Conditional value-at-risk: Aspects of modeling and estimation

This paper considers flexible conditional (regression) measures of market risk. Value-at-Risk modeling is cast in terms of the quantile regression function – the inverse of the conditional distribution function. A basic specification analysis relates its functional forms to the benchmark models of returns and asset pricing. We stress important aspects of measuring the extremal and intermediate conditional risk. An empirical application characterizes the key economic determinants of various levels of conditional risk. Received: September 30, 1999/Revised version: November 20, 2000     

Competition as market progress: An Austrian rationale for agent-based modeling

Economists recognize competition as fundamental to economic science. General equilibrium is not competition; Austrians, like other economists, have sometimes confused the two. The socialist calculation debate and the elimination of competition by socialists in the Soviet Union offer insight into danger of using an equilibrium framework to study competition. Current policy models are based on a general equilibrium framework, but heterogeneous interactive agent-based models are rising to challenge them. Austrian economists should embrace this new direction and guide the creation of agent-based models of the economy.     

Forward-looking versus recursive-dynamic modeling in climate policy analysis: A comparison

This paper develops a multi-regional general equilibrium model for climate policy analysis based on the latest version of the MIT Emissions Prediction and Policy Analysis (EPPA) model. We develop two versions so that we can solve the model either as a fully inter-temporal optimization problem (forward-looking, perfect foresight) or recursively. The standard EPPA model on which these models are based is solved recursively, and it is necessary to simplify some aspects of it to make inter-temporal solution possible. The forward-looking capability allows one to better address economic and policy issues such as borrowing and banking of GHG allowances, efficiency implications of environmental tax recycling, endogenous depletion of fossil resources, international capital flows, and optimal emissions abatement paths among others. To evaluate the solution approaches, we benchmark each version to the same macroeconomic path, and then compare the behavior of the two versions under a climate policy that restricts greenhouse gas emissions. We find that the energy sector and CO₂ price behavior are similar in both versions (in the recursive version of the model we force the inter-temporal theoretical efficiency result that abatement through time should be allocated such that the CO₂ price rises at the interest rate.) The main difference that arises is that the macroeconomic costs are substantially lower in the forward-looking version of the model, since it allows consumption shifting as an additional avenue of adjustment to the policy. On the other hand, the simplifications required for solving the model as an optimization problem, such as dropping the full vintaging of the capital stock and fewer explicit technological options, likely have effects on the results. Moreover, inter-temporal optimization with perfect foresight poorly represents the real economy where agents face high levels of uncertainty that likely lead to higher costs than if they knew the future with certainty. We conclude that while the forward-looking model has value for some problems, the recursive model produces similar behavior in the energy sector and provides greater flexibility in the details of the system that can be represented.     

Optimality versus practicality in market design: A comparison of two double auctions

We consider a market for indivisible items with m buyers and m sellers. Traders privately know their values/costs, which are statistically dependent. Two mechanisms are considered. The buyer's bid double auction collects bids and asks from traders and determines the allocation by selecting a market-clearing price. It fails to achieve all possible gains from trade because of strategic bidding. The designed mechanism is a revelation mechanism in which honest reporting of values/costs is incentive compatible and all gains from trade are achieved. This optimality, however, comes at the expense of plausibility: (i) the monetary transfers among the traders are defined in terms of the traders' beliefs about each other's value/cost; (ii) a trader may suffer a loss ex post; (iii) the mechanism may run a surplus/deficit ex post. We compare the virtues of the simple yet mildly inefficient buyer's bid double auction to the flawed yet perfectly efficient designed mechanism.     

A comprehensive study on smart beta strategies in the A-share market

In this article, we explore how smart beta strategies are applied in the Chinese A-share market. Specifically, we empirically examine several popular smart beta strategies, including mean-variance optimization, minimum-variance portfolio, equal weighting, risk parity strategy, and fundamental indexation, and we do so using the Shanghai Stock Exchange (SSE) 50 index and SSE sector indices as our comparison benchmarks. We find that all smart beta strategies outperform these benchmarks from year 2006 to year 2015, and that all smart beta strategies outperform the SSE 50 index by an average of 2.57% per year. In turn, these strategies improve the Sharpe Ratio by 46.2% on average.     

Pitfalls in the modeling of labor market flows: a reappraisal

ABSTRACT

We discuss the relevance of the internationally adopted methodology for modelling labour market flows and comparing labour market flexibility. This is based on a two-state labour market model that neglects inactivity and uses aggregate stock data to derive transition rates. Traditionally, the results suggest that continental European labour markets are inflexible and unable to adjust quickly to aggregate demand or supply shocks compared with their Anglo-Saxon counterparts. This evidence has driven us to gain a better understanding of the relevance of such a modelling approach and critically discuss its main methodological hypothesis. We relax its assumptions by including inactivity and by using flow data for the period 2010–2017. We compare the results thus obtained with transition rates derived using a three-state labour market model for France, Italy, Spain and the United Kingdom. These countries represent the institutional settings of continental Europe on the one hand and Anglo-Saxon nations on the other. The implied transition rates are much higher, even in continental Europe, when inactivity is considered, thus suggesting that conclusions derived using an incomplete representation of the labour market are misleading. Inactivity therefore plays a crucial role and its inclusion provides a more exhaustive picture of labour mobility.     

Conditional heteroscedasticity with leverage effect in stock returns: Evidence from the Chinese stock market

In recent years the Chinese stock market has experienced an astonishing growth and unprecedented development, but is also viewed as one of the most volatile markets, which has been called by many observers a “casino”. This study intends to examine the presence of heteroskedasticity and the leverage effect in the Chinese stock markets, and to capture the dynamics of conditional correlation between returns of China's stock markets and those of the U.S. in a bivariate VC-MGARCH framework. The results show that the leverage effect is significant in these markets during the sample period in 2000–2013, and the conditional correlation between mainland China's and the U.S. stock markets is quite low and highly volatile. The Chinese stock markets are found to be highly regimes persistent. These findings have important implication for investors seeking opportunity of portfolio diversification.     

A comparison between qualitative and quantitative histories: the example of the efficient market hypothesis

ABSTRACT

This paper uses the example of the history of the efficient market hypothesis (EMH) and citation analysis in order to investigate some differences between qualitative history and a quantitative history. The history of the EMH provides a telling example of the way quantitative analyses can supply different perspectives on the qualitative history of this hypothesis or complement it. For instance, since the EMH was proposed, several criticisms emerged. In addition, the definition and the scope of this hypothesis have been modified several times. Although the qualitative history of the EMH refers to these criticisms and these alternative definitions and scopes, qualitative tools cannot provide a clear measure of the impact of these criticisms and these modifications among economists. By studying the dissemination of the EMH, its major criticisms, and the answers economists provided, citation analysis sheds a different light on the history of the EMH.     

Generalized beta distributions for describing and analysing intraday stock market data: testing the U-shape pattern

There is an impressive body of empirical evidence which indicates the existence of an intraday U-shaped curve in stock prices. In an effort to shed additional light on the U-shaped curve a new procedure for U-shape testing is introduced. From careful analysis of intraday data it is observed that minimum or maximum stock prices can occur several times during the day. Here, attention is focused on the first time during the day that the maximum or minimum stock price occurred. Because of the importance of the first time during the day that the maximum or minimum stock price occurred, an attempt is made to model these two characteristics with probability distributions. The objective of this study is to use a generalized beta distribution to examine the intradaily behaviour of stocks, using closing stock prices for each one-minute interval, using data from Athens Stock Exchange (ASE). This generalized beta distribution has not been used before to model U-shaped behaviour. The results are consistent with the intraday U-shaped curves, i.e. the time to first maximum (or minimum) stock prices follows a U-shaped pattern. In addition, some potential applications of the generalized beta distribution are discussed and exemplified by analysing the relationship between herd behaviour and U-shaped.     

Modelling structural change in the UK housing market: A comparison of alternative house price models

This paper develops a new approach to the modelling of house prices in the UK, with housing demand being conditioned directly on consumers' expenditure rather than the determinants of expenditure. Conditioning on consumption ensures that the permanent income measure used in determining the level of consumption is consistently reflected in housing demand. The effects of financial liberalisation on the relative consumption of housing and non-housing goods and services are captured using the average loan-value ratio for first-time buyers. We also allow for financial effects via the real user cost of home ownership. House prices are assumed to adjust so as to clear the housing market. The proposed model is found to have structurally stable parameters across the housing market downturn since 1990. Statistical comparisons with the more conventional models in use at HM Treasury and the Bank of England during the early 1990s provide additional evidence in favour of our proposed approach.     

The explanatory power of the market model: an international comparison

The various published studies of the market model and the capital asset pricing model are examined, with the objective of seeing if any pattern emerges in terms of its explanatory power (r ²), and the various circumstances specific to each study. Several factors are identified as being associated with high values of r ²in these studies.     

A comparison of commodity price forecasting by Box-Jenkins and regression-based techniques

This article describes a study of forecasting methods performed for the corporate purchasing function, which required monthly forecasts of high-volume rubber-commodity prices as an aid to formulating its future purchasing strategy. Four mathematical forecasting procedures are applied to the same set of rubber-commodity price-index data. The forecasting techniques used are the Box-Jenkins time-series method, multiple linear regression analysis, and two new regression-based techniques, referred to as minimum relative error regressionanalysis and dynamic regression analysis.The rationale behind each method is briefly described. The forecast results generated by each algorithm are presented in graphic and numerical form. The accuracy of each method is evaluated by comparing forecasted versus actual values of the rubber-commodity price index. For this data, the new minimum relative error regression technique compares quite favorably with the powerful Box-Jenkins method, followed by standard multiple regression. The dynamic regression method is the least accurate of the four in this application.     

A monopolistic market for information

We analyze a model where traders buy information from a monopolistic seller, which is subsequently used in a speculative market. In order to overcome the dilution in the value of information due to its leakage through informative prices, the seller of information may prefer to sell noisier versions of the information he actually has. Moreover, to obtain higher profits, it is desirable for the seller to sell different signals to different traders, so that the added noise realizations do not affect equilibrium prices. One way of doing so, which does not require discrimination, is to sell identically distributed personalized signals to each of a large number of traders.     

Going to market: A commentary

The commentary identifies 10 major generic turnaround strategies that firms commonly use. Then it addresses each of the strategies separately, as well as how these strategies are combined, under the specific Romanian and Russian circumstances, to formulate an appropriate recovery strategy. The commentary points out that in a severe cash crisis both Romanian and Russian managers should use, first and foremost, cash-generation strategies such as asset reduction and debt restructuring. These strategies must also be supported by very tight financial control procedures, which both Russian and Romanian managers are reluctant to follow.     

赞比亚资源开发市场前景广阔

赞比亚位于非洲东南部,是一个矿产资源丰富的国家,采矿业已有80余年历史,目前以铜为主产品的矿业是其支柱产业之一,其行业法规、行业标准等相关政策,以及矿业人才储备和配套产业的发展,都有良好的基础,主要矿产品的储量分布有很大的发展潜力。赞比亚资源分布及开发状况1.铜赞比亚的铜资源是一条西北向的铜带,长200-250公里,宽65公里。赞比亚—刚果铜矿带是世界上最大的沉积型铜矿床,2000年,赞比亚境内已探明铜储量为12亿吨,平均品位2.5%。2002年在西北省卢姆瓦纳(Lumwana)地区发现的新铜矿储量为4.8亿吨,据称是世界上最大的尚未开发的铜矿…     

Conditional volatility and correlations of weekly returns and the VaR analysis of 2008 stock market crash

Modelling of conditional volatilities and correlations across asset returns is an integral part of portfolio decision making and risk management. Over the past three decades there has been a trend towards increased asset return correlations across markets, a trend which has been accentuated during the recent financial crisis. We shall examine the nature of asset return correlations using weekly returns on futures markets and investigate the extent to which multivariate volatility models proposed in the literature can be used to formally characterize and quantify market risk. In particular, we ask how adequate these models are for modelling market risk at times of financial crisis. In doing so we consider a multivariate t version of the Gaussian dynamic conditional correlation (DCC) model proposed by Engle (2002), and show that the t-DCC model passes the usual diagnostic tests based on probability integral transforms, but fails the value at risk (VaR) based diagnostics when applied to the post 2007 period that includes the recent financial crisis.