Market Resilience Research Articles

A Theoretical Appraisal of Elaborating a Stock Market Prudential Surveillance System Based on a Conceptual Model of Integration of the Financial Sectors and Market Risk Mitigation

This theoretical research investigates the integration process between the two most prominent financial sectors the stock market and the credit market and attempts to engineer an alternative prudential toolkit shaped for stock market resilience from systemic risk and financial instability and that complements the basic Basel II and III framework shaped for the credit market. An analytical study will be conducted for the purpose of engineering a stock market prudential surveillance system with both micro and macro-prudential instruments, taking into account the integration constraints and unveiling thereby the threats ensuing from excessive covariance between stock returns. It finds evidence of theoretical arguments implying amplification and offsetting of threats by interaction between prudential instruments deployed simultaneously across sectors, for instance the credit sector and the stock market sector and finds solutions to collusion of interaction within the framework of elaborating instruments related to the prudential engineering. This research holds that Pareto improvement in the prevalence of market frictions introduced by prudential surveillance instruments leaves room for resilience from the onslaught of market risk entailed by sentiment driven speculation. Prudential surveillance fashioned like Basel II and III for the scope of mitigating stock market vulnerability to excessive volatility harbours some highly challengable presumptions regarding the methodology to be persued for the sake of shaping the best methodological approach to prudential engineering of instruments. The interaction process between the proposed prudential scheme and monetary policy highlights one additional challenging scope for central banking while shaping monetary policy stance. This complementary prudential framework reinvigorates the Basel II and III agreements which is specific to the credit sector and might reveal in shortage of instruments providing surveillance on the sources of systemic exposure whenever it is stemming from the stock market. This reinvigorating toolkit thereby reinforces the surveillance instruments aimed at mitigating financial instability in a more pervasive and comprehensive method.

Human capital and labour market resilience over time: a regional perspective of the Portuguese case

Human capital and labour market resilience over time: a regional perspective of the Portuguese case

Long-term Resilient Labour Strategies to Deal with the Economic Crisis in Europe Using Qualitative Comparative Analysis (QCA)

The crisis has had a negative impact on both European economies and labour markets with different effects among countries, raising the importance of analysing the labour market resilience. This paper seeks to identify which strategies and labour adjustments have led European labour markets to both resilient and non-resilient results by using Qualitative Comparative Analysis (QCA). The findings show two different configurations explaining 57% of the resilient cases and four configurations explaining 74% of the non-resilient cases. The results of this study revealed three important issues. First of all, the same strategy was found to have different results on labour markets. This fact stressed that the context in which different measures are imposed is a decisive factor in their success. Secondly, resilient strategies underlined the importance of “flexibility”, by increasing temporary employment together with other conditions to escape from the crisis. Finally, the non-resilient results stress the importance of the imbalance between the flexicurity dimensions and the effect of the fall in economic activity on not being resilient in the long-term.

Central and Eastern European economies in a Goldilocks age: A model of labor market institutional choice

We construct a simple model of a small, open economy with two macroeconomic variables of interest, namely, wage and employment dynamics and two institutions, namely, employment protection legislation (EPL) and minimum wage level (MW). Using stylized facts about macroeconomic performance and labor market reforms in Central Eastern European countries (CEEC) and assuming that the government wants to maximize equilibrium payroll, we can reproduce interesting labor market dynamics in these economies similar to those observed after the global financial crisis (GFC). This includes increased labor market resilience coupled with an increase in MW level and an implicitly higher EPL, with a partial reversal of a secular trend toward temporary employment. We conclude that a degree of complementarity (or at least weakened substitution) exists between worker-friendly EPL and MW policies in the peculiar economic circumstances that CEEC found themselves in the years after the GFC. We call these circumstances a Goldilocks period for the labor market.

How does market power affect the resilience of food supply?

Food system shocks are mediated through value chains and underlying market structures, characterised by elements of power. Power imbalances are assumed to be detrimental to food security and to economic welfare, but the links between market power and food system resilience have not been extensively explored. This paper considers how shocks are potentially mitigated or amplified by the increasing consolidation of market power in globally interconnected food supply chains. We use UK examples to highlight evolving power-resilience dynamics and challenges from the perspectives of supply chain actors and regulators. We find that the impact of market power on the resilience of food supply is mixed. Low functional diversity levels, inflexible contracts and homogenous processes may increase supply chain vulnerability. A degree of power in terms of financial capacity, robust logistics and cooperation can enable firms to better mitigate shock impacts. Episodic crises appear to highlight the value of cooperation and of supply chain redundancy or slack, rather than the efficiency of perfect competition. This suggests a more nuanced perspective on market power than the largely detrimental perception implied by dominant economic theory. The discussion of the role of power in the food system should also consider social and environmental accountabilities of dominant food system actors, and whether these are sufficiently considered by existing regulatory structures.

Improving Strategic Planning In Textile Enterprises

This article examines the development of measures to improve strategic planning in the development of development strategies aimed at ensuring market resilience in textile enterprises.

Terrorism and Patriotic Investors: Evidence from the 1920 Wall Street Bombing

This paper argues that patriotism does not necessarily account for market resilience in the face of terror. Studying the 1920 Wall Street bombing, I find that rallying-around-the-flag does not explain the upbeat nature of the first trading session after the attack. In fact, NYSE-traded firms with patriotic terms (such as American'' or U.S.'') in their name underperformed by 1 percentage point. The absence of a clear international actor behind the attack may explain the absence of patriotic trading. I also point out an alternative, economic reason for the upbeat market, which centers around Mexican Petroleum’s postponement of its ex-dividend date.

Market resilience in times of crisis: The case of Darfur

AbstractThis article focuses on market behavior during crises. It provides an analysis of market functioning in North Darfur, Sudan, over a decade when both natural and manmade disasters were experienced. Results obtained using two rigorous methodological approaches highlight how markets not only remained functional during crises, but even operated more efficiently after a shock than in normal conditions. While our analysis focuses on specific events, we argue that our findings have general validity and application.

Universal resilience patterns in labor markets

Cities are the innovation centers of the US economy, but technological disruptions can exclude workers and inhibit a middle class. Therefore, urban policy must promote the jobs and skills that increase worker pay, create employment, and foster economic resilience. In this paper, we model labor market resilience with an ecologically-inspired job network constructed from the similarity of occupations’ skill requirements. This framework reveals that the economic resilience of cities is universally and uniquely determined by the connectivity within a city’s job network. US cities with greater job connectivity experienced lower unemployment during the Great Recession. Further, cities that increase their job connectivity see increasing wage bills, and workers of embedded occupations enjoy higher wages than their peers elsewhere. Finally, we show how job connectivity may clarify the augmenting and deleterious impact of automation in US cities. Policies that promote labor connectivity may grow labor markets and promote economic resilience.

FINANCIAL RESILIENCE TO THE COVID-19 PANDEMIC: THE ROLE OF BANKING MARKET STRUCTURE

ABSTRACT This article examines whether differences in banking market structures across countries influence the local stock market resilience to the COVID-19 pandemic. Using a sample of 66 countries for the period January 2020 to July 2020, our findings demonstrate that countries with more concentrated banking systems, with a higher presence of foreign banks, and a higher share of Islamic banks are more resilient to the pandemic. Considering the banking regulatory differences between countries, we observe that equity markets of countries with stricter regulatory requirements on capital and liquidity are more resilient to the COVID-19. Finally, regarding banking sector performance indicators, our findings show that while stock reactions of countries with more stable banking systems are more resilient to the pandemic; countries with more credit to deposit ratio, overhead costs, high provisions and nonperforming loans are more vulnerable. Our findings provide important implications for policymakers, regulatory bodies and investors.

German Labour Market Resilience in Times of Crisis: Revealing Coordination Mechanisms in the Social Market Economy

Most observers point to the importance of short-time work (Kurzarbeit) as one of the key explanations for Germany's stellar employment performance during the economic downturn in 2008–09. In this paper, I reveal previously unidentified causal mechanisms that have led to the widespread application of Kurzarbeit: the Christian Democrats’ embrace of the Social Market Economy, the formation of an ‘informal’ neo-corporatist alliance, the well-functioning communication channels within the public employment service and social partner organisations, and the ‘watch dog’ role of firm-level metal labour unions. This paper also reflects on the state of Germany's coordinated market economy despite the neoliberal discourse at European level, its labour market responses to the Corona pandemic of 2020, and the possible lessons for the Italian case.

Nature-based Solutions, Market Resilience, and Food Sovereignty

Nature-based Solutions, Market Resilience, and Food Sovereignty

Constrained Optimal Execution in Limit Order Book Market with Power-shaped Market Depth

Instead of using the classical block-shaped market depth to build the optimal execution model, this work studies the constrained optimal execution problem in a limit order book (LOB) market with a power-shaped market depth. Different from the linear price impact derived from the framework of block-shaped market depth, the price impact generated from the framework of our power-shaped market depth becomes a nonlinear function, which is consistent with the empirical studies. We also consider a class of state-dependent upper and lower bound constraints on trading strategies, which includes non-negative constraint (or non-short selling constraint) as its special case. Even though both the power-shaped market depth and trading strategy constraints make it hardly to solve such an optimal execution problem analytically, we still develop some significant properties on the optimal execution policy and optimal execution cost of our model. From some illustrative examples, we find that the optimal execution policy derived from our model is quite different from the one generated from the model with the block-shaped market depth when the market exhibits finite resiliency. However, when the market resilience is infinite, the obtained result becomes different, i.e., the optimal execution policies derived from these two kind of models are equivalent. For a special model with the stochastic block-shaped market depth and infinite market resilience, we successfully derive the analytical solution for such an optimal execution problem by utilizing the state separation property induced from its structure. The revealed optimal execution strategy is a piece-wise affine function with respect to the current remaining position, which can be computed off-line efficiently by solving two coupled equations. Finally, due to its explicit solution, we utilize this optimal execution model to demonstrate that the model admits no price magnification opportunity for the two-sided trading strategy.

The Key technologies for the construction of resilient distribution networks under the background of smart grids

When the power grid faces sudden extreme events, large-scale blackouts have caused huge economic losses. At the same time, under the development of smart grid, the research of resilient distribution network has received more extensive attention. This article introduces the connotations and concepts of resilient distribution networks in the context of smart grids, and expands the connotations of resilient grids. In addition to the resilience of physical strength under extreme disasters, it also proposes market resilience under the laws of market economy and normal operation mode. This article also introduces several key technologies for improving the resilience of power grids, including intelligent self-sensing power reserve system, adjustable flexible load, source-grid-load-storage coordinated control system, online intelligent diagnosis of power cables, and Operation and maintenance, describes the principles and functions of these technologies in building resilient power grids. The article describes from the perspectives of prevention before disasters and recovery when disasters occur.

Explaining Stock Market Resilience During COVID-19 Pandemic via Money Supply Channel

We show that the resilient stock market performance in the US, UK, and Canada amid heightened COVID-19 pandemic uncertainties do not constitute an anomaly. Rather, when one accounts for money supply expansion and immediate liquidity injection facilitated through the monetary policy channel, the market reactions align with theory. Our conclusions stem from estimating a functional cointegrating relationship between money supply and market outcomes conditioned upon a basket of macro-variables denoting the state of the economy. We conjecture that clamors of market inefficiency in early 2020 may have been premature.

Building stock market resilience through digital transformation: using Google trends to analyze the impact of COVID-19 pandemic

As the 2019 novel coronavirus disease (COVID-19) pandemic rages globally, its impact has been felt in the stock markets around the world. Amidst the gloomy economic outlook, certain sectors seem to have survived better than others. This paper aims to investigate the sectors that have performed better even as market sentiment is affected by the pandemic. The daily closing stock prices of a total usable sample of 1,567 firms from 37 sectors are first analyzed using a combination of hierarchical clustering and shape-based distance (SBD) measures. Market sentiment is modeled from Google Trends on the COVID-19 pandemic. This is then analyzed against the time series of daily closing stock prices using augmented vector autoregression (VAR). The empirical results indicate that market sentiment towards the pandemic has significant effects on the stock prices of the sectors. Particularly, the stock price performance across sectors is differentiated by the level of the digital transformation of sectors, with those that are most digitally transformed, showing resilience towards negative market sentiment on the pandemic. This study contributes to the existing literature by incorporating search trends to analyze market sentiment, and by showing that digital transformation moderated the stock market resilience of firms against concern over the COVID-19 outbreak.

Collective market shaping by competitors and its contribution to market resilience

Employing an inductive approach, we found that competitors engage in market shaping, where they actively change their market through their purposeful actions. These competitors shape their market from one characterized by competition to one of collaboration when facing disturbances, ultimately contributing to market resilience, with benefits to market actors. They achieve this through engaging in unique forms of work, which we have called ‘resilience work’ and its three associated practices, namely meshing, pooling, and deploying. The competitors engage in these practices, which provide for and deploy communally pooled resources across their cultivated web of meshed relationships in the face of disturbances. The findings, which provide a model of market resilience, contribute to marketing’s emerging knowledge of competitors’ collective actions with respect to market shaping, while delineating an important outcome of market shaping, that of resilience.

Housing market bubbles and urban resilience: Applying systems theory

In this paper, we aim to connect the academic discourses of housing market and urban resilience. For this purpose, we discussed the housing market and its performance within the broader housing system, with a specific attention to the transient state of the housing market bubble. Through a systematic literature review, the housing system is framed based on the involved actors and their interactions. This systems theory based view is then used to provide a broader definition of the variations in the market performance within the urban resilience literature. In this sense, the theoretical underpinning of the literature of resilience within the systems and the observed variations in the housing market performance is discussed in view of shocks and stressors to the system, as well as equilibria and responses to disturbances. The aim is to provide a foundation for an alternative theoretical framework that focuses on interactions within the market and can be used to understand the impact of the housing market's financial drivers on urban resilience.

The COVID‐19 Pandemic: Energy Market Disruptions and Resilience

Direct risks and indirect effects from the COVID‐19 pandemic have impacted the operations and resilience of global energy markets. This article considers several aspects of the impacts and responses of these markets as well as energy sector resilience. All major energy markets have been affected, with unprecedented decreases in oil and natural gas demand, alongside operational stress for electric systems. Construction, maintenance, and operations in the industry face personnel constraints and limitations. Meanwhile, the disruptions from public health measures have tested the market's abilities to reliably manage severe demand destruction. Moving forward, there is a need to include demand shocks within energy resilience planning frameworks, and to prepare for multiple concurrent crises.

Fixed income ETFs: Primary market participation and resilience of liquidity during periods of stress

Using a unique transactions dataset, we present initial facts about participation in ETF primary markets and an analysis of the behaviour of liquidity providers in times of stress. We find that ETF primary markets are highly concentrated, particularly for fixed income. However, our preliminary analysis of stress events provides some evidence that alternative liquidity providers ‘step up’ during times of market disruption.