The financial fragility and the crisis of the Greek government sector

The purpose of this paper is to develop Minskyan financial fragility indices for the government sector and to examine the financial structure of the Greek government before and after the onset of the sovereign debt crisis in 2009. We provide empirical evidence that clearly shows the growing financial fragility of the Greek public sector in the 2000s. We also assess the effectiveness of the implemented bailout adjustment programmes in Greece and claim that the conducted austerity measures and fiscal consolidation have not significantly improved the financial posture of the Greek government sector. We argue that the implementation of fiscal and wage austerity in an economy that lacks structural competitiveness produces prolonged recession and unemployment with adverse feedback effects on the financial fragility of the government.     

Performance of technical trading rules: evidence from the crude oil market

ABSTRACT

This study investigates the debatable success of technical trading rules, through the years, on the trending energy market of crude oil. In particular, the large universe of 7846 trading rules proposed by Sullivan, Timmermann, and White (1999. “Data-Snooping, Technical Trading Rule Performance, and the Bootstrap.” The Journal of Finance 54 (5): 1647–1691. doi:10.1111/0022-1082.00163), divided into five families (filter rules, moving averages, support and resistance rules, channel breakouts, and on-balance volume averages), is applied to the daily prices of West Texas Intermediate (WTI) light, sweet crude oil futures as well as the United States Oil (USO) fund, from 2006 onwards. We employ the k-familywise error rate (k-FWER) and false discovery rate (FDR) techniques proposed by Romano, J. P., and M. Wolf. (2007. “Control of Generalized Error Rates in Multiple Testing.” The Annals of Statistics 35 (4): 1378–1408. doi:10.1214/009053606000001622) and Bajgrowicz, P., and O. Scaillet. (2012. “Technical Trading Revisited: False Discoveries, Persistence Tests, and Transaction Costs.” Journal of Financial Economics 106 (3): 473–491. doi:10.1016/j.jfineco.2012.06.001) respectively, accounting for data snooping in order to identify significantly profitable trading strategies. Our findings explain that there is no persistent nature in rules performance, contrary to the in-sample outstanding results, although tiny profits can be achieved in some periods. Overall, our results seem to be in favor of interim market inefficiencies.     

New development: Managing and accounting for sustainable development across generations in public services—and call for papers

Social and environmental justice across generations is a fundamental attribute of sustainable development. In this article, which is also a call for papers for a future theme in Public Money & Management (PMM), we develop our case for further research on how governments and public service organizations seek to address sustainable development in their decision-making processes. We believe that accounting for social and environmental aspects is an underdeveloped area of research and practice that is worthy of further critical enquiry. We therefore call on researchers and practitioners to submit their research to a themed issue of PMM on managing and accounting for sustainable development in public services.     

Accounting conservatism and corporate social responsibility

We examine the association between accounting conservatism, expressed in the form of asymmetric timeliness of recognition of economic gains and losses, and corporate social responsibility (CSR). We provide evidence that, under unfavorable macroeconomic conditions and financial constraints, as well as increased levels of outside pressure from debtholders and equity holders, catering for capital providers through conservative reporting becomes a managerial priority over engagement in CSR. Our results overall indicate that, for our whole sample period (starting in the early 2000s), higher levels of conservatism are negatively associated with a CSR orientation shown by firms; however, our analysis also indicates a significant reversing trend regarding the effect of conservatism on CSR, coinciding with the post-financial-crisis period. The findings are robust to a number of specifications and tests, including the use of an instrumental variable approach explicitly addressing endogeneity biases related to reverse causality concerns. Our study suggests that, under monitoring pressure from financial stakeholders, firms prioritize commitment to accounting conservatism over the needs of non-financial stakeholders and other interest groups.     

The Real Exchange Rate in Small, Open, Developed Economies: Evidence from Cointegration Analysis

We examine the effects of the terms of trade and the expected real interest rate differential on the real exchange rate in small, open, developed economies. We employ cointegration analysis to search for long-term linkages. We find that while both the terms of trade and the expected real interest rate differentials affect the real exchange rate in the long run, the role of the terms of trade generally proves more consistent. The speed of adjustment for the expected real interest rate differential in the error-correction model, however, is quantitatively larger than it is for the terms of trade.     

The day-of-the-week effect is weak: Evidence from the European real estate sector

The day-of-the-week effect for the securitized real estate indices is investigated by employing daily data at the global, European and country level for the period 1990 to 2010. We test for daily seasonality in 12 countries using both full sample and rolling-regression techniques. While the evidence for the former is in line with the literature, the results for the latter cast severe doubts concerning the existence of any persistent day-of-the-week effects. Once we allow our sample to vary over time, the average proportion of significant coefficients per day ranges between 15 % and 24 %. We show that higher average Friday returns evident in previous literature, remain significant in 21 % of the rolling samples. We conclude that daily seasonality in the European Real Estate sector is subject to the data mining and sample selection bias criticism.     

Stock market prediction using evolutionary support vector machines: an application to the ASE20 index

The main motivation for this paper is to introduce a novel hybrid method for the prediction of the directional movement of financial assets with an application to the ASE20 Greek stock index. Specifically, we use an alternative computational methodology named evolutionary support vector machine (ESVM) stock predictor for modeling and trading the ASE20 Greek stock index extending the universe of the examined inputs to include autoregressive inputs and moving averages of the ASE20 index and other four financial indices. The proposed hybrid method consists of a combination of genetic algorithms with support vector machines modified to uncover effective short-term trading models and overcome the limitations of existing methods. For comparison purposes, the trading performance of the ESVM stock predictor is benchmarked with four traditional strategies (a naïve strategy, a buy and hold strategy, a moving average convergence/divergence and an autoregressive moving average model), and a multilayer perceptron neural network model. As it turns out, the proposed methodology produces a higher trading performance, even during the financial crisis period, in terms of annualized return and information ratio, while providing information about the relationship between the ASE20 index and DAX30, NIKKEI225, FTSE100 and S&P500 indices.     

HOW PUZZLING IS THE PPP PUZZLE? AN ALTERNATIVE HALF‐LIFE MEASURE OF CONVERGENCE TO PPP

Evidence of lengthy half‐lives for real exchange rates in the presence of a high degree of exchange rate volatility has been considered as one of the most puzzling empirical regularities in international macroeconomics. This paper suggests that the measure of half‐life used in the literature might be problematic and proposes alternative measures with desirable properties. Their focus on the cumulative effects of the shocks distinguishes them from the measures used in the literature. An empirical analysis of bilateral US dollar real exchange rates employing the alternative half‐life measure produces results consistent with theory and indicates that the PPP puzzle is less pronounced than initially thought. Copyright © 2012 John Wiley & Sons, Ltd.     

The Yen Real Exchange Rate may be Stationary after all: Evidence from Non‐linear Unit‐root Tests*

The empirical literature that tests for purchasing power parity (PPP) by focusing on the stationarity of real exchange rates has so far provided, at best, mixed results. The behaviour of the yen real exchange rate has most stubbornly challenged the PPP hypothesis and deepened this puzzle. This paper contributes to this discussion by providing new evidence on the stationarity of bilateral yen real exchange rates. We employ a non‐linear version of the augmented Dickey–Fuller test, based on an exponentially smooth‐transition autoregressive model (ESTAR) that enhances the power of the tests against mean‐reverting non‐linear alternative hypotheses. Our results suggest that the bilateral yen real exchange rates against the other G7 and Asian currencies were mean reverting during the post‐Bretton Woods era. Thus, the real yen behaviour may not be so different after all but simply perceived to be so because of the use of a restrictive alternative hypothesis in previous tests.