda Avrupa yenilenebilir enerji şirketlerinin finansal performansını tahmin etmede geçmiş verilerin kullanılabileceği bulunmuştur. GARCH(1,1) modeli sonucunda bugün meydana gelen şokların gelecek dönem varyans tahminlerinde uzun süre etkili olduğu sonucuna varılmıştır. TAGRCH modeli ERIX endeksi üstünde kötü haberlerin oynaklık etkisinin daha fazla, iyi haberlerin ise daha az olduğunu göstermiştir. EGARCH modeli de iyi haberle ile kötü haberlerin yol açtığı şokların asimetrik olduğu sonucunu ortaya koymuştur. Bu çalışma yenilenebilir enerji endeksine finansal bir veri olarak yaklaşan ve volatilite analizini yapan ilk çalışmadır.

Multi-scale dependence and risk contagion among international financial markets based on VMD-Vine copula-CoVaR

ABSTRACT Considering the frequency domain and nonlinear characteristics of financial risks, we propose a VMD-Vine copula-CoVaR framework to study the dependence structures and risk spillovers among international financial markets at different time scales. Furthermore, a mean-variance optimization technique has been applied to evaluate the performance of the optimal cross-market portfolios. The empirical results show that: (1) The R-Vine copula is superior to the C- and D-Vines; (2) Compared with the Asian stock markets, the European stock markets are more correlated with each other. The correlations between the markets at the long-term scale are greater than those at the short- and medium-term ones; (3) The optimal pair copulas are combined with the CoVaR to estimate the systemic spillover risks among the markets. The downside and upside spillover risks across the markets are not always symmetric. Moreover, the ΔCoVaRs at the medium-term scale are the highest and the lowest at the short-term one; and (4) The optimal cross-market portfolio constructed by our framework perform better than the benchmarks by annualized return, Sharpe ratio, and maximal drawdown. The findings have direct implications for portfolio managers and investors to prevent extreme risks and take better international investment decisions based on the knowledge of optimum portfolio.

A novel statistical approach to deal with spatial bias in maturity ogive estimation

The proportion of mature fish at length is one of the most important population attributes when evaluating reproductive potential for fish stock assessment purposes. Bias in maturity ogive parameters can lead to fishery management decisions based on misspecified biological reference points. These parameters can vary spatially and temporally, and this variability should be understood and included in the assessment models. However, integrating this variability becomes challenging when specific spatial-dependent ogives cannot be used in the stock assessment model. Hence, this study proposes a novel use of a multivariate response Bayesian regression model, employing an integrated nested Laplace approximation to estimate a single global maturity ogive using data from various spatial areas. This model explicitly accounts for differences in the sampling process and combines information from different areas to estimate shared maturity ogive parameters using joint-likelihood procedures. The model is applied to the European hake stock in ICES (International Council for the Exploration of the Sea) Divisions 27.8.c and 27.9.a, serving as a practical guide. In this model, we have considered different predictors to handle the relationship between the probability of being mature and the length and year covariates. Our results suggest that the logistic formulation correctly captures the relationship between the probability of being mature and length. For year variability, including a year factor covariate or year random effect in the predictor model produces similar values of goodness of fit measures.

Quasi Maximum Likelihood Estimation of Vector Multiplicative Error Model using the ECCC-GARCH Representation

Abstract We introduce an ECCC-GARCH representation for the vector Multiplicative Error Model (vMEM) that enables maximum likelihood estimation using the multivariate normal distribution. We show via Monte Carlo simulations that the QML estimator possesses desirable small sample properties (towards unbiasedness and efficiency). In the empirical application, we firstly use a two-dimensional vMEM for the squared return and realized volatility, which nests the High-frEquency-bAsed VolatilitY (HEAVY) and Realized GARCH model. We show that the Realized GARCH model is a more appropriate specification for the dynamics of the return-volatility relationship. The second empirical application is a four-dimensional vMEM for volatility spillover effects in the four European stock markets. The results confirm interdependence across European markets and the relative strength of volatility spillovers increases in the post-2010 turmoil periods.

The relevance of network effects on the Central-Eastern European (CEE) stock market indices, 2008 Q1-2022 Q1

The relevance of network effects on the Central-Eastern European (CEE) stock market indices, 2008 Q1-2022 Q1

Conceptual design of a modular Expanded Polystyrene (EPS) formwork for sustainable prefabricated concrete slab

European policymakers emphasize the critical need for a substantial renovation of the current European building stock, stressing the imperative to sustainably integrate energy and structural design. Consistent with the European objectives, industrialized construction and precast/offsite methods offer potential advantages in terms of time, cost, and quality for building renovation; along with the possibility of utilizing secondary raw materials, they enhance the energy performance of building products and advocate for environmentally sustainable solutions. This study presents the initial stage in designing a prefabricated concrete floor system, thermally and structurally high-performing, to be integrated into new and existing buildings. Specifically, the study outlines the design development of a modular element made with expanded polystyrene (EPS) for the construction of insulated floor systems with EPS lost-formwork (ICF - Insulated Concrete Form). This element ensures high and continuous thermal insulation without contributing to the structural resistance of the finished floor system. The process of designing, optimizing, and testing various design iterations is described. Materials and finished product requirements were identified, and numerical analyses and experimental tests were conducted. The main step involved the formwork mould, focusing on the shaping of joints, and evaluating the performance from a mechanical and thermal perspective. Field tests were also conducted, first on virgin EPS formwork and subsequently on a formwork containing a percentage of recycled EPS.

Analysis of the Physical Phenomena and Modelling Procedures of Building Heating and Cooling Emission System Energy Losses

An important research issue in assessing the energy performance of buildings concerns the modelling of the interaction between the built environment and the heating/cooling emission systems. Several methods can be used to evaluate the effect of the heating emitter characteristics, including the possible embedment in the building structure, non-uniform space temperature distribution, and the accuracy of the indoor temperature control. Generally, technical standards specify simplified, yet insufficiently validated methods, based on tabulated values. This paper outlines the main simplified procedures for assessing the efficiency of the emission subsystem, with a particular focus on the hydronic systems. It describes the essential datasets required for the analysis and highlights the interaction with phenomena related to the emitter heat loss. The simplified calculation procedures are then methodologically compared with detailed simulation tools, such as EnergyPlus, to identify differences and limitations in the models. The main discrepancies in the procedures and the required input data are highlighted, and possible strategies for improving the simplified methods are presented. A building representative of the European residential building stock is then analysed in the Italian climate using different calculation procedures. The results, in terms of thermal output of the emitter, are then analysed and compared.

Is there an optimal working capital management that minimizes European stock risk?

Is there an optimal working capital management that minimizes European stock risk?

The moderating role of blockchain technology in ESG disclosure and operational efficiency: evidence from the banking sector in ASEAN and European stock market

The moderating role of blockchain technology in ESG disclosure and operational efficiency: evidence from the banking sector in ASEAN and European stock market

The Effect of Seasonal Depression on Stock Market Returns

The study analyses the statistical relationship between the degree of seasonal depression and stock index returns. For this analysis, we examine the daily returns of two US and five European stock indices using OLS regression. The analysis found a statistically significant relationship between seasonal depression and the change in returns. However, due to the limited use of the reduced form, this only confirms the link between seasonal depression and returns, and further observations would be required to confirm a causal relationship.

Textile Membrane for Façade Retrofitting: Exploring Fabric Potentialities for the Development of Innovative Strategies

The European building stock demands urgent renovation due to the age of the buildings, their expected lifetime, and their excessive energy consumption, which accounts for more than a third of the EU’s total emissions. However, the complexities involved, such as time, costs, and structural modifications, often discourage clients, tenants, and occupants from undergoing a building renovation process. Textile membranes, despite their long history in various architectural applications, have only been employed in façades in the last decades. Their intrinsic properties, such as lightness and flexibility, together with rapid assembly and low maintenance make these materials particularly suitable for façade retrofitting. Therefore, they are worth exploring as a way to promote the development of lightweight and easy-to-assemble façade products that could help overcome the current limitations of building retrofitting efforts. This paper aims to establish relationships between textile membranes and potential building retrofit applications. To this end, this study builds on the categorization of traditional façade retrofit strategies and proposes a new classification for textile façade retrofit products. The methodology includes a comprehensive literature review of textile properties and characteristics, along with a thorough assessment through case studies, of membrane use in façade applications. A sequential investigation leads to the main outcome of identifying three clear pathways for the development of new textile-based façade products for building retrofit.

Impact of Lockdown Measures on Central-East European Stock Markets: A Cointegration and Granger Causality Analysis of Indices

Impact of Lockdown Measures on Central-East European Stock Markets: A Cointegration and Granger Causality Analysis of Indices

Has COVID-19 changed the correlation between cryptocurrencies and stock markets?

The COVID-19 pandemic has challenged the notion that cryptocurrencies are uncorrelated with traditional asset markets. This study uses VAR-OLS techniques to investigate the time-varying correlation between Bitcoin and three major European stock market indices from January 4, 2016, to February 26, 2021. Our results show that cryptocurrencies and stock markets are dependent during crisis periods, but not during non-crisis periods. This confirms the time-varying correlation between cryptocurrencies and stock markets, which depends on the extent and persistence of responses to own and cross shocks. To improve the robustness of our results, we also test the impact of government measures on Bitcoin and stock market indices and find that they are both affected by these measures. Our study adds to the literature by examining the impacts of pandemics on the correlations between Bitcoin returns and the stock market, oil, and gold index returns, which have so far been unaddressed.

Market Efficiency During the COVID-19 Pandemic. Some Insights Using Non-Parametric Tests

ABSTRACT This paper examines the weak form of the Efficient Market Hypothesis (EMH) across fourteen European Stock Markets from October 2018 to April 2021, a period divided into subsamples based on the outbreak of the COVID-19 pandemic. Using non-parametric tests, including Runs, Bartel’s rank, and Wright’s rank and sign test, the findings indicate that EMH holds for developed capital markets. However, capital markets in Central and Eastern Europe exhibited a heterogeneous response to the pandemic. Some markets violated the efficiency hypothesis (Latvia and Lithuania), others consistently adhered to it (Hungary and Slovenia), while others became less efficient post-pandemic (Estonia and Romania).

On the relationship between oil market and European stock returns

This paper investigates the dynamic relationship between the oil market and European stock market returns using monthly data from May 2007 to April 2022 for 27 European Union member countries. A novel approach is adopted by using the time-varying Granger causality test and the structural vector auto-regression model to examine the causal links. Empirical results reveal strong evidence of time-varying causation between the variables, considering the oil market from both the supply-side and demand-side perspectives. In light of these findings, numerous policy considerations emerge, including refining risk management strategies for investors, reformulating economic and energy policies, the potential impact on monetary policy decisions, the need for ad hoc market regulations, facilitating investor education initiatives, promoting international cooperation, and advancing the transition to sustainable energy sources.

New ESG rating drivers in the cross‐section of European stock returns

AbstractWe assess the performance of two quantitative signals based on ESG scores across a large, multi‐national cross‐section of European stock returns. We test whether the cost of equity capital is more influenced by the upward momentum (measured over time) of the ESG scores of the firms issuing stocks or by their stability (identified as the volatility of the scores over time), measured around a changing mean level. We find that short‐term ESG momentum over 1 month has a significant impact on the cross‐section of stock returns, lowering the anticipated cost of capital and leading to positive average abnormal returns. This suggests that short‐term ESG momentum may represent a novel, priced systematic risk factor. Furthermore, we find strong evidence that an ESG volatility spread strategy which buys low ESG score volatility stocks and sells high volatility ones, generates a substantial alpha and affects the ex‐ante cost of capital. Both quantitative ESG signals result in portfolio sorting and long‐short strategies that enhance the overall sustainability profile of the issuing firms without compromising the raw average of their ESG scores.

Dynamic spillover and connectedness in higher moments of European stock sector markets

This study examines the spillovers in high-order moments (realized volatility, jumps, skewness, and kurtosis) among European stock sectoral indices. Using 5-minute data from January 2, 2013 to January 7, 2022, we show that the four sources of systemic risk, namely, volatility, jumps, skewness, and kurtosis, are transmitted from four main sectors before and during COVID-19 pandemic. Further, volatilities and jumps (bad volatility) associated with activities of the European energy and chemicals sectors that spillover shocks to other European markets are the greatest sources of systemic risk. Whereas, skewness (asymmetry) and kurtosis (fat-tail) associated with activities of the European industrial and insurance sectors that spillover shocks to other European markets are the greatest sources of systemic risk.

Oil in crisis: What can we learn

This study focuses on the Chicago Board Options Exchange Oil Volatility Index (CBOEOVX)'s volatility transmission to the European stock markets. In the first section, to determine the contingent connection between market returns and CBOEOVX and to examine if CBOEOVX return Granger causes economic capital rates of return, the Dynamic Conditional Correlation (DCC) GARCH model has been used. Then, the study examined the asymmetric effects of fluctuations in estimated unpredictability on markets' profitability as the last step of the methoology. In this regard, the study applies quantile regression to examine the asymmetrical effect of the CBOEOVX on the market's daily returns. We have discovered a statistically significant inverse link that changes over time across our various sample markets. This hints at and supports CBOEOVX ‘s influence on the European stock market as a source of primary energy risk. In addition, we find substantial evidence of an asymmetric effect of fluctuations in the CBOEOVX on very negative market profits in the lowest quartile. Our findings not only build on and support previous research and add to the existing body of knowledge but also have evident consequences for future research, regulatory authorities, and practitioners. Practitioners and regulators may use these findings to better comprehend the connection between all crises and pave the path for the future.