Michael Frömmel - Academia.edu (original) (raw)

Papers by Michael Frömmel

Journal of Policy Modeling, Nov 1, 2015

Take-down policy If you believe that this document breaches copyright please contact us providing... more Take-down policy If you believe that this document breaches copyright please contact us providing details, and we will remove access to the work immediately and investigate your claim.

Social Science Research Network, 2007

This paper examines the roles of order flow (reflecting private information) and news (reflecting... more This paper examines the roles of order flow (reflecting private information) and news (reflecting public information) in explaining exchange rate volatility. Analyzing four months of a bank's high frequency dollar/euro trading, three different kinds of order flow are used in addition to seasonal patterns in explaining volatility. We find that only larger sized order flows from financial customers and banks e indicating informed trading e contribute to explaining volatility, whereas flows from commercial customers do not. The result is robust when we control for news and other measures of market activity. This strengthens the view that exchange rate volatility reflects information processing.

Social Science Research Network, 2015

We examine the likely drivers of intraday momentum, defined as a significantly positive relation ... more We examine the likely drivers of intraday momentum, defined as a significantly positive relation between the first half-hour and the last half-hour return, in a foreign exchange market with explicit trading hours. Using transaction-level data from the Moscow Interbank Currency Exchange on the RUB-USD currency pair for the 2005-2014 period, our results suggest that intraday momentum in the ruble market is induced by risk aversion to overnight holdings among liquidity providers. In addition, our results complement earlier findings that suggest that market concentration due to trading hours matters for intraday momentum and that the effect is more pronounced during financial crises.

Emerging Markets Review, Jun 1, 2021

The conventional risk-based theory does not reconcile with the liquidity-beta anomaly in China: L... more The conventional risk-based theory does not reconcile with the liquidity-beta anomaly in China: Low liquidity-beta stocks outperform high liquidity-beta stocks on a risk-adjusted basis. This striking pattern is robust to different weighting schemes, competing factor models, and other wellknown return determinants in the cross section. We propose a competing behavioral-based explanation on the low liquidity beta anomaly in China. Consistent with our new perspective, liquidity beta is a negative return predictor in the cross section. Moreover, the time variation of the return differential between low and high liquidity beta stocks is led by investor sentiment after accounting for other possible economic mechanism.

Mathematics, Nov 29, 2022

This article is an open access article distributed under the terms and conditions of the Creative... more This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY

Economic Modelling, Apr 1, 2021

Understanding the intervention policy of central banks on currency markets is important for both ... more Understanding the intervention policy of central banks on currency markets is important for both practitioners and researchers. Existing models for central bank interventions exclusively focus on exchange rate targeting in level or volatility. However, central banks in emerging economies use international reserves as an insurance against sudden capital outflows and use interventions to manage them. Omitting the reserve component in the reaction function may therefore lead to a bias and wrong conclusions. We therefore extend the reaction function by incorporating a reserve component and illustrate its benefit by applying it to the case of Turkey. We find that the intervention policy of the Turkish Central Bank indeed incorporated interventions to manage their reserves and is therefore better described by our extended model. Furthermore it provides a more accurate description of changes in the central bank's policy. Our results strongly suggest to incorporate reserve variables in intervention functions for emerging countries.

Finance Research Letters, Dec 1, 2022

International Journal of Disclosure and Governance, Nov 23, 2020

Your article is protected by copyright and all rights are held exclusively by Springer Nature Lim... more Your article is protected by copyright and all rights are held exclusively by Springer Nature Limited. This e-offprint is for personal use only and shall not be self-archived in electronic repositories. If you wish to self-archive your article, please use the accepted manuscript version for posting on your own website. You may further deposit the accepted manuscript version in any repository, provided it is only made publicly available 12 months after official publication or later and provided acknowledgement is given to the original source of publication and a link is inserted to the published article on Springer's website. The link must be accompanied by the following text: "The final publication is available at link.springer.com".

Sustainability, Nov 12, 2021

This article is an open access article distributed under the terms and conditions of the Creative... more This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY

Hannover Economic Papers (HEP), 2006

We estimate monetary policy rules for six central and eastern European countries (CEEC) during th... more We estimate monetary policy rules for six central and eastern European countries (CEEC) during the period, when they prepared for membership to the EU and monetary union. By taking changes in the policy settings explicitly into account and by introducing several new methodological features we significantly improve estimation results for monetary policy rules in CEEC. We find that in the Czech Republic, Hungary and Poland the focus of the interest rate setting behaviour switched from defending the peg to targeting inflation. For Slovakia, however, there still seemed to be on ongoing focus on the exchange rate. For Slovenia and only after a policy switch for Romania we find a solid relation with inflation as well. * Any findings, interpretations, and conclusions are those of the authors and do not necessarily represent the views of the Deutsche Bundesbank. For helpful suggestions we would like to thank Gerdie Everaert, Koen Inghelbrecht, Robinson Kruse, Robert Tamura and two anonymous referees. The paper benefits from Nils Gottfries' comments on an earlier version.

Finance A Uver-czech Journal of Economics and Finance, 2016

RePEc: Research Papers in Economics, Aug 1, 2009

We estimate monetary policy rules for six central and eastern European countries (CEEC) during th... more We estimate monetary policy rules for six central and eastern European countries (CEEC) during the period, when they prepared for membership to the EU and monetary union. By taking changes in the policy settings explicitly into account and by introducing several new methodological features we significantly improve estimation results for monetary policy rules in CEEC. We find that in the Czech Republic, Hungary and Poland the focus of the interest rate setting behaviour switched from defending the peg to targeting inflation. For Slovakia, however, there still seemed to be on ongoing focus on the exchange rate. For Slovenia and only after a policy switch for Romania we find a solid relation with inflation as well. * Any findings, interpretations, and conclusions are those of the authors and do not necessarily represent the views of the Deutsche Bundesbank. For helpful suggestions we would like to thank Gerdie Everaert, Koen Inghelbrecht, Robinson Kruse, Robert Tamura and two anonymous referees. The paper benefits from Nils Gottfries' comments on an earlier version.

Finance A Uver-czech Journal of Economics and Finance, 2016

This study analyzes the effects of macroeconomic and bank-level variables on the loan growth of b... more This study analyzes the effects of macroeconomic and bank-level variables on the loan growth of banks in Central and Eastern European countries (CEECs) for the period between 1999 and 2010. Differences between private, state, domestic and foreign banks are analyzed by using the ownership structures of banks. We show that, unlike macroeconomic factors and other bank-level variables, leverage growth and equity growth have consistently significant effects on the loans of both domestic and foreign banks. The real exchange rate turns out to be a significant factor only for foreign banks. The latter result is important in understanding the transmission of global shocks to domestic credit. The results are robust to different specifications. * We gratefully acknowledge financial support from the Postgraduate Scholarship of the Ministry of National Education of the Republic of Turkey. We would like to thank Markus Eller, participants at the 2015 Joint Conference on 'Institutional Investors/Hedge Funds and Emerging Market Finance' at Ghent University and two anonymous referees for their comments.

Social Science Research Network, 2013

We investigate the implications of variations in the frequency with which hedge fund managers upd... more We investigate the implications of variations in the frequency with which hedge fund managers update their high-water mark on fees paid by investors. We rst document the crystallization frequencies used by Commodity Trading Advisors (CTAs) and then perform simulations and a bootstrap analysis. We nd a statistically and economically signicant eect of the crystallization frequency on the total fee load. Hedge funds' total fee load increases signicantly as the crystallization frequency increases. As such, our ndings indicate that the total fee load not only depends on the management fee and incentive fee, but also on the crystallization frequency set by the manager.

Financial Innovation

Using transaction-level tick-by-tick data of same- and next-day settlement of the Russian Ruble v... more Using transaction-level tick-by-tick data of same- and next-day settlement of the Russian Ruble versus the US Dollar exchange rate (RUB/USD) traded on the Moscow Exchange Market during the period 2005–2013, we analyze the impact of trading hours extensions on volatility. During the sample period, the Moscow Exchange extended trading hours three times for the same-day settlement and two times for the next-day settlement of the RUB/USD rate. To analyze the effect of the implementations, various measures of historical and realized volatility are calculated for 5- and 15-min intraday intervals spanning a period of three months both prior to and following trading hours extensions. Besides historical volatility measures, we also examine volume and spread. We apply an autoregressive moving average-autoregressive conditional heteroscedasticity (ARMA-GARCH) model utilizing realized volatility and a trade classification rule to estimate the probability of informed trading. The extensions of t...

Sustainability

Two years after the onset of the COVID-19 pandemic, the economy has adapted to the new market con... more Two years after the onset of the COVID-19 pandemic, the economy has adapted to the new market conditions that coexist with this global phenomenon [...]

Social Science Research Network, 2023

Journal of Policy Modeling, Nov 1, 2015

Take-down policy If you believe that this document breaches copyright please contact us providing... more Take-down policy If you believe that this document breaches copyright please contact us providing details, and we will remove access to the work immediately and investigate your claim.

Social Science Research Network, 2007

This paper examines the roles of order flow (reflecting private information) and news (reflecting... more This paper examines the roles of order flow (reflecting private information) and news (reflecting public information) in explaining exchange rate volatility. Analyzing four months of a bank's high frequency dollar/euro trading, three different kinds of order flow are used in addition to seasonal patterns in explaining volatility. We find that only larger sized order flows from financial customers and banks e indicating informed trading e contribute to explaining volatility, whereas flows from commercial customers do not. The result is robust when we control for news and other measures of market activity. This strengthens the view that exchange rate volatility reflects information processing.

Social Science Research Network, 2015

We examine the likely drivers of intraday momentum, defined as a significantly positive relation ... more We examine the likely drivers of intraday momentum, defined as a significantly positive relation between the first half-hour and the last half-hour return, in a foreign exchange market with explicit trading hours. Using transaction-level data from the Moscow Interbank Currency Exchange on the RUB-USD currency pair for the 2005-2014 period, our results suggest that intraday momentum in the ruble market is induced by risk aversion to overnight holdings among liquidity providers. In addition, our results complement earlier findings that suggest that market concentration due to trading hours matters for intraday momentum and that the effect is more pronounced during financial crises.

Emerging Markets Review, Jun 1, 2021

The conventional risk-based theory does not reconcile with the liquidity-beta anomaly in China: L... more The conventional risk-based theory does not reconcile with the liquidity-beta anomaly in China: Low liquidity-beta stocks outperform high liquidity-beta stocks on a risk-adjusted basis. This striking pattern is robust to different weighting schemes, competing factor models, and other wellknown return determinants in the cross section. We propose a competing behavioral-based explanation on the low liquidity beta anomaly in China. Consistent with our new perspective, liquidity beta is a negative return predictor in the cross section. Moreover, the time variation of the return differential between low and high liquidity beta stocks is led by investor sentiment after accounting for other possible economic mechanism.

Mathematics, Nov 29, 2022

This article is an open access article distributed under the terms and conditions of the Creative... more This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY

Economic Modelling, Apr 1, 2021

Understanding the intervention policy of central banks on currency markets is important for both ... more Understanding the intervention policy of central banks on currency markets is important for both practitioners and researchers. Existing models for central bank interventions exclusively focus on exchange rate targeting in level or volatility. However, central banks in emerging economies use international reserves as an insurance against sudden capital outflows and use interventions to manage them. Omitting the reserve component in the reaction function may therefore lead to a bias and wrong conclusions. We therefore extend the reaction function by incorporating a reserve component and illustrate its benefit by applying it to the case of Turkey. We find that the intervention policy of the Turkish Central Bank indeed incorporated interventions to manage their reserves and is therefore better described by our extended model. Furthermore it provides a more accurate description of changes in the central bank's policy. Our results strongly suggest to incorporate reserve variables in intervention functions for emerging countries.

Finance Research Letters, Dec 1, 2022

International Journal of Disclosure and Governance, Nov 23, 2020

Your article is protected by copyright and all rights are held exclusively by Springer Nature Lim... more Your article is protected by copyright and all rights are held exclusively by Springer Nature Limited. This e-offprint is for personal use only and shall not be self-archived in electronic repositories. If you wish to self-archive your article, please use the accepted manuscript version for posting on your own website. You may further deposit the accepted manuscript version in any repository, provided it is only made publicly available 12 months after official publication or later and provided acknowledgement is given to the original source of publication and a link is inserted to the published article on Springer's website. The link must be accompanied by the following text: "The final publication is available at link.springer.com".

Sustainability, Nov 12, 2021

This article is an open access article distributed under the terms and conditions of the Creative... more This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY

Hannover Economic Papers (HEP), 2006

We estimate monetary policy rules for six central and eastern European countries (CEEC) during th... more We estimate monetary policy rules for six central and eastern European countries (CEEC) during the period, when they prepared for membership to the EU and monetary union. By taking changes in the policy settings explicitly into account and by introducing several new methodological features we significantly improve estimation results for monetary policy rules in CEEC. We find that in the Czech Republic, Hungary and Poland the focus of the interest rate setting behaviour switched from defending the peg to targeting inflation. For Slovakia, however, there still seemed to be on ongoing focus on the exchange rate. For Slovenia and only after a policy switch for Romania we find a solid relation with inflation as well. * Any findings, interpretations, and conclusions are those of the authors and do not necessarily represent the views of the Deutsche Bundesbank. For helpful suggestions we would like to thank Gerdie Everaert, Koen Inghelbrecht, Robinson Kruse, Robert Tamura and two anonymous referees. The paper benefits from Nils Gottfries' comments on an earlier version.

Finance A Uver-czech Journal of Economics and Finance, 2016

RePEc: Research Papers in Economics, Aug 1, 2009

We estimate monetary policy rules for six central and eastern European countries (CEEC) during th... more We estimate monetary policy rules for six central and eastern European countries (CEEC) during the period, when they prepared for membership to the EU and monetary union. By taking changes in the policy settings explicitly into account and by introducing several new methodological features we significantly improve estimation results for monetary policy rules in CEEC. We find that in the Czech Republic, Hungary and Poland the focus of the interest rate setting behaviour switched from defending the peg to targeting inflation. For Slovakia, however, there still seemed to be on ongoing focus on the exchange rate. For Slovenia and only after a policy switch for Romania we find a solid relation with inflation as well. * Any findings, interpretations, and conclusions are those of the authors and do not necessarily represent the views of the Deutsche Bundesbank. For helpful suggestions we would like to thank Gerdie Everaert, Koen Inghelbrecht, Robinson Kruse, Robert Tamura and two anonymous referees. The paper benefits from Nils Gottfries' comments on an earlier version.

Finance A Uver-czech Journal of Economics and Finance, 2016

This study analyzes the effects of macroeconomic and bank-level variables on the loan growth of b... more This study analyzes the effects of macroeconomic and bank-level variables on the loan growth of banks in Central and Eastern European countries (CEECs) for the period between 1999 and 2010. Differences between private, state, domestic and foreign banks are analyzed by using the ownership structures of banks. We show that, unlike macroeconomic factors and other bank-level variables, leverage growth and equity growth have consistently significant effects on the loans of both domestic and foreign banks. The real exchange rate turns out to be a significant factor only for foreign banks. The latter result is important in understanding the transmission of global shocks to domestic credit. The results are robust to different specifications. * We gratefully acknowledge financial support from the Postgraduate Scholarship of the Ministry of National Education of the Republic of Turkey. We would like to thank Markus Eller, participants at the 2015 Joint Conference on 'Institutional Investors/Hedge Funds and Emerging Market Finance' at Ghent University and two anonymous referees for their comments.

Social Science Research Network, 2013

We investigate the implications of variations in the frequency with which hedge fund managers upd... more We investigate the implications of variations in the frequency with which hedge fund managers update their high-water mark on fees paid by investors. We rst document the crystallization frequencies used by Commodity Trading Advisors (CTAs) and then perform simulations and a bootstrap analysis. We nd a statistically and economically signicant eect of the crystallization frequency on the total fee load. Hedge funds' total fee load increases signicantly as the crystallization frequency increases. As such, our ndings indicate that the total fee load not only depends on the management fee and incentive fee, but also on the crystallization frequency set by the manager.

Financial Innovation

Using transaction-level tick-by-tick data of same- and next-day settlement of the Russian Ruble v... more Using transaction-level tick-by-tick data of same- and next-day settlement of the Russian Ruble versus the US Dollar exchange rate (RUB/USD) traded on the Moscow Exchange Market during the period 2005–2013, we analyze the impact of trading hours extensions on volatility. During the sample period, the Moscow Exchange extended trading hours three times for the same-day settlement and two times for the next-day settlement of the RUB/USD rate. To analyze the effect of the implementations, various measures of historical and realized volatility are calculated for 5- and 15-min intraday intervals spanning a period of three months both prior to and following trading hours extensions. Besides historical volatility measures, we also examine volume and spread. We apply an autoregressive moving average-autoregressive conditional heteroscedasticity (ARMA-GARCH) model utilizing realized volatility and a trade classification rule to estimate the probability of informed trading. The extensions of t...

Sustainability

Two years after the onset of the COVID-19 pandemic, the economy has adapted to the new market con... more Two years after the onset of the COVID-19 pandemic, the economy has adapted to the new market conditions that coexist with this global phenomenon [...]

Social Science Research Network, 2023