A portfolio approach to a cross-sectoral and cross-national investment strategy in transition economies

This paper takes a systematic look at the portfolio choice problem faced by Investment Banks or Funds investing in transition economies. We relate the performance of projects in the transition economies to the broader macroeconomic and international environments, which affect the project through their input-output structures and financial balance sheets. Among the macroeconomic determinanst of enterprise behaviour are productivity growth, real wage growth, movements in the international terms of trade, shocks to the relative price of traded and non-traded goods, domestic and foreign interest rates, currency depreciation and the rate of inflaction. We evaluate the attractiveness of alternative investment strategies and provisioning rules from the perspective of portfoio theory.     

气候变化经济学和气候政策

在气候变化经济学和气候政策的文献综述基础上,剖析了经济学原理在全球气候变化研究中的应用。在总结西方流行的气候变化的经济影响评估、预测、分析方法和模型的前提下,回顾了不同空间和时间尺度上温室气体减排成本估算的方法和结果,特别分析和强调了气候变化不确定性的特点对经济模型和政策设计的影响,提供了有效的基于市场的政策选择。     

Evaluating flood risk management options in Scotland: A participant-led multi-criteria approach

The characteristics of flood risk management include complexity, large spatial scales, inter-temporal issues, plural values and conflicts of interests. It is argued that issues with such characteristics require public participation in the decision making process. This study builds on existing deliberative processes to develop a new participant-led multi-criteria method to evaluate flood risk management options in Scotland. The results show that participants preferred regeneration or planting of native woodland to other flood management options, and least preferred building flood walls and embankments. The design of the workshops allowed a rich dataset to reveal the thinking behind such results and provided a deeper understanding of why participants came to these conclusions.     

基于CAPM的中国股市羊群行为研究——兼与宋军、吴冲锋先生商榷

本文首先对宋军和吴冲锋的《基于股价分散度的金融市场羊群行为研究》一文进行了分析 ,指出其在分析方法和论证逻辑两方面存在的问题。随后 ,本文以资本资产定价模型 (CAPM)为基础 ,建立了一个更为灵敏的羊群行为检验模型 ,并据此对我国股市进行了实证检验。研究结果表明 :在政策干预频繁和信息不对称严重的市场环境下 ,我国股市存在一定程度的羊群行为 ,并导致系统风险在总风险中占有较大比例     

Union wage effects in Australia: an endogenous switching approach

Using data from the Household and Labour Income Dynamics Australia (HILDA), an endogenous switching model is employed to analyse union wage effects in Australia between 2001 and 2013. An advantage of this approach is that the decision to join a union is treated as potentially endogenous, a function of the wage differential between union and non-union workers, rather than exogenous as is the case in virtually all previous Australian studies. The article finds that the decision to join a union is highly sensitive to the wage differential between union and non-union workers. The article also finds that male (female) union workers with average union characteristics earn 12% (18%) more than male (female) non-union workers with average non-union characteristics. However, a decomposition analysis finds that this difference is due to union workers having better human capital endowments than their non-union counterparts. In addition, they also receive a lower return for those endowments. These decomposition results suggest that union wage effects in Australia may be negative, rather than the small positive effects typically found in the Australian literature.     

Countermeasures of adaptation to climate change： establishment and application for implementation matrix

In the conceptual framework of adaptation policy assessment to climate change, adaptation measures can be categorized as two groups：facilitation and implementation. Facilitation measures refers to activities that enhance adaptive capacity, while implementation refers to activities that actually avoid adverse climate impacts on a system by reducing its exposure or sensitivity to climatic hazards, or by moderating relevant non-climatic factors. This paper aims to establish a matrix of implementation measures of adaptation to climate change, through four different ways how adaptation can influencc the relevant elements of climate change. reducing the exposure, reducing the sensitivity, alleviating the adverse impacts and reducing the negative non-climatic factors, and then further discuss the particular implementation measures of adaptation to climate change, through application studies on the selected sub-systems, intend to organize the disordered implementation measures in existent, and put forward some new measures under the guidance of this matrix, which could enrich and promote the system and content of implementation measures of adaptation.     

Equity market information and credit risk signaling: A quantile cointegrating regression approach

Investigating linkages between credit and equity markets, we consider daily aggregate U.S. CDS spreads as well as well-chosen equity market and implied volatility indexes over ten years. We describe such robust (to spurious correlation) relationship with the quantile cointegrating regression approach. Such approach handles extreme quantiles/CDS values and their behavior with respect to the equity market's influence. Heteroskedastic patterns such as time-varying variance, but also autocorrelation, skewness and leptokurtosis are captured. Thus, the sensitivity of aggregate CDS spreads to equity market price and volatility channels is accurately measured across quantiles and spreads. Such quantile-dependent sensitivity exhibits asymmetric responses to equity market shocks. A sub-period analysis investigates potential regime shifts in estimated quantile cointegrating regressions. Quantile cointegrating coefficients vary over time and quantiles, and exhibit different magnitudes across sub-periods and spreads. Therefore, the relationship is unstable over time. We also propose a scenario analysis and risk signaling application for credit risk management prospects. Under specific risk levels, credit risky situations are described conditional on the equity market's information over time, and related expected aggregate CDS spreads are computed. Estimated conditional quantiles/CDS spreads act as credit alert triggers.     

A real options reasoning approach to hybrid vehicle investments

Long term increases of petrol prices and the threat of a global climate change have created in the automotive industry a new competitive environment based on the development of more sustainable technologies. Using the real option reasoning lens we provide a theoretical framework to better account for the technological and market uncertainties and irreversibilities that impact the investment and innovation decisions of automotive firms supporting the development of more sustainable vehicle technologies. We investigate the case of hybrid vehicles in a transitional perspective by insisting on their potential to influence the dynamic shaping of investment decisions of firms in the car industry. We consider the hybridization strategy as intra-project and inter-project compound growth options to manage the flexibilities and irreversibilities of investment decisions during the transition process. We provide four different-sometimes conflicting-strategic rationales structuring the investment efforts of firms in hybrid vehicles and illustrate them with numerous examples from the automotive industry.     

市场风险与信用风险:风险管理中存在的悖论

利率、汇率波动的加剧,使金融衍生市场的风险成为影响金融体系稳定运行的最重要因素之一。在金融风险定价理论和资产组合技术的支持下,金融衍生工具已成为防范基础性金融风险的有效工具。但金融衍生工具在用于金融风险管理中也存在市场风险、信用风险、流动性风险等基本金融风险。不仅存在着市场风险与信用风险的替代性,还存在着加大金融风险总量的可能。金融风险管理的实质是寻求风险损失与风险收益的平衡。     

A comment on “Economy-wide estimates of the implications of climate change: Human health”

In a recent article in this journal, Francesco Bosello, Roberto Roson, and Richard Tol make the remarkable prediction that one degree of global warming will, on balance, save more than 800,000 lives annually by 2050. They introduce enormous, controversial monetary valuations of mortality and morbidity, varying with income; they then focus primarily on modeling the much smaller, indirect economic effects of the changes in health outcomes. Their calculations, large and small, are driven by the huge projected reduction in mortality — an estimate that Bosello et al. fail to substantiate. They rely on research that identifies a simple empirical relationship between temperature and mortality, but ignores the countervailing effect of human adaptation to gradual changes in average temperature. While focusing on small changes in average temperatures, they ignore the important health impacts of extreme weather events. They extrapolate the effects of small changes in average temperature far beyond the level that is apparently supported by their principal sources, and introduce arbitrary assumptions that may bias the result toward finding net health benefits from warming.     

The Idiosyncratic Risk-Return Relation: A Quantile Regression Approach Based on the Prospect Theory

Given some debate on the empirical idiosyncratic risk-return relation in the literature, we reexamine the relation using a quantile regression approach based on the prospect theory developed by Kahneman and Tversky [1979]. The quantile regression approach allows the coefficient on the independent variable (idiosyncratic risk) to vary across the distribution of the dependent variable (return). Our sample consists of stocks traded on the NYSE, AMEX, and NASDAQ during 1980–2010: 80,324 firm-year observations and 8,123 firms in total. The quantile regression results show that idiosyncratic risk is positively (negatively) related to returns at the high (low) quantiles of returns. The findings are consistent with the prospect theory that investors have a tendency to be less (more) willing to gamble with profits (losses). The results also demonstrate that the least-squares and least-sum optimization methods commonly used in prior research do not capture the relations between idiosyncratic risk and returns at the tail parts of the distribution of returns. Therefore, our empirical results provide new insights into the idiosyncratic risk-return relation in the literature.     

Property rights and investments: An evolutionary approach

When contracts are not enforceable, or property rights are not clearly defined, individuals may lack an incentive to carry out costly investments even when they are socially efficient. Some recent contributions such as Ellingsen and Robles (2002) prove that this problem may be less dramatic than standard economic models would suggest. They propose evolutionary models in which only efficient equilibria can be (stochastically) stable. In this paper we show that these results are not robust with respect to the introduction of individual heterogeneity. When individuals have different cost functions, stochastically stable states may be inefficient, even when they induce a positive (suboptimal) level of investment.     

Adverse risk interaction: An integrated approach

This paper studies adverse interaction between credit and market risk. We develop a comprehensive Merton-type model, in which payment ability of borrowers is driven by the overall economic growth, while the level of their liabilities is sensitive to market variables. To illustrate the model, we apply numerical simulations to estimate credit, market and integrated Value at Risk from the loss distribution using industry-wide data from the Serbian banking sector. We show that—even after accounting for presence of market risk in the banking book—the total risk remains higher than the simple sum of credit and market risk. The results emphasize the importance of integrated approach to assessment of economic capital.     

Uncertainty and Climate Change

Uncertainty is pervasive in analysis of climatechange. How should economists allow for this? And how have they allowed for it? This paperreviews both of these questions.     

Risk taking by banks and captial accumulation: A portfolio approach

This paper shows the risk taking role of banks within a continuous-time portfolio model. Banks are considered as risk-averse utility maximizers which differ from private investors and firms only by their degree of risk aversion. Since bankruptcy risk, described by a Poisson jump-process, restrains the capability of firms to mobilize funds from private investors, banks foster capital accumulation by investing in risk-bearing credits financed by risk-free deposits. The provision of collateral by the borrowing firms is found to be necessary for the viability of financial intermediation. This result adds to the explanation of collateral given by the theory of asymmetric information.I would like to thank Manfred Neumann, Thusnelda Tivig, two anonymous referees, and my husband for helpful comments. Financial support by the Deutsche Forschungsgemeinschaft is gratefully acknowledged.     

Identification of national priority areas for adaptation to climate change in China

The problem of global warming has been identified as the first in the list of the top ten environmental problems in the world. As climate change will seriously affect the social and natural world that people live in, so it may lay serious repercussions on economic progress, social improvement, and sustainable development. International bodies everywhere and many of the countries＇ governments are responding urgently to this call In recent years, climate change has affected different regions in China in different ways. In its national agenda, the Chinese government should address the problem of climate change and its negative impact on socio-economic development. In this endeavor the nation should introduce policies which will help its people and economy to adapt to these effects and changes. Priority-fields of adaptation to climate change are the sensitive areas or departments which are more vulnerable to the negative influences of climate change. The negative impacts of climate change in some parts of China are considered to be very serious indeed as they affect the whole economy and community. As a result, priority should be given to these more affected regions for the limited state financing. This paper defines adaptation and discusses the basic principles and programs in the identi.fication of national priority areas where adaptation should be exercised. Based on the past studies, four priority areas in China are identified, namely, disaster prevention and mitigation, water resources, agriculture, and ecosystem. An analysis on the identification procedures, and the reasons and tasks involved are given for each.     

Operationalising a resilience approach to adapting an urban delta to uncertain climate changes

Climate change may pose considerable challenges to coastal cities, particularly in low-lying urban deltas. Impacts are, however, associated with substantial uncertainties. This paper studies an uncertainty-robust adaptation strategy: strengthening the resilience of the impacted system. This approach is operationalised for the city of Rotterdam, using literature study, interviews, and a workshop. Potential impacts have been explored using national climate statistics and scenarios and a set of ‘wildcards’ (imaginable surprises). Sea level rise, particularly in combination with storm surge, and enduring heat and drought are the most relevant potential stresses in the area. These can lead to damage, loss of image, and societal disruption. Unclear responsibilities enhance disruption. ‘Resilience principles’ made the concept of resilience sufficiently operational for local actors to explore policy options. Useful principles for urban resilience include: homeostasis, omnivory, high flux, flatness, buffering, redundancy, foresight and preparedness/planning, compartmentalisation, and flexible planning/design. A resilience approach makes the system less prone to disturbances, enables quick and flexible responses, and is better capable of dealing with surprises than traditional predictive approaches. Local actors frame resilience as a flexible approach to adaptation that would be more suitable and tailored to local situations than rigid top-down regulations. In addition to a change in policy, it would require a more pro-active mentality among the population.     

Housing price fluctuations and financial risk transmission: a spatial economic model

Financial risk derived from housing price fluctuations in China garnered much public concern recently. Based on the theoretical analyses of the transmission of financial risk from housing price fluctuations, this paper establishes panel spatial Durbin models to empirically analyse housing price fluctuations and financial risks transmission from a spatial economic perspective. Employing the panel provincial data from 1999–2015, we conduct an analysis on the 30 provinces in China as well as a comparison among the Eastern, Middle and Western regions of China. The results indicate that: (1) The soaring housing prices driven by bank credit, real estate developers’ heavy investment, local governments’ land revenue and individuals and households demands leads to financial risk in various sectors; (2) due to the ‘substitution effect’, the capital agglomeration in metropolis from bank credits, real estate developers, and individuals and households furthers the amassment of financial risks; (3) housing prices have a significant spatial contagion effect throughout the country, and financial risk could directly transmit across provinces through housing price fluctuations; (4) financial risks could indirectly transmit across provinces via the ‘imitative behaviour’ or ‘driving effect’ of different sectors for different regions of China.     

Hedging the portfolio of raw materials and the commodity under the mark-to-market risk

This paper considers the hedging problem of a portfolio composed of raw materials and a commodity. A new theoretical model is presented to manage the risk exposure of the portfolio under the mark-to-market risk. Moreover, we employ the Lemke algorithm to obtain the optimal hedging strategy. We use a case of the soybean oil manufacturer from May 2008 to June 2011 to illustrate the proposed model and algorithm. The results show that the mark-to-market risk must be taken into account when devising the hedging strategies.