An analysis of political uncertainty and corporate investment cycles in Pakistan

Quality & Quantity - This paper documents the cycles in corporate investments around national elections in Pakistan from 2000 to 2016. It employed the investment-Q model as the baseline...     

Risk management of precious metals

This paper examines volatility and correlation dynamics in price returns of gold, silver, platinum and palladium, and explores the corresponding risk management implications for market risk and hedging. Value-at-Risk (VaR) is used to analyze the downside market risk associated with investments in precious metals, and to design optimal risk management strategies. We compute the VaR for major precious metals using the calibrated RiskMetrics, different GARCH models, and the semi-parametric Filtered Historical Simulation approach. The best approach for estimating VaR based on conditional and unconditional statistical tests is documented. The economic importance of the results is highlighted by assessing the daily capital charges from the estimated VaRs.     

The changing role of house price dynamics over the business cycle

In this paper, we attempt to analyse the relationship between house price dynamics and the business cycle. Employing a time-varying transition probability Markov switching framework, we provide empirical evidence that house price growth may prove a useful leading indicator for turning point detection. Focusing on three countries, the US, UK and Spain, we furthermore provide evidence that although potentially informative from an overall perspective in business cycle modelling, the significance of signals contained in house prices may not be symmetric across the identified high growth and low growth states. In addition, we suggest a possible range of values for house price deflation which may trigger a recession the following period.     

Estimating Volatility Persistence in Oil Prices Under Structural Breaks

Policy makers and financial market participants are interested in knowing how shocks affect the volatility of oil prices over time. We accurately compute the volatility persistence by incorporating endogenously determined structural breaks into a GARCH model. Contrary to previous findings, we find that oil shocks dissipate very quickly but have a strong initial impact. Understanding this behavior is not only important for derivative valuation and hedging decisions but for broader financial markets and the overall economy, for which there are significant consequences.     

The Impact of Single Stock Futures on Market Efficiency and Volatility: A Dynamic CAPM Approach

The concerns regarding regulations of futures markets and their destabilizing ability are unresolved in both developed and developing markets. Following stringent regulations of single stock futures (SSFs) for resumption episode after financial crises, this study addresses this concern and investigates the destabilizing impact of SSFs on the underlying stocks in an emerging economy using data of companies listed in the Karachi Stock Exchange between 1999 and 2008. Specifically, the study explores whether SSFs have caused a simultaneous increase in the volatility and operational efficiency of their underlying spot market counterparts. The results reported in the study show that the introduction of SSFs has no significant impact on market efficiency and volatility of SSFs underlying stocks and non-SSFs stocks. The results affirm that SSFs have, at least, no destabilizing impact on the underlying stocks.     

A conceptual framework for intra-company technology transfer: cases of leveraging production process innovations across MNEs

Multinational enterprises (MNEs) strive to commercialise their knowledge base globally by mobilising their technological competencies, transferring them across organisational boundaries, and selling the resulting systems, products, processes, and services worldwide. However, co-operation within MNEs still leaves potential for improvement, because intra-company transfers of technology as modes of corporate expansion and conquest of new international markets seldom work efficiently. Academic literature has not adequately addressed this important issue. Based on six case studies from MNEs, this paper highlights the challenges of intra-company technology transfer by examining exemplary cases of production process-related technology transfers. It establishes a conceptual framework model for intra-company technology transfers and identifies important success factors.     

Pollution Taxes When Firms Choose Technologies

We consider the properties of a pollution tax when the regulated firm has a discrete choice of technologies with which to reduce pollution. The firm's technology choice makes possible two sequences of play: the traditional one in which the regulator moves first, committing to a tax rate before the firm adopts a technology, and an alternative one in which the firm moves first by adopting a technology. We find that a range of pollution levels, including possibly the first-best one, are unattainable when the regulator moves first. The regulator may be better able to achieve the first-best outcome when the firm moves first.     

The Desirability of forgiveness in regulatory enforcement

I present a model that explains two common features of regulatory enforcement: selective forgiveness of noncompliance, and the collection of information on a firm’s compliance activities and not just its compliance status. I show that forgiving noncompliance is optimal if the information on a firm’s compliance activities constitutes sufficiently strong evidence of the firm having exerted a high level of compliance effort. The key benefit of forgiving noncompliance is a reduction in the probability with which the firm needs to be monitored.