The rapidly growing Russian national currency bond market is demonstrating attractive yield levels after global crisis 2008-2009. A significant share of ruble bond issues has relatively low trading volume, so liquidity risk is of particular importance for potential investors. This article provides an analysis of theoretical approaches to the construction of bond liquidity integral indices andreviews existing practice in the Russian market. First, it compares methodologies of Russian investment banks (Trust, Gazprombank, Zenith and others) and a new cyclic algorithm introduced by Thomson Reuters Agency (TRLI 2015). In empirical part of our research Thomson Reuters’ integral indices of bond liquidity (weighted and non-weighted) are tested in the context of explaining the difference in yields of 1118 Russian national currency bonds outstanding (including government,municipal and corporate bonds). The multi-factor cross-sectional regression analysis results show that the influence of both Thomson Reuters liquidity indices on Russian bond yields is fairly stable. Duration and S&P rating also exert stable influence on bond yields. The non-weighted liquidity index has better explanatory power than the weighted one.
We investigate the cross section momentum effect in the Japanese stock market over the period January 1997 to December 2013, sub-periods before August 2008 and during the crisis September2008–2009. From previous studies, it follows that the Japanese market is the exception to the findings on developed capital markets (momentum effect does not occur or is weak). Our study highlights the limitation of standard notions; we document the conditional nature of momentum and identify the characteristics of companies and their stocks and market states, allowing investors to earn positive momentum profit in the Japanese market (the statistically significant positive monthly return of zero cost portfolios is not less than 1%). It is shown that investors should take into account the seasonal pattern (for the Japanese stocks this revealed two months when we do not recommend taking investment activity) to increase portfolio profits. We explain the results from the specifics of the Japanese financial and governance systems, the ownership structure of listed Japanese firms and socio-cultural factors.
What is the relationship between the two largest emerging financial markets of Eastern Europe, Russia and Poland, and how do they impact the region’s stock markets? The purpose of this paper is to examine the role of these two countries in regional volatility by examining their effect on two separate phenomena: financial volatility, defined here as long-term interrelations, and contagion, a more short-term phenomenon. Utilizing bivariate DCC-GARCH modeling, this paper estimates long-term volatility spillover effects and short-term contagion effects and their origins during several periods of financial crisis in the Central and Eastern European region. Our results show that the long-term impact of volatility in the Russian market is much more substantial than that of Poland in Central and Eastern Europe, with this disparate impact corresponding to each country’s level of market capitalization. Additionally, our results show that Russia served as a source of short-term contagion for neighboring countries during its banking crisis in 2004 and during the Russian stock market fall in 2008. Poland had comparatively less effect on the region during the Global Financial Crisis. Moreover, the entrance of Poland into the European Union in May 2004 had no impact on stock markets in the region in terms of enhancing contagion.