Where have all the traditional classroom settings gone?—The use of large scale, public sector projects to illustrate a multidisciplinary approach to problem solving

This work describes the evolution and potential of an elective course for students who have already been exposed to the standard techniques of problem solving as presented in traditional courses. Students apply these techniques to large scale problems in directed mullidisciplinary project teams. In doing so, they are provided with a unique learning experience allowing them to serve as a resource to the community. Course projects described here include the promotion of a railing retail district; the formulation, implementation and monitoring of litter reduction strategies; the economic evaluation of using inmate labor to clean public areas; and economic comparisons of recycling strategies for used tires.     

Artificial stock markets with different maturity levels: simulation of information asymmetry and herd behavior using agent-based and network models

This paper aims mainly at building artificial stock markets with different maturity levels by modeling information asymmetry and herd behavior. The developed artificial markets are multi-assets, order-driven and populated by agents having heterogeneous behaviors and information. Agents are defined by their information and their herd behavior levels. Agents trade multiple risky assets based on their wealth, their behaviors and their available information which spread among multiple behavioral networks. In a novel contribution to artificial stock markets literature, agents’ behaviors modeling is mixed with social network simulation to reproduce different degrees of information asymmetry and herd behavior based on several assortative topologies. Several simulations validated the proposed model since univariate and multivariate stylized facts were reproduced both for mature and immature stock markets. The proposed artificial stock market can be considered as a first step toward decision and simulation tools for optimal management, strategy analysis and predictions evolution of immature stock markets.     

Is unlevered firm volatility asymmetric?

Asymmetric volatility refers to the stylized fact that stock volatility is negatively correlated to stock returns. Traditionally, this phenomenon has been explained by the financial leverage effect. This explanation has recently been challenged in favor of a risk premium based explanation. We develop a new, unlevering approach to document how well financial leverage, rather than size, beta, book-to-market, or operating leverage, explains volatility asymmetry on a firm-by-firm basis. Our results reveal that, at the firm level, financial leverage explains much of the volatility asymmetry. This result is robust to different unlevering methodologies, samples, and measurement intervals. However, we find that financial leverage does not explain index-level volatility asymmetry. We show that this difference between index-level asymmetry and firm-level asymmetry is driven by the asymmetry of the unlevered covariance component of index volatility.     

Financial development and economic growth: an empirical evidence from the GCC countries using static and dynamic panel data

This paper contributes to the existing empirics of finance-growth nexus of all GCC countries with new results based on a larger dataset and longer time period 1975–2012, incorporating additional control variables, FDI, interaction term of FDI & financial development variables, and oil production. We employed four estimation techniques, Pooled OLS, Fixed effect estimation, Random effect estimation, and the system GMM estimation and used static and dynamic panel data. We obtain a robust finding of consistently a positive effect of financial sector development (FSD) on economic growth of GCC region with implication that a substantial improvement in FSD was in place. The results indicate that FDI, Fixed capital formation and oil production contribute positively to the economic growth of this region. The study results signify for a continuity of the on-going financial reform process, supervision & monitoring exercises to bring hitherto more dividends to the GCC economies.     

Do investors learn about analyst accuracy? A study of the oil futures market

We study the impact of analyst forecasts on prices to determine whether investors learn about analyst accuracy. The straight‐forward relationship between supply and price, the economic importance of the market, the predictable timing of forecast error realizations, and the high frequency of the data make the crude oil market an interesting and advantageous setting. We find that prices rise (fall) when analysts forecast a decrease (increase) in supplies. During the 15 minutes following supply announcements, prices rise (fall) when forecasts have been too high (low). Importantly, both relationships are stronger for more accurate analysts, implying that investors learn about analyst accuracy. © 2009 Wiley Peridocals, Inc. Jrl Fut Mark 29:414–429, 2009     

Switching asymmetric GARCH and options on a volatility index

Few proposed types of derivative securities have attracted as much attention and interest as option contracts on volatility. Grunbichler and Longstaff (1996) is the only study that proposes a model to value options written on a volatility index. Their model, which is based on modeling volatility as a GARCH process, does not take into account the switching regime and asymmetry properties of volatility. We show that the Grunbichler and Longstaff (1996) model underprices a three‐month option by about 10%. A Switching Regime Asymmetric GARCH is used to model the generating process of security returns. The comparison between the switching regime model and the traditional uni‐regime model among GARCH, EGARCH, and GJR‐GARCH demonstrates that a switching regime EGARCH model fits the data best. Next, the values of European call options written on a volatility index are computed using Monte Carlo integration. When comparing the values of the option based on the Switching Regime Asymmetric GARCH model and the traditional GARCH specification, it is found that the option values obtained from the different processes are very different. This clearly shows that the Grunbichler‐Longstaff model is too stylized to be used in pricing derivatives on a volatility index. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:251–282, 2004     

The World Price of Insider Trading

The existence and the enforcement of insider trading laws in stock markets is a phenomenon of the 1990s. A study of the 103 countries that have stock markets reveals that insider trading laws exist in 87 of them, but enforcement—as evidenced by prosecutions—has taken place in only 38 of them. Before 1990, the respective numbers were 34 and 9. We find that the cost of equity in a country, after controlling for a number of other variables, does not change after the introduction of insider trading laws, but decreases significantly after the first prosecution.