Open Access
The quality premium with leverage and liquidity constraints
(Elsevier, 2021) González Urteaga, Ana; Rubio Irigoyen, Gonzalo; Enpresen Kudeaketa; Institute for Advanced Research in Business and Economics - INARBE; Gestión de Empresas; Universidad Pública de Navarra / Nafarroako Unibertsitate Publikoa
This research analyzes the causes of the quality premium, one of the most intriguing and successful investment strategies in equity markets. While previous research has argued that psychological biases explain the performance of the quality minus junk factor, our paper analyzes a leverage constraint explanation within a rational risk-based framework. The quality factor is multidimensional in nature, which suggests that a combination of risk, frictions, and behavioral biases is a reasonable explanation. Once we incorporate margin requirements and liquidity restrictions, we find that tighter conditions result in a higher intercept and a lower slope for the empirically implemented capital asset pricing model when using 10 quality-sorted portfolios. Our paper shows that, indeed, not only behavioral biases explain quality, but also market frictions account for its performance.
Open Access
Is there a connection between sovereign CDS spreads and the stock market? Evidence for European and US returns and volatilities
(MDPI, 2020) Ballester Miquel, Laura; González Urteaga, Ana; Enpresen Kudeaketa; Institute for Advanced Research in Business and Economics - INARBE; Gestión de Empresas; Universidad Pública de Navarra / Nafarroako Unibertsitate Publikoa
This study complements the current literature, providing a thorough investigation of the lead–lag connection between stock indices and sovereign credit default swap (CDS) returns for 14 European countries and the US over the period 2004–2016. We use a rolling VAR framework that enables us to analyse the connection process over time covering both crisis and non-crisis periods. In addition, we analyse the relationship between stock market volatility and CDS returns. We find that the connection between the credit and equity markets does exist and that it is time variable and seems to be related to financial crises. We also observe that stock market returns anticipate sovereign CDS returns, and sovereign CDSs anticipate the conditional volatility of equity returns, closing a connectedness circle between markets. Contribution percentages in terms of returns are more intense in the US than in Europe and the opposite result is found with respect to volatilities. Within Europe, a greater impact in Eurozone countries compared to non-Eurozone countries is observed. Finally, an additional analysis is also carried out for the financial sector, obtaining results largely consistent with those found using sovereign data.
Open Access
A systematic review of sovereign connectedness on emerging economies
(Elsevier, 2019) Ballester Miquel, Laura; Díaz Mendoza, Ana Carmen; González Urteaga, Ana; Enpresen Kudeaketa; Institute for Advanced Research in Business and Economics - INARBE; Gestión de Empresas
This article systematically reviews the academic literature on emerging market contagion in order to summarize what we have learnt about the transmission channels existing in these countries. Given the large body of academic research focused on this topic, we especially direct our attention to the strand of the literature that defines and empirically analyses this topic as the significant increase in the cross-market correlations between asset returns during crisis periods or when a shock occurs. The survey covers the findings on financial contagion in the stock, bond, exchange and credit default swap markets during a large period that covers several crises that have characterized the related literature, such as the currency crises of the 1990s, the global financial crisis and the Eurozone debt crisis. Finally, new topics are identified, serving as an outline for future research.
Open Access
Volatility spillovers in the European bank CDS market
(Elsevier, 2015) Alemany, Aida; Ballester Miquel, Laura; González Urteaga, Ana; Gestión de Empresas; Enpresen Kudeaketa
From the 2007 subprime crisis to the recent Eurozone debt crisis,the banking industry has experienced terrible financial instabilitywith increasing volatility levels of bank default probability. UsingEuropean CDS spreads data from January 2006 to March 2013, thispaper sheds light on the impact of three recent significant events ofcredit risk volatility transmission between, firstly, Eurozone andnon-Eurozone banks, and then between distressed peripheral andcore countries inside the Eurozone. We employ an asymmetricmultivariate BEKK model to measure cross-market volatility spil-lovers. We find that both recent crises are distinct episodes. Theglobal financial crisis that originated outside Europe is character-ized by unidirectional volatility spillovers in credit risk from insideto outside the Eurozone. By contrast, the Eurozone debt crisis isrevealed to be local in nature with the euro as the key element,suggesting a financial market fragmentation within the Eurozonebetween distressed peripheral and non-distressed core Eurozonecountries, whereas retaining the local currency has acted as afirewall.
Open Access
Extracting expected stock risk premia from option prices and the information contained in non-parametric-out-of-sample stochastic discount factors
(Routledge, 2020) González Urteaga, Ana; Nieto, Belén; Rubio Irigoyen, Gonzalo; Enpresen Kudeaketa; Institute for Advanced Research in Business and Economics - INARBE; Gestión de Empresas; Universidad Pública de Navarra / Nafarroako Unibertsitate Publikoa
This paper analyzes the factor structure and cross-sectional variability of a set of expected excess returns extracted from option prices and a non-parametric and out-of-sample stochastic discount factor. We argue that the existing potential segmentation between the equity and option markets makes it advisable to avoid using only option prices to extract expected equity risk premia. This set of expected risk premia significantly forecasts future realized returns, and the first two principal components explain 94.1% of the variability of expected returns. A multi-factor model with the market, quality, funding illiquidity, the default premium and the market-wide variance risk premium as factors significantly explains the cross-sectional variability of expected excess returns. The (asymptotically) different from zero adjusted cross-sectional R-squared statistic is 83.6%.
Open Access
Volatility risk premia betas
(Universidad de Zaragoza, 2016) González Urteaga, Ana; Rubio Irigoyen, Gonzalo; Gestión de Empresas; Enpresen Kudeaketa
This paper analyzes the cross-sectional and time-series behavior of thevolatility risk premia betas at the portfolio level. These betas show a monotonic relation with respect to the magnitude of the volatility risk premium payoffs. Moreover, portfolio conditional volatility risk premia betas increase significantly in recessions. In particular, these betas tend to increase significantly with default premium, market betas and the HML and SMB Fama-French risk factors. On the other hand, conditional betas tend to decrease when industrial production growth, consumption growth, the market excess return, and the momentum factor increase.
Open Access
The joint cross-sectional variation of equity returns and volatilities
(Elsevier, 2017) González Urteaga, Ana; Rubio Irigoyen, Gonzalo; Gestión de Empresas; Enpresen Kudeaketa
This paper analyzes the determinants of the simultaneous cross-sectional variation of return and volatility risk premia. Independently of the model specification employed, the estimated risk premium associated with the default premium beta is always positive and statistically different from zero. Moreover, the risk premium of the market volatility risk premium beta is negative and statistically significant. However, both risk factors are priced economically and statistically differently in the volatility and return segments of the market. On average, common factors in both segments explain 90% of the variability of volatility risk premium portfolios, but only 65% of the variability of equity return portfolios.
Open Access
Further empirical evidence on stochastic volatility models with jumps in returns
(Elsevier España, S.L., 2012) González Urteaga, Ana; Gestión de Empresas; Enpresen Kudeaketa
Using the Efficient Method of Moments we estimate a continuous time diffusion for the stochastic volatility of some international stock market indices that allows for possible jumps in returns. These jumps are needed for a sensible characterization of the dynamics of the distribution of returns, even under stochastic volatility. Although the stochastic volatility model with jumps in returns tends to exaggerate the negative skewness relative to the sample moments, the inclusion of jumps strongly improves the ability of the model to replicate sample kurtosis. This contrasts with the failure of the pure stochastic volatility model in generating high enough kurtosis. Our results extend the limited available evidence from the U.S. market to several European stock market indices.
Open Access
Lagged accuracy in credit-risk measures
(Elsevier, 2022) Abinzano Guillén, María Isabel; González Urteaga, Ana; Muga Caperos, Luis Fernando; Sánchez Alegría, Santiago; Institute for Advanced Research in Business and Economics - INARBE
This paper analyzes the magnitude (accuracy) and length (time) of the lag in the incorporation of new information in different measures of credit risk. The results, for US firms, show a lag for Altman’s Z accounting measure and credit rating. In contrast, market-based credit-risk measures such as CDSs and the Black-Scholes-Merton model show no lag. This paper also analyzes the determinants of the lags found showing the importance of the informativeness of CDSs in reducing the lag for all types of default events, and a negative relationship between accounting manipulation and the lag of Altman’s Z for severe default events.
Open Access
Enhancing learning in the finance classroom
(Universidad Politécnica de Valencia., 2022) Abinzano Guillén, María Isabel; Corredor Casado, María Pilar; Río Solano, María Cristina del; Ferrer Zubiate, Elena; González Urteaga, Ana; Mansilla Fernández, José Manuel; Martínez García, Beatriz; Muga Caperos, Luis Fernando; Gestión de Empresas; Enpresen Kudeaketa
This paper aims to describe a teaching-learning experience based on ProjectBased Learning (PBL). This experience is part of an educational innovation project devoted to transforming finance classes in various facets of financial advice. Specifically, the article focuses on the transformation process of a subject that studies financial markets and the assets traded in them. Based on this experience, the classroom becomes a financial consulting firm that advises investors on how to invest their capital. The results show us a remarkable active dedication of the students to the course, improved knowledge, and marks. In addition, the development of skills and values such as teamwork, autonomy, solidarity, equality, and professional skills are elements that encourage us to continue along this line.