Forecast of realized covariance matrix based on asymptotic distribution of the LU decomposition with an application for balancing minimum variance portfolio

We derive the asymptotic distribution for the LU decomposition, that is, the Cholesky decomposition, of realized covariance matrix. Distributional properties are combined with an existing generalized heterogeneous autoregressive (GHAR) method for forecasting realized covariance matrix, which will be referred to as a generalized HARQ (GHARQ) method. An out-of-sample forecast comparison of a real data set shows that the proposed GHARQ method outperforms other existing methods in terms of optimizing the variances of portfolios.     

Measuring extreme risk spillovers across international stock markets: A quantile variance decomposition analysis

This paper proposes a quantile variance decomposition framework for measuring extreme risk spillover effects across international stock markets. The framework extends the spillover index approach suggested by Diebold and Yilmaz (2009) using a quantile regression analysis instead of the ordinary least squares estimation. Thus, the framework provides a new tool for further study into the extreme risk spillover effects. The model is applied to G7 and BRICS stock markets, from which new insights emerged as to the extreme risk spillovers across G7 and BRICS stock markets, and revealed how extreme risk spillover across developed and emerging stock markets. These findings have important implications for market regulators.     

Modelling the iron ore price index: A new perspective from a hybrid data reconstructed EEMD-GORU model

As iron ore is the fundamental steel production resource, predicting its price is strategically important for risk management at related enterprises and projects. Based on a signal decomposition technology and an artificial neural network, this paper proposes a hybrid EEMD-GORU model and a novel data reconstruction method to explore the price risk and fluctuation correlations between China’s iron ore futures and spot markets, and to forecast the price index series of China’s and international iron ore spot markets from the futures market. The analysis found that the iron ore futures market in China better reflected the price fluctuations and risk factors in the imported and international iron ore spot markets. However, the forward price in China’s iron ore futures market was unable to adequately reflect the changes in the domestic iron ore market, and was therefore unable to fully disseminate domestic iron ore market information. The proposed model was found to provide better market risk perceptions and predictions through its combinations of the different volatility information in futures and spot markets. The results are valuable references for the early-warning and management of the related enterprise project risks.     

Investor attention,firm-specific characteristic,and momentum: A case of the Korean stock market

This study examines the sources of negative momentum profits by combining investor attention and the properties of common and firm-specific factors. We choose the Korean stock market as a good case to characterize the negative momentum profits identified in Asia. In both portfolio and stock analyses, a method is devised to generate return data involving the property of each common and firm-specific factor within stock groups by investor attention. This study found significant negative momentum profits within the stock group with high investor attention. This momentum effect is highly dependent on the reversed performance of the past loser portfolio, not the continued performance of the past winner portfolio, and this reversal is strongly attributable to the properties of firm-specific factors, and not those of common factors. These results are robustly consistent regardless of changes in empirical design and the consideration of influence factors, market dynamics, and other stock markets.     

Gender Discrimination in Earnings in Indonesia: A Fuller Picture

This article analyses data from the 2007 Indonesia Family Life Survey in order to decompose the gender gap in earnings into explained and unexplained gaps, not only at the mean but also across the entire distribution. Women earned about 30% less than men, in both paid work and self-employment. The explained gap accounts for only about a quarter of the gap in paid work but for about half of the gap in self-employment. When the decomposition is made across the earnings distribution, the total gap decreases with earnings in both paid work and self-employment, and both conditional and unconditional on characteristics. In both employment sectors, the explained gap remains similar across the distribution, and therefore the unexplained gap drives the decrease in the total gap. The unconditional decomposition across the distribution provides great insight into the dynamics that are obscured in results derived from decomposition at the mean.     

高等教育能打破社会阶层固化吗?--基于有序probit半参数估计及夏普里值分解的实证分析

文章基于2013年中国综合社会调查(CGSS2013)数据,首先运用有序probit 模型的半参数估计方法检验高等教育对社会阶层的影响,其次采用最新发展的基于 R2的夏普里值方法测度高等教育对社会分层形成的贡献率,并从区域视角管窥经济发展和市场化转型条件下高等教育受影响的演进趋势。结果显示：(1)接受过高等教育的居民,确实拥有更高的社会阶层评估。但若剔除家庭背景带来的接受高等教育机会的差距,高等教育促进社会阶层流动的能力明显弱化。基于R2的夏普里值分解表明,高等教育变量的贡献率不到10%,撇去高等教育的代际传递效应后,净效应更低。(2)东部地区有微弱的证据显示高等教育带来的社会阶层提升效应正在展现。无论是从总贡献率还是分解后的直接贡献率看,东部地区的百分比贡献都要高于中西部地区。这说明随着经济发展和市场化改革的推进,高等教育改善社会分层的效果有可能会强化。(3)影响社会分层差异最重要的因素为家庭过去的社会阶层,即社会阶层分布存在明显的代际传递现象。另外,个体特征及经济特征也是影响社会分层的重要因素。文章研究显示,要进一步推进开放型社会阶层的形成,需要在构建市场化导向能力本位的新型社会流动体系制度框架下,确立更为公平的高等教育竞争机制及补偿机制。     

On domain modelling of the service system with its application to enterprise information systems

Information systems are a kind of service systems and they are throughout every element of a modern industrial and business system, much like blood in our body. Types of information systems are heterogeneous because of extreme uncertainty in changes in modern industrial and business systems. To effectively manage information systems, modelling of the work domain (or domain) of information systems is necessary. In this paper, a domain modelling framework for the service system is proposed and its application to the enterprise information system is outlined. The framework is defined based on application of a general domain modelling tool called function-context-behaviour-principle-state-structure (FCBPSS). The FCBPSS is based on a set of core concepts, namely: function, context, behaviour, principle, state and structure and system decomposition. Different from many other applications of FCBPSS in systems engineering, the FCBPSS is applied to both infrastructure and substance systems, which is novel and effective to modelling of service systems including enterprise information systems. It is to be noted that domain modelling of systems (e.g. enterprise information systems) is a key to integration of heterogeneous systems and to coping with unanticipated situations facing to systems.     

THE IMPACT OF FOREIGN CAPITAL ON MACROECONOMIC PERFORMANCE IN CENTRAL ASIA

This paper investigates the short‐run impact of shocks in international capital flows channeled through foreign direct investment (FDI) and foreign aid on national output and export performance in five Central Asian economies under a dynamic multivariate structural vector autoregressive (SVAR) framework. The identification of structural shocks is implemented by AB model based on IS‐LM‐BP postulates. The main message is that external capital shocks are persistent and small open economies are weak to absorb them. Overall, the aid shocks reduce national outputs, while FDI increase it, on average. The expansion of global demand (G20) leads to an increase in domestic GDPs, notably in Kazakhstan, Kyrgyzstan and Uzbekistan. The impact is augmented by a positive effect of FDI on export channel (and net exports) that shift the IS curve upwards. We cannot find any significant aid‐FDI nexus in the region, except in Kazakhstan. The structural variance decomposition (SFEVD) results suggest that external flows and foreign demand together explain the bigger part of variability in domestic GDP and exports. Finally, variations in foreign capital, aid and FDI, are mainly explained by series themselves. The role of domestic activities is found to be weaker for aid and greater for FDI. The results could be attributed to rigid exchange rates, high trade dependence, and necessity for foreign capital to explore natural resources in Central Asian region. Our results provide some valuable suggestions to improve an investment climate for boosting economic growth.     

Dynamics of foreign exchange implied volatility and implied correlation surfaces

The prices of currency options expressed in terms of their implied volatilities and the implied correlations between foreign exchange rates at a given point in time depend on option delta and time to maturity. Implied volatilities and implied correlations likewise may thus be represented as a surface. It is well known that these surfaces exhibit both skew/smile features and term structure effects and their shapes fluctuate substantially over time. Using implied volatilities on three currency pairs as well as historical implied correlation values between them, we study the nature of these fluctuations by applying a Karhunen-Loève decomposition that is a generalization of a principal component analysis. We demonstrate that the largest share in the dynamics of these surfaces' fluctuations may be explained by exactly the same three factors, providing evidence of strong interdependences between implied correlation and implied volatility of global currency pairs.     

Understanding Income Inequality in China: A Multi-Angle Perspective

Economic reforms have brought about spectacular growth and vast improvements of people’s living standards in China since 1978. In the meantime, unbalanced regional growth and income inequality have become two important concerns of future development. Most available studies on income distribution have either focused on the rural population or on the urban citizens. This paper stresses the importance of adopting a multi-angle approach to fully understand income inequality in China. We first use some top-down information to form a general picture of inequality for the whole country, and then use some bottom-up household survey data to explain in detail the development of inequality over time regarding rural/urban inequality, rural inequality, urban inequality and inter-regional inequality, the relative importance of different income sources to overall inequality. This revised version was published online in July 2006 with corrections to the Cover Date.