Spanish Stock Research Articles

Shackled High Speed Traders? Latency Reduction and Short Sale Bans

We examine the market quality effects of technology upgrades juxtaposed with short sale bans. Between 2011 and 2013, the Spanish Stock Exchange launched a smart trading platform (SIBE-Smart), imposed two short sale bans, and introduced colocation to facilitate high speed trading. We find that the SIBE-Smart introduction leads to reduced market quality. Although colocation improves some dimensions of liquidity, it does not attract additional high speed trading. Our results indicate that the effects of the two technology enhancements cannot overcome the negative effects of the short sale bans and overall market quality declines significantly. These results are in contrast to existing studies that attribute enhanced market quality to increased fast trading resulting from technological inducements. We conclude that the beneficial effects of technological upgrades that attract fast trading, improving liquidity and price efficiency, are negated in the presence of regulatory restrictions.

Self-perception of ethical behaviour: The case of listed Spanish companies

Purpose: This article aims to research into the perception that companies have of their ethical behavior. Design/methodology/approach: A questionnaire was conducted in June 2014 among the listed companies that comprise the IBEX35 index of Spanish stock exchanges. For the statistical analysis, contingency tables (double entry) were drawn up as well and several statistical tests (Cramer’s V, Pearson’s x 2 , Kendall’s correlation coefficient; and Goodman and Kruskal’s Gamma). Findings: The results show the self-perception that listed Spanish companies have of their ethical behaviour, with the observation that, generally, they have a greater perception than the reality of the study actually shows. Research limitations: Main limitations are that the sample size is small, although it includes the largest listed companies in the country. Respondents were essentially the Corporate Social Responsibility managers, so they may not be familiar with some of the subjects on which they were questioned, as we are dealing with large companies where responsibilities may be very compartmentalised. Practical implications: This line of research helps to know more about the self perception of big Spanish listed companies about their ethical behavior. Social implications: The evidence provided by this study helps to know more about aspects than can be improved in connection the ethical behavior in companies. Recent scandals make the topic very relevant from a social point of view. Originality/value: In recent years there has been much talk about the ethics of organisations and studies on the subject are plentiful. However, there has been scarcely any research into the perception that companies themselves have of their ethical behaviour.

Heterogeneous model ensembles for short-term prediction of stock market trends

Here, we discuss the identification of heterogeneous ensembles for short-term prediction of trends in stock markets. The goal is to predict trends (uptrend, sideways trend, or downtrend) for the next day, the next week, and the next month. A sliding window approach is used; model ensembles are iteratively learned and tested on subsequent data points. We have applied several machine learning approaches, and the models produced using these methods have been combined to heterogeneous model ensembles. The final estimation for each sample is calculated via majority voting, and the confidence in the final estimation is calculated as the relative ratio of a sample's majority vote. We use a confidence threshold that specifies the minimum confidence level that has to be reached. In the empirical section, we discuss results achieved using data of the Spanish stock market recorded from 2003 to 2013.

Heterogeneous model ensembles for short-term prediction of stock market trends

Here, we discuss the identification of heterogeneous ensembles for short-term prediction of trends in stock markets. The goal is to predict trends (uptrend, sideways trend, or downtrend) for the next day, the next week, and the next month. A sliding window approach is used; model ensembles are iteratively learned and tested on subsequent data points. We have applied several machine learning approaches, and the models produced using these methods have been combined to heterogeneous model ensembles. The final estimation for each sample is calculated via majority voting, and the confidence in the final estimation is calculated as the relative ratio of a sample's majority vote. We use a confidence threshold that specifies the minimum confidence level that has to be reached. In the empirical section, we discuss results achieved using data of the Spanish stock market recorded from 2003 to 2013.

Fragmentation vs. Consolidation in Spanish Stock Exchange. A Note

After the implementation of MiFID (I and II), competition is a reality in all the European Cash Markets. A natural consequence of competition is that order flow is fragmented in different type of venues. This paper focuses on the consequences of fragmentation on the local market liquidity of the Spanish Stock Exchange (hereafter SSE). Our main result shows that, for our sample, fragmentation is relevant determining the cost of liquidity. Following the analysis of Degryse, de Jong and van Kervel (2014), the linear component of fragmentation has a positive and significant effect on liquidity (reduces spreads and increases Kyle’s Lambda) and the quadratic term has a negative and significant effect on liquidity (increases spreads and reduces Kyle’s Lambda). So, fragmentation is good for liquidity but beyond a given level of fragmentation, increasing it is worse for the liquidity of the regulated market.

Interest Rate Sensitivity of Spanish Industries: A Quantile Regression Approach

This paper examines the degree of interest rate exposure of Spanish industries for the period 1993–2012 using the quantile regression methodology. The empirical results show that the Spanish stock market exhibits a significant level of interest rate sensitivity, although there are notable differences across industries and over time. In addition, the impact of changes in interest rates on industry equity returns tends to be more pronounced in extreme market conditions, i.e. during crises or bubbles in stock markets, than in normal periods. This finding may be related to herding behavior of stock investors during periods of market stress.

Effectiveness of pre-commitments on reducing asymmetrical information in equity issues

ABSTRACTThe aim of this article is to find out whether or not consideration of significant shareholders announcement of intention to exercise subscription rights makes a difference in eliminating or reducing the effects of asymmetrical information in equity offerings with pre-emptive rights on the Spanish Stock Market. For the 17 years of equity issues covered, we find that the type of underwriting arrangements has not a statistically significant impact on the issues’ Excess Risk Adjusted Return. The main contribution of this study is the finding of a statistically significant negative impact on returns either when the significant shareholders indicate their intention not to subscribe or when not enough information is provided about their intention. We also find a statistically significant reinforcing negative effect on returns in the case of simultaneous lack of commitment on the part of significant shareholders, and non-underwritten equity issues.

Evolutionary multi-objective optimization algorithms for fuzzy portfolio selection

In this paper, we consider a recently proposed model for portfolio selection, called Mean-Downside Risk-Skewness (MDRS) model. This modelling approach takes into account both the multidimensional nature of the portfolio selection problem and the requirements imposed by the investor. Concretely, it optimizes the expected return, the downside-risk and the skewness of a given portfolio, taking into account budget, bound and cardinality constraints. The quantification of the uncertain future return on a given portfolio is approximated by means of LR-fuzzy numbers, while the moments of its return are evaluated using possibility theory. The main purpose of this paper is to solve the MDRS portfolio selection model as a whole constrained three-objective optimization problem, what has not been done before, in order to analyse the efficient portfolios which optimize the three criteria simultaneously. For this aim, we propose new mutation, crossover and reparation operators for evolutionary multi-objective optimization, which have been specially designed for generating feasible solutions of the cardinality constrained MDRS problem. We incorporate the operators suggested into the evolutionary algorithms NSGAII, MOEA/D and GWASF-GA and we analyse their performances for a data set from the Spanish stock market. The potential of our operators is shown in comparison to other commonly used genetic operators and some conclusions are highlighted from the analysis of the trade-offs among the three criteria.

Corporate social responsibility, stock salience, and the asymmetric market impact of consumer sentiment news on Spanish firms

Purpose– The purpose of this paper is to identify whether the Spanish stock market experiences a negativity effect on the announcement of Spanish consumer sentiment information and if firms that are signatory to the UN Global Compact on corporate social responsibility are relatively more salient in the minds of investors.Design/methodology/approach– The authors use consumer sentiment announcements to show how the negativity effects on the Spanish stock market are significantly influenced by how salient the stock is in the minds of investors. If a firm’s stock exhibits negativity effects on the release of consumer sentiment information then this stock is salient to investors. If firms who are signatory to the UN Global Compact exhibit significant negativity effects, it could be concluded that these stocks are salient, particularly if firms that are not signatory to the Global Compact do not exhibit a similar negativity effect.Findings– The IBEX35 index experiences significant negativity effects upon the release of Spanish consumer sentiment announcements. This is similar to that reported in other countries, notably Australia and the USA. Using the constituent firms in the IBEX35 index, the authors find that those firms that are signatory to the UN Global Compact are significantly more likely to experience negativity effects upon the release of Spanish consumer sentiment information than if they are not signatory to the Global Compact. This indicates that firms that are part of the UN Global Compact are more salient to investors.Research limitations/implications– Available published Spanish data on consumer sentiment.Practical implications– Little is understood of the impact that consumer sentiment announcements have on stock prices. Studies in USA and Australia have identified significant negativity effects in stock markets when consumer sentiment information is released. This research has found that a psychological negativity bias occurs in firms that are salient to investors. Salience has been found to be important in asset pricing.Originality/value– This paper tries to find out which companies are more likely to sign the UN Global Compact. These companies are more sensitive to consumer sentiment, because they depend on the everyday decisions of the consumers. The more the companies depend on consumers, the more they care about them. And, when the consumer sentiment goes down, they are more affected by this sentiment. These firms are also more worried about the long term. They are not only thinking about the profits in the short term but also about maintaining the generation of profits in the long term.

The influence of family control on decisions regarding the specialization and diversification of business groups

This study analyses the impact of family control on decisions regarding the specialization and diversification of large business groups whose parent companies are listed on Spanish stock exchanges. Using a sample of ninety-nine companies, having identified the companies that constitute the business group, and using both binary logistic models and the Heckman two-step method to eliminate selection bias, the results show how the familial nature of the parent company favours specialization and reduces the level of the business group's diversification. In addition, we see that there are differences among family groups with respect to the concentration of their holdings in that a higher level of concentration increases the level of diversification in the family business group.

Negative aspects of counter-knowledge on absorptive capacity and human capital

Purpose – People live and work in a world where they do not have complete knowledge and, as a result, they make use of rumours, beliefs and assumptions about relevant areas of concern. The term counter-knowledge has been used to refer to knowledge created from unverified sources. The purpose of this paper is to examine the relationship between counter-knowledge and human capital (HC) as well as investigating interactions between absorptive capacity (ACAP) and HC. Design/methodology/approach – A model is tested to examine the relationship between counter-knowledge, HC and the financial performance of 112 companies listed on the Spanish Stock Exchange. Findings – The results are calculated using structural equation modelling. This leads to the main conclusion that while the increasing presence of counter-knowledge leads to a reduction of ACAP and, by extension with HC. However, in the context of the sample, HC has positive effects on firms’ performance. Therefore, consideration must be given to the evaluation of the real cost of counter-knowledge or inappropriate assumptions on HC. Practical implications – The key managerial implication of this paper is that management should actively develop an organizational culture which questions the source of any knowledge and favours evidence-based reasoning over reasoning based on “gut instinct”, what has worked in the past and reasoning based on rumours and gossip. Originality/value – This paper provides empirical support for the argument that the all so-called “knowledge” generated from the sharing of unverified news is not necessarily good knowledge. Rumours or gossip shared thanks to unverified sources are some examples that illustrate people possibility to create inappropriate or false beliefs via unsupported explanations and justifications.

El consenso de los analistas financieros antes y durante la crisis financiera: una evidencia en el mercado continuo

The goal of this article is to determine the effects of financial analysts’ consensus in the Spanish Stock Market (Mercado Continuo) in different periods (2002-2007 and 2008-2009), specifically its influence during the financial crisis. This article concludes that the effects of financial analysts’ consensus is modest but statistically significant in the Spanish Mercado Continuo, and is also stronger during the financial crisis.

E-Recruitment, gender discrimination, and organizational results of listed companies on the Spanish Stock Exchange

The recruitment process aims to request relevant information from applicants, but sometimes this could be used to discriminate. Based mainly on the legal framework and the Rational Bias, the present paper explores the use of potentially discriminatory content against women in Spanish companies according to the enforcement of the equal employment opportunity legislation in 2007, and its relationship with organizational results. We have performed a comparative study between 2005 and 2009 implementing a combination of qualitative and quantitative analysis. All the websites of the Spanish Stock Exchange were analyzed. Results show that companies did include potentially discriminatory questions in application forms, even after the law enforcement, but not in recruitment statements. Regarding organizational results, small but significant relationships between legal fulfillment and annual returns were found, but these results could have been influenced by factors attributable to the economic crisis. To conclude, we provide recommendations regarding desirable policies and organizational practices in the context of the area being studied.

Formación de precios de las acciones tras el acceso al MAB

El presente trabajo tiene por objeto analizar el impacto que la incorporación de las empresas al Mercado Alternativo Bursátil (MAB) español ha supuesto sobre la formación de los precios de las acciones involucradas. Para ello, se ha construido una base de datos que incluye la totalidad de las salidas a bolsa que han tenido lugar en el MAB hasta 2013, por medio de ofertas públicas iniciales (OPIs) y listing. A partir de dicha información, se han analizado tanto cuestiones relativas a la infravaloración inicial de los precios ofertados como a la evolución de precios de las acciones. Los resultados obtenidos muestran la existencia de una infravaloración durante el primer día de negociación, que está significativamente relacionada con el tamaño de la oferta, el clima bursátil, el tamaño de la empresa y su edad, siendo esta relación positiva para el tamaño de la oferta y el clima bursátil, y negativa para el resto de variables analizadas. Además, se observa que la evolución de los precios de las acciones, desde su incorporación al MAB hasta los 18 meses posteriores, no difiere de la evolución general de los precios de las acciones de las pequeñas empresas en el mercado.

Network-based measures as leading indicators of market instability: the case of the Spanish stock market

This paper studies the undirected partial-correlation stock network for the Spanish market that considers the constituents of IBEX-35 as nodes and their partial correla- tions of returns as links. I propose a novel methodology that combines a recently developed variable selection method, Graphical Lasso, with Monte Carlo simula- tions as fundamental ingredients for the estimation recipe. Three major results come from this study. First, in topological terms, the network shows features that are not consistent with random arrangements and it also presents a high level of stability over time. International comparison between major European stock mar- kets extends that conclusion beyond the Spanish context. Second, the systemic im- portance of the banking sector, relative to the other sectors in the economy, is quan- titatively uncovered by means of its network centrality. Particularly interesting is the case of the two major banks that occupy the places of the most systemic players. Finally, the empirical evidence indicates that some network-based measures are leading indicators of distress for the Spanish stock market

How Spanish options market smiles in summer: an empirical analysis for options on IBEX-35

This paper examines the behaviour of the smile in the Spanish Stock Exchange during 2011 and 2012 summers. In these periods, the value of the main index of the Spanish Stock Exchange market IBEX-35 had fallen down a maximum of 2103.60 points in summer 2011, which made a drop of 20.05% in this period. On the contrary, in summer 2012, it had raised a maximum of 2165.70 points. That means a rise of 26.31%, whereas the Spanish risk premium had raised dramatically. By linear interpolation, implied volatilities for moneyness points needed were calculated. Then, we construct 3288 smile curves and the same quantity of distortion levels. Thousand six hundred and forty-four smiles are for both call and put option contracts, and for all summer 2011 and 2012 maturities (June, July, August and September). Next, we compare all smile curves with 1 of the 17-typical shape patterns for calls, puts, different dates, etc. Afterwards, we take the value of the distortion level calculated before and include the smile in one A–E class of distortion. We can notice that the most popular types are only two, for both calls and puts, Left Smirk (LK) rather than Reversed Right Smirk (RRK); all smiles are formed in the same way, and they are all from ‘D’ class. The changes between LK and RRK occur only on, or one day after, expiring dates, thus are jumps in distortion. Afterwards, we make a comparison with 2013 and 2014 summers' smiles which are not marred by the short-selling ban imposed by the Spanish Securities Exchange Commission in 2011 and 2012.

Response of Spanish stock market to ECB monetary policy during financial crisis

The present paper analyzes the effects of ECB monetary policy on the Spanish stock market returns. The data sample run all over the euro period: from January 1999 to December 2014. This period is split into two well-defined sub-periods based on the structural change brought about by the financial crisis in August 2007. Spanish stock market returns are approximated by the returns of the selective index Ibex 35 while monetary policy of the Eurozone is measured by the nominal target interest rate on the last day of the month. With regard to the methodology, as I am interested in the long-term relationship between the two variables aforementioned, a structural vector autoregressive (SVAR) model. The results show that monetary policy shocks have a considerable effect on the Spanish stock market returns in the long run. The results also show that monetary policy shocks of the ECB monetary policy lead to a different long-term effect in the pre-crisis period and the post-crisis sample.

Momentum and default risk. Some results using the jump component

In this paper we separate the total stock return into its continuous and jump component to test whether stock return predictability should be attributed to omitted risk factors or behavioral finance theories. We extend results from the US market to the Spanish stock market, which, despite being a developed market, presents several differences in terms of stock characteristics, financial system, investor typology and cultural dimensions. The results show that the jump component has significant explanatory power for the premium of three characteristics (size, book-to-market and illiquidity), which is at odds with risk-based explanations. Using the same testing strategy, we try to shed some light on an important controversy concerning the relationship between default risk and momentum. The results suggest that default risk is not the source of momentum returns.

Portfolio optimization using a credibility mean-absolute semi-deviation model

We introduce a cardinality constrained multi-objective optimization problem for generating efficient portfolios within a fuzzy mean-absolute deviation framework. We assume that the return on a given portfolio is modeled by means of LR-type fuzzy variables, whose credibility distributions collect the contemporary relationships among the returns on individual assets. To consider credibility measures of risk and return on a given portfolio enables us to work with its Fuzzy Value-at-Risk. The relationship between credibility expected values for LR-type fuzzy variables and possibilistic moments for LR-fuzzy numbers having the same membership function are analyzed. We apply a heuristic approach to approximate the cardinality constrained efficient frontier of the portfolio selection problem considering the below-mean absolute semi-deviation as a measure of risk. We also explore the impact of adding a Fuzzy Value-at-Risk measure that supports the investor’s choices. A computational study of our multi-objective evolutionary approach and the performance of the credibility model are presented with a data set collected from the Spanish stock market.

Stock Market Liquidity and 􀀀/􀀁 LIBOR Rates: A Study for PIGS Countries and Turkey

During the mortgage crisis in 2008 there was a significant demand increase in the LIBOR market due to the shrinkage in commercial paper market and liquidity crunch. This study examines the relationship of stock market price movements and liquidity with the overnight LIBOR rates for PIGS countries and Turkey. In the first section of empirical analysis we determined the stationary levels of data and tested long term relationship through Maki (2012) cointegration test with structural breaks. Following the verification of the relationship between stock market liquidity and overnight LIBOR rates, we conducted Fully Modified OLS, Canonical Cointegrating Regression and Dynamics Least Squares tests to estimate the parameter of LIBOR variable and identify the direction of relationship. This parameter was only significant for the Turkish and Spanish stock markets and the sign of this parameter was negative. Results showed that when the overnight LIBOR rates increased, the bid-ask spreads of the Turkish and Spanish markets expand indicating a decrease in liquidity of the market. A possible reason for this finding was the decoupling process of Turkey and Spain, especially during the mortgage crisis. EU defined debt stock/GDP ratios also supported that explanation. DOI: 10.5901/mjss.2015.v6n3p297