P.C. Schotman (Peter)
http://repub.eur.nl/ppl/5192/
List of Publications
en
http://repub.eur.nl/eur_signature.png
http://repub.eur.nl/
RePub, Erasmus University Repository

Conditional asset pricing and stock market anomalies in Europe
http://repub.eur.nl/pub/31266/
Mon, 01 Mar 2010 00:00:01 GMT
<div>R. Bauer</div><div>M.M.J.E. Cosemans</div><div>P.C. Schotman</div>
This study provides European evidence on the ability of static and dynamic specifications of the FamaFrench (1993) threefactor model to price 25 sizeB/M portfolios. In contrast to US evidence, we detect a smallgrowth premium and find that the size effect is still present in Europe. Furthermore, we document strong time variation in factor risk loadings. Incorporating these risk fluctuations in conditional specifications of the threefactor model clearly improves its ability to explain time variation in expected returns. However, the model still fails to completely capture crosssectional variation in returns as it is unable to explain the momentum effect. © 2008 The Authors Journal compilation

The cost of capital in international financial markets: local or global?
http://repub.eur.nl/pub/16943/
Fri, 01 Nov 2002 00:00:01 GMT
<div>C.G. Koedijk</div><div>C.J.M. Kool</div><div>P.C. Schotman</div><div>M.A. van Dijk</div>
This paper analyzes to what extent international and domestic asset pricing models lead to a different estimate of the cost of capital for an individual firm under the maintained assumption of perfect international financial integration. We distinguish between (i) the multifactor
Solnik–Sercu ICAPM including both the global market portfolio and exchange rate risk premia, and (ii) the single factor domestic CAPM. We use a sample of 3,293 stocks from nine countries in the period 1980–1999. The domestic CAPM yields a significantly different estimate of the cost of capital from the multifactor ICAPM for only five percent of the firms in our sample. We attribute the close correspondence between local and global pricing to strong country factors in individual stock returns, which are probably due to lack of real integration. Our results reinforce the home bias puzzle.

Price Discovery on Foreign Exchange Markets with Differentially Informed Traders
http://repub.eur.nl/pub/7724/
Mon, 24 May 1999 00:00:01 GMT
<div>F.C.J.M. de Jong</div><div>R.J. Mahieu</div><div>P.C. Schotman</div><div>I.W. van Leeuwen</div>
This paper uses Reuters exchange rate data to investigate the contributions to the price discovery process by individual banks in the foreign exchange market. We propose multivariate time series models as well as models in tick time to study the dynamic relations between the quotes of individual banks. We investigate the hypothesis that German banks are price leaders in the deutschmark/dollar market. Our empirical results suggest an important but not exclusive role for German banks in the price discovery process. There is also a group of banks, German and nonGerman, that lags behind the market and does not contribute to the price discovery process. In contrast to Peiers~(1997) we do not find evidence for stronger price leadership of Deutsche bank on days with suspected Bundesbank interventions in the foreign exchange market.

An empirical application of stochastic volatility models
http://repub.eur.nl/pub/16768/
Thu, 01 Jan 1998 00:00:01 GMT
<div>R.J. Mahieu</div><div>P.C. Schotman</div>
This paper studies the empirical performance of stochastic volatility models for twenty years of weekly
exchange rate data for four major currencies. We concentrate on the effects of the distribution of the
exchange rate innovations for both parameter estimates and for estimates of the latent volatility series. The
density of the log of squared exchange rate innovations is modelled as a flexible mixture of normals. We use
three different estimation techniques: quasimaximum likelihood, simulated EM, and a Bayesian procedure.
The estimated models are applied for pricing currency options. The major findings of the paper are that:
(1) explicitly incorporating fattailed innovations increases the estimates of the persistence of volatility
dynamics; (2) the estimation error of the volatility time series is very large; (3) this in turn causes standard
errors on calculated option prices to be so large that these prices are rarely significantly different from a
model with constant volatility.

The Reemergence of PPP in the 1990s
http://repub.eur.nl/pub/16944/
Thu, 01 Jan 1998 00:00:01 GMT
<div>C.G. Koedijk</div><div>P.C. Schotman</div><div>M.A. van Dijk</div>
In this paper we investigate purchasing power parity (PPP) in a panel with 17 countries for the period 1972 through 1996. The novel feature of our panel methodology is that results
are invariant to the choice of a benchmark on numeraire currency. In the panel we allow individual country effects in the relation between prices and exchange rates. In this way we
can identify the currency pairs for which PPP holds or does not hold. We conclude that there is substantive evidence for PPP, although not to the same extent for every currency.
Evidence in favor of PPP is strongest for many exchange rates relative to the Dmark, and weakest for the Japanese yen. For this currency a trendlike variable, like productivity
growth, is missing.

An empirical application of stochastic volatility models
http://repub.eur.nl/pub/17280/
Thu, 01 Jan 1998 00:00:01 GMT
<div>R.J. Mahieu</div><div>P.C. Schotman</div>

Big news in small samples
http://repub.eur.nl/pub/12476/
Sat, 16 Aug 1997 00:00:01 GMT
<div>P.C. Schotman</div><div>S. Straetmans</div><div>C.G. de Vries</div>
Univariate time series regressions of the forex return on the forward
premium generate mostly negative slope coefficients. Simple and refined
panel estimation techniques yield slope estimates that are much closer to
unity. We explain the two apparently opposing results by allowing for both
additive and multiplicative news. No arbitrage arguments imply that the
multiplicative news component must be identical across all exchange rates
at a given point in time. Cross section estimates reveal that the movements
in the multiplicative news component are so large that a negative
slope coefficient for the post Bretton Woods time series regressions is not inprobable.

A Bayesian analysis of the unit root in real exchange rates
http://repub.eur.nl/pub/11240/
Tue, 01 Jan 1991 00:00:01 GMT
<div>P.C. Schotman</div><div>H.K. van Dijk</div>
We propose a posterior odds analysis of the hypothesis of a unit root in real exchange rates. From a Bayesian viewpoint the random walk hypothesis for real exchange rates is a posteriori as probable as a stationary AR(1) process for four out of eight time series investigated. The French franc/German mark is clearly stationary, while the Japanese yen/US dollar is most likely a random walk. In contrast, classical tests are unable to reject the unit root for any of these series.

On Bayesian routes to unit roots
http://repub.eur.nl/pub/11243/
Tue, 01 Jan 1991 00:00:01 GMT
<div>P.C. Schotman</div><div>H.K. van Dijk</div>
This paper is a comment on P. C. B. Phillips, `To criticise the critics: an objective Bayesian analysis of stochastic trends' [Phillips, (1991)]. Departing from the likelihood of an univariate autoregressive model different routes that lead to a posterior odds analysis of the unit root hypothesis are explored, where the differences in routes are due to the different choices of the prior. Improper priors like the uniform and the Jeffreys prior are less suited for Bayesian inference on a sharp null hypothesis as the unit root. A proper normal prior on the mean of the process is analysed and empirical results using extended NelsonPlosser data are presented.