Martin T. Bohl

• University of Münster

Using modern text mining methods, we analyze the influence of central bank mandates on the content and tone of communication via speeches. Relatedly, we also examine empirically how inflation and unemployment expectations affect the tone of speeches relative to past macroeconomic developments. We compare speeches given by senior officials of the Fe...

This study extensively analyses a recently popularised asset class, exchange-traded commodities (ETCs). We demonstrate that the tracking error of ETCs is dependent on the volatility of the underlying commodity prices but not persistent. Furthermore, we find the tracking ability of agricultural ETCs is affected by the replication method and the leve...

The derivative accounting standard requires hedging to satisfy the 80–125 rule to be eligible to apply the hedge accounting treatment. This means the hedging relationship should achieve hedging effectiveness within the 80%–125% level to qualify for hedge accounting. The appropriateness of this screening criterion is questioned in the existing liter...

In this paper, we examine whether the repeated rejection of Masters's price pressure hypothesis is robust with respect to measurement errors in index trader positions data. We allow for autocorrelated errors and a potential impact of index trader positions on both the level and volatility of commodity returns. The resulting state‐space model is est...

The recent financialization in commodity futures markets has prompted many calls for restricting speculative activity due to its detrimental effect on market quality. One aspect of market quality is that new information is instantaneously reflected in the price. This article studies how speculative activity affects informational efficiency of commo...

This article studies the effects of increasing political uncertainty on the functioning of German futures markets. We examine a unique event, namely the discussions around and the final coming into force of the German Exchange Act of 1896. Using static and time‐varying vector error correction models, the empirical analysis shows that, although earl...

Tea is one of the most popular beverages in the world. Its consumption exceeds the consumption of milk, coffee and orange juice. Despite its importance, tea has not been considered a commodity on financial markets and there is still no futures contract on tea. This study adds to the current literature by providing an overview of the development of...

In this paper we show, that approaches used to forecast the success of media investments can be challenged on the basis of the efficient markets hypothesis. Moreover, we present new empirical evidence which supports our argumentation in favour of the non-predictability of the success of media investments.

This article studies the effects of speculation in a thinly traded commodity futures market, paying particular attention to periods characterized by high‐speculative activity of long–short speculators. Using the speculation ratio as a daily measure for long–short speculation, we employ generalized autoregressive conditional heteroscedasticity regre...

Previous literature on price discovery in commodity markets is mainly focused on the question of whether the spot or the futures market dominates the price discovery process. Little attention, however, has been paid to the question of how the price discovery process is affected by futures speculation. Using different measures for speculation and he...

This paper examines the role of the Brazilian futures exchange, BM&F Bovespa, in the global price formation process of Arabica coffee. Using a multivariate GARCH model we find bi-directional information transmission in terms of spillover effects between the BM&F Bovespa futures contract for Arabica coffee and the ‘Coffee C’ futures contract traded...

Using unique data about capital flows from the public social security institute ZUS (Zakład Ubezpieczeń Społecznych) to private pension funds OFEs (Otwarte Fundusze Emerytalne) in Poland, we find that their impact, as a group of large institutional investors, on stock returns is statistically significant in short-term but no such effect exists in t...

This paper begins with the observation that short-selling bans spread globally in 2008. We find some evidence that the bans were unsuccessful at least insofar as they did not take into account the global component a short-selling ban which reduced equity returns in about a third of the 17 countries sampled, most notably in some of the major advance...

This article examines the influence of European agricultural futures contracts on price discovery during periods of price turmoil and rising trading activity. We use a hand-collected data set of spot and futures prices for canola, wheat, and corn and show that the impact of the futures markets was high during the first period of price spikes (2007...

Chinese futures markets for agricultural commodities are among the fastest growing futures markets in the world and trading behaviour in those markets is perceived as highly speculative. We empirically investigate whether speculative activity in Chinese futures markets for agricultural commodities destabilizes futures returns. To capture speculativ...

Zusammenfassung Im Zuge der weitgehenden Liberalisierung des europäischen Milchmarkts ist die Volatilität von Milchpreisen seit dem Jahr 2007 deutlich gestiegen. Das vorliegende Forschungsprojekt nimmt diese Entwicklung zum Ausgangspunkt, um die Frage nach der Eignung von Milchprodukt-Futures der European Energy Exchange (EEX) als Informations- u...

In this paper, we focus on the impact of short selling restrictions on stock returns volatility. In order to assess the potential effects econometrically, we apply two distinct versions of an asymmetric Markov-switching GARCH model to the short selling bans on stocks of financial enterprises in Germany, that were established between September 2008...

Recent evidence shows that U.S. price momentum strategies suffer tremendous losses in times of highly volatile market recoveries. We extend the existing literature by analyzing the performance of both price and earnings momentum portfolios across different market states. For our German sample, we find that the long-short price momentum strategy los...

Existing models of herding suffer from the drawback that conventional measures assume it is constant over time and independent of the state of the economy. This paper proposes a Markov switching herding model which supports the view that herding is not constant. By means of time-varying transition probabilities, the model is able to link changes in...

North American and European agricultural futures markets faced significant changes in recent years, i.e., the financialization which originated in the USA, the increase of futures trading in Europe and the recent price turmoils in international commodity markets. We analyse the long- and short-run dynamics between North American and European agricu...

Our study investigates the role of the exchange rate regime to explain the empirical link between financial crises and economic activity. We examine the relationship between real per capita GDP growth, exchange rate regimes, and the incidence of crises. Asymmetries are also explored. While exchange rate regimes of all types can promote positive eco...

It is still an unanswered question how much trading activity is needed for efficient price discovery in commodity futures markets. For this purpose, we investigate the price discovery process of two thinly traded agricultural futures contracts traded at the European Exchange in Frankfurt. Our empirical results show that the trading volume threshold...

Soaring prices in European alternative energy stocks and their subsequent tumble have attracted attention both from investors and academics. We extend recent research to an international setting and analyze whether the explosive price behavior of the mid-2000s was driven by rising crude oil prices and overall bullish market sentiment. Inflation-adj...

This study challenges the existing literature examining the impact of the introduction of index futures trading on the volatility of its underlying. To overcome econometric shortcomings of previously published work using the dummy variable approach, we employ a Markov-switching-GARCH technique. This approach endogenously identifies distinct volatil...

This paper examines whether the introduction of Chinese stock index futures had an impact on the volatility of the underlying spot market. To this end, we estimate several Generalized Auto-Regressive Conditional Heteroscedasticity (GARCH) models and compare our findings for mainland China with Chinese index futures traded in Singapore and Hong Kong...

Motivated by the recent gold price boom, this paper examines whether an asset bubble exists in the gold market. We approximate gold's fundamental value us-ing several econometric models and apply a Markov regime-switching Augmented Dickey-Fuller (ADF) test which has substantial power for detecting explosive be-havior. Although our results are sensi...

Motivated by repeated price spikes and crashes over the last decade, we investigate whether the growing market shares of futures speculators destabilize commodity spot prices. We approximate conditional volatility and analyze how it is affected by speculative open interest. In this context, we split our sample into two equally long subperiods and d...

Stocks of German renewable energy companies have commonly been regarded as lucrative investment opportunities. Their innovative line of business initially seemed to promise considerable future earnings. As shown by two powerful bubble tests, the positive sentiment for renewable energy stocks even led to explosive price behavior in the mid-2000s. Ho...

There have been calls to incorporate comparative institutional li terature, such as the Varieties of Capitalism (VoC) (Hall and Soskice, 2001) and National Business Systems (NBS) (Whitley, 1999), into research in international business, including the investigation of FDI (Mudambi and Navarra, 2002; Redding, 2005). Outward FDI is considered in terms...

Recent evidence shows that U.S. price momentum strategies suffer tremendous losses in times of highly volatile market recoveries. We extend the existing literature by analyzing the performance of both price and earnings momentum portfolios across different market states. For our German sample, we find that the long–short price momentum strategy los...

Short sellers are routinely blamed for destabilizing stock markets by exacerbating deviations from fundamental values. In response, regulators periodically impose short sale constraints aimed at preventing excessive stock market declines. One explanation is that policy makers regard short sellers as behaving like positive feedback traders. Relying...

Using unique data about capital flows to private pension funds in Poland, we find that their impact, as a group of large institutional investors, on stock returns is statistically significant in short-term but no such effect exists in the long-run. We analyze the capital transfers, in form of the aggregated pension contributions collected from all...

Motivated by repeated price spikes and crashes over the last decade, we investigate whether the intensive investment activities of commodity index traders (CITs) has destabilized agricultural futures markets. Using a stochastic volatility model, we treat conditional volatility as an unobserved component, and analyze whether it has been affected by...

In this paper, we investigate short sale constraints' impact on the incidence of extreme stock market movements. The latter can be used to proxy for the likelihood of tail events like crashes and bubbles in a market and, thus, is a crucial measure of stock market stability. Since crashes and bubbles are, almost by definition, unpredictable, we, unl...

Existing models of market herding suffer from several drawbacks. First, measures assuming herd behavior to be constant over time are not only economically unreasonable but also badly describe the data, since only a two regime test can clearly reject a unit root in the time series of dispersions around the market. Second, existing models of time-var...

Existing models of market herding suffer from several drawbacks. First, measures assuming herd behavior to be constant over time are not only economically unreasonable but also badly describe the data, since only a two regime test can clearly reject a unit root in the time series of dispersions around the market. Second, existing models of time-var...

The literature on short selling restrictions focuses mainly on a ban's impact on market efficiency, liquidity and overpricing. Surprisingly, little is known about the effects of short selling restrictions on institutional investors' trading behavior.Since institutional investors dominate mature stock markets and mainly use short sales, constraining...

Against the backdrop of critique on the German model of capitalism in general, and German public policy in particular as to the ability to successfully adjust to rapid change and exogenous shocks in wake of economic globalisation this paper investigates the degree of shock persistence in foreign direct investment (FDI) of ten German manufacturing i...

Short sellers have been routinely blamed for triggering, or exacerbating, stock market declines. The experience of Taiwan provides an interesting case study of the impact of short selling bans on stock returns volatility in a time series framework due to the length of time the short selling ban was in place there. Estimating several variants of an...

Previous literature on price discovery in stock index futures and spot markets neglects the role of different investor groups. This study relates time-varying spot-futures linkages studied within a VECM-DCC-GARCH framework to changes in the investor structure of the futures market over time. Empirical results suggest that during the dominance of pr...

The longitudinal properties of outward FDI and multinational company (MNC) strategies and activities have been extensively investigated by international business scholars (Buckley et al., 2007; Butler and Domingo, 1998; Liu et al., 2005). There has, however, been less investigation of the role of outward FDI in the debates about regionalism and glo...

This paper investigates the impact of introducing index futures trading on the volatility of the underlying stock market. We exploit a unique institutional setting in which presumably uninformed individuals are the dominant trader type in the futures markets. This enables us to investigate the destabilization hypothesis more accurately than previou...

Short sellers have been routinely blamed for triggering, or exacerbating, stock market declines. The experience of Taiwan provides an interesting case study of the impact of short selling bans on stock returns volatility in a time series framework due to the length of time the short selling ban was in place there. Estimating several variants of an...

Changes in the field of central banking over the past two decades have been nothing short of dramatic. They include the importance of central bank autonomy, the desirability of low and stable inflation, and the vital role played by how central banks communicate their views and intentions to the markets and the public more generally. There remains c...

This paper investigates whether seasonalities in daily stock returns are related to the trading behavior of individual and institutional investors. The change in the investor structure of B-share markets in Shanghai and Shenzhen after the abolition of ownership restrictions in 2001 provides a unique testing environment. We show that day-of-the-week...

This paper investigates the effect of foreign institutional investors on the stability of Chinese stock markets. Previous literature views this investor group as destabilizing feedback traders. We use the abolition of ownership restrictions on A shares as a natural experiment. There is strong evidence that foreign institutions have a stabilizing ef...

This paper analyzes the first part of the stock market channel of monetary policy in the euro area. We find heterogeneous reactions of euro area stock markets to unexpected ECB's interest rate decisions. Splitting all markets into two groups, covering the stock markets reacting significantly to monetary policy shocks and the ones which do not, each...

With a few unfortunate exceptions the last three decades have seen reductions in inflation around the world to the point that many would argue that further improvements in price stability would offer only limited welfare gains. This experience is the result of many factors, some of which are country-specific. In this paper we seek to isolate one of...

In this paper, we provide empirical evidence on the impact of institutional investors on stock market returns dynamics. The Polish pension system reform in 1999 and the associated increase in institutional ownership due to the investment activities of pension funds are used as a unique institutional characteristic. Performing a Markov-switching-GAR...

This paper estimates forward-looking and forecast-based Taylor rules for France, Germany, Italy, and the euro area. Performing extensive tests for over-identifying restrictions and instrument relevance, we find that asset prices can be highly relevant as instruments in policy rules. While asset prices improve Taylor rule estimates, different assets...

The US economy is arguably following an unsustainable trajectory. The main indicators of this are a large current account deficit, a large federal budget deficit and trend-wise increasing costs of Social Security and Medicare. In this chapter, we will discuss these observations and to what extent the financial and economic crisis may have changed t...

This paper contributes to the literature measuring the response of stock markets to monetary policy actions. We analyse the reaction of European stock market returns to unexpected interest rate decisions by the European Central Bank (ECB). Endogeneity between interest rate changes and stock returns is taken into account using the identification thr...

This paper contributes to the literature measuring the response of stock markets to monetary policy actions. We analyze the reaction of European stock market returns to unexpected interest rate decisions by the ECB. Endogeneity between interest rate changes and stock returns is taken into account using the identification through heteroskedasticity...

We investigate the hypothesis that some participants in mature and emerging stock markets engage in feedback trading. The analysis is based on the Shiller-Sentana-Wadhwani model, which has the attractive property that it yields testable implications about the presence of positive and negative feedback traders in stock markets. In addition, the Shil...

This paper presents a comparative analysis of pension funds' performance in Eastern Central Europe. In theoretical literature it is argued that investment limits and performance regulations may have a negative influence on the performance of the corresponding funds. We estimate a number of unconditional performance measures based on the CAPM for Po...

This paper examines the role of the European Central Bank (ECB) communication activities on daily eurodollar exchange rate and interest rates. We estimate the relationship between monetary policy and the exchange rate using a technique that explicitly recognizes the joint determination of both the levels and volatilities of these variables. We also...

This paper investigates the predictive power of stock market returns in January for the subsequent eleven months' returns across 14 countries, thereby contributing to the literature on stock market seasonalities. In addition to the presentation of international empirical findings on the Other January Effect, we investigate the forecasting capabilit...

This paper proposes that an important instrument of monetary policy of the Bundesbank is how it communicates with the public. We argue that communication by senior central bank officials represents an instrument of monetary policy that complements changes in interest rates. Moreover, the communications instrument can partly explain how a central ba...

In this paper, we ask whether the Bundesbank, prior to the European Central Bank taking responsibility for monetary policy in 1999, reacted systematically to stock price movements. In contrast to the results for the US, our empirical findings show a generally weak relationship between German stock returns and short-term interest rates at the daily...

Recent studies argue that the spread-adjusted Taylor rule (STR), which includes a response to the credit spread, replicates monetary policy in the United State. We show (1) STR is a theoretically optimal monetary policy under heterogeneous loan interest rate contracts in both discretionay and commitment monetary policies, (2) however, the optimal r...

Using monthly data for the period 1953–2003, we apply a real-time modeling approach to investigate the implications of U.S. political stock market anomalies for forecasting excess stock returns. Our empirical findings show that political variables, selected on the basis of widely used model selection criteria, are often included in real-time foreca...

In this paper we provide an estimate of the likelihood of conflict between the federal government and the Bundesbank for the 1989–1998 period. We rely on a novel proxy for the impact of public communication by Bundesbank officials on the probability of conflict, in addition to interest rate, exchange rate, money supply behavior, as well as electora...

In this paper we provide an estimate of the likelihood of conflict between the federal government and the Bundesbank for the 1989‐1998 period. We rely on a novel proxy for the impact of public communication by Bundesbank officials on the probability of conflict, in addition to interest rate, exchange rate, money supply behavior, as well as electora...

This paper estimates forward-looking and forecast-based Taylor rules for France, Germany, Italy, as well as the euro area, using both final revised data and real-time data. We are particularly interested in the impact of adding asset prices to the standard Taylor rule specification. Since forward-looking Taylor rules are usually estimated via GMM,...

Stock markets periodically experience sharp falls with some referred to as outright crashes. The extant literature has generally resorted to survey type evidence to determine the behavior of investors during such episodes. These kind of studies come to the conclusion that fundamentals play little role in explaining sharp stock market downturns as i...

The paper analyzes the influence of the Bundesbank's inflation targeting policy on the behavior of the spread between long-term and short-term German interest rates. The term spread is considered to be a key indicator of future inflation and economic activity. The application of a momentum threshold autoregressive cointegration model enables the au...

This paper estimates standard and extended Taylor rules for core countries in the euro area, namely France, Germany and Italy, as well as for the ECB. Forward, backward and forecast-based rules are estimated for a variety of samples since the late 1970s. We are particularly interested in the impact of adding asset prices to the standard Taylor rule...

In this paper, we investigate the relationship between stock returns and short-term interest rates. Identification of the stock return-interest rate relation is solved by using a new technique that relies on the heteroskedasticity of shocks to stock market returns. We suggest some improvements to the identification technique and its justification,...

Relying on a present value model with time-varying expected returns, and incorporating a quite general class of processes to model bubble-like stock price deviations from the long-run equilibrium, we provide empirical evidence on the U.S. log dividend–price ratio over the 1871:1–2001:9 period, as well as for several sub-periods. The application of...

A large part of the current debate on US stock price behavior concentrates on the question of whether stock prices are driven by fundamentals or by non-fundamental factors. In this paper we put forward the hypothesis that a present value model with time-varying expected returns provides an empirically valid description of US stock price behavior in...

This paper proposes that an important tenet of monetary policy, as practiced by the Bundesbank, is how it communicates with the public. The results have implications for the conduct of monetary policy more generally. Indeed, recent Fed behavior may also be likened to the experience of the Bundesbank. We argue that communication by senior central ba...

The purpose of this paper is to develop and test a cash-in-advance model of an open economy. Following the contribution of Bohn (1991) and using intertemporal balance of payments theory we set up a currency demand function with real consumption expenditure, the foreign interest rate and exchange rate expectations as the core explaining variables. W...

In this paper, we investigate the effect of institutional investors on the January stock market anomaly. The Polish pension system reform in May 1999 and the associated increase in investment activities of pension funds are used as a unique institutional characteristic to provide evidence on the impact of individual versus institutional investors o...