Liquidity effects and FFA returns in the international shipping derivatives market

A new paper co-authored by Nadia Kappou, ICMA Centre MSc Financial Risk Management programme director, with Amir H. AlizadehDimitris Tsouknidis and Ilias Visvikis has recently been published

The study examines the impact of liquidity risk on freight derivatives returns. The Amihud liquidity ratio and bid–ask spreads are utilized to assess the existence of liquidity risk in the freight derivatives market. Other macroeconomic variables are used to control for market risk. Results indicate that liquidity risk is priced and both liquidity measures have a significant role in determining freight derivatives returns.  The results have important implications for modeling freight derivatives, and consequently, for trading and risk management purposes.

The full paper is available at this link. For more information about our MSc Financial Risk Management, accredited by the Global Association of Risk Professionals (GARP), please see this link.





Strategic risk shifting and idiosyncratic volatility

A recent research paper, “Strategic risk shifting and idiosyncratic volatility”, by Dr Nicholas Chen with his co-authors, has been accepted for presentation at the 2015 Western Finance Association Meetings. The conference is highly prestigious with an acceptance rate from submitted papers of only 8%.

Nicholas’s work helps advance our understanding of asset pricing and capital markets. More specifically, while standard asset pricing models argue that idiosyncratic risk should not be priced, the new research theoretically and empirically demonstrates that when stock holders can manipulate a firm’s idiosyncratic risk profile to maximise their own wealth at the cost of bond holders, idiosyncratic risk will be priced in stock returns. They show that this unequal risk-sharing between equity and debt holders can explain a very important puzzle in the asset pricing literature, namely the negative relationship between idiosyncratic risk and future stock returns. Nicholas’s research will help advance our understanding on this well-known asset pricing puzzle. The full working paper is available at .

A real estate bubble in medieval England?

Financial history experts from Henley Business School’s ICMA Centre are to investigate the possible existence of a real estate bubble in medieval England. The University of Reading has recently won a research project grant worth almost £200,000 from the Leverhulme Trust.[1] The research team, comprising Professors Adrian Bell and Chris Brooks, will examine in detail the workings of the English real estate market in the thirteenth to fifteenth centuries.

Professor Bell said, “I am delighted that Leverhulme has chosen to fund this project, which builds on our previous successful research on the wool and foreign exchange markets and sovereign borrowing and credit crises in thirteenth century England, and aims to draw policy-relevant lessons from the medieval environment for contemporary problems.”

Prior work conducted by the project team has shown that medieval financial markets were far more sophisticated and well-functioning than had previously been reported. Following the credit crisis of 2007-8, their body of work has been extensively drawn upon to highlight parallels with the current economic situation and to propose appropriate policy responses in the light of this historical analogy.

The contemporary British housing market is perceived as being beset with problems leading to serious social and economic consequences, and there is much discussion of the possible existence of speculative bubbles in house prices. Yet the existing historical literature on the development of the UK housing market in the pre-Victorian era is sparse and mainly descriptive.

This will be a unique, interdisciplinary study that will considerably advance understanding of the medieval property market in England by analysing it both from a historical perspective and using sophisticated econometric techniques. As well as a national overview, the project will examine regional variations in property prices and rents with the aim of identifying whether the North-South divide can be traced back to the Middle Ages. Better data on medieval property prices and rental values will also contribute to an understanding of the distribution of wealth and changes in living standards over the long run. The study aims to be the first to test for speculative bubbles in medieval real estate markets in England, which would constitute much earlier financial market bubbles than documented anywhere in the existing literature.

The project is timely given current debates about whether the property market in the South of England is overheating and whether policy mechanisms, including higher transactions taxes or reductions in the availability of credit, should be put in place to prevent the formation of (another) speculative bubble. The parallels that the work will draw between the medieval and modern markets aims to provide governments and regulators with some historical context within which they can make more informed decisions.


The Leverhulme Trust

The Leverhulme Trust was established in 1925 under the Will of the First Viscount Leverhulme with the instruction that its resources should be used to support “scholarships for the purposes of research and education.” Since that time, the Trust has provided funding for research projects, fellowships, studentships, bursaries and prizes; it operates across all the academic disciplines, the ambition being to support talented individuals as they realise their personal vision in research and professional training. With annual funding of approximately £80 million, the Trust is amongst the largest all-subject providers of research funding in the UK.

[1] “The first real estate bubble?  Land Prices and Rents in Medieval England c. 1200-1550,” Leverhulme Trust grant RPG-2014-307.

Presentation by David Roberts, the Chairman-Elect of the Nationwide Building Society

We are pleased to welcome David Roberts, the Chairman-Elect of the Nationwide Building Society. David’s presentation will focus on corporate governance and culture using the banking industry as an example and will contrast the mutual model followed by Nationwide with joint stock owned businesses such as Lloyds and Barclays.

Venue: ICMA Centre, Large Lecture Theatre (Room 150 on the first floor)

Date: Wednesday, 11th March at 6.30pm

David has a wealth of experience to draw upon. He was appointed Deputy Chairman of Lloyds Banking Group in 2012, previously serving as Chairman of the Board Risk Committee from 2010. He has held a number of senior positions in banking and finance: a main Board Director and CEO for International & Retail Banking at Barclays from 2004 to 2006, as well as serving as a member of the Group Executive Committee at Barclays from 2001 to 2006. David was Chairman of the Managing Board at BAWAG PSK Gruppe, the second largest retail bank in Austria from 2007 to 2009. David has been a member of the Henley Advisory Board for some years and is a great supporter of the Business School.  

Nationwide is the world’s largest building society, as well as the second largest savings provider and a top-three provider of mortgages in the U.K. With some 15 million customers Nationwide has positioned itself as a real and credible alternative to the established banks. Unlike some of its competitors, Nationwide successfully weathered the banking crisis and economic downturn with its reputation intact and emerged in a strong position to meet the challenges facing financial institutions in the years ahead.

To reserve a place please use the form below:

Tsinghua University PBC School of Finance Summer Program Scholarship 2015

Do you want an opportunity to visit and study in China for two weeks this Summer?

We are very pleased to announce that Tsinghua University, PBCSF have awarded the ICMA Centre 3 scholarships for students to join their Summer Programme from June 28 to July 10, 2015 in Beijing. The Scholarship covers the full programme fee, room and board (on campus), courses, materials, events and related domestic transportation. Recipients will have to cover airfare and other expenses.

The scholarship is a fantastic opportunity, open to all current ICMA Centre students or students studying at the ICMA Centre as part of their degree programme. For more information please visit the Tsinghua University PBC School of Finance Summer Program website. In order to be considered for this scholarship please send a video titled ‘Why me?’, of no more than 5 minutes in length, detailing why you should be chosen for this opportunity, by 1pm Monday, 20th April.

Three winners will be chosen by academic staff from those submitted. The video can be in all files and formats. Videos must be submitted by either emailing a Dropbox link to or by bringing a USB stick to the ICMA Centre Front office. Please title the subject of the email “Tsinghua University Summer Program”, and include your name, student number and course in the email.

If you have any questions please email

Good luck!

Be in Demand- Postgraduate studies at the ICMA Centre

Are you a current undergraduate student at the ICMA Centre or University of Reading and interested in a future career in finance? Would you like to find out more about our uniquely designed Masters degrees in Finance?

If you would like to find out more about the postgraduate programmes offered at the ICMA Centre and how a Masters in Finance could be your next step, please join us on

Monday, 2 March
Room G03/4 (ICMA Centre)

You will have the opportunity to meet with staff and to learn more about career development and the admissions process. We have some exciting discounts on fees for University of Reading and ICMA Centre Alumni, as well as ten ambassador scholarships of up to £10,000!


Statistical Model Selection with `Big Data’ by Sir David Hendry

On Wednesday 28th January, Sir David Hendry visited the ICMA Centre, and gave a joint ICMA Centre and Economics Department seminar on Statistical Model Selection with `Big Data”. 

Sir David has been the pre-eminent British econometrician for the last forty years, and was knighted for contributions to social science in 2007. He spoke to a large audience on the difficulties involved in selecting useful models when the complexity of the system is such that there are a huge number of candidate explanatory variables.  

Price discovery in the 18th Century

New research by Professor Adrian Bell, Chris Brooks (both of the ICMA Centre, Henley Business School) and Nick Taylor (of the University of Bristol) has been published in Cliometrica: The Journal of Historical Economics and Econometric History.

The journal specialises in original research that focuses upon the use of modern economic theory and econometric techniques to investigate historical issues.

The paper titled ‘Price discovery in the 18th Century’ combines the methodological approaches of modern finance and historical analysis, to investigate the time-varying nature of price discovery – the process by and the speed with which, new information is reflected in the prices of traded assets – in eighteenth century cross-listed stocks.

Specifically, the work investigates how quickly news was impacted in share prices for two of the ‘great moneyed companies’, the Bank of England and the East India Company, over the period 1723 to 1794.

These British companies were cross-listed on the London and Amsterdam stock exchanges and news between the capitals flowed mainly via the use of boats that sailed up to twice per week transporting mail. The study examines in detail the historical context surrounding the defining events of the period, and uses these as a guide to how the data should be analysed.

The research shows that both trading venues contributed to price discovery, and that although the London venue was more important for these stocks, Amsterdam also played an increasing role.

The results of this research demonstrates that despite communication being delayed between the two financial centres (and being tricky especially during periods of warfare and economic uncertainty), price differentials would disappear so that prices returned to equilibrium quickly, and any arbitrage opportunities would therefore swiftly disappear.

The study is also able to show that the prices of these early examples of cross-listed stocks incorporated information from both listing venues despite operating in a period of great political and financial turbulence.

Professor Adrian Bell, head of the ICMA Centre, stated “These findings offer an important wider implication; that financial markets do not require modern forms of immediate electronic communication or a highly developed regulatory framework in order to function effectively.”

Insights into Environmental, Social and Governance (ESG) investing by Neil Brown

Neil has worked in investment for 13 years. Before joining Alliance Trust Investments in August 2001, Neil spent 4 years at Aviva Investors where, most recently, he was an SRI Fund Manager.

Neil’s investment career started at Pensions & Investments Research Consultants where he was a senior researcher. In 2004, he moved to Threadneedle Asset Management where, as well as having the role of Pan European Equity Analyst, he was also Head of Governance and Responsible Investment.

Neil is lead Fund Manager on the SF European Growth OEIC and SF Pan European SICAV. He is co-fund manager on the SF UK Growth and UK Ethical funds.
Neil has an MSc in Development Economics from the School of African & Oriental Studies and a BA (Hons) in Economics from the University of Manchester. He holds the CFA Society of the UK Investment Management Certificate. Neil is also Chair of the UN Principle for Responsible Investment Integration Working Group.

This guest lecture is part of the new Industry Insights seminar series. To register and for more information, please go to

Institutional investors, business and the public good from transactions to relations by Colin Melvin

Colin joined Hermes Fund Managers in 2002 and became CEO of Hermes Equity Ownership Services in 2005. Colin provides advice and assistance to pension funds and other institutional investors in the areas of responsible asset management, corporate governance, voting and engagement. He is currently an Associate of the Centre for Corporate Governance Research of the University of Birmingham and a non-executive director of Aedas Europe, an architectural firm. Colin is currently an active member of various industry steering groups and committees including those of the United Nations Principles for Responsible Investment Initiative (for which he was the first Chair), Tomorrow’s Company Inquiry into Corporate Ownership, the Work Foundation Panel of Inquiry into Work and Enterprise, the Global Institutional Governance Network, the Institutional Investors Group on Climate Change and the International Corporate Governance Network. Previously, Colin was Corporate Governance Manager and Secretary to the Ethics Committee at Standard Life Investments and Head of Corporate Governance and responsible investment at Baillie Gifford.  

He is also a former member of the Advisory Board to Aberforth Limited Partnership I, a fund engaged in relational and active-value investing. He holds an MA from Aberdeen University and an MPhil from Cambridge University, both in History, and a Diploma in Investment Analysis from Stirling University.

This guest lecture is part of the new Industry Insights seminar series. To register and for more information, please go to