In partnership with Association française de finance

an academic and professional review

n° 141March-April 2016ISSN 2101-9304150 euros revue-banque.fr

A R T I C L E S

6 Expected Credit Loss vs. Credit Value Adjustment: A Comparative Analysis

Vivien BRUNEL, Société Générale, Léonard de Vinci Pôle Universitaire, Finance Lab, France Stéphane CRÉPEY, Laboratoire de mathématiques et modélisation d’Évry, France Monique JEANBLANC, Laboratoire de mathématiques et modélisation d’Évry, France

20 Analyst Earnings Forecasts, Individual Investors’ Expectations and Trading Volume: An Experimental Approach

Thanh Huong DINH, Accenture France, University of Paris East Créteil Val-de-Marne Jean-François GAJEWSKI, IREGE – University Savoie Mont Blanc Duc Khuong NGUYEN, IPAG Lab, IPAG Business School

36 Changing Dynamic Relationships between Stock and Bond Markets in Crises: Evidence of a Flight to Quality

Wafa KAMMOUN MASMOUDI, Higher School of Economic and Commercial Sciences, University of Tunis

58 Do Regulatory and Supervisory Reforms Affect European Bank Stability: Further Evidence from Panel Data

Hachmi BEN AMEUR, Groupe INSEEC Faten BEN BOUHENI, ISC Paris Business School, France Abdoulkarim IDI CHEFFOU, EDC Paris Business School, France Fredj JAWADI, Université d’Evry Val d’Essonne, France

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Bankers, Markets and Investors aims at publishing short and innovative research articles in the areas of banking, financial markets and investment with relevant practical application for investors.

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Instructions to Authors

5bankers, markets & investors n° 141 March-April 2016

■■ Expected Credit Loss vs. Credit Value Adjustment: A Comparative Analysis 6Vivien BRUNEL, Société Générale, Léonard de Vinci Pôle Universi-taire, Finance Lab, France Stéphane CRÉPEY, Laboratoire de mathématiques et modélisa-tion d’Évry, France Monique JEANBLANC, Laboratoire de mathématiques et modéli-sation d’Évry, FranceThe recent publication of the IFRS 9 norms related to collective provisions for non defaulted instruments has settled a new vision to banking book portfolios. In this paper we show that the IFRS 9 provision measured through the Expected Credit Loss (ECL), inspired from a market vision on loan books, is very similar to the Credit Value Adjustment (CVA) for derivative exposures. However, even if the underlying formulas are identical, the metrics and parameters are not the same. Hence, though ECL and CVA measure similar effects, they involve different modeling challenges.Keywords: Expected Credit Loss (ECL); IFRS 9; Credit Value Adjustment (CVA); Counterparty Risk.JEL Codes: G13; G21; G22; G23; G24

■■ Analyst Earnings Forecasts, Individual Investors’ Expectations and Trading Volume: An Experimental Approach 20Thanh Huong DINH, Accenture France, University of Paris East Créteil Val-de-Marne Jean-François GAJEWSKI, IREGE – University Savoie Mont Blanc Duc Khuong NGUYEN, IPAG Lab, IPAG Business SchoolThis paper studies how analysts’ earnings forecasts affect investors’ expectations and trading decisions. From an experiment built on a double-auction market, we find that investors partially incorporate the forecasting information in their expectations and trading decisions. Investors partly correct for analysts’ forecast errors and their expectations are less heterogeneous than analysts’ forecasts. As for the trading volume, it is negatively driven by the heterogeneity of the analysts’ forecasts but positively by the size of the forecast errors. Keywords: Analysts’ Forecasts; Investor Expectations; Trading Volume; Experimental Asset Market; Earnings Announcement.JEL Codes: C91; G12; M41.

■■ Changing Dynamic Relationships between Stock and Bond Markets in Crises: Evidence of a Flight to Quality 36Wafa KAMMOUN MASMOUDI, Higher School of Economic and Commercial Sciences, University of TunisThis research explores the dynamic relationship between the domestic stock and bond returns for developed and emerging markets in order to approximate the time varying of inter-market integration and identify its main economic and financial determinants. The results show firstly that there is a significant time-varying conditional correlations between stock and bond indices. During crisis periods or turbulence, dynamic conditional correlations (DCC) fall and even become negative for developed countries, confirming the phenomenon of flight to quality in financial markets. This variability is mainly due to the variation of the exchange rate and economic uncertainty in the financial system.Keywords : Volatility; Stock-bond Correlations; Time-varying Financial Market Integration; Flight to Quality.JEL Codes: C32; E44; F3; G14; G15.

■■ Do Regulatory and Supervisory Reforms Affect European Bank Stability: Further Evidence from Panel Data 58Hachmi BEN AMEUR, Groupe INSEEC Faten BEN BOUHENI, ISC Paris Business School, France Abdoulkarim IDI CHEFFOU, EDC Paris Business School, France Fredj JAWADI, Université d’Evry Val d’Essonne, FranceThis paper investigates the impact of regulatory and supervisory reforms on the risk-taking by European banks in the context of the subprime crisis. To this end, we employed data for six European countries (France, Germany, the UK, Spain, Italy and Greece) over the period 2005-2011, applying the Generalized Method of Moments (GMM). Our investigation pointed to three interesting findings. First, in France, Germany and the UK, supervisory power appears to boost banking stability (reduce bank’s risk-taking), while restrictions on banking activities, deposit insurance and capital adequacy encourage risky behavior, confirming the view that a strongly regulated institutional environment encourages risk-taking. Second, tightening regulations and supervision appears to weaken banking stability in Italy, Greece and Spain as, with more supervisory power, the largest banks tend to take greater risks. Third, the strongly regulated institutional environment enhances financial stability in Europe, while European banks with a higher rate of asset growth tend to have higher risk appetite.Keywords: European banks, Banking Supervision; Risk-taking; Dynamic Panel. JEL Codes: G21; G28; G32; C23.

Abstracts

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In partnership with Association française de finance

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4 Testing the Profitability of Contrarian Trading Strategies Based on the Overreaction Hypothesis Matthieu DUVINAGE, National Bank of Belgium Paolo MAZZA, IESEG School of Management Mikael PETITJEAN, Louvain School of Management & CORE

11 Evaluating UCITS Compliant Hedge Fund Performance Serge DAROLLES, Université Paris Dauphine

24 Do Cooperative Banks Have Greater Market Power? Damien EGARIUS and Laurent WEILL, LaRGE Research Center, EM Strasbourg Business School, University of Strasbourg

34 In which Media are Analysts’ Recommendations most Followed? Nadine GALY, University of Toulouse-Toulouse Business School Laurent GERMAIN, University of Toulouse, Toulouse Business School and ISAE Denis HILTON, University of Toulouse II Rainer MATHES, Prime Research, Mainz, Germany

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