USING DUMMY VARIABLES IN THE EVENT METHODOLOGY

In this paper, the author outlines a dummy variable technique that is a convenient procedure for obtaining cumulative prediction errors and related test statistics. By appending a vector of (0,1) dummy variables to the right-hand side of the market model, results usually obtained in two steps can be obtained in a single multiple regression. The primary advantage of this technique is that both prediction errors and correct test statistics may be obtained from any standard regression package.     

Optimal liquidation strategies regularize portfolio selection

We consider the problem of portfolio optimization in the presence of market impact, and derive optimal liquidation strategies. We discuss in detail the problem of finding the optimal portfolio under expected shortfall (ES) in the case of linear market impact. We show that, once market impact is taken into account, a regularized version of the usual optimization problem naturally emerges. We characterize the typical behavior of the optimal liquidation strategies, in the limit of large portfolio sizes, and show how the market impact removes the instability of ES in this context.     

Does Market Structure Influence Price Transmission in the Agro‐food Sector? A Meta‐analysis Perspective

There exists a large literature on price transmission in agro‐food sectors. However, a great majority of empirical studies focus on the existence of asymmetry and, by and large, do not investigate the reason for its presence or absence. This is in sharp contrast to the theoretical literature that provides a number of explanations of why we should expect (a)symmetry. In response, this paper investigates the reasons for asymmetric price transmission in the agro‐food chain, using meta‐analysis of existing studies. Our focus is on the organizational and institutional characteristics of the agro‐food supply chain. Our findings suggest that asymmetric price transmission in farm–retail relationships is more likely to occur in sectors/countries with more fragmented farm structure, higher governmental support and more restrictive regulations on price controls in the retail sector. On the other hand, more restrictive regulations on entry barriers in the retail sector and the relative importance of the sector tend to promote symmetric farm–retail price transmission. The latter is also more likely in the presence of a strong processing industry.     

European Enlargement and Agro‐Food Trade

This paper investigates the level, composition, and differences in the dynamics of revealed comparative advantage and trade specialization patterns of the 12 new member states (NMS‐12) as part of the enlarged European Union 27 countries (EU‐27). The NMS‐12 are classified into four country groups: the Baltic States, the CEFTA‐5, and the Mediterranean and the Balkan regions. The empirical analysis employs a regression framework, a duration analysis, Markov transition probability matrices, and mobility indices. Trade increases with the EU enlargement and so does revealed comparative advantage in agro‐food products. There are catching‐up difficulties, as indicated by revealed comparative advantage, in higher added‐value processed products. Le présent article examine le degré, la composition et les différences de la dynamique des avantages comparatifs révélés ainsi que les caractéristiques de la spécialisation du commerce des douze nouveaux pays membres (NPM‐12) de l'Union européenne élargie (UE–27). Les 12 nouveaux pays membres sont divisés en quatre groupes: les États baltiques, les cinq pays membres de l'ALECE, la région de la Méditerranée et la région des Balkans. L'analyse empirique utilise un modèle de régression, une analyse de durée, des matrices de probabilités des transitions (Markov) et des indices de mobilité. Les échanges augmentent avec l'élargissement de l'UE tout comme les avantages comparatifs révélés des produits agroalimentaires. On observe des difficultés de rattrapage, comme l'indique l'avantage comparatif révélé, dans le cas des produits transformés à forte valeur ajoutée.     

Hungarian Agriculture at the Dawn of EU Accession

Hungarian AgricuIture at the Dawn of EU Accession Hungary and Hungarian agriculture nurse high hopes for EU-accession. Agriculture and rural development were of pivotal importance during the accession negotiations, in the accession referendum and the preparations for accession. The success in integrating our agriculture into the CAP and the single market will substantially influence public opinion in the post-accession years. We expect our membership to stabilise market conditions and to improve development possibilities in rural areas where there is great demand for better employment and living conditions. These benefits will emerge from our integration into the single market, our involvement in decision-making and from the backing of EU resources. But the challenges of EU membership also evoke fears amongst Hungarian farmers. The transformation of agriculture is incomplete, agricultural incomes and investments are stagnant, rural infrastructure is somewhat weak and marketing systems are rather inefficient. Hungarian farmers have difficulty accepting the relatively low levels of direct aids whereas they face full health and food safety restrictions from day one of accession. The CAP Reform of June 2003 confuses and slows down our preparatory work. Hungarian agriculture, however, is determined to respond to the challenges of accession. Our common Europe will prove stronger with Hungarian agriculture, and Hungarian agriculture has to become stronger through our EU membership. L'agriculture hongroise au temps zéro de I'accession OLa Hongrie et l'agriculture hongroise mettent de grands espoirs dans L'accession à l'Union Européenne. L'agriculture et le développement rural ont été au centre des négotiations sur l'accession, du référendum associé et des mesures préparatoires correspondantes. l'opinion publique sera grandement influenceée, dans les années qui suivront l'accession, par le succés de l'intégration de notre agriculture dans la politique agricole commune et le marché unique. De notre appartenance à l'UE, nous attendons la stabilisation des marchés et l'amélioration des perspectives de développement dans les zones rurales oú le besoin de meilleures conditions de vie et d'emploi se fait sentir avec acuité. Ces avantages devraient provenir de notre intégration dans le marché unique, de notre participation aux décisions collectives et d'un soutien à la mesure des ressources de l'Union Européenne. Cependant, les défis de l'intégration européenne ne vont pas aussi sans susciter des craintes chez les agriculteurs hongrois. La transformation de l'agriculture est incompléte, les revenus et les investissements stagnent, les infrastructures rurales sont insuffisantes et l'organisation des marchés inefficace. Les agriculteurs hongrois acceptent difficilement de ne bénéficier que d'aides directes relativement faibles, alors que, dés le premier jour de l'accession, ils seront soumis à tous les réglements communautaires en matiére de santé et de sécurité alimentaires. La réforme de la PAC en juin 2003 complique encore et ralentit les travaux préparatoires à l'accession. Néanmoins, l'agriculture hongroise est résolue à relever le défi. L'Europe commune sera plus forte avec l'agriculture hongroise et cette derniére sera renforcée par son appartenance à l' Europe Ungarische Landwirtschaft kurz vor dem EU-Beitritt Ungarn und die ungarische Landwirtschaft setzen große Hoffnungen in den EU-Beitritt. Die Landwirtschaft und die Entwicklung des ländlichen Raums waren in den Beitrittsverhandlungen, beim Volksentscheid zum Beitritt und bei den Vorbereitungen des Beitritts von entscheidender Bedeutung. Das Gelingen bei der Integration unserer Landwirtschaft in die GAP und den Binnenmarkt wird die öffendiche Meinung in den Jahren nach dem Beitritt entscheidend beeinflussen. Wir erhoffen uns von unserer Mitgliedschaft stabilere Marktbedingungen und bessere Entwicklungsmöglichkeiten im ländlichen Raum, wo Verbesserungen im Hinblick auf Beschäftigungssituation und Lebensbedingungen dringend erforderlich sind. Dies wird durch unsere Integration in den Binnenmarkt, unseren Beitrag zur Entscheidungsfindung und mit Hilfe von EU-Ressourcen erfolgen. Die Herausforderungen der EU-Mitgliedschaft rufen jedoch bei den ungarischen Landwirten auch Ängste hervor. Die Transformation der Landwirtschaft ist noch nicht abgeschlossen, die ländwirtschaftlichen Einkommen und die Investitionen stagnieren, die landliche Infrastruktur ist recht schwach entwickelt und die Vermarktung ist relativ ineffizient. Die ungarischen Landwirte können nur schwer akzeptieren, dass ab dem ersten Tag ihres Beitritts zwar alle Gesundheits- und Nahrungs-mittelsicherheitsbestimmunge n eingehalten werden müssen, aber nur geringe direkte Beihilfen gewährt werden. Die Reform der GAP vom Juni 2003 irritiert und verzögert unsere Vorbereitungen. Die ungarische Landwirtschaft ist jedoch entschlossen, sich den Herausforderungen des Beitritts zu stellen. Unser gemeinsames Europa wird mit der ungarischen Landwirtschaft noch stärker, und die ungarische Landwirtschaft muss durch unsere EU-Mitgliedschaft gestärkt werden.     

AN EMPIRICAL INVESTIGATION OF BETA STABILITY: PORTFOLIOS VS. INDIVIDUAL SECURITIES

The concept that portfolio betas are more stable than betas for individual securities has become the 'conventional wisdom' in finance; statements to this effect may be found in many popular finance textbooks. The objective of this paper is to challenge the conventional wisdom. A random sample of individual stock returns and portfolio returns is used to compare the empirical distribution of beta shifts for individual firms and portfolios. The number of statistically significant changes in beta are no greater for individual securities than for portfolios.     

Intra-Industry Effects of a Regulatory Shift: Capital Market Evidence from Penn Square

In this paper, we use stock market data to examine the intra-industry effects of the July 5, 1982, closure of the Penn Square bank. A sample of 54 bank stocks is divided into four portfolios: industry, money center, Texas, and upstream. The latter group consists of banks that had purchased loans directly from Penn Square. Our objective is to determine whether FDIC Chairman Isaac's decision to close, rather than merge, Penn Square had an industry-wide contagion effect or a firm-specific information effect. We conclude that the stock market reaction to the Penn Square closure represents a rational investor response to new bank-specific information.