{"title":"Predicting the conditional distribution of US stock market systemic Stress: The role of climate risks","authors":"Massimiliano Caporin , Petre Caraiani , Oguzhan Cepni , Rangan Gupta","doi":"10.1016/j.intfin.2025.102156","DOIUrl":"10.1016/j.intfin.2025.102156","url":null,"abstract":"<div><div>This paper explores how climate risks impact the overall systemic stress levels in the United States (US). We initially apply the TrAffic Light System for Systemic Stress (<em>TALIS<sup>3</sup></em>) approach that classifies the stock markets across all 50 states based on their stress levels, to create an aggregate stress measure called <em>ATALIS<sup>3</sup></em>. Then, we utilize a nonparametric causality-in-quantiles approach to thoroughly assess the predictive power of climate risks across the entire conditional distribution of <em>ATALIS<sup>3</sup></em>, accounting for any data nonlinearity and structural changes. Our analysis covers daily data from July 1996 to March 2023, reveals that various climate risk indicators can predict the entire conditional distribution of <em>ATALIS<sup>3</sup></em>, particularly around its median. The full-sample result also carries over time, when the nonparametric causality-in-quantiles test is conducted based on a rolling-window. Our findings showing that climate risks are positively associated with <em>ATALIS<sup>3</sup></em> over its entire conditional distribution, provide crucial insights for investors and policymakers regarding the economic impact of environmental changes, especially since we confirm that the results continue to be robust in an international-setting involving 11 important stock markets of the European Union.</div></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":"101 ","pages":"Article 102156"},"PeriodicalIF":5.4,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143686881","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Diversification and firm risk: New evidence on exchange rate exposure","authors":"Taek Ho Kwon , Sung C. Bae , Chenyang Liu","doi":"10.1016/j.intfin.2025.102158","DOIUrl":"10.1016/j.intfin.2025.102158","url":null,"abstract":"<div><div>This study examines the effect of industrial diversification on exchange rate exposure based on the resource-based and portfolio views of corporate diversification. Sampling Korean firms, we report new evidence that once the effect of geographic diversification is controlled and the self-selection bias is corrected, industrial diversification provides a strong positive effect in reducing exchange rate exposure. The mitigating effect of industrial diversification on FX exposure is more pronounced for geographically diversified firms which are in nature highly exposed to FX risk. Our results indicate that industrial diversification helps firms with international operations reduce their exchange rate exposure, supporting the complementary role of industrial diversification in managing FX risk associated with geographic diversification. Our study offers further discussions on potential mechanisms through which industrial and geographic diversification interacts in FX risk reduction.</div></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":"101 ","pages":"Article 102158"},"PeriodicalIF":5.4,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143769039","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Oskar Kowalewski , Prabesh Luitel , Rosanne Vanpée
{"title":"Sovereign credit rating provision and financial development","authors":"Oskar Kowalewski , Prabesh Luitel , Rosanne Vanpée","doi":"10.1016/j.intfin.2025.102153","DOIUrl":"10.1016/j.intfin.2025.102153","url":null,"abstract":"<div><div>This paper examines the impact of obtaining a sovereign credit rating for the first time on financial development in 50 emerging countries. Controlling for endogeneity and selection bias, we show that receiving an initial sovereign credit rating significantly transforms domestic financial systems. Rated countries experience a reallocation of bank assets, reduced reliance on domestic bank financing, and increased access to international bond markets, enabling expanded private-sector credit. Sovereign ratings also stimulate local currency bond market development and enhance foreign currency bond issuance. Additionally, they attract portfolio equity inflows and foster the internationalization of domestic banks, though their effects on direct debt flows and FDI are less pronounced. Overall, our findings highlight the critical role of sovereign credit ratings in advancing financial development and integration in emerging markets.</div></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":"101 ","pages":"Article 102153"},"PeriodicalIF":5.4,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143641922","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Financial connectivity in cross-border lending and crises: Role of financial and legislative integration","authors":"Müge Demir , Zeynep Önder","doi":"10.1016/j.intfin.2025.102137","DOIUrl":"10.1016/j.intfin.2025.102137","url":null,"abstract":"<div><div>This study investigates whether financial and legislative integration affects the relationship between financial stability and connectivity in the bank-to-bank and bank-to-non-bank cross-border lending markets of 25 European countries by using network analysis and the locational banking statistics of the Bank for International Settlements. We test whether connecting through a single market or a single currency affects the interplay between financial stability and connectivity across the members of the European Union. The results suggest that as the level of financial connectivity increases, using the single currency, the euro, helps to improve the resilience of the European Union in response to the crisis in both bank-to-bank and bank-to-non-bank lending markets but legislative-regulatory integration does not have any significant effect. The positive effect of the euro on financial stability is observed not only for systemic crises but also for residual events.</div></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":"101 ","pages":"Article 102137"},"PeriodicalIF":5.4,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143724969","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Erdinc Akyildirim , Shaen Corbet , Abhishek Mukherjee , Michael Ryan
{"title":"Global perspectives on open banking: Regulatory impacts and market response","authors":"Erdinc Akyildirim , Shaen Corbet , Abhishek Mukherjee , Michael Ryan","doi":"10.1016/j.intfin.2025.102159","DOIUrl":"10.1016/j.intfin.2025.102159","url":null,"abstract":"<div><div>This study investigates the adoption of open banking across several diverse global jurisdictions, focusing specifically on regulatory and market implications. Employing a comparative analysis, we examine the dual nature of open banking as both a regulatory framework and a technological innovation, exploring how different regulatory approaches shape its implementation and market reception. Results indicate significant variation in market responses to open banking announcements, presenting evidence of the underlying factors driving these disparities, such as the role of regulatory environments, technological infrastructures, and bank size in shaping market reactions.</div></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":"101 ","pages":"Article 102159"},"PeriodicalIF":5.4,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143829651","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Securing passive liquidity: The impact of Europe’s first asymmetric speed bump on market liquidity","authors":"Caroline Le Moign","doi":"10.1016/j.intfin.2025.102145","DOIUrl":"10.1016/j.intfin.2025.102145","url":null,"abstract":"<div><div>This study evaluates the impact of Europe’s first asymmetric speed bump, an order delay introduced by Eurex in 2019 for French equity options, as an innovative response to high-frequency trading externalities. Using a matched transaction-level database and a difference-in-difference strategy, we analyze liquidity changes on Eurex and its competitor Euronext. Results show significant improvements in Eurex liquidity, with decreased spreads and increased market depth. Notably, positive spillover effects were observed on Euronext for cross-listed options, with decreased spreads and an increase in aggressive HFT presence. These findings support the effectiveness of asymmetric speed bumps in mitigating latency arbitrage and enhancing market liquidity across competing platforms.</div></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":"101 ","pages":"Article 102145"},"PeriodicalIF":5.4,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143686346","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Cash or Cache? Distributional and business cycle implications of CBDC holding limits","authors":"Jana Anjali Magin, Ulrike Neyer, Daniel Stempel","doi":"10.1016/j.intfin.2025.102161","DOIUrl":"10.1016/j.intfin.2025.102161","url":null,"abstract":"<div><div>Many central banks are discussing the introduction of a Central Bank Digital Currency (CBDC). Empirical evidence suggests that households differ in their demand for a CBDC. This paper investigates the macroeconomic and distributional effects of different CBDC regimes within a New Keynesian model with a heterogeneous household sector. Households prefer to hold part of their income in CBDC as a means of payment as it facilitates transactions. If they cannot hold their preferred share of CBDC, they will face transaction costs. We find that the introduction of a binding limit on CBDC holdings can increase the shock absorption capabilities of an economy. If the limit is used as a monetary policy instrument, prices will be stabilized more effectively after shocks. However, a CBDC implies distributional effects across households.</div></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":"101 ","pages":"Article 102161"},"PeriodicalIF":5.4,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143820544","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Theofilia Kaourma , Andreas Milidonis , George Nishiotis , Marios Panayides
{"title":"News and intraday retail investor order flow in foreign exchange markets","authors":"Theofilia Kaourma , Andreas Milidonis , George Nishiotis , Marios Panayides","doi":"10.1016/j.intfin.2025.102146","DOIUrl":"10.1016/j.intfin.2025.102146","url":null,"abstract":"<div><div>This paper examines the trading behavior of individual investors using a proprietary intraday dataset of a large pool of retail investor aggregate (minute by minute) long and short positions in EUR/USD. Standard event study analysis shows no significant adjustment in trading ahead of scheduled macro news announcements and trading contrary to the announcement surprise after the event. A panel regression analysis shows that such contrarian trading behavior is mainly driven by lagged returns rather than fundamental macro news. Further, intraday time series analysis shows that the lagged overall news sentiment also significantly affects retail investor trading. Finally, to verify the uninformed nature of retail trading, we show that simple cross-over trading strategies that exploit retail investors’ order flow could be profitable. Overall, our results suggest that retail investors in currency markets are influenced by news sentiment and past returns, but do not appear able to extract fundamental information from public news. Our findings support the differential abilities of market participants to interpret public information as reflected through the intraday trading activity of retail currency traders.</div></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":"101 ","pages":"Article 102146"},"PeriodicalIF":5.4,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143686345","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Beyond education: International student inflow and outbound cross-border mergers and acquisitions","authors":"Hao Wang , Shuting Tan , Yonghui Han","doi":"10.1016/j.intfin.2025.102143","DOIUrl":"10.1016/j.intfin.2025.102143","url":null,"abstract":"<div><div>This paper investigates the impact of international education exchange on cross-border mergers and acquisitions (CBMA). Using a comprehensive panel dataset covering 141 countries from 2006 to 2018, we find that international students studying in China have a positive impact on China’s outbound CBMA. Such an effect operates through diplomatic relations, economic cooperation and cultural convergence as the underlying mechanisms. The effect of international education exchange is more pronounced for degree-seeking students than for non-degree-seeking students. Moreover, non-degree-seeking scholarship recipients exert a stronger influence on CBMA than degree-seeking scholarship recipients.</div></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":"101 ","pages":"Article 102143"},"PeriodicalIF":5.4,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143576746","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"ESG ratings: Disagreement across providers and effects on stock returns","authors":"Giulio Anselmi, Giovanni Petrella","doi":"10.1016/j.intfin.2025.102133","DOIUrl":"10.1016/j.intfin.2025.102133","url":null,"abstract":"<div><div>This paper examines the ESG ratings assigned by two providers, LSEG and Bloomberg, to companies listed in Europe and the United States from 2010 to 2020. The objective is to document the path of the ESG ratings over time, the divergence of opinions across providers, and whether the ESG dimension affects stock returns. The ESG scores have increased significantly over time, both in Europe and the United States, and<!--> <!-->higher scores are common for larger firms with low credit risk and lower equity returns. Once risk factors have been considered, the ESG dimension does not affect stock returns. The divergence of opinions across rating providers is vast and mainly increasing, especially in the US and for the social component. A wide divergence of opinions on the ESG score does not favour the correct pricing of the ESG risks and weakens the link between investors’ ESG preferences and the performance of stocks with better ESG metrics. However, disagreement across providers should not be considered only negatively as it can enrich the information set and avoid rating over-reliance (which proved to be a vital issue in the 2007–2009 financial crisis).</div></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":"100 ","pages":"Article 102133"},"PeriodicalIF":5.4,"publicationDate":"2025-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143548293","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}