Mean-variance hedging for continuous processes: New proofs and examples

Let be a special semimartingale of the form and denote by the mean-variance tradeoff process of . Let be the space of predictable processes for which the stochastic integral is a square-integrable semimartingale. For a given constant and a given square-integrable random variable , the mean-variance optimal hedging strategy by definition minimizes the distance in between and the space . In financial terms, provides an approximation of the contingent claim by means of a self-financing trading strategy with minimal global risk. Assuming that is bounded and continuous, we first give a simple new proof of the closedness of in and of the existence of the F?llmer-Schweizer decomposition. If moreover is continuous and satisfies an additional condition, we can describe the mean-variance optimal strategy in feedback form, and we provide several examples where it can be computed explicitly. The additional condition states that the minimal and the variance-optimal martingale measures for should coincide. We provide examples where this assumption is satisfied, but we also show that it will typically fail if is not deterministic and includes exogenous randomness which is not induced by .     

Strategies for integrating farmers into modern vegetable supply chains in Vietnam: farmer attitudes and willingness to accept

In Vietnam, the development of so‐called ‘modern’ vegetable supply chains is receiving considerable interest amongst researchers and governments. This interest partly stems from the view that enhancements in food safety can be achieved if farmers are willing to adopt supply chains that are often associated with ‘western’ forms of retailing. Our study investigates farmers’ willingness to change to two ‘modern’ alternatives – a supply model based on cooperatives and another based on investors facilitating the change. Using discrete choice data drawn from 412 farmers, mixed logit models in willingness to pay space are developed that reveal the relative importance of different drivers of change. The paper offers insights that can inform governments about the incentives required to bring about change. In addition, the paper illustrates the novel application of a choice experiment to enumerating the perceived costs of changes in vegetable supply chains.     

Exploring the Impacts of McService on Customers’ Loyalty: An Emerging Market’s Perspective

The aim of the study is to examine the key service quality attributes that affect Korean consumers’ loyalty toward McDonald’s in Korea. A survey instrument was developed to examine the key service quality attributes that influenc Korean consumers’ loyalty. The surveys were distributed to Korean college students. The results of the study suggest that social place and employee service quality are the two major dimensions that significantly affect Korean respondents’ intent to return to McDonald’s. Interestingly, convenience, value, and food quality were not found to be major dimensions that impact Korean respondents’ intention to return to McDonald’s. This finding is starkly different from the common belief that McService is based on value and covenience, as emphasized by McDonald’s value statements. The results of the study suggests that Korean consumers view McDonald’s as a social gathering place and expect high service quality from McDonald’s.     

Does Real Exchange Rate Depreciation Boost Capital Accumulation? An Intertemporal Analysis

This paper examines the investment‐enhancing effect of real exchange rate (RER) depreciation in a two‐sector small open economy model where a representative firm in the tradable sector maximises its discounted profit over an infinite planning period. In this framework, a one‐time, permanent, unanticipated depreciation in the RER leads to a higher steady‐state level of capital stock and investment. This consequently increases the optimal investment rate associated with an arbitrary level of capital stock as the saddle path shifts upwards. In the benchmark calibration, the investment‐enhancing effect of RER depreciation is sizeable. One per cent depreciation in the RER leads to an increase of 0.4444 per cent in the rate of capital accumulation.     

Growth, volatility and stabilisation policy in a DSGE model with nominal rigidities and learning-by-doing

The paper aims to analyse the question of how cyclical fluctuations might affect long run growth. The analysis is based on a dynamic stochastic general equilibrium model for an imperfectly competitive economy with fully optimising agents. The model is characterized with nominal rigidities, an endogenous technology, and multiple shocks. It predicts either a negative or positive relationship between short run volatility and long run growth depending on the source of shocks and the reaction of the central bank. The model also shows that, even when the negative relationship exits the policy that is designed to stabilise short run volatility may either increase or decrease growth depending on the source of shocks.     

The role of endowments,technology and size in international trade: new evidence from product-level data

Using product-level trade data, we empirically investigate the export patterns of more than 150 countries in their exports to the USA, Brazil, India, and Japan. We document strong evidence that exporters specialize according to their relative factor endowments, technology, and economic size. More developed, capital abundant countries are found to export products of higher unit values and a wider range of products to developed, emerging and developing markets. More developed, economically larger, and technologically advanced countries are also the major exporters of new products, spanning a wide range of product categories with high unit values. Our findings provide important insights into the macro phenomenon that a large proportion of the global trade takes place among developed economies, and that the latter are also major exporters to developing markets.     

Hollowing out of middle-pay jobs in Ohio: An exploratory analysis

Hollowing out is a term that refers to the decline in the share of middle-pay and middle-skilled jobs relative to low-pay and high-pay jobs. This study employs county-level occupational data at the place of employment to document hollowing out of middle-pay jobs across regions in Ohio. The county-level data with occupational information allow us to study how regions' economic heterogeneity contributes to the decline of middle-paying jobs in Ohio over the 2001–2019 period. Of 88 counties in Ohio, 77 counties experienced declines in the shares of middle-paying jobs. On average, Appalachian Ohio counties experienced higher hollowing out rates than other counties. We found that the hollowing out of middle-paying jobs in Ohio is associated with the declines in the shares of manufacturing and mining jobs.     

Impact of farm management diversity on the environmental and economic performance of the wheat–maize cropping system in the North China Plain

To assess the attainable greenhouse gas (GHG) mitigation potential from crop production in China's most important grain production region, the North China Plain (NCP), single farm environmental and economic performances of 65 winter wheat–summer maize (WW–SM) producing households were determined. The results revealed a huge heterogeneity among farms, with up to five times higher environmental impact of worst compared to best performing farms. Astonishingly no trade-off between productivity and sustainability could be identified in the region, with high-yield farms emitting no different amounts of GHGs per hectare compared to low-yield farms. Building on cluster analysis, with farms grouped according to their economic and environmental performance into ‘poor’, ‘fair' and ‘good’ producers, the regional GHG mitigation potential was estimated. Under the scenario assumption that all grain in the NCP is produced under ‘good’ production conditions, 21% and 7% of GHG could be mitigated in wheat and maize production, respectively. The study shows that in the NCP, exemplary for China's rapidly developing agricultural sector, the crop management skills of a substantial share of farmers could obviously not keep pace with the massive input intensification. Among others, farmer–farmer trainings are recommended to close the gap in crop production performance among producers.     

Energy Consumption and Bitcoin Market

Asia-Pacific Financial Markets - This paper is the first empirical paper to study the relationship between Bitcoin energy consumption and its market. Using the variance decompositions in...     

The sectoral effects of Brexit on the British economy: early evidence from the reaction of the stock market

We investigate the impact of the outcome of the EU referendum (Brexit) on various sectors of the British economy over the period June–July 2016. Using the event study methodology, we assess the effects of Brexit, relative to what had been anticipated, as measured by abnormal returns (ARs). The results show that the banking and travel and leisure sectors were affected negatively, with a cumulative AR of ?15.37% for the banking sector. We observe that Brexit has a mixed effect on ARs with apparent sector-by-sector differences.