a nonparametric copula based test for conditional independence with applications to granger causality this article proposes a new nonparametric test for conditional independence that can directly be applied to test for granger causality based on the comparison of copula densities the test is easy to implement because it does not involve a weighting function in the test statistic and it can be applied in general settings since there is no restriction on the dimension of the time series data in fact to apply the test only a bandwidth is needed for the nonparametric copula we prove that the test statistic is asymptotically pivotal under the null hypothesis establishes local power properties and motivates the validity of the bootstrap technique that we use in finite sample settings a simulation study illustrates the size and power properties of the test we illustrate the practical relevance of our test by considering two empirical applications where we examine the granger noncausality between financial variables in a first application and contrary to the general findings in the literature we prov

what drives the high moments of hedge fund returns abstractwe study the high moment distribution of hedge fund returns and identify factors that drive high moment risk using hedge fund monthly returns we find a strong correlation between the first four moments of returns i e mean standard deviation sd skewness and kurtosis and different characteristics of the funds such as leverage liquidity incentives and strategy related factors we find that after controlling for other factors incentives related factors and a hedge fund s specific strategy have the greatest impact on the distribution of fund returns our evidence also suggests investors allocate across hedge fund characteristics while placing greater emphasis on fund strategies and incentive factors

trust and stock price crash risk evidence from china abstract this paper examines the impact of social trust on stock price crash risk social trust measures the level of mutual trust among the members of a society using a large sample of chinese listed firms for the 2001 2015 period we find that firms headquartered in regions of high social trust tend to have smaller crash risks this result is robust to a battery of sensitivity tests and is more prominent for state owned enterprises soes for firms with weak monitoring and for firms with higher risk taking moreover we observe that firms in regions of high social trust are associated with higher accounting conservatism and fewer financial restatements our study suggests that social trust is an important variable that is omitted in the literature investigating the predictors of stock price crashes

stock returns and volatility a firm level analysis abstract it has been previously documented that individual firms stock return volatility rises after stock prices fall this paper finds that this statistical relation is largely due to a positive contemporaneous relation between firm stock returns and firm stock return volatility this positive relation is strongest for both small firms and firms with little financial leverage at the aggregate level the sign of this contemporaneous relation is reversed the reasons for the difference between the aggregate and firm level relations are explored

theoretical relations between risk premiums and conditional variances many statistical models of time varying risk premiums including the autoregressive conditional heteroscedasticity arch in mean attempt to exploit a relation between risk premiums and conditional variances or covariances of asset returns we examine this relation in numerical versions of a dynamic asset pricing theory and show that it can be increasing decreasing flat or nonmonotonic its shape depends on both the preferences of the representative agent and the stochastic structure of the economy without additional structure the theory does not provide either a general foundation for arch in mean specifications or a simple interpretation of their parameters

stock returns inflation and real activity in canada this paper finds evidence that as for the united states there exists an inverse relation between real stock returns and inflation i n canada such a relation if nonspurious could signify a nonneutralit y of money the authors causality tests suggest however that inflation does not cause real stock returns instead their empirical results support e f fama s proxy effect hypothesis according to which the observed inverse relation is proxying for fundamental relations between real stock returns and anticipated real activity and between inflation and real activity the authors therefore cannot reject the fisherian hypothesis that variations in anticipated inflation have no effect on real stock returns

nonstationary expected returns abstract recent evidence reveals significant negative serial correlation in aggregate market wide stock returns we extend this result to relative market adjusted returns demonstrating negative serial correlation in five year returns we then test two competing explanations 1 market mispricing and 2 changing expected returns in an efficient market the tests are conducted using the capital asset pricing model to estimate relative returns the evidence suggests that negative serial correlation in relative returns is due almost entirely to variation in relative risks and therefore expected relative returns through time we document substantial relative risk shifts particularly for extreme performing stocks

sensitivity of the bank stock returns distribution to changes in the level and volatility of interest rate a garch m model abstract the objective of this paper is to employ the generalized autoregressive conditionally heteroskedastic in the mean garch m methodology to investigate the effect of interest rate and its volatility on the bank stock return generation process this framework discards the restrictive assumptions of linearity independence and constant conditional variance in modeling bank stock returns the model presented here allows for shifts in the volatility equation in response to the changes in monetary policy regime in 1979 and 1982 to be estimated arch garch and volatility feed back effects are found to be significant interest rate and interest rate volatility are found to directly impact the first and the second moments of the bank stock returns distribution respectively the latter also affects the risk premia indirectly the degree of persistence in shocks is substantial for all the three bank portfolios and sensitive to the nature of the bank portfolio and the prevailing monetary policy regime

the determinants of asymmetric volatility volatility in equity markets is asymmetric contemporaneous return and conditional return volatility are negatively correlated in this article i develop an asymmetric volatility model where dividend growth and dividend volatility are the two state variables of the economy the model allows both the leverage effect and the volatility feedback effect the two popular explanations of asymmetry the model is estimated by the simulated method of moments i find that both the leverage effect and volatility feedback are important determinants of asymmetric volatility and volatility feedback is significant both statistically and economically the relationship between stock price and its volatility has long interested financial researchers empirically returns and conditional variance of next period s returns are negatively correlated that is negative positive returns are generally associated with upward downward revisions of the conditional volatility this empirical phenomenon is often referred to as asymmetric volatility in the literature see engle and ng 1993 zakoian 1994 and wu and xiao 1999 the presence of asymmetric volatility is most apparent during stock market crashes when a large decline in stock price is associated with a significant increase in market volatility formal econometric models have been developed by researchers to capture asymmetric volatility for example asymmetric arch models of nelson 1991 and glosten jagannathan and runkle 1993 have been found to significantly outperform their counterparts that do not accommodate the asymmetry moreover continuous time stochastic volatility models generally produce estimates of a negative correlation between return and return volatility bakshi cao and chen 1997 and bates 1997 for a review of the literature on asymmetric volatility see bekaert

a note on peters and severinov competition among sellers who offer auctions instead of prices abstract we consider a market in which sellers compete for buyers by advertising reserve prices for second price auctions applying the limit equilibrium concept developed in peters and severinov 1997 1 we show that the competitive matching equilibrium is characterized by a reserve price of zero this corrects a result in peters and severinov 1997 1

innovation and idiosyncratic risk an industry and firm level analysis recent studies find that idiosyncratic risk ir the degree to which firm specific returns are more volatile than aggregate market returns has increased since the 1960s and attribute this to economy wide factors such as the role of the it revolution yet no innovation data is used in these studies to gain further insights into the relationship between technology and ir our aricle studies whether firms and industries that are more r d intensive are in fact characterized by higher ir due to how innovation affects the uncertainty of expected future profits while the industry level results prove inconclusive a clear relationship is found between firm level r d intensity and firm level volatility of returns

s p 100 index option volatility using transaction data on the s p 100 index options we study the effect of valuation simplifications that are commonplace in previous research on the timeseries properties of implied market volatility using an american style algorithm that accounts for the discrete nature of the dividends on the s p 100 index we find that spurious negative serial correlation in implied volatility changes is induced by nonsimultaneously observing the option price and the index level negative serial correlation is also induced by a bid ask price effect if a single option is used to estimate implied volatility in addition we find that these same effects induce spurious and unreasonable negative cross correlations between the changes in call and put implied volatility an important area of current research is the estimation and behavior of market volatility implied by option pricing models for example stein 1989 concludes that the s p 100 index option market is inefficient because longer term options overreact to changes in the implied volatility of short maturity options day and lewis 1988 document an increase in volatility around the quarterly expiration cycle schwert 1990 draws conclusions about the behavior of volatility around the stock market crash of 1987 by using implied volatility all of these studies use a simplified option pricing framework to estimate implied market volatility previous research generally assumes that the s p 100 index option is european style this option is actually american style it is also common to assume that the dividend yield is constant the dividends are not constant and exhibit distinct seasonal patterns harvey and whaley 1991b show that large pricing errors can be induced in the option prices if the american feature and the discrete dividends are ignored option pricing errors translate into errors in the implied volatility estimates this paper uses s p 100 index call and put transactions and an american style option pricing model with the exact discrete dividend series to calculate a time series of implied volatilities this valuation method

religiosity and the volatility of stock prices a cross country analysis prior research argues that religiosity increases the ethical behavior and levels of risk aversion of firm managers to the extent that this is true more religious countries might exhibit more stability in stock prices this study tests this assertion by determining whether religiosity in countries is negatively associated with volatility in financial markets using a unique empirical design we account for the possibility that the structure of financial markets is endogenously related to a country s religiosity by examining the volatility of american depositary receipts adrs while conditioning on a number of home country variables capturing religiosity we also control for the possibility of endogeneity bias by identifying an appropriate instrumental variable interestingly our tests show that religious affiliation and to a lesser extent religious adherence and religious beliefs negatively affect the level of adr volatility

mechanism design by competing sellers a dynamic model with many sellers and buyers is constructed agents failing to trade may trade in the next period an equilibrium is found where sellers hold identical auctions and buyers randomize over the sellers they visit the distribution of buyer valuations is endogenous an auction with efficient reserve is an optimal mechanism from each seller s point of view in spite of the ability of any seller to alter the distribution of buyer types participating in the seller s mechanism by altering the mechanism copyright 1993 by the econometric society

stock market volatility and the crash of 1987 evidence from six emerging markets abstract this paper studies volatility risk premia and the persistence of volatility in six emerging stock markets before and after the 1987 stock market crash the empirical investigation is conducted by means of the garch in the mean model garch m and monthly data from argentina greece india mexico thailand and zimbabwe between january of 1976 and august of 1994 results indicate changes in the arch parameter risk premia and persistence of volatility before and after the 1987 crash but these noted changes are not uniform and depend upon the individual markets factors other than the 1987 crash may also be responsible for the changes

efficient club formation in a frictional environment we study the assignment of agents to clubs in a frictional market environment club entry is endogenous and clubs compete by posting reserve prices in a competing auctions game prior to the agents decisions regarding which club to visit the competing auctions equilibrium is constrained efficient and the reserve price in general will not be zero

the impact of trades on daily volatility this article proposes a trading based explanation for the asymmetric effect in daily volatility of individual stock returns previous studies propose two major hypotheses for this phenomenon leverage effect and time varying expected returns however leverage has no impact on asymmetric volatility at the daily frequency and moreover we observe asymmetric volatility for stocks with no leverage also expected returns may vary with the business cycle that is at a lower than daily frequency trading activity of contrarian and herding investors has a robust effect on the relationship between daily volatility and lagged return consistent with the predictions of the rational expectation models the non informational liquidity driven herding trades increase volatility following stock price declines and the informed contrarian trades reduce volatility following stock price increases the results are robust to different measures of volatility and trading activity jel c30 g11 g12 stock return volatility is fundamental to finance contingent claims pricing risk management asset allocation and market efficiency tests use volatility as a basic building block consequently volatility has been widely studied along several dimensions volatility clustering in financial data has been well documented and extensively modeled by the autoregressive conditional heteroskedasticity arch of engle 1982 and the generalized arch extension of bollerslev 1986 1 shiller 1981 leroy and porter 1981 roll 1984 1988 french and roll 1986 and cutler poterba and summers 1989 have all documented a significant amount of volatility that cannot be explained by changes in fundamentals and thus may be attributable to mispricing schwert 1989 has studied the variation in stock market volatility over time and has analyzed the

adaptive expectations and stock market crashes a theory is developed that explains how stocks can crash without fundamental news and why crashes are more common than frenzies a crash occurs via the interaction of rational and naive investors naive traders believe that prices follow a random walk with serially correlated volatility their expectations of future volatility are formed adaptively when the market crashes naive traders sell stock in response to the apparent increase in volatility since rational traders are risk averse as well a lower price is needed to clear the market the crash is a self fulfilling prophecy frenzies cannot occur in this model

mutual fund herding and stock price crashes abstract we investigate the impact of mutual fund herding behaviours on stock price crashes there are competing hypotheses with respect to how investors herding behaviours are associated with information processing our empirical evidence shows that mutual fund herding is associated with a poor information environment and low disclosure quality more importantly mutual fund herding amplifies stock price crash risk afterwards the main finding is concentrated on buy herding rather than sell herding to mitigate the endogeneity concern we use the 2004 sec mutual fund disclosure regulation change as an exogenous shock and the results hold we further use propensity score matching to alleviate the impact of information asymmetry finally additional analysis reveals that our results are not driven by the price impact hypothesis

macroeconomic announcements and asymmetric volatility in bond returns this study analyses the impact of macroeconomic news announcements on the conditional volatility of bond returns using daily returns on the 1 3 5 and 10 year us treasury bonds we find that announcement shocks have a strong impact on the dynamics of bond market volatility our results provide empirical evidence that the bond market incorporates the implications of macroeconomic announcement news faster than other information moreover after distinguishing between types of macroeconomic announcements releases of the employment situation and producer price index are especially influential at the intermediate and long end of the yield curve while monetary policy seem to affect short term bond volatility

competition among sellers who offer auctions instead of prices abstract in this paper we study a large market in which sellers compete by offering auctions to buyers instead of simple fixed price contracts two variants of the model are studied one extends a model first analyzed by wolinsky rev econ stud 55 1988 71 84 in which buyers learn their valuations only after meeting sellers the other variant extends the model of mcafee econometrica61 1993 1281 1312 in which buyers know their valuations before they choose among available auctions the equilibrium array of auctions is characterized for each case and the efficiency properties of the equilibria are analyzed journal of economic literatureclassification numbers d41 d44 d82

margin requirements volatility and the transitory component of stock prices official margin requirements in the u s stock market were established in october 1934 to limit the amount of credit available for the purpose of buying stocks since then higher or rising margin requirements are associated with lower stock price volatility lower excess volatility and smaller deviations of stock prices from their fundamental values the results hold throughout the post 1934 period and are not very sensitive to the exclusion of the turbulent depression years from the sample thus margin requirements seem to be an effective policy tool in curbing destabilizing speculation jel 313 520 federal regulation of securities margins was mandated by congress in the securities exchange act of 1934 the stock market experience of the late 1920s led congress to the conclusion that credit financed speculation in the stock market might create excessive market volatility through a pyramidingdepyramiding process congress reasoned that the imposition of margin requirements could constrain the amount of borrowing and prevent excessive market volatility and subsequently gave the federal reserve jurisdiction over the level of margin requirements since 1934 the federal reserve

consumption volatility production volatility spot rate volatility and the returns on treasury bills and bonds abstract the study documents a relation between the expected holding period premiums on treasury bills and the ex ante conditional volatilities of consumption spot one month interest rate and industrial production a model portraying the relation as a risk and return phenomenon is presented and tested consistent with the model the coefficients of the relation appear to depend on the sensitivity of the realized premium to the ex post shocks in consumption industrial production and the spot rate the model fits the data better than the traditional term premium models

the econometric analysis of models with risk terms summary in this paper we have attempted to provide an integrated approach to the estimation of models with risk terms it was argued that there exist orthogonality conditions between variables in the information set and higher order moments of the unanticipated variable density these could be exploited to provide consistent estimators of the parameters associated with the risk term specifically it was recommended that an iv estimator should be applied with instruments constructed from the information set four existing methods commonly used to estimate models with risk terms are examined and applications of the techniques are made to the estimation of the risk term in the us c exchange market and the effects of price uncertainty upon production

risk inflation and the stock market most explanations for the decline in share values over the past two decades have focused on the concurrent increase in inflation this paper considers an alternative explanation a substantial increase in the riskiness of capital investments we show that the variance of firms real gross marginal return on capital has increased significantly increasing the relative riskiness of investors returns on equity and that this can explain a large part of the market decline we also assess the effects of increase in the mean and variance of the inflation rate and a decline in firms expected return on capital this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

price convexity and skewness this paper develops a model in which investors who are prohibited from short selling agree to disagree on the precision of a publicly observed signal the model implies that the equilibrium price is a convex function of the public signal the model predicts that 1 the stock price reacts more to good news than to bad news 2 the skewness of stock returns is positively correlated with contemporaneous returns but negatively correlated with lagged returns 3 short sale constraints increase rather than decrease skewness and 4 disagreement about information precision increases skewness empirical tests conducted find supportive evidence for all these predictions

does idiosyncratic risk really matter goyal and santa clara 2003 find a significantly positive relation between the equalweighted average stock volatility and the value weighted portfolio returns on the nyse amex nasdaq stocks for the period of 1963 08 to 1999 12 we show that this result is driven by small stocks traded on the nasdaq and is in part due to a liquidity premium in addition their result does not hold for the extended sample of 1963 08 to 2001 12 and for the nyse amex and nyse stocks more importantly we find no evidence of a significant link between the value weighted portfolio returns and the median and value weighted average stock volatility the intertemporal relation between risk and return has long been an important topic in asset pricing literature most asset pricing models postulate a positive relationship between a stock portfolio s expected returns and risk which is often modeled by the variance or standard deviation of the portfolio s returns however there is no agreement about the existence of such a trade off for stock market indices 1 while return volatility is an intuitively appealing measure of risk different approaches used by previous researchers suggest that no clear consensus has emerged regarding its relevance 2 whether or not investors require a larger risk premium on average for investing in a security during times when the security is more risky remains an open question

efficient entry in competing auctions in this paper we consider the efficiency of seller entry into a large market in which sellers post and commit to terms of trade and buyers then allocate themselves across sellers buyers differ in their valuations for the good being sold in this mar ket and sellers are heterogeneous with respect to their reservation values in this environment a second price auction is a simple mechanism which allows the buyers who interact with a particular seller to compete for that seller s good the competing auctions literature e g mcafee 1993 and peters and severinov 1997 considers the characteristics of these auctions as the market gets large and it is now well understood that competition leads each seller to post an efficient mechanism e g a second price auction with reserve price equal to seller reservation value the implications of a large market for seller entry are less well understood in this environment when goods are auctioned buyers extract an information rent from sellers one might therefore expect that the equilibrium level of seller entry into the market would be below the level that a social planner would choose there is however a counterbalancing force namely that when a seller enters the market that seller steals buyers from the sellers who were already there and so potentially reduces the surpluses associated with these sellers our main result is that in a large market when sellers are free to choose their preferred mechanisms these two effects information rent versus business stealing exactly offset each other leading to the socially efficient level of seller entry in addition we show that the equilibrium and social planner allocation of buyers across seller types coincide the model we present is one of competitive search sellers compete for buyers by posting and committing to selling mechanisms and buyers direct their search based on these posted mechanisms moen 1997 and shimer 1996 demonstrate the efficiency of entry in a model of competitive search that has two special features first meetings between buyers and sellers are one on one that is each seller interacts with at most one buyer second there is complete information in the sense that once

stock returns and volatility an empirical study of the uk stock market abstract attempts to quantify the relationship between stock returns and volatility have produced conflicting conclusions in recent u s studies our paper examines this issue in the u k context for the first time using daily weekly fortnightly and monthly returns on the financial times all share index from january 1965 to december 1989 volatility estimates are obtained from monthly sample variances and arch models expected returns are shown to have had a positive though not statistically significant relationship with expected volatility the relationship between the unexpected components of the returns and volatility series is less clear we find evidence for a negative relationship but only when volatility expectations are represented by standard deviations

what drives international equity correlations volatility or market direction abstract we consider impulse response functions to study the impact of both return and volatility on the correlation between international equity markets using data on the us as the reference country canada the uk and france equity indices empirical evidence shows that without taking into account the effect of return there is an asymmetric effect of volatility on correlation the volatility seems to have an impact on correlation especially during downturn periods however once we introduce the effect of return the impact of volatility on correlation disappears these observations suggest that the relation between volatility and correlation is an association rather than a causality the strong increase in the correlation is driven by the past of the return and the market direction rather than the volatility

measuring business cycle time the business cycle analysis of arthur f burns and wesley c mitchell and the national bureau of economic research presumed that aggregate economic variables evolve on a time scale defined by business cycle turning points rather than by months or quarters do macroeconomic variables appear to evolve on an economic rather than a calendar time scale evidence presented here suggests that they do however the estimated economic time scales are only weakly related to business cycle time scales providing evidence against the view underlying traditional business cycle analysis copyright 1987 by university of chicago press

an examination of the relationship between australian industry equity returns and expected inflation this paper analyses the relationship between inflation and equity returns in australia over the period january 1974 to march 1996 analysis is based on monthly and quarterly data using value weighted equity indices at both the aggregate market and industry level three price indices the consumer price index cpi quarterly and the manufactured materials used index mmu and the manufacturing articles produced index map both monthly and quarterly are used to measure inflation results provide little evidence of the statistically significant negative relationship observed in the us for the full study period analysis is also conducted on three subperiods monetary targeting july 1976 january 1985 checklist approach february 1985 december 1989 and anti inflation january 1990 march 1996 at the market level the anti inflation subperiod does provide some evidence of a negative relationship between inflation and equity returns though statistical significance is not apparent with quarterly tim

clubs and the market this paper defines a general equilibrium model with exchange and club formation agents trade multiple private goods widely in the market can belong to several clubs and care about the characteristics of the other members of their clubs the space of agents is a continuum but clubs are finite it is shown that i competitive equilibria exist and ii the core coincides with the set of equilibrium states the central subtlety is in modeling club memberships and expressing the notion that membership choices are consistent across the population

stock returns asymmetric volatility risk aversion and business cycle some new evidence i introduction most asset pricing models starting with intertemporal capital asset pricing model of merton 1973 suggest a positive relation between risk and return for the aggregate stock market there is an extensive empirical literature that has tried to establish the existence of such a trade off between risk and return for stock market indexes unfortunately the results have been inconclusive often the relation between risk and return has been found insignificant and sometimes even negative recently it has been debated whether risk aversion is state dependent and whether it is procyclical or countercyclical in this article we explore the role of the business cycle in the relation between risk and return for the aggregate stock market specifically by employing asymmetric generalized autoregressive conditional heteroskedasticity in mean models agarch m markov switching models and a simple theoretical equilibrium framework we explore how these three related issues excess stock returns volatility and risk aversion are affected by business cycles as noted by fama 1990 of many possible forces that drive the stock market real economic activities represented by business cycles could be an important one since they are highly related to major stock pricing factors market volatility and the psychology of investors particularly investors attitude toward risk an interesting observation about excess stock return is that it is time varying over business cycles and significantly higher in boom periods 1 according to our estimates for the sample period 1926 2001 presented in table 1 the mean excess stock return is 0 8963 mo in boom periods and 0 3247 mo in recession periods the excess stock return tends to be very high in the boom period because stock returns remain relatively high with increasing dividend payments another interesting observation about the stock market is that the volatility of excess stock return is also time varying over business cycles and significantly lower in boom periods our estimates of standard deviation of monthly stock excess return for the sample period 1926 2001 are 4 6 in the boom period and 8 2 in the recession period these estimates imply that the excess return risk relation is time varying over the business cycle since the coefficient of variance or standard deviation in the conditional mean equation is usually interpreted as being closely related to the coefficient of relative risk aversion as argued by merton 1980 our finding suggests a potential time varying risk aversion 2 there is a general agreement that investors within a given time period require a larger expected return from a security that is riskier however there seems to be no relationship between risk and return over time as such whether or not investors require a larger risk premium for investing in a security during periods when the security is more risky relatively remains inconclusive at first glance it may appear that rational risk averse investors would require a relatively larger risk premium during times when the payoff from the security is more risky a larger risk premium may not be required however because times that are relatively more risky could coincide with times in which investors are better able to bear particular types of risk further a larger risk premium may not be required because investors may want to save relatively more during periods when the future is more risky 3 hence a positive as well as a negative sign for the correlation between the conditional mean and the conditional variance of the excess return on stocks would be consistent with existing theories since there are conflicting predictions about the intertemporal trade off between risk and return it is important to empirically characterize the nature of this relation according to merton 1980 the coefficient of variance or the standard deviation in the conditional mean equation which is called volatility feedback is usually interpreted as the coefficient of relative risk aversion

measurement of consumer gains from market stabilization for most cases of practical significance in which partial equilibrium analysis is appropriate there is little difference between exact measures of consumer gains from market stabilization and approximations such as expected change in marshallian or hicksian consumer surplus careful specification of the nature of stabilization is more crucial than the choice of welfare measure it is important to represent correctly the demand curvature and supply response and to determine whether general equilibrium responses can be ignored in any event an improved analytical approximation and a simple numerical method for calculating the exact measures make it unnecessary to rely on suspect measures

asymmetric volatility connectedness on the forex market abstract we show how bad and good volatility propagate through the forex market i e we provide evidence for asymmetric volatility connectedness on the forex market using high frequency intra day data of the most actively traded currencies over 2007 2015 we document the dominating asymmetries in spillovers that are due to bad rather than good volatility we also show that negative spillovers are chiefly tied to the dragging sovereign debt crisis in europe while positive spillovers are correlated with the subprime crisis different monetary policies among key world central banks and developments on commodities markets it seems that a combination of monetary and real economy events is behind the positive asymmetries in volatility spillovers while fiscal factors are linked with negative spillovers

good volatility bad volatility what drives the asymmetric connectedness of australian electricity markets efficient delivery of network services and the electricity infrastructure to meet the long term consumer s interests are the main objectives and the strategies of a national electricity market while the main interests of generators are to maximize their profit through pricing strategies therefore the objective of this study is to explore whether electricity prices across the four australian states display symmetric price volatility connectedness the study is the first attempt in the literature to make use of intraday 5 min australian dispatch electricity prices spanning the period december 8th 1998 to may 5th 2016 to quantify asymmetries in volatility connectedness emerging from good and bad volatility the results provide supportive evidence that the australian electricity markets are connected asymmetrically implying the presence of some degree of market power that is exercised by generators across regional electricity markets

volatility components leverage effects and the return volatility relations abstract this paper investigates the risk return trade off by taking into account the model specification problem market volatility is modeled to have two components one due to the diffusion risk and the other due to the jump risk the model implies merton s icapm in the absence of leverage effects whereas the return volatility relations are determined by interactions between risk premia and leverage effects in the presence of leverage effects empirically i find a robust negative relationship between the expected excess return and the jump volatility and a robust negative relationship between the expected excess return and the unexpected diffusion volatility the latter provides an indirect evidence of the positive relationship between the expected excess return and the diffusion volatility

speculative carryover an empirical examination of the u s refined copper market this article develops and estimates an empirically tractable model of equilibrium storage the method bridges the gap between theoretical rational expectations models and applied commodity market work the application to the u s refined copper market provides estimates of structural supply and demand rational price forecasts and the risk of copper storage that is consistent with modern portfolio theory

uncertain inflation and social security indexation abstract this paper provides a theoretical analysis of the effects of the insurance feature of social security indexation on portfolio allocation and the stability of income and consumption of the retiree within the framework of a life cycle model of allocation under uncertainty the paper shows that the magnitudes of such effects depend on the importance of social security in total wealth the covariance of real portfolio returns with the inflation rate and more importantly whether there exists market failure in providing for inflation insurance

the effects of irregular markets on macroeconomic policy some estimates for belgium abstract the paper aims at evaluating the efficiency of traditional keynesian demand or neo classical income policies in the presence of an irregular sector the analysis is applied to the belgian economy for which it is shown that the objectives of increasing output and employment and reducing the importance of the irregular economy will often lead to conflicting policy prescriptions in addition keynesian multipliers may be lowered by as much as 40 though the irregular market only represents some 10 to 15 of total activity