(Press-News.org) A study of the reaction by the United States stock market to international financial crises shows that small companies are often hit hardest, and the impact is above and beyond what would be expected given their exposure to global market factors.
This unexpected result suggests the significant impact that investors' actions can have during emerging market crises. During these crises, investors flee to the perceived safety of big companies and shed stocks of smaller companies, despite comparable levels of international exposure during normal periods.
"The take-away is, just because you invest locally doesn't mean you are protected from the global market," said David Berger, an assistant professor of finance at Oregon State University.
Looking at almost 20 years of data that covered about eight large emerging market crashes, Berger and H.J. Turtle of Washington State University uncovered this flight-from-risk trend on the part of investors that flee from small stocks. The results are published in the current issue of the Global Finance Journal.
"We would expect that stock markets in two different, but related economies would crash at the same time," Berger said. "But we found that during big market crashes, investors adjust their holdings towards bigger corporate stocks that they perceive as being safer, even after controlling for economic exposures."
Berger said the results of his study are unexpected because past research has focused on the aggregate U.S. market as a whole and found little impact during emerging market crises.
"Investors see these big blue chip stocks as the safer ones, and small, R&D intensive stocks for example, as riskier," Berger said. "So the stock of a smaller domestic company could take a hit because of an international shock."
Berger studies U.S. equity markets and international stocks, and said the findings from this study have important implications for investors, even those who tend to invest mainly in the domestic market.
"Interestingly, larger stocks often benefited from emerging market crises and exhibited positive returns," Berger added. "Because investors started dumping smaller stocks in favor of safer, larger ones, the irony is that larger multinational corporations potentially see positive benefits during international crises."
### END
Smaller companies hit hardest during emerging market crises
2011-06-22
ELSE PRESS RELEASES FROM THIS DATE:
New Release of GNCutter32 Boosts Multi-Size Stock-Cutting Effectiveness
2011-06-22
Optimalon Software has released version 4.0 of their GNCutter32 stock-cutting optimization library for software developers. The calculation algorithm of cutting plan generation for multi-size stock cutting has been significantly re-designed. A completely new cutting layout minimization algorithm has been developed and successfully implemented in the new version.
Finding the optimal stock-cutting plan is a hard optimization problem that arises in woodworking, glass and metal industries on a regular basis. The problem gets even harder when several sizes of the stocks are ...
Scientists rise to the challenge of identifying and comparing yeast genomes
2011-06-22
Bethesda, MD -- If you think yeast is most useful for beer and pizza crust, here's something else to chew on: a team of U.S. researchers has identified and compared the genetic codes for all known species of yeasts closely related to bakers' and brewers' yeast. This information, published in the Genetics Society of America's new open-access journal, G3: Genes | Genomes | Genetics (http://www.g3journal.org), lays the foundation for future understanding of mutation and disease, as studies of yeasts often identify key genes and mechanisms of disease.
"We hope to learn to ...
Lyme disease tick adapts to life on the (fragmented) prairie
2011-06-22
CHAMPAIGN, lll. — A new study offers a detailed look at the status of Lyme disease in Central Illinois and suggests that deer ticks and the Lyme disease bacteria they host are more adaptable to new habitats than previously appreciated.
Led by researchers at the University of Illinois, the study gives an up-close view of one region affected by the steady march of deer ticks across the upper Midwest. Their advance began in Wisconsin and Minnesota, and is moving at a pace of up to two counties a year in Illinois and Indiana.
Today the deer tick is established in 26 Illinois ...
Aces High, the Combat Simulator Sensation, Introduces New Version
2011-06-22
Since 2000, Aces High has been the leader of the pack in flight simulation games. One reason is that HiTech Creations does not believe in standing pat with what they have created. Over the years more than 37 different versions of this wildly popular World War 2 flight simulator game have been introduced and this new version is far and away the best.
While other companies tinker around with four or five different games, in effect watering down the attention given to any one game, HiTech Creations founder Dale Addink has always believed that the concentration of talent ...
UC Riverside neuroscientists' discovery could bring relief to epilepsy sufferers
2011-06-22
RIVERSIDE, Calif. – Researchers at the University of California, Riverside have made a discovery in the lab that could help drug manufacturers develop new antiepileptic drugs and explore novel strategies for treating seizures associated with epilepsy – a disease affecting about two million Americans.
Neurons, the basic building blocks of the nervous system, are cells that transmit information by electrical and chemical signaling. During epileptic seizures, which generally last from a few seconds to minutes and terminate spontaneously, the concentrations of ions both ...
Non-coding RNA has role in inherited neurological disorder -- and maybe other brain diseases too
2011-06-22
A team of scientists, led by researchers at the University of California, San Diego School of Medicine, have uncovered a novel mechanism regulating gene expression and transcription linked to Spinocerebellar ataxia 7, an inherited neurological disorder. The discovery promises to have broad ramifications, suggesting that abundant non-coding transcripts of ribonucleic acid (RNA) may be key players in neurological development and function, and could be powerful targets for future clinical therapies.
The research, headed by Albert La Spada, MD, PhD, chief of the division ...
Acrobatics for anyons: New test for elusive fundamental particle proposed
2011-06-22
In quantum physics there are two classes of fundamental particles. Photons, the quanta of light, are bosons, while the protons and neutrons that make up atomic nuclei belong to the fermions. Bosons and fermions differ in their behavior at a very basic level. This difference is expressed in their quantum statistics. In the 1980s a third species of fundamental particle was postulated, which was dubbed the anyon. In their quantum statistics, anyons interpolate between bosons and fermions.
"They would be a kind of missing link between the two known sorts of fundamental ...
Angry online commenters can cause negative perceptions of corporations, MU researchers find
2011-06-22
COLUMBIA, Mo. -With the increasing pervasiveness of social media and online communication in the operation of most organizations and corporations, little is known about the potential effects of public expressions of anger displayed throughout various online sources. Now, researchers at the University of Missouri have found that angry user-generated comments on Internet sites can further perpetuate negative perceptions of an organization undergoing the crisis.
Based on her findings, Bo Kyung Kim, a doctoral student in the University of Missouri School of Journalism, urges ...
Planning is key to a healthy and happy retirement, studies find
2011-06-22
COLUMBIA, Mo. –Retirement is often viewed as a time to relax, travel, participate in leisurely activities and spend time with family. However, for many older adults, chronic health problems and poor planning often hinder the enjoyment of retirement. Now, a University of Missouri researcher has found that planning for changes in lifestyle and health leads to better retirement for married couples.
Angela Curl, an assistant professor in the School of Social Work, says it is important for couples to plan for retirement, both financially and socially and to consider the changes ...
UC San Diego researchers create tool to put the lid on solar power fluctuations
2011-06-22
How does the power output from solar panels fluctuate when the clouds roll in? And can researchers predict these fluctuations? UC San Diego Professor Jan Kleissl and Matthew Lave, a Ph.D. student in the Department of Mechanical and Aerospace Engineering at the Jacobs School, have found the answer to these questions. They also have developed a software program that allows power grid managers to easily predict fluctuations in the solar grid caused by changes in the cloud cover. The program uses a solar variability law Lave discovered.
The finding comes at a time when the ...