IDEAS home Printed from https://ideas.repec.org/a/taf/quantf/v11y2011i2p237-245.html
   My bibliography  Save this article

Spatial linkages in international financial markets

Author

Listed:
  • Viviana Fernandez

Abstract

Spatial dependency has been studied in several research areas, such as environmental criminology, economic geography, environmental sciences, and urban economics. However, it has essentially been overlooked in other subfields of economics and in the field of finance as a whole. A key element at stake is the definition of contiguity. In the context of financial markets, defining a metric distance is not a simple matter. In this article, we explore the notion of spatial dependency by formulating a spatial version of the capital asset pricing model (S-CAPM). Such a model specification makes it possible to account for alternative measures of distance between firms, such as market capitalization, the market-to-book, and other financial ratios. Our model is tested on a panel of 126 Latin American firms. In addition, we derive Value-at-Risk (VaR) measures from our S-CAPM formulation. We complement our discussion with Monte Carlo simulations aimed at quantifying the benefits of diversification in terms of VaR reduction.

Suggested Citation

  • Viviana Fernandez, 2011. "Spatial linkages in international financial markets," Quantitative Finance, Taylor & Francis Journals, vol. 11(2), pages 237-245.
    • Handle: RePEc:taf:quantf:v:11:y:2011:i:2:p:237-245
    DOI: 10.1080/14697680903127403
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/14697680903127403
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/14697680903127403?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Varouj A. Aivazian & Ying Ge & Jiaping Qiu, 2005. "Debt Maturity Structure and Firm Investment," Financial Management, Financial Management Association, vol. 34(4), Winter.
    2. Oscar Villar & Esther Vayá, 2005. "Financial Contagion between Economies - an Exploratory Spatial Analysis," ERSA conference papers ersa05p574, European Regional Science Association.
    3. Aivazian, Varouj A. & Ge, Ying & Qiu, Jiaping, 2005. "The impact of leverage on firm investment: Canadian evidence," Journal of Corporate Finance, Elsevier, vol. 11(1-2), pages 277-291, March.
    4. Stephen C. Vogt, 1994. "The Cash Flow/investment Relationship: Evidence from U.S. Manufacturing Firms," Financial Management, Financial Management Association, vol. 23(2), Summer.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Danso, Albert & Lartey, Theophilus & Amankwah-Amoah, Joseph & Adomako, Samuel & Lu, Qinye & Uddin, Moshfique, 2019. "Market sentiment and firm investment decision-making," International Review of Financial Analysis, Elsevier, vol. 66(C).
    2. Fernández de Guevara, Juan & Maudos, Joaquín & Salvador, Carlos, 2021. "Effects of the degree of financial constraint and excessive indebtedness on firms’ investment decisions," Journal of International Money and Finance, Elsevier, vol. 110(C).
    3. de Guevara, Juan Fernández & Maudos, Joaquín & Salvador, Carlos, 2022. "Firms’ investment, indebtedness and financial constraints: Size does matter," Finance Research Letters, Elsevier, vol. 46(PA).
    4. Ning Ding & Kalimullah Bhat & Khalil Jebran, 2020. "Debt choice, growth opportunities and corporate investment: evidence from China," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-22, December.
    5. Julio Pindado & Chabela De La Torre, 2009. "Effect of ownership structure on underinvestment and overinvestment: empirical evidence from Spain," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 49(2), pages 363-383, June.
    6. Shi, Jinyan & Yang, Jianheng & Li, Yanxi, 2020. "Does supply network location affect corporate investment efficiency?," Research in International Business and Finance, Elsevier, vol. 51(C).
    7. Brunella Bruno & Alexandra D’Onofrio & Immacolata Marino, 2017. "Financial Frictions and Corporate Investment in Bad Times. Who Cut Back Most?," CSEF Working Papers 463, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 02 May 2017.
    8. Zdeněk Toušek & Barbora Malinská & Martin Prokop & David Procházka, . "The Effect of Financial Leverage on Operating Performance: Evidence from the Czech Republic," Prague Economic Papers, Prague University of Economics and Business, vol. 0.
    9. Crt Lenarcic & Georgios Papadopoulos, 2020. "Determinants of Firm Investment: Evidence from Slovenian Firm-Level Data," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 18(2), pages 159-180.
    10. Yomna Abdulla & Viet Anh Dang & Arif Khurshed, 2016. "Debt maturity and initial public offerings," Review of Quantitative Finance and Accounting, Springer, vol. 47(4), pages 1129-1165, November.
    11. Matthias Nnadi & Vachiraporn Surichamorn & Ranadeva Jayasekera & Yacine Belghitar, 2022. "Empirical analysis of debt maturity, cash holdings and firm investment in developing economies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 3345-3372, July.
    12. Karren Lee-Hwei Khaw & Benjie Chien Jiang Lee, 2016. "Debt Maturity, Underinvestment Problem and Corporate Value," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 12(Suppl. 1), pages 1-1–17.
    13. Dang, Viet Anh, 2013. "An empirical analysis of zero-leverage firms: New evidence from the UK," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 189-202.
    14. Pindado, Julio & Requejo, Ignacio & de la Torre, Chabela, 2011. "Family control and investment–cash flow sensitivity: Empirical evidence from the Euro zone," Journal of Corporate Finance, Elsevier, vol. 17(5), pages 1389-1409.
    15. Zdeněk Toušek & Barbora Malinská & Martin Prokop & David Procházka, 2021. "The Effect of Financial Leverage on Operating Performance: Evidence from the Czech Republic," Prague Economic Papers, Prague University of Economics and Business, vol. 2021(4), pages 381-401.
    16. Dang, Viet Anh & Kim, Minjoo & Shin, Yongcheol, 2015. "In search of robust methods for dynamic panel data models in empirical corporate finance," Journal of Banking & Finance, Elsevier, vol. 53(C), pages 84-98.
    17. Phan, Quynh Trang, 2018. "Corporate debt and investment with financial constraints: Vietnamese listed firms," Research in International Business and Finance, Elsevier, vol. 46(C), pages 268-280.
    18. Chen, Ni-Yun & Liu, Chi-Chun, 2021. "The effect of repurchase regulations on actual share reacquisitions and cost of debt," The North American Journal of Economics and Finance, Elsevier, vol. 55(C).
    19. Xin Qu & Majella Percy & Fang Hu & Jenny Stewart, 2022. "Can CEO equity‐based compensation limit investment‐related agency problems?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(2), pages 2579-2614, June.
    20. Z. Jun Lin & Shengqiang Liu & Fangcheng Sun, 2017. "The Impact of Financing Constraints and Agency Costs on Corporate R&D Investment: Evidence from China," International Review of Finance, International Review of Finance Ltd., vol. 17(1), pages 3-42, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:quantf:v:11:y:2011:i:2:p:237-245. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RQUF20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.