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2006, 25
This study analyzes the short-term dynamic spillovers between the futures returns on the DAX, the DJ Eurostoxx 50 and the FTSE 100. It also examines whether economic news is one source of international stock return co-movements. In particular, we test whether stock market interdependencies are attributable to reactions of foreign traders to public economic information. Moreover, we analyze whether cross-market linkages remain the same or whether they do increase during periods in which economic news is released in one of the countries. Our main results can be summarized as follows: (i) there are clear short term international dynamic interactions among the European stock futures markets; (ii) foreign economic news affects domestic returns; (iii) futures returns adjust to news immediately; (iv) announcement timing of macroeconomic news matters; (v) stock market dynamic interactions do not increase at the time of the release of economic news; (vi) foreign investors react to the content of the news itself more than to the response of the domestic market to the national news; and (vii) contemporaneous correlation between futures returns changes at the time of macroeconomic releases. JEL Classification: G14, G15
2006, 14
Several recent studies have addressed household participation in the stock market, but relatively few have focused on household stock trading behavior. Household trading is important for the stock market, as households own more than 40% of the NYSE capitalization directly and can also influence trading patterns of institutional investors by adjusting their indirect stock holdings. Existing studies based on administrative data offer conflicting results. Discount brokerage data show excessive trading to the detriment of stockholders, while data on retirement accounts indicate extreme inactivity. This paper uses data representative of the population to document the extent of household portfolio inertia and to link it to household characteristics and to stock market movements. We document considerable portfolio inertia, as regards both changing stockholding participation status and trading stocks, and find that specific household characteristics contribute to the tendency to exhibit such inertia. Although our findings suggest some dependence of trading directly-held equity through brokerage accounts on the performance of the stock market index, they do not indicate that the recent expansion in the stockholder base and the experience of the stock market downswing have significantly altered the overall propensity of households to trade in stocks or to switch participation status in a way that could contribute to stock market instability. JEL Classification: G110, E210