Delta-Hedged Gains and the Negative Market Volatility Risk Premium

We investigate whether the volatility risk premium is negativeby examining the statistical properties of delta-hedged optionportfolios (buy the option and hedge with stock). Within a stochasticvolatility framework, we demonstrate a correspondence betweenthe sign and magnitude of the volatility risk premium and themean delta-hedged portfolio returns. Using a sample of S&P500 index options, we provide empirical tests that have thefollowing general results. First, the delta-hedged strategyunderperforms zero. Second, the documented underperformanceis less for options away from the money. Third, the underperformanceis greater at times of higher volatility. Fourth, the volatilityrisk premium significantly affects delta-hedged gains, evenafter accounting for jump fears. Our evidence is supportiveof a negative market volatility risk premium.     

Contagious diseases and tourism: a systematic review based on bibliometric and content analysis methods

Quality & Quantity - The present study examines the existing knowledge and intellectual structure on contagious diseases and tourism to map the development of the concept through collaborative...     

Do subjective expectations explain asset pricing puzzles?

The structural uncertainty model with Bayesian learning, advanced by Weitzman (AER 2007), provides a framework for gauging the effect of structural uncertainty on asset prices and risk premiums. This paper provides an operational version of this approach that incorporates realistic priors about consumption growth volatility, while guaranteeing finite asset pricing quantities. In contrast to the extant literature, the resulting asset pricing model with subjective expectations yields well-defined expected utility, finite moment generating function of the predictive distribution of consumption growth, and tractable expressions for equity premium and risk-free return. Our quantitative analysis reveals that explaining the historical equity premium and risk-free return, in the context of subjective expectations, requires implausible levels of structural uncertainty. Furthermore, these implausible prior beliefs result in consumption disaster probabilities that virtually coincide with those implied by more realistic priors. At the same time, the two sets of prior beliefs have diametrically opposite asset pricing implications.     

Variance bounds on the permanent and transitory components of stochastic discount factors

In this paper, we develop lower bounds on the variance of the permanent component and the transitory component, and on the variance of the ratio of the permanent to the transitory components of SDFs. Exactly solved eigenfunction problems are then used to study the empirical attributes of asset pricing models that incorporate long-run risk, external habit persistence, and rare disasters. Specific quantitative implications are developed for the variance of the permanent and the transitory components, the return behavior of the long-term bond, and the comovement between the transitory and the permanent components of SDFs.     

Assessing models of individual equity option prices

Review of Quantitative Finance and Accounting - This study sheds light on risk exposures of cooperative banks in Austria, Germany and Italy. We investigate how major risk elements of banks in these...     

Predictability of currency carry trades and asset pricing implications

This paper studies the time series predictability of currency carry trades, constructed by selecting currencies to be bought or sold against the US dollar, based on forward discounts. Changes in a commodity index, currency volatility and, to a lesser extent, a measure of liquidity predict in-sample the payoffs of dynamically re-balanced carry trades, as evidenced by individual and joint p-values in monthly predictive regressions at horizons up to six months. Predictability is further supported through out-of-sample metrics, and a predictability-based decision rule produces sizable improvements in the Sharpe ratios and skewness profile of carry trade payoffs. Our evidence also indicates that predictability can be traced to the long legs of the carry trades and their currency components. We test the theoretical restrictions that an asset pricing model, with average currency returns and the mimicking portfolio for the innovations in currency volatility as risk factors, imposes on the coefficients in predictive regressions.     

Scale Development and Validation for Measuring Online Engagement

Although the construct of online engagement has received considerable attention in the consumer behavior literature, academic research lacks clear conceptualization and rigorous measurement of the construct within social media. Further, a lack of consensus remains with regard to the conceptualization and operationalization of engagement in the marketing literature. This study develops and validates a 16-item online engagement scale comprising four factors: conscious attention, affection, enthused participation, and social connection. Strong evidence supports the reliability of the multidimensional conceptualization, as well as its convergent and discriminant validity. The scale offers a framework for future research investigations in an increasingly important area.     

Inflation, asset prices, and the term structure of interest rates in monetary economics

This article offers a tractable monetary asset pricing model.In monetary economies, the price level, inflation, asset prices,and the real and nominal interest rates have to be determinedsimultaneously and in relation to each other. This link allowsus to relate in closed form each of the dependent entities tothe underlying real and monetary variables. Among other featuresof such economies, inflation can be partially nonmonetary andthe real and nominal term structures can depend on fundamentallydifferent risk factors. In one extreme, the process followedby the real term structure is independent of that followed byits nominal counterpart.     

Analysing the impact of restructuring transportation,production and distribution on costs and environment – a case from the Thai Rubber industry

Transportation and distribution are key elements to successful supply chains, however there is some disagreement regarding the impact of distribution and transportation restructuring on costs and the environment. This paper explores the use of an optimisation model of Thailand’s rubber industry supply chain, to assess the impact of distribution and transportation on costs and greenhouse gas emissions. It has previously been observed that there is a positive correlation between transportation cost reduction and environmental impact, nevertheless the correlation is not clearly established when the distribution system is restructured. This paper is divided into two parts: the first part examines the impact of transportation service capacity on distribution decisions; the second part of the paper aims to examine the impact of restructuring the distribution network considering multi-modal options on cost and greenhouse gas emissions. For both parts a scenario analysis is utilised in conjunction with an optimisation model to derive the best possible answer in terms of costs and GHG emissions. In this paper, the results obtained indicate that the impact on cost minimisation from the increase in rail freight service capacity is marginal, while the impact on GHG emission minimisation is more significant. In terms of short-sea shipping prices and service capacity, the scenario analysis shows a slight positive impact on cost minimisation but no positive or negative impact on GHG emission minimisation. Results also confirm that in terms of economic advantages, distribution network restructuring provides greater benefit to the industry than does capacity development for the transportation service.