In this paper we model the return volatility of stocks traded in the Athens Stock Exchange using alternative GARCH models. We employ daily data for the period January 1998 to November 2008 allowing us to capture possible positive and negative effects that may be due to either contagion or idiosyncratic sources.  The econometric analysis is based on the estimation of a class of five GARCH models under alternative assumptions with respect to the error distribution. The main findings of our analysis are: First, based on a battery of diagnostic tests it is shown that the normal mixture asymmetric GARCH (NM-AGARCH) models perform better in modeling the volatility of stock returns. Second, it is shown that with the use of the Kupie’s tests for in-sample and out-of-sample forecasting performance the evidence is mixed since the choice of the appropriate volatility model depends on the trading position under consideration. Third, at the 99% confidence interval the NM-AGARCH model with skewed student-  distribution outperforms all other competing models both for in-sample and out-of-sample forecasting performance. This increase in predictive performance for higher confidence intervals of the NM-AGARCH model with skewed student- distribution makes this specification consistent with the requirements of the Basel II Agreement.

Focusing on the Greek market, we attempt to control whether the independence of the board, the leadership structure and the board size, are exogenous determinants to the firm’s performance, using a simultaneous equations framework. We compose a database of firms quoted in the ASE, starting from 146 observations in 2000 and ending with 232 firms in 2006. Contrary to theoretical arguments but aligned with similar empirical works, the independence of the BOD and the leadership structure do not really have an impact in firm’s value, whilst a larger BOD in size proves to be less efficient. We believe that our effort is valued to the extent that such an empirical work is the first time conducted for the Greek market. Having gained experience of econometric analysis, no prior study has incorporated in a system of equations, these three board characteristics when examining their possible relationship with firm performance. More than that another point of distinction from all recent papers treating the endogeneity of variables, is that our a larger sample, extended to more than one or two periods, allows to test dynamic responses and provides robustness in our conclusions. We consider our work as an extension of the long discussed issue of BOD structure and firm performance in an institutional environment that differs systematically from those of other developed countries. In testing well documented interlinks between qualitative variables and firm performance in a relatively understudied market in the governance literature, our main contribution is how these institutional differences affect corporate governance. We found that the law of corporate governance enforced in the middle of the period under examination, has led to a convergence of the BOD attitude and attributes with those reported as western style culture. Investors and portfolio managers should consider these qualitative characteristics in their valuation models/strategies.

Research on the relationship between spot and derivatives markets has attracted the interest by many analysts. According to many analysts there still exists a puzzle regarding the lead-lag effect and the causality of possible spillover effects between these markets. Although in most cases derivatives markets produce the means for price discovery and play a leading role in the transmission mechanism of information, many research papers derive opposite conclusions. Consequently, the empirical findings of the extant literature are either model or sample specific, while lack of the appropriate financial theory is responsible for spurious spillover effects.

This paper applies the Dynamic Conditional Correlation (DCC) multivariate GARCH model of Engle (2002), in order to examine the time-varying conditional correlations, to the index returns of seven emerging stock markets of Central and Eastern Europe. We use weekly data for the period 1997-2009 in order to capture potential contagion effects among the US, German and Russian stock markets and the CEE stock markets. The main finding of the present analysis is that there is a statistically significant increase in conditional correlations between the US and the German stock returns and the CEE stock returns particularly during the 2007-2009 financial crisis, implying that these emerging markets are exposed to external shocks with a substantial regime shift in conditional correlation. Finally, we demonstrated that domestic and foreign monetary variables, as well as exchange rate movements have a significant impact on the corresponding conditional correlations.

In a recent line of research the low interest-rate environment of the early to mid 2000s is viewed as an element that triggered increased risk-taking appetite of banks in search for yield. This paper uses approximately 18,000 annual observations on euro area banks over the period 2001-2008 and presents strong empirical evidence that low interest rates indeed increase bank risk-taking substantially. This result is robust across a number of different specifications that account, inter alia, for the potential endogeneity of interest rates and/or the dynamics of bank risk. Notably, among the banks of the large euro area countries this effect is less pronounced for French institutions, which held on average a relatively low level of risk assets. Finally, the distributional effects of interest rates on bank risk-taking due to individual bank characteristics reveal that the impact of interest rates on risk assets is diminished for banks with higher equity capital and is amplified for banks with higher off-balance sheet items.