Dinh-Vinh Vo

Working paper

 

1. The Response of Exchange Rate to Central Bank Communication: A Textual Analysis Approach (Job Market Paper) 

 

This study explores how central bank communication affects the movement of exchange rates. The paper constructs the sentiment by employing textual information from the European Central Bank press conferences (ECB PCs). Using high-frequency data, we find that a more positive/negative sentiment is associated with appreciation/depreciation of the euro and decreasing/increasing exchange rate volatility. The results are robust to the inclusion of relevant control variables: the changes in key policy interest rate,  textual characteristics of ECB PCs, and macro fundamentals. We apply a machine learning technique to decompose central bank communication into a variety of topics. The results indicate that EUR-USD responds most strongly to topics of economic growth and central bank liquidity provision. We provide evidence that central bank sentiment contains forward-looking views about future policy rates and exchange rates. A risk-based channel is only significant during the unconventional monetary policy period.

 

2. News-implied Volatility and the Cross-sectional Stock Returns 

 

Our study examines the role of news-implied volatility (NVIX) in the cross-section of stock returns. NVIX is driven by different components: financial intermediation, government, war, natural disaster, and stock market news. Among these categories, we find that only the volatility related to stock markets is priced.  Stocks with negative (positive) betas perform poorly (well) during times of a high volatility index. Portfolio-level analyses and stock-level cross-sectional regressions provide evidence of a negative and statistically significant relationship between volatility betas and expected returns, even after controlling for firm characteristics. The strategy taking long positions in stocks with the highest exposure to innovations in the volatility and short positions in stocks with the lowest volatility exposure generates an annualized excess return of 6.6%. The results are robust across individual stocks and equity portfolios.

 

3. Contagion in the Global Banking System during the U.S and Eurozone Crisis 

 

I estimate a factor model using a Bayesian approach to investigate the transmission of the US  and  European crises to 45 banking systems. Contagion is defined as an unexpected increase in factor exposures during the crisis. The results confirm the strong evidence of contagion from the US market. The Eurozone crisis tends to disturb the banking sectors in American and Asia-Pacific countries, but the impacts are not remarkable. Banks with high profitability, a high stability score, low diversification, and low concentration are more resilient in both episodes. In contrast, banks in countries with positive investment positions, high government debt ratios, and high unemployment rates augment the intensity of contagion. Additionally, one standard deviation increase in the US exposure increases the likelihood of a  banking crisis by 16.1%.

 

 

 

Conferences

 

 

• NLP in Finance, Oslo, Norway, Mar 2020

• KWC-CFF Workshop, Arild, Sweden, Sep 2019

• PhD Nordic Finance Workshop, Helsinki, Finland, May 2019 

• Belgian Financial Research Forum, Brussels, Belgium, Jun 2018

•  PhD Nordic Finance Workshop, Lund, Sweden, May 2018

• Paris Financial Management Conference, Paris, France, Dec 2017

• Workshop in Advanced Empirical Asset Pricing, Bergen, Norway, Dec 2017

• KWC-CFF Workshop, Mölle, Sweden, Sep 2017

• National PhD Workshop in Finance, Stockholm, Sweden, Nov 2014

• Multinational Finance Society Conference, Czech Republic, Jul 2014 

 

Professional activities 

• Referee for: Economic Modeling, Asia-Pacific Financial Markets

• Member, American Finance Association 2016--Present

• Member, European Finance Association 2018--Present

• Member, Euro Area Business Cycle Network 2017--Present