Creditor Moral Hazard in Equity Markets: A Theoretical Framework and Evidence from Indonesia and Korea
dc.contributor.author | Kutan, Ali M. | en_US |
dc.contributor.author | Evrensel, Ayse Y. | en_US |
dc.date.accessioned | 2006-08-01T16:14:45Z | |
dc.date.available | 2006-08-01T16:14:45Z | |
dc.date.issued | 2004-02-01 | en_US |
dc.identifier.other | RePEc:wdi:papers:2004-659 | en_US |
dc.identifier.uri | https://hdl.handle.net/2027.42/40045 | en_US |
dc.description.abstract | This paper expands on the work of Sarno and Taylor (1999) and develops three alternative models in which creditor moral hazard might occur in equity markets under different assumptions regarding the existence of asset market bubbles and implicit guarantees. Incorporating IMF-related news associated with the own country and with other countries to our models, we are able to predict the expected change in investor behavior and its effect on stock returns. Using daily stock returns for Indonesia and Korea, we test the ability of the models to predict the expected changes in stock returns on the days of IMF-related news such as program negotiations and program approval. Our results regarding Korea and, to a lesser extent, Indonesia are consistent with the creditor moral hazard models that assume implicit guarantees and asset price bubbles. Our results show that, if there is creditor moral hazard in equity markets, its duration could be measured only by days, suggesting that creditor moral hazard is a short-term phenomenon. | en_US |
dc.format.extent | 48623 bytes | |
dc.format.extent | 3151 bytes | |
dc.format.extent | 566918 bytes | |
dc.format.mimetype | text/plain | |
dc.format.mimetype | text/plain | |
dc.format.mimetype | application/pdf | |
dc.language.iso | en_US | en_US |
dc.relation.ispartofseries | 659 | en_US |
dc.subject | Creditor Moral Hazard, Financial Markets, the IMF, and News | en_US |
dc.subject.other | F32, F33, F34 | en_US |
dc.title | Creditor Moral Hazard in Equity Markets: A Theoretical Framework and Evidence from Indonesia and Korea | en_US |
dc.type | Working Paper | en_US |
dc.subject.hlbsecondlevel | Economics | en_US |
dc.subject.hlbtoplevel | Business | en_US |
dc.description.bitstreamurl | http://deepblue.lib.umich.edu/bitstream/2027.42/40045/3/wp659.pdf | en_US |
dc.owningcollname | William Davidson Institute (WDI) - Working Papers |
Files in this item
Remediation of Harmful Language
The University of Michigan Library aims to describe library materials in a way that respects the people and communities who create, use, and are represented in our collections. Report harmful or offensive language in catalog records, finding aids, or elsewhere in our collections anonymously through our metadata feedback form. More information at Remediation of Harmful Language.
Accessibility
If you are unable to use this file in its current format, please select the Contact Us link and we can modify it to make it more accessible to you.