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Limited Liability, Asset Price Bubbles and the Credit Cycle: The Role of Monetary Policy
Matějů, Jakub ; Kejak, Michal
This paper suggests that the dynamics of the non-fundamental component of asset prices are one of the drivers of the credit cycle. The presented model builds on the financial accelerator literature by including a stock market where investors with limited liability trade stocks of productive firms with stochastic productivities. Investors borrow funds from the banking sector and can go bankrupt. Their limited liability induces a moral hazard problem which shifts demand for risk and drives prices of risky assets above their fundamental value. Embedding the contracting problem in a New Keynesian general equilibrium framework, the model shows that expansionary monetary policy induces loose credit conditions and leads to a rise in both the fundamental and non-fundamental components of stock prices. A positive shock to the non-fundamental component triggers a credit cycle: collateral value rises, and lending and default rates decrease. These effects reverse after several quarters, inducing a credit crunch. The credit boom lasts only while stock market growth maintains sufficient momentum. However, monetary policy does not reduce the volatility of inflation and the output gap by reacting to asset prices.
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Speculative bubbles in capital markets
Petr, Jiří ; Veselá, Jitka (advisor)
Bachelor thesis deals with speculative bubbles in capital markets. The goal of this thesis is to analyse causes and processes of bubbles and their influence on a real economy. The problem is processed both theoretically and practically. First chapter are concerned with definition and typology of bubbles. Theoretical part is focused on irrational view on bubbles with an accent on psychology analysis and behavioral finance. Main part of this work is third chapter, where I analyse particular examples of bubbles and determine their causes.
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Paintings rate of return and their determinants of market price in Czech Republic.
Tomandlová, Tereza ; Hudík, Marek (advisor) ; Schwarz, Jiří (referee)
Abstract The goal of this diploma thesis is to explore the potential of Czech paintings as an alternative investment asset. Using hedonic model, I estimate the main sale price determinants such as painting technique, size, author, auction hall and the rate of return. Observed rate of return is than compared to global rate of return of art on one hand and to common investment tools such as gold and the Stock Exchange on the other. At the same time I examine the impact of GDP growth and inflation. I find a positive effect of GDP growth on the art market. After taking these questions into consideration I found, that even though art is associated with relatively low rate of return, it is eligible investment tool. Since it is unrelated to joint stock, it can serve as a convenient instrument of portfolio diversification. At the same time, Czech paintings may also serve as a very good store of value.
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Information as a basis for stock trading
Mixánek, Lukáš ; Rosický, Antonín (advisor) ; Matuštík, Ondřej (referee)
The objective of the thesis is to characterize the importance of information and consequently also of knowledge as the bases for active dealing in the stock market. The fundamental terms of information credibility, disinformation and information asymmetry, which have a cardinal effect on behaviour of particular participants of the market, are mentioned in the thesis. The theory of effective markets and the factors due to which it is not able to explain the development and the real state of the contemporary stock markets, are analysed in more detail in the thesis. A considerable part of the thesis is devoted to the analysis and the definition of information need as a basic requirement for making successful investment decisions of an individual, whereas ways to its fulfilment are implied -- including a description and a division of available information sources. The description and the analysis of several dealing strategies which are directly based on usage of various kinds of information are not missing in the thesis. A part of the work is a presentation and an analysis of the results of a research made among real investors.
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Financial market anomalies
Gavrylyuk, Zinayida ; Havlíček, David (advisor)
This bachelor thesis is focused on the analysis of some well-known financial market anomalies. The first part deals with the efficient market theory which is confronted with the basic ideas of behavioral finance. It is followed by the more-detailed description and analysis of three selected anomalies: the December effect, the momentum effect, and the underpricing of IPO. Analytical part tests the occurrence of anomalies on selected equity markets and deals with the possibilities to exploit them. There was not found any statistically significant evidence of influence of the December effect and the momentum effect on stock returns. But there were found significant differences in underpricing of IPO across sectors of the U. S. industry. The thesis provides an overview of the characteristics and occurrence of selected market abnormalities and opens the door to a more detailed analysis.
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Harmonization of the Czech stock market legislation after EU entrance
Čejková, Klára ; Veselá, Jitka (advisor)
The bachelor thesis deals with the current legislative situation in the Czech capital market. Aims to analyze the currently applicable regulations which were influenced by European harmonization trends particularly MiFID. In the first chapter are defined key terms associated with the stock market. The second chapter deals with the MiFID and its transposition into national legal systems of the Member States of the European Union. The last chapter is devoted to Czech laws which were affected by MiFID. Thesis aims to provide a concise and comprehensive overview of the current situation in the capital market in relation to key European events.
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Initial Public Offerings in the Czech Republic and in the World
Zahradníková, Kristýna ; Marek, Petr (advisor) ; Podškubka, Tomáš (referee)
Initial public offerings as a source of obtaining the additional capital usually used for financing new projects or further development of companies are popular especially in the United States and Great Britain. There is not such a tradition of initial pubic offerings in the Czech Republic where companies usually prefer to use credit resources prevailingly from the banks. The aim of this paper is to define initial public offerings not only on the general basis but also specifically on the stock markets in France and in Spain. This paper focuses on the Euronext Paris stock market in France and the Madrid stock market in Spain. Firstly, the basic advantages and disadvantages of IPOs are defined in conjunction with the principal IPO anomalies. Secondly, this paper gives a general outline of the IPO process in the Czech Republic. Consequently, this paper presents an overview of the IPO activity in France, Spain and in Europe on the whole in the past few years. Furthermore, it defines particular conditions of admission to the French and Spanish stock markets specified above. Concerning the affinity of the number and total offering value of the French and Spanish IPOs and the business cycle, this paper endeavours to prove certain relation using the correlation analysis. The IPO process in France and in Spain is demonstrated on the specific examples of one French and one Spanish IPO.
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Specific issues of financial service firms at determining the intristic value of a stock
Mathonová, Ivana ; Veselá, Jitka (advisor) ; Paholok, Igor (referee)
The principal aim of the thesis is to analyze specific issues of financial service firms in comparison with nonfinancial firms, and to explain how to determine the intristic value of a stock using the fundamental analysis. The particular macroeconomic, industrial and business factors influencing the intristic value of a stock are desribed in detail with the emphasis on the distinctions of financial service firms. A separate chapter is focused on particular methods suitable for determining the intristic value of a financial service firm's stock. The applied section analyzes all the components of the fundamental analysis in detail using Komerční banka's stock as an example. Consequently, the intristic value of the stock is calculated by means of available methods with the decision whether the market pricing is correct.
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