Risk management under extreme events

This article presents two applications of extreme value theory (EVT) to financial markets: computation of value at risk (VaR) and cross-section dependence of extreme returns (i.e., tail dependence). We use a sample comprised of the United States, Europe, Asia, and Latin America. Our main findings are the following. First, on average, EVT gives the most accurate estimate of VaR. Second, tail dependence of paired returns decreases substantially when both heteroscedasticity and serial correlation are filtered out by a multivariate GARCH model. Both findings are in agreement with previous research in this area for other financial markets.     

Commodities and Macroeconomic Factors: Unconditional Volatility Measures

Abstract:

This study focuses on the measurement of spillover effects from macroeconomic factors to commodity volatility. It argues that such measurement is sensitive to volatility computation and to causality testing. To this end, I analyze two commodity data sets-gold and the Continuous Commodity Index (1969-2011), and twenty-four Dow Jones futures indexes (1991-2011)-and various macroeconomic indicators. I conclude that the macroeconomic factors that influence volatility generally depend on the commodity under consideration. I also explore whether commodities of the same class experience volatility shifts around the same dates, and find that this is not the case except for energy commodities.     

The curious case of Panama

A small country in Central America offers some interesting ideas on how the insurance industry can handle the COVID‐19 pandemic and crisis.     

Participation in Community Leisure Programs: Experiences and Perspectives of Children with Developmental Difficulties and Their Parents

Children with developmental disabilities participate in more solitary, sedentary, and home-based leisure activities than active physical pursuits or community-based activities. Clinical experience suggests that children with less well-recognized developmental difficulties also have compromised leisure experiences; however, this has not been fully investigated. This study engaged 20 school-age children with developmental difficulties in a community-based circus program, designed in collaboration with occupational therapists. The program included activities such as trampolining, trapeze, and acrobatics. Semi-structured interviews with children and parents explored children's leisure experiences both at circus and more broadly. Qualitative content analysis revealed that friendships, having fun, and being physically active were highly valued aspects of leisure. The coaching style and “just right” level of challenge within programs were identified as central to children's engagement and sense of competence. Participating in a supported leisure program such as circus appeared to promote children's engagement in community leisure, at least in the short term.     

Erosion mitigation in the Waikato District,New Zealand: economic implications for agriculture

Soil erosion, in its various forms, is caused or aggravated by agricultural activities. Mitigation of surface erosion comprises the construction of shelterbelts, fencing, riparian buffering, and stock reduction. Mitigation of mass‐movement erosion, in turn, takes the form of spaced planting of trees to maintain a persistent, healthy, and complete ground cover. In this article, we assess the economic implications to agriculture of the adoption of mitigation alternatives for erosion control in the Waikato District, New Zealand. The Waikato District presents a spatial pattern of erosion that affects profitability of dairy, and sheep and beef enterprises. We use the Universal Soil Loss Equation and the New Zealand Empirical Erosion Model to estimate erosion figures that are then fed into an economic‐focused, nonlinear, partial equilibrium mathematical programming model of New Zealand land use. Different scenarios are constructed for surface and mass‐movement soil erosion targets ranging from 0% to 50% below baseline levels. We find that achieving surface erosion targets is more expensive than mass‐movement targets, and results in different responses in regional‐level costs, land use, enterprise net revenue, and adoption of mitigation alternatives.     

National Determinants of Family Firm Development? Family Firms in Britain, Spain, and Italy in the Nineteenth and Twentieth Centuries

We provide here a complement to recent work on family business,which has demonstrated the need to go beyond the generic definitionof the family firm to place personal capitalism in an appropriateinstitutional, historical, and cultural framework. By focusingon the nineteenth- and twentieth-century experiences in Britain,Spain, and Italy, we challenge the notion that in the nineteenthand twentieth centuries there was anything so simple as a Mediterraneanmodel for family business. Rather, we demonstrate the need toconsider family businesses in national and regional contextsif we are to understand their various capabilities and characteristics.We use similarities and differences in the experiences and responsesof families and firms in the three countries to support thisclaim.     

Returns to Regionalism: An Analysis of Nontraditional Gains from Regional Trade Agreements

The past decade has witnessed a renewed interest in regionaltrade agreements, with many policymakers and academics seemingto believe that these provide more than the traditional gainsfrom trade. This article examines several possible benefitsthat regional trade agreements may confer on their partners,including credibility, signaling, bargaining power, insurance,and coordination. It assesses the necessary conditions for eachpossible channel to work, gives stylized examples of specifictypes of policy where the benefit might be applicable, examinescases where the explanation might be relevant, and discussestheir overall plausibility. It concludes by examining the NorthAmerican Free Trade Agreement and the Europe Agreements.     

Restoring Wetlands Through Wetlands Mitigation Banks

This paper offers the first economic analysis of wetlands mitigation banks. The banks are a new alternative for restoration of wetlands by developers before receiving regulatory approval for future development of wetlands in the same watershed. A stochastic optimal control model is developed which incorporates ecological uncertainty of wetlands restoration. The model helps in examining the decisions of how much to invest in a wetlands mitigation bank. The model is calibrated with data from California bioeconomic parameters. Numerical simulation of the model provides a sensitivity analysis of how model parameters of restoration costs, stochastic biological growth, interest rate, and the market value of credits affect the trajectory of investment and the optimal stopping state of wetlands quality when the investment ends. The analysis reveals that restoration of the whole site will occur when there is a reduction in restoration costs, an increase in biological uncertainty or an increase in the value of wetlands credits. Continued restoration is harder to justify with a higher interest rate.     

Market efficiency in the Spanish derivatives markets: An empirical analysis

This paper analyzes Granger caUSAlity between daily prices of the Spanish stock index (Ibex 35) and its futures contract using Johansen cointegration methodology. The study differentiates between short-run and long-run caUSAlity. The empirical results prove that, in the short run, the futures price causes the spot price. However, the opposite is not true. On the other hand, long-run caUSAlity is embodied in the response of futures prices after deviations from the long-run equilibrium. These results say that during the period of study, the Spanish futures market behaved as an efficient market.