Research articles for the 2020-11-14

Do Financial Reforms Promote Entrepreneurship?
Jha, Chandan Kumar,Bhuyan, Rafiqul
This paper investigates whether financial reforms promote entrepreneurship. Using a panel of 41 developed and developing countries from around the world, we find that financial sector reforms are positively associated with early-stage entrepreneurial activity. In a variety of robustness checks, including a falsification test, we fail to find the evidence that this relationship is driven due to the omission of unobserved, country-specific factors. Investigating the relationship between reforms in different dimensions of the financial sector and entrepreneurship, we find reforms in directed credit, credit controls, banking supervision, and international capital flows dimensions to be significantly associated with early-stage entrepreneurial activity.

How do Extreme Price Movements End?
Brogaard, Jonathan,Sokolov, Konstantin,Zhang, Jiang
We test competing theories on liquidity dynamics during extreme price movements (EPMs). Our findings indicate that market makers strategically allow for price pressures and earn compensation from pricing errors. As a result, liquidity provision intensifies towards the end of an average EPM. This goes counter to a widespread concern that market making constraints cause the deterioration of liquidity as EPMs develop. Finally, we demonstrate that limit order book dynamics during EPMs is in line with a socially beneficial equilibrium.

Market Volatility and Efficiency Within and Across Cryptocurrency Composite Indexes
Koutsoupakis, Dimitrios
The study of peer groups as Initial Offerings of diverse cryptocurrencies continue to expand is important for matching investors' tastes and preferences in relation to volatility. This paper poses the question whether stylized facts traditionally found in daily returns differ between individual cryptocurrencies and comparable indexes. Against this background, we use daily data frequency of 57 cryptocurrencies throughout their entire trading history and construct 7 benchmark indexes that track market cap by crypto-asset class aiming to draw inferences about the presence of effects namely symmetric time-varying, risk premium, leverage and calendar. The findings are useful as guidance for examining level of risk more evenly by employing the framework of composite crypto-indexes.