forecasting crude oil price volatility and value at risk evidence from historical and recent data abstract this paper adopts the markov switching multifractal msm model and a battery of generalized autoregressive conditional heteroscedasticity garch type models to model and forecast oil price volatility extending previous work by wei et al 2010 and wang et al 2016 we evaluate the forecasting performance of all these models via a superior predictive ability spa test we go beyond previous research by i considering oil price volatility in the nineteenth century along with recent data ii applying different types of msm models and iii considering value at risk predictions besides our forecasting of volatility confirming its successful performance in other studies the new msm model comes out as the model that most often across forecasting horizons and subsamples cannot be outperformed by other models this superiority also applies to forecasting of value at risk

answering the skeptics yes standard volatility models do provide accurate forecasts a voluminous literature has emerged for modeling the temporal dependencies in financial market volatility using arch and stochastic volatility models while most of these studies have documented highly significant in sample parameter estimates and pronounced intertemporal volatility persistence traditional ex post forecast evaluation criteria suggest that the models provide seemingly poor volatility forecasts contrary to this contention we show that volatility models produce strikingly accurate interdaily forecasts for the latent volatility factor that would be of interest in most financial applications new methods for improved ex post interdaily volatility measurements based on high frequency intradaily data are also discussed

discrimination in the payment of full time wage premiums this study investigates how many hours must be worked per week in order for workers in different race and gender groups to receive a high hours full time wage premium an analysis of 1989 current population survey data shows that across occupations both white and black men received a full time wage premium for working at least 33 hours per week whereas white women had to work at least 37 hours and black women at least 39 hours to receive the premium controlling for occupation changes the threshold for black women to 33 hours but does not change the results for the other groups the authors find that the observed differences account for at most two percentage points of the wage differentials across race and gender

the effect of asymmetries on optimal hedge ratios there is widespread evidence that the volatility of stock returns displays an asymmetric response to good and bad news this article considers the impact of asymmetry on time varying hedges for financial futures an asymmetric model that allows forecasts of cash and futures return volatility to respond differently to positive and negative return innovations gives superior in sample hedging performance however the simpler symmetric model is not inferior in a hold out sample a method for evaluating the models in a modern risk management framework is presented highlighting the importance of allowing optimal hedge ratios to be both time varying and asymmetric

the impact of children on married women s labor supply black white differentials revisited previous studies have documented that the depressing effect of children on labor supply is greater for white wives than for their black counterparts the present paper examines the hypothesis that this difference by race is less pronounced in the highly educated segments of the population multinomial logit estimates of a labor supply model using data from the 1982 national survey of family growth are consistent with the hypothesis

married womens tastes and the decision to participate in the labour market results from a fixed effects model in the paper we report estimates from two logit models of women s labour force participation a model with out fixed effects estimated from cross sectional data indicates a significant postive relation between work experience and particiption we ask whether the relation is due to a causal influence extered by the former variable on the latter or to a common underlying variable taste for market attachement to answer this question we present results from a fixed effects model estimated from panel data in this model the estimated coefficients of experience are insignificant suggestion that a taste for market attachement underlies both experience and participation is the presence of preschool children

bivariate garch estimation of the optimal commodity futures hedge six different commodities are examined using daily data over two futures contract periods cash and futures prices for all six commodities are found to be well described as martingales with near integrated garch innovations bivariate garch models of cash and futures prices are estimated for the same six commodities the optimal hedge ratio ohr is then calculated as a ratio of the conditional covariance between cash and futures to the conditional variance of futures the estimated ohrs reveal that the standard assumption of a time invariant ohr is inappropriate for each commodity the estimated ohr path appears non stationary which has important implications for hedging strategies

impact of the financial crisis on indian commodity markets structural breaks and volatility dynamics the shocks transmitted across the financial markets during the financial crisis resulted in structural changes in commodity volatility hence understanding volatility dynamics in changing scenario is vital for derivative pricing risk management and monetary policy stabilization this paper studies the impact of the financial crisis by analyzing the following aspects 1 presence of structural break regime shift in volatility by deploying markov and wavelet model during financial crisis and 2 crisis impact on volatility dynamic behavior such as persistence leverage and long memory by deploying hybrid wavelet egarch and fractional integration spot prices of 18 commodities were examined including all sub sectors of energy metals and agriculture indian commodity indices sub indices global benchmark indices and also stock indices such as sp agricultural commodities showed faster convergence to long run equilibrium while metal and energy experienced higher persistence and attracted more financial speculation the impact of the crisis on agricultural commodities was limited to internationally traded commodities such as sugar and rubber the common breaks and different volatility dynamics have been attributed to systematic risk and to idiosyncratic components respectively it was also found that during and after the crisis more than idiosyncratic risk it was systematic risk that contributed significantly to the volatility patterns of indian commodity markets

can the markov switching model forecast exchange rates abstract a markov swirching model is fit for 18 exchange rates at quarterly frequencies the model fits well in sample for many exchange rates by the mean squared error criterion the markov model does not generate superior forecasts to a random walk or the forward rate there appears to ne some evidence that the forecasts of the markov model are superior at predicting the direction of change of the exchange rate

are part time women paid less a model with firm specific effects this paper uses data from a survey of child care establishments to compare part and full time wages within two narrow occupations one high skill and one low skill unlike previous studies it controls for firm specific effects we find that when firm specific effects are accounted for only the low skill workers in our sample receive lower wages for working part time on the other hand when compensation is defined to include prorated fringe benefits establishments appear to compensate both high and low skill part timers at a lower hourly rate

hedging crude oil using refined product a regime switching asymmetric dcc approach abstract in this paper we explore the strategy on hedging crude oil using refined product we develop a regime switching asymmetric dcc rs adcc model by taking into account both of regime switching and asymmetry in correlations our out of sample findings indicate that rs adcc displays greater hedging effectiveness than some conventional multivariate garch heating oil can better hedge crude oil than gasoline

a bivariate markov regime switching garch approach to estimate time varying minimum variance hedge ratios this article develops a new bivariate markov regime switching bekk generalized autoregressive conditional heteroscedasticity garch rs bekk garch model the model is a state dependent bivariate bekk garch model and an extension of gray s univariate generalized regime switching grs model to the bivariate case to solve the path dependency problem inherent in the bivariate regime switching bekk garch model we propose a recombining method for the covariance term in the conditional variance covariance matrix the model is applied to estimate time varying minimum variance hedge ratios for corn and nickel spot and futures prices out of sample point estimates of hedging portfolio variance show that compared to the state independent bekk garch model the rs bekk garch model improves out of sample hedging effectiveness for both corn and nickel data we perform white s 2000 data snooping reality check to test for predictive superiority of rs bekk garch over the benchmark model and find that the difference

electricity portfolio management optimal peak off peak allocations electricity purchasers manage a portfolio of contracts in order to purchase the expected future electricity consumption profile of a company or a pool of clients this paper proposes a mean variance framework to address the concept of structuring the portfolio and focuses on how to optimally allocate positions in peak and off peak forward contracts it is shown that the optimal allocations are based on the difference in risk premiums per unit of day ahead risk as a measure of relative costs of hedging risk in the day ahead markets the outcomes of the model are then applied to show i that it is typically not optimal to hedge a baseload consumption profile with a baseload forward contract and ii that under reasonable assumptions risk taking by the purchaser is rewarded by lower expected costs

towards a knowledge based theory of the geographical cluster co located firms within related industries enhance the ability to create knowledge by variation and a deepened division of labour the interdependent development between economic activities and local institutions make the cluster attractive to some industries and hostile to others the very reasons why cognitive distance might be small within the cluster tend to make cognitive distance great between clusters and make interfirm co operation across bodies of knowledge more costly the additional value created when clustering may justify the additional cost copyright 2001 by oxford university press

optimal hedging under departures from the cost of carry valuation evidence from the spanish stock index futures market abstract we provide an analytical discussion of the optimal hedge ratio under discrepancies between the futures market price and its theoretical valuation according to the cost of carry model assuming a geometric brownian motion for spot prices we model mispricing as a specific noise component in the dynamics of futures market prices empirical evidence on the model is provided for the spanish stock index futures ex ante simulations with actual data reveal that hedge ratios that take into account the estimated time varying correlation between the common and specific disturbances lead to using a lower number of futures contracts than under a systematic unit ratio without generally losing hedging effectiveness while reducing transaction costs and capital requirements besides the reduction in the number of contracts can be substantial over some periods finally a mean variance expected utility function suggests that the economic benefits from an optimal hedge can be substantial

regime switching approach to monetary policy effects even though monetary policy has kept interest rates at historically low levels the japanese economy has experienced long lasting recessions since the 1990s in this paper japanese data are employed to conduct an empirical analysis of changes in the effects of monetary policy on the real economy it is found that monetary policy effects vary depending on the phase of the business cycle and the lending attitudes diffusion indices more precisely policy effects are larger in recession but diminish in extreme recession and monetary policy is more effective when lenders attitudes are severe but less effective when they are excessively severe

labour market externalities and regional growth in sweden the importance of labour mobility between skill related industries boschma r eriksson r h and lindgren u labour market externalities and regional growth in sweden the importance of labour mobility between skill related industries regional studies this study investigates the relationship between labour market externalities and regional growth based on real labour flows in particular it tests for the importance of labour mobility across so called skill related industries between 435 four digit industries within 72 swedish functional regions 1998 2002 both the fixed effect models and generalized method of moments gmm estimates demonstrate that a strong intensity of intra regional labour flows between skill related industries impacts positively on regional productivity growth but less so on employment growth labour mobility between unrelated industries tends to dampen regional unemployment growth while a high degree of intra industry labour flows is only found to be associated with rising unemployment

co movement of major energy agricultural and food commodity price returns a time series assessment abstract using monthly data between 1970 and 2013 we provide a comprehensive analysis of the extent of co movement measured by correlation coefficients among the nominal price returns of 11 major energy agricultural and food commodities we study the degree and the time evolution of unconditional and conditional correlations using a uniform spacings estimation and testing approach multivariate dynamic conditional correlation models and a rolling regression procedure we find that 1 the price returns of energy and agricultural commodities are highly correlated 2 the overall level of co movement among commodities increased in recent years especially between energy and agricultural commodities and in particular in the cases of maize and soybean oil which are important inputs in the production of biofuels and 3 the stock market volatility is positively associated with the co movement of price returns across markets especially after 2007

agglomeration economies interregional commuting and innovation in the peripheries regional development and innovation are often studied in the context of agglomeration economies leading to a perception bias regarding the virtues of cities recent work on interregional connectiv

the asymmetric return volatility relationship of commodity prices abstract there is a well documented asymmetric return volatility effect of equity returns that is negative shocks increase volatility by more than positive shocks this paper analyzes the return volatility relationship of commodity prices and finds a positive inverted asymmetric effect with a tendency to weaken and converge towards an equity like effect since the mid 2000s and particularly during the global financial crisis a comparison of the findings with equity prices also reveals a strengthening of the asymmetric effect in equity markets the change in the asymmetric volatility effect is consistent with the financialization of commodity markets and has strong portfolio implications

asset market linkages evidence from financial commodity and real estate assets abstract we use a general markov switching model to examine the relationships between returns over three different asset classes financial assets us stocks and treasury bonds commodities oil and gold and real estate assets us case shiller index we confirm the existence of two distinct regimes a tranquil regime with periods of economic expansion and a crisis regime with periods of economic decline the tranquil regime is characterized by lower volatility and significantly positive stock returns during these periods there is also evidence of a flight from quality from gold to stocks by contrast the crisis regime is characterized by higher volatility and sharply negative stock returns along with evidence of contagion between stocks oil and real estate furthermore during these periods there is strong evidence of a flight to quality from stocks to treasury bonds

volatility regimes asymmetric basis effects and forecasting performance an empirical investigation of the wti crude oil futures market abstract this study employs a flexible regime switching egarch model with student t distributed error terms to investigate whether volatility regimes and basis affect the behavior of crude oil futures returns including the conditional mean variance skewness kurtosis as well as the extent of heavy tailedness the study also examines whether volatility regimes and asymmetric basis effects can improve the forecasting accuracy the main merit of the empirical model is that the basis effect is allowed to be asymmetric and to vary across volatility regimes empirical results suggest that the conditional mean and variance respond to the basis asymmetrically and nonlinearly and that the responses of transition probabilities to the basis are symmetric furthermore the conditional higher moments are sensitive to the absolute value of basis and the heavy tailed characteristic can be greatly alleviated by taking into account the asymmetric basis effects and regime switches finally the regime switches and asymmetric basis effects play decisive roles in forecasting return volatility and tail distribution

index arbitrage and dynamics between reit index futures and spot prices abstractthis article contributes to the real estate literature by investigating the pricing relationship between reit index futures and spot based on the cost of carry model we first show that there exist three arbitrage regimes in australia s reit spot futures price dynamics further analysis indicates that the two thresholds which separate the regimes are largely consistent with the level dictated by transaction costs we then estimate a threshold vector error correction model tvecm the results show that mean reversion of the mispricing error only takes place in the two outer regimes furthermore we find evidence that reit spot market is more informationally efficient than the futures market given its short history it will take time for reit index futures market to mature finally we find that we can enhance hedging performance by accommodating the feature of threshold cointegration displayed by the data as the futures spot relationship differs across regimes we can develop a hedging strate

hedging with futures does anything beat the naive hedging strategy this paper investigates out of sample performance of the naive hedging strategy relative to that of the minimum variance hedging strategy in which the covariance parameters are estimated from 18 e

human capital graduate migration and innovation in british regions with the aid of a geographical information system our paper constructs a three stage least squares simultaneous equation model to investigate the interrelationships between the interregional flows of human capital and the innovation dynamism of a region in order to do this we model the interregional migration behaviour of high quality british university graduates from university into first employment and we relate these human capital flows to both the labour market characteristics and the knowledge characteristics of the employment regions this is done for all industries and separately for just high technology industries our results indicate that for england and wales there is a two way causality between the interregional human capital employment migration flows of recent university graduates and the innovation performance of regions however the results for great britain as a whole depend on whether london is included and scotland is excluded we find little or no support for the argument that the presence of local universities or small firms promotes regional innovation

modeling and forecasting crude oil markets using arch type models this study investigates the time varying volatility of two major crude oil markets the west texas intermediate wti and europe brent a flexible autoregressive conditional heteroskedasticity arch model is used to take into account the stylized volatility facts such as clustering volatility asymmetric news impact and long memory volatility among others the empirical results indicate that the intensity of long persistence volatility in the wti is greater than in the brent it is also found that for the wti the appreciation and depreciation shocks of the wti have similar impact on the resulting volatility however a leverage effect is found in brent although both the estimation and diagnostic evaluations are in favor of an asymmetric long memory arch model only the wti models provide superior in the out of sample forecasts on the other hand from the empirical out of sample forecasts it appears that the simplest parsimonious generalized arch provides the best forecasted evaluations for the brent crude oil data

part time participation over the life cycle among married women who work in the market reported here are the estimates from two logit models of married women s labour force employment a pooled unconditional logit that does not control for fixed effects and a conditional logit model incorporating fixed effects both sets of results indicate the presence of occupational segregation between part time and full time employment since the amount of part time experience a woman has obtained increases the probability of part time employment these results are in agreement with those reported in previous studies that the presence of preschool children differentially encourages part time employment

married women in part time employment this research deals with three aspects of the part time employment pattern of working wives 1 the wives characteristics 2 the level and structure of their earnings in part time jobs and 3 the duration of their employment when part time jobs are available to them this study improves upon previous research by using multivariate analysis to determine if the variation in the incidence of part time work consistently found in other studies persists when earnings potential fertility family income and other factors that may vary by age or race are held constant it differs further by including a data source that contains direct measures of market wages and experience for a large sample of married working women the authors find that husband s income family size and the wife s health race and previous work experience are among the variables that influence the probability that the wife works part time they also find that the level of wages and returns to some investments in human capital are rela

convenience yield in commodity price modeling a regime switching approach this paper attempts to model the futures term structures of crude oil and natural gas using the notion of convenience yield in a regime switching framework unlike the existing studies which assume the convenience yield to have either a constant value or to have a stochastic behavior with mean reversion to one equilibrium level the model of this paper extends the gibson and schwartz 1990 model to allow for regime switching in the convenience yield along with the other parameters a closed form solution for the futures price is derived and the model parameters are estimated using the maximum likelihood method the results show that the estimated regimes are very close to the contango and backwardation regimes commonly seen in futures markets the results also show that the transitional probabilities play an important role in shaping the futures term structure implied by the model

estimation of the optimal futures hedge standard approaches to designing a futures hedge often suffer from two major problems first they focus only on minimizing risk so no account is taken of the impact on expected return second in estima ting the hedge ratio no allowance is made for time variation in the distribution of cash and futures price changes this paper describes a technique for estimating the optimal futures hedge that corrects these problems and illustrates its use in hedging treasury bonds with t bond futures copyright 1988 by mit press

female labor supply with a discontinuous nonconvex budget constraint incorporation of a part time full time wage differential this paper incorporates the well documented part time full time wage differential into an empirical labor supply model with both a heterogeneity and a random error term and estimates that model fo

performance replication of the spot energy index with optimal equity portfolio selection evidence from the uk us and brazilian markets abstract this paper reproduces the performance of a geometric average spot energy index by investing only in a subset of stocks from the dow jones composite average the ftse 100 and bovespa composite indexes and in two pools that include only energy sector stocks from the us and the uk respectively daily data are used and the index tracking problem for passive investment is addressed with two evolutionary algorithms the differential evolution algorithm and the genetic algorithm the performance of the suggested investment strategy is tested under three different scenarios buy and hold quarterly and monthly rebalancing accounting for transaction costs where necessary

markov switching garch models for bayesian hedging on energy futures markets abstract effective hedging strategies on oil spot and future markets are relevant in reducing price volatility for investors energy traders and companies operating in the oil markets a new bayesian multi chain markov switching garch model for dynamic hedging in energy futures markets is developed it builds on the construction of a system of simultaneous equations for the return dynamics on the hedged portfolio and the futures the implication of our model for portfolios allocation and energy trading are manyfold first our formulation allows for an easy identification of the different states of the discrete processes as volatility regimes secondly the use of regime switching models with multiple chains allows for an effective way to reduce risk furthermore correlated chains are more flexible than single chain models since they account for co movement in the volatility regimes of different markets thus they should be preferred in turbulent periods e g financial crisis finally the combination of the expected utility framework with the regime switching structure allows us to define a robust minimum variance hedging strategy changes in the optimal hedging strategies before and after the financial crisis are evidenced when the proposed robust hedging strategy is applied to crude oil spot and futures markets it is therefore recommended that many and different models should be used in place of a single one in energy risk hedging since they could perform differently in various phases of the market

a multi stage financial hedging approach for the procurement of manufacturing materials abstract this paper addresses the problem of mitigating procurement risk that arises from volatile commodity prices by proposing a hedging strategy within a multi stage time frame the proposed multi stage hedging strategy requires a commodity futures position to be correctly initialised and rebalanced with adequate volumes of short long positions so as to reduce the volatility in the total procurement cost that would otherwise be generated by varying commodity spot prices the novelty in the approach is the introduction of the rebalancing of commodity futures position at defined intermediate stages to obtain an efficient or near optimal multi stage hedging strategy a discrete time stochastic control model dscm is developed numerical experiments and monte carlo simulation are used to show that the proposed multi stage hedging strategy compares favourably with the minimal variance hedge and the one stage hedge a close form optimal solution is also presented for the case when procurement volume and price are independent

hedging performance and basis risk in stock index futures in early 1982 trading began at three different exchanges in futures contracts based on stock indexes stock index futures were an immediate success and quickly led to a proliferation of new futures and options markets tied to various indexes one reason for this success was that index futures greatly extended the range of investment and risk management strategies available to investors by offering them for the first time the possibility of unbundling the market and nonmarket components of risk and return in their portfolios many portfolio management and other hedging applications in investment banking and security trading have been described elsewhere1 ranging from use by a passive fund manager to reduce risk over a long time horizon to use by an underwriter to hedge the market risk exposure in a stock offering for one or two days in considering the potential applications of index futures it is clear that in nearly every case a cross hedge is involved that is the stock position that is being hedged is different from the underlying portfolio for the index contract 2 this means that return and risk for an index futures hedge will depend upon the behavior of the basis i e the difference between the futures price and the cash price hedging a position in stock will necessarily expose it to some measure of basis risk risk that the change in the futures price over time will not track exactly the value of the cash position basis risk can arise from a number of different sources and is a more significant problem for stock index contracts than for other financial futures like treasury bills and bonds 3 the most apparent cause of basis risk is the nonmarket component of return on the cash stock position since the index contract is tied to the behavior of an underlying stock market index nonmarket risk cannot be hedged this is the essential problem of a cross hedge however basis risk can be present even when the hedge involves a position in the index portfolio itself and there is no nonmarket risk for one thing returns to the index portfolio include dividends while the index and the index future only track the capital value of the portfolio any risk associated with dividends on the portfolio will become basis risk in a hedged position still dividends are fairly low and also quite stable so this may not be a terribly important shortcoming

a markov regime switching approach for hedging energy commodities abstract this paper estimates constant and dynamic hedge ratios in the new york mercantile exchange oil futures markets and examines their hedging performance we also introduce a markov regime switching vector error correction model with garch error structure this specification links the concept of disequilibrium with that of uncertainty as measured by the conditional second moments across high and low volatility regimes overall in and out of sample tests indicate that state dependent hedge ratios are able to provide significant reduction in portfolio risk

regime switching correlation hedging this paper investigates the hedging effectiveness of commodity futures when the correlations of spot and futures returns are subject to multi state regime shifts an independent switching dynamic conditional correlation garch is dcc which is free from the problems of path dependency and recombining is applied to model multi regime switching correlations the results of hedging exercises indicate that state dependent is dcc outperforms state independent dcc garch and three state is dcc exhibits superior hedging effectiveness illustrating importance of modeling higher state switching correlations for dynamic futures hedging

a markov switching model of the conditional volatility of crude oil futures prices abstract this paper examines the temporal behaviour of volatility of daily returns on crude oil futures using a generalised regime switching model that allows for abrupt changes in mean and variance garch dynamics basis driven time varying transition probabilities and conditional leptokurtosis this flexible model enables us to capture many complex features of conditional volatility within a relatively parsimonious set up we show that regime shifts are clearly present in the data and dominate garch effects within the high volatility state a negative basis is more likely to increase regime persistence than a positive basis a finding which is consistent with previous empirical research on the theory of storage e g fama and french 1988a fama and french 1988b and ng and pirrong 1994 the volatility regimes identified by our model correlate well with major events affecting supply and demand for oil out of sample tests indicate that the regime switching model performs noticeably better than non switching models regardless of evaluation criteria we conclude that regime switching models provide a useful framework for the financial historian interested in studying factors behind the evolution of volatility and to oil futures traders interested short term volatility forecasts

some recent developments in futures hedging the use of futures contracts as a hedging instrument has been the focus of much research at the theoretical level an optimal hedge strategy is traditionally based on the expected utility maximization paradigm a simplification of this paradigm leads to the minimum variance criterion although this paradigm is quite well accepted alternative approaches have been sought at the empirical level research on futures hedging has benefited from the recent developments in the econometrics literature much research has been done on improving the estimation of the optimal hedge ratio as more is known about the statistical properties of financial time series more sophisticated estimation methods are proposed in this survey we review some recent developments in futures hedging we delineate the theoretical underpinning of various methods and discuss the econometric implementation of the methods

working through knowledge pools labour market dynamics the transference of knowledge and ideas and industrial clusters this article explores a prominent cluster in the swedish capital stockholm and its surrounding region the ict information and communications technology cluster in particular the article focuses on the issue of the extent to which labour market and labour mobility are the most likely channels for local and extra local sources of knowledge and ideas thus the article positions itself against a growing literature that focuses on rather diffuse and vague notions that knowledge and innovation reside in the air or in the buzz of urban life instead the underlying hypothesis is that in many sectors and industries such things as a cosmopolitan street life or accidental face to face encounters play relatively little part in the flow of experiences knowledge and innovation rather it is in the workplace that these exchanges and flows are located and it is thus through labour mobility that intracluster exchanges occur the article tests such ideas in relation to the ict cluster and the stockholm region using a uniquely detailed time series data set the data set used is based on official taxation and civil registration records and contains complete details on everything from education to career changes to income levels for every individual resident in sweden the detail of the individual records and the complete nature of the data set mean that it offers a unique possibility to examine on a large scale the micro dynamics of individuals in the labour market and in clusters the data are used to examine whether there have existed over time higher levels of labour market mobility in clusters as opposed to the rest of the urban economy the article empirically verifies the idea that labour market mobility is significantly higher in the cluster than in the rest of the urban economy

futures hedging with markov switching vector error correction fiegarch and fiaparch abstract markov switching vector error correction asymmetric long memory volatility models with fat tailed innovations are proposed bivariate two state versions of the models are applied to a futures hedge of the s p500 regime switches occur between high and low cost of carry states via changes in the error correction term or basis regime identification is therefore dominated by switches in the mean not volatility relative to a number of alternatives the proposed models provide superior out of sample forecasts of the covariance matrix particularly for horizons greater than 10 days ahead when hedging markov switching with long memory improves the tail risk of hedged returns beyond 10 day horizons however there is mixed support for models with volatility asymmetries these findings have important implications for the development of multivariate models and other applications including portfolio management spread option pricing and arbitrage

no arbitrage conditions for storable commodities and the modeling of futures term structures abstract one distinguishable feature of storable commodities is that they relate to two markets cash market and storage market this paper proves that if no arbitrage exists in the storage cash dual markets the commodity convenience yield has to be non negative however classical reduced form models for futures term structures could allow serious arbitrages due to the high volatility of the convenience yield to avoid negative convenience yield this paper proposes a semi affine arbitrage free model which prices futures analytically and fits futures term structures reasonably well importantly our model prices commodity related contingent claims such as calendar spread options quite differently with classical models

a regime switching approach for hedging tanker shipping freight rates tanker shipping is the primary means for the transportation of petroleum and petroleum products around the world and thus plays a crucial role in the energy supply chain however the high volatility of tanker freight rates has been a major concern for market participants and led to the development of the tanker freight derivatives in the form of forward freight agreements ffas the aim of this paper is to investigate the performance of these instruments in managing tanker freight rate risk using a data set for six major tanker routes covering the period between 2005 and 2013 we examine the effectiveness of alternative hedging methods including a bivariate markov regime switching garch model in hedging tanker freight rates the regime switching garch specification links the concept of equilibrium freight rate determination underlying different market conditions and the dynamics of the conditional second moments across high and low volatility regimes overall we find evidence supporting the argument that the tanker freight market is characterized by different regimes however while the use of a regime switching model allows for a significant improvement in the performance of the hedge in sample out of sample results are mixed

the definition of part time employment a switching regression model with unknown sample selection rejecting the standard less than thirty five hours per week categorization of part time workers this paper offers an empirically justified definition of the part time employed the definition is based on the distinction through wage payments that employers make between a high hours full time and a low hours part time group of workers a switching regression model of wage equations with deterministic but unknown sample selection is estimated resulting in a significant split between high hours and low hours workers that is higher than the standard definition wage differentials are calculated and decomposed and estimates from the structural choice model are presented copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

part time versus full time work and child care costs evidence for married mothers this paper contributes to the analysis of female labour supply by accounting for both child care costs and differences in part time and full time work an ordered probit model is used to examine the impact of child care costs on the work status of married mothers data are drawn from the canadian national child care survey and the labour market activity survey the results from this paper show the degree to which child care subsidies may have differential impacts on part time and full time work decisions by mothers the child care cost elasticities for part time and full time employment are reported to be 0 21 and 0 71 respectively

estimating stochastic discount factor models with hidden regimes applications to commodity pricing abstract we develop new likelihood based methods to estimate factor based stochastic discount factors sdf that may accommodate hidden markov dynamics in the factor loadings we use these methods to investigate whether it is possible to find a sdf that jointly prices the cross section of eight u s portfolios of stocks treasuries corporate bonds and commodities in particular we test a range of possible different specification of the sdf including single state and hidden markov models and compare their statistical and pricing performances in addition we assess whether and to which extent a selection of these models replicates the observed moments of the return series and especially correlations we report that regime switching models clearly outperform single state ones both in term of statistical and pricing accuracy however while a four state model is selected by the information criteria a two state three factor full vector autoregression model outperforms the others as far as the pricing accuracy is concerned

the minimum cvar strategy with semi parametric estimation in carbon market hedging problems abstract effective hedging strategies are important in reducing price volatility risk for business investors and companies participating into carbon markets in this paper we investigate the risk triggered by price fluctuation of european union allowance eua a semi parametric approach with cornish fisher expansion which approximates the quantile using the higher moments of the distribution is provided to estimate hedging ratios using cvar as risk objective function the approach can successfully capture the features of higher moments with the heavy tailed and higher kurtosis distribution of the eua returns which tends to be neglected the hedging performances of minimum cvar model we proposed and the conventional minimum variance model are evaluated and compared our empirical results show that minimum cvar hedging strategy generally outperforms the other in sample using all the effectiveness criteria while it is not consistent out of sample the proposed semi parametric minimum cvar strategy with cornish fisher expansion is advisable in carbon market hedging problems

the hedging performance of electricity futures on the nordic power exchange the nordic power exchange nord pool the first multinational exchange for electricity trading has existed since january 1996 spot and futures contracts are traded on this exchange and its typical characteristics are very high volatilities as well as non normally distributed returns this article looks at electricity futures and how they can be used for short term hedging of positions taken in the spot market it studies the minimum variance hedge ratio and how it can be estimated in different ways the traditional naive hedge and the ols hedge are compared out of sample to more elaborate moving average and garch hedges and the empirical results indicate some gains from hedging with futures despite the lack of straight forward arbitrage possibilities in the electricity market furthermore we find a slightly better performance of the simple ols hedge compared to the conditional hedges

which types of relatedness matter in regional growth industry occupation and education abstractwhich types of relatedness matter in regional growth industry occupation and education regional studies this paper provides a conceptual discussion of relatedness which suggests a focus on individuals as a complement to firms and industries the empirical relevance of the main arguments is tested by estimating the effects of related and unrelated variety in education and occupation among employees as well as in industries on regional growth the results show that occupational and educational related variety are positively correlated with productivity growth which supports the conceptual discussion put forth in the paper in addition related variety in industries is found to be negative for productivity growth but positive for employment growth

spread and volatility in spot and forward exchange rates abstract this paper is concerned with modeling the conditional heteroscedasticity of the prediction error of foreign exchange rates as spot and forward rates are cointegrated we use a system of error correction models for mean prediction to predict the variance we use a vibariate generalized autoregressive conditional heteroscedasticity garch model as a function of the spread using daily series for seven currencies we find that unmodeled conditional heteroscedasticity by garch can generally be explained by the squared spread this indicates that as the spread is bigger the exchange rates are more volatile jel f31 c32

investor attention and crude oil prices evidence from nonlinear granger causality tests abstract using the google search volume index gsvi to measure investor attention this paper investigates the relationships between investor attention and crude oil prices for the main crude oil markets worldwide to account for possible structural breaks and nonlinearity in the relation between investor attention and oil returns fourier unit root test and nonlinear granger causality tests are employed the empirical results suggest that the bidirectional nonlinear granger causality exists only between investor attention and wti future crude oil return however wti crude oil return granger causes investor attention weakly for dubai spot daqing spot wti spot and brent future oil markets unidirectional nonlinear granger causality runs from investor attention to oil returns which is relatively weak

forecasting energy market volatility using garch models can multivariate models beat univariate models abstract in this paper we forecast energy market volatility using both univariate and multivariate garch class models first we forecast volatilities of individual assets and find that multivariate models display better performance than univariate models second we forecast crack spread volatility and contrast the performance of multivariate models for two underlyings with the alternative of univariate ones for crack spreads directly our evidence shows that univariate models allowing for asymmetric effects display the greatest accuracy we also discuss the hedging strategy based on multivariate models and its implications for market participants

expiration and maturity effect empirical evidence from the spanish spot and futures stock index the paper studies how the time remaining to the expiration date of derivative markets affects the volatility of the ibex 35 index expiration effect and its futures market maturity effect the innovation of the study lies in both effects being studied together for the spanish stock market using bivariate ecm garch including dummy variables that express the time left to expiration day the results obtained show that during the week of the expiration day the conditional variance of both markets increases without presenting any significant behaviour in the correlation level during the second week however the conditional variance diminishes and the degree of correlation between both markets increases

innovation r d cooperation and labor recruitment evidence from finland this article investigates the role played by one type of firm interaction namely rd rd and labor acquisition appears to be only of limited importance for innovation

a markov model of switching regime arch in this article i present a new approach to model more realistically the variability of financial time series i develop a markov arch model that incorporates the features of both hamilton s switching regime model and engle s autoregressive conditional heteroscedasticity arch model to examine the issue of volatility persistence in the monthly excess returns of the three month treasury bill the issue can be resolved by taking into account occasional shifts in the asymptotic variance of the markov arch process that cause the spurious persistence of the volatility process i identify two periods during which there is a regime shift the 1974 2 1974 8 period associated with the oil shock and the 1979 9 1982 8 period associated with the federal reserve s policy change the variance approached asymptotically in these two episodes is more than 10 times as high as the asymptotic variance for the remainder of the sample i conclude that regime shifts have a greater impact on the properties of the data and i ca

sudden changes in variance and time varying hedge ratios abstract this paper analyzes the influence of sudden changes in the unconditional volatility on the estimation and forecast of volatility and its impact on futures hedging strategies we employ several multivariate garch models to estimate the optimal hedge ratios for the spanish stock market including in each one some well known patterns that may affect volatility forecasts asymmetry and sudden changes the main empirical results show that more complex models including sudden changes in volatility outperform the simpler models in hedging effectiveness both with in sample and out of sample analysis however the evidence is stronger when the loss distribution tail is used as a measure for the effectiveness value at risk var and expected shortfall es suggesting that traditional measures based on the variance of the hedged portfolio should be used with caution

returning to work regional determinants of re employment after major redundancies abstractusing matched employer employee data on roughly 429 000 workers made redundant from large plant closures or major downsizing in sweden between 1990 and 2005 this paper analyses the role of the regional industry mix specialization related and unrelated variety in the likelihood of returning to work the results show that a high presence of same or related industries speeds up the re employment process while high concentrations of unrelated activities do not the role of related activities is particularly evident in the short run and in regions with high unemployment consequently the prospect of successful diversification is enhanced in regions with related industries

inheriting knowledge and sustaining relationships what stimulates the innovative performance of small software firms in the netherlands abstract previous studies showed that firms established by experienced founders have higher survival rates and employment growth but the potential effect of pre entry experiences on innovation remains unclear using an original dataset we examine the effect of founder s experiences the relationship with the founder s previous employer and spatial proximity to the previous workplace on the innovative performance of small software firms in the netherlands apart from entrepreneurial experiences the results suggest no effect of pre entry experiences continued contacts with the founder s previous employer appear to limit the firm s innovative performance but firms do benefit from being established near the previous workplace

firm innovation the influence of r d cooperation and the geography of human capital inputs abstract this paper investigates the role played by the geography of labor inputs in the promotion of innovation knowledge can be transferred between firms by inter firm interactions and inter firm cooperation in addition knowledge can also be transferred between firms by human capital mobility in order to examine these issues we employ a unique innovation dataset from finland this dataset provides information about a firm s innovation performance along with information regarding the origins of a firm s recent labor acquisitions the origins of the labor are defined according to both the industry and the region analyzing these data allows us to identify the different roles which the geography of knowledge exchanges and the geography of labor markets play in the innovation process

short term employment transitions of women in the israeli labor force using data on jewish israeli women aged 25 to 55 the author examines patterns and determinants of women s transitions among four employment categories regular full time employment reduced hours full time employment part time employment and non employment israeli women are not trapped in part time employment departures from reduced hour and part time employment occur at higher rates than departures from full time jobs women who have just given birth have an increased likelihood of moving from full time employment to reduced hour or part time employment women in female type occupations and those in peripheral jobs jobs outside core industries are more likely than other women to reduce their work hours or exit the labor force the author argues that although part time work is a valuable short term option for many women in the long run it preserves labor market institutions that are disadvantageous to women

hedging against bunker price fluctuations using petroleum futures contracts constant versus time varying hedge ratios the effectiveness of hedging marine bunker price fluctuations in rotterdam singapore and houston is examined using different crude oil and petroleum future contracts traded at the new york mercant

persistence in variance structural change and the garch model this article examines the persistence of the variance as measured by the generalized autoregressive conditional heteroskedasticity garch model in stock return data in particular we investigate the extent to which persistence in variance may be overstated because of the existence of and failure to take account of deterministic structural shifts in the model both an analysis of daily stock return data and a monte carlo simulation experiment confirm the hypothesis that garch measures of persistence in variance are sensitive to this type of model misspecification

optimal gasoline hedging strategies using futures contracts and exchange traded funds this article employs a variety of econometric models including ols vec var dcc garch and a class of copula based garch models to estimate optimal hedge ratios for gasoline spot prices using gasoline exchange traded funds etfs and gasoline futures contracts we then compare their performance using four different measures from the perspective of both their hedging objectives and trading position using four different measures variance reduction measure utility based measure and two tail based measures value at risk and expected shortfall the impact of the 2008 financial market crisis on hedging performance is also investigated our findings indicate that in terms of variance reduction the static models ols and vec var are found to be the best hedging strategies however more sophisticated time varying hedging strategies could outperform the static hedging models when the other measures are used in addition etf hedging is a more effective hedging strategy than futures hedging during the high

forecasting petroleum futures markets volatility the role of regimes and market conditions in this paper we employ regime volatility models to describe time dependency in petroleum markets using a sample of nymex and ice futures contracts we establish the existence of a regime process and link this process to market fundamentals this formulation results in two distinct states a highly persistent conditional volatility process characterised by long memory and low sensitivity to market shocks and a relatively short lived nonstationary process with less memory but higher sensitivity to shocks moreover to investigate the relationship between disequilibrium and volatility of oil futures across high and low volatility regimes we use augmented regime garch models to address in a realistic way the potential diverse response of volatility to forward curve shocks the performance of these models is compared to benchmarks using both statistical tests and risk management loss functions to test the robustness of the forecasting strategies we also perform a reality check employing the stationary bootstrap approach the findings of this paper have important implications for decision making concerning trading and risk management as well as energy market operations such as refining and budget planning by providing valuable information on the oil price volatility dynamics and the ability to predict risk

economic linkages across commodity futures hedging and trading implications we investigate cross market trading dynamics in futures contracts written on seemingly unrelated commodities that are consumed by a common industry on the tokyo commodity exchange we find such evidence in natural rubber nr palladium pa and gasoline ga futures markets the automobile industry is responsible for more than 50 of global demand for each of these commodities var estimation reveals short run cross market interaction between nr and ga and from nr to pa cross market influence exerted by pa is felt in longer dynamics with pa volatility volume affecting nr ga volume volatility our findings are robust to lag specification volatility measure and consistent with full bekk garch estimation results further analysis which benchmarks against silver futures market tocom index and topix transportation index confirms that our results are driven by a common industry exposure and not a commodity market factor a simple trading rule that incorporates short run ga and long run pa dynamics to predict nr return yields positive economic profit our study offers new insights into how commodity and equity markets relate at an industry level and implications for multi commodity hedging

process innovation and environmental sustainability engagement an application on technological firms abstract this study makes a contribution to the current literature by analysing how an internal strategic decision process innovation interacts with some features of the external environment to explain environmental sustainability engagement by companies drawing on economic and institutional rationales three hypotheses are proposed to examine the relationship between process innovation and environmental sustainability engagement considering the role played by the competitive and institutional context in which the firm operates the hypotheses are tested using a sample of 239 companies in high tech sectors operating in spanish science and technology parks using a non parametric test the results show that companies that perform process innovation are more engaged in environmental sustainability based on hierarchical regression models further results show that performing process innovation more than competitors is related to higher environmental sustainability engagement however when time is considered in the model as an explanatory factor the effect exerted by the institutional environment fades away furthermore the results show that as companies accumulate years operating in a science and technology park the relationship between process innovation and environmental sustainability engagement even becomes negative these findings suggest that there is a strong link between process innovation and sustainability engagement companies tend to satisfy both economic restrictions posed by their competitive environment and institutional pressures exerted by their stakeholders albeit in a manner that is not evenly distributed over time similarly firms devote more attention to institutional pressures at the beginning and to economic requirements in later stages of their evolution within science and technology parks