dynamic analysis of aluminum stocks and flows in the united states 1900 2009 abstract a dynamic analysis of anthropogenic aluminum stocks and flows in the u s from 1900 to 2009 has been conducted key findings include 1 historical cumulative aluminum input into the u s anthroposphere amounts to 438 tg with only about 35 of it accumulating in domestic in use stock 2 less than 5 of most flows take place before 1950 while more than 50 of them happen after 1990 3 flows into fabrication manufacturing and use processes as well as trade flows are vulnerable to energy crises basically after an energy crisis the u s tends to produce less primary aluminum less semis as well as less final products and therefore import less bauxite and alumina but import more unwrought aluminum and final products 4 the u s has been a net importer of aluminum from the life cycle perspective with its total annual net import increasing from 1945 to 2005 5 as a result of the continuous increase of net import total domestic stock of aluminum in the u s dramatically increases in the period of 1945 2009 and amounts to 316 tg in 2009 about nine times of that in 1900 6 in use stock comprises about 48 of total domestic stock in 2009 and is dominated by two sectors buildings and construction 32 and transportation 35 7 total per capita stock in use of aluminum keeps increasing until 2009 and currently amounts to 490 kg 8 per capita stock of aluminum in transportation sector increases substantially after 1990s because of the light weighting of automobiles while that in the buildings and construction and electrical engineering sectors seems have reached a saturation level after 2005

preferred risk habitat of individual investors abstract the preferred risk habitat hypothesis introduced here is that individual investors select stocks whose volatilities are commensurate with their risk aversion the data 1995 2000 holdings of over 20 000 clients at a large german broker are consistent with the predictions of the hypothesis the returns of stocks within each portfolio have remarkably similar volatilities when stocks are sold they are replaced by stocks of similar volatilities and the more risk averse customers indeed hold less volatile stocks greater volatility specialization is associated with lower sharpe ratios primarily because more specialized investors hold fewer stocks and thereby expose themselves to more unsystematic risk

oil price shocks global financial markets and their connectedness abstract this paper extends the literature on the relationship between oil price shocks and financial markets by examining the effect of oil shocks on the sovereign bond markets of a large number of advanced and emerging economies and exploring the impact of oil shocks on the degree of connectedness among international financial markets we show that the effect of oil price shocks is not only limited to stock market returns but also extends to bond markets even after controlling for discount rate shocks as well as aggregate capital market effects unlike the case for stock markets the effect on sovereign bonds is found to be rather heterogeneous in terms of size and sign and primarily driven by demand related shocks we also show that oil price shocks serve as a driver of connectedness patterns across global financial markets although the effect on connectedness depends on the nature of the oil market shock and the economic characteristics of the countries overall the findings highlight the role of crude oil as a driver of not only of return dynamics in global stock and bond markets but also of global financial connectedness patterns

ex day behavior with dividend preference and limitations to short term arbitrage the case of swedish lottery bonds abstract swedish lottery bonds offer a unique opportunity to study ex day effects in an environment where cash distributions are tax advantaged relative to capital gains thus in the lottery bond market we observe a reversal of the preference for capital gains that researchers have cited as an explanation for the ex day behavior of u s equities further in this market there are barriers to short term arbitrage when prices do reflect the tax preferences of individual investors we find the bonds are priced around the ex day to reflect differential tax rates on income and capital gains consistent with the prevailing tax regimes the bonds consistently experience negative returns over the coupon payment period and in fact often sell at negative yields prior to the cash distribution as one would expect given tax motivated trading between high tax investors who buy prior to the distribution and low tax investors who buy after the distribution

cautious risk takers investor preferences and demand for active management actively managed mutual funds have distinct return distributions from their passive benchmarks and our theoretical analysis using tail sensitive risk preferences suggests that active value and growth funds may serve to reduce downside risk and capture upside potential respectively furthermore tail sensitivity measures estimated from the empirical pricing kernel have significant explanatory power for active fund flows even after controlling for business cycles and market wide sentiment finally active funds unlike their passive counterparts have exposures to option strategies hedging downside risk or capturing upside potential

herding on fundamental information a comparative study this paper tests for herding towards the market consensus for us and uk leading stocks and to the best of our knowledge addresses a gap in the literature regarding the importance of major fundamental macroeconomic announcements the results indicate that us investors tend to herd during days when important macro data are released and that there have been herding spill over effects from the us to the uk during earlier financial crises further results reveal more differences in herding behavior between the two markets in the us we find that investors herd due to both fundamentals and non fundamentals during different crises when in the uk there is herding only due to fundamentals and only during the dotcom bubble burst these results suggest that the drivers of herding behavior are period and country specific

analyst forecasts and herding behavior the use of analyst forecasts as proxies for investors earnings expectations is commonplace in empirical research an implicit assumption behind their use is that they reflect analysts private information in an unbiased manner as demonstrated here this assumption is not necessarily valid there is shown to be a tendency for analysts to release forecasts closer to prior earnings expectations than is appropriate given their information further analysts exhibit herding behavior whereby they release forecasts similar to those previously announced by other analysts even when this is not justified by their information these results are shown to have interesting empirical implications article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

stock dynamics for forecasting material flows case study for housing in the netherlands abstract this article discusses the role of lifestyle in physical material accounting and introduces a new method for simultaneously determining national or regional resource demand and waste generation through estimations of the population and its lifestyle which is manifested in the stocks of service providing goods their composition and lifetimes improving our comprehension of the stocks in use is essential for environmental policy making because 1 they are becoming the most important resource providers 2 they are important drivers for resource and energy consumption as well as waste and emission generation and 3 their magnitudes and dynamics are the parts of the material cycles that is usually least understood a generic dynamic material flow analysis model is presented and applied for the diffusion of concrete in the dutch dwelling stock for the period of 1900 2100 simulation results are illustrated for a standard scenario and a parameter variation the results show that 1 construction and demolition flows follow a cyclical behaviour 2 the cycles of construction and demolition flows are phase displaced in the first half of the 21st century with decreasing construction and increasing demolition and 3 growth of the dwelling stock is becoming increasingly more material intensive as a growing amount of material is used for replacements the presented stock dynamics approach can principally be applied for any anthropogenic material stock however it is most useful for the examination of metabolic consequences of diffusion processes of durable and fixed capital stocks

institutional investors and the qe portfolio balance channel the operation of the portfolio balance channel has been emphasized by monetary policy makers as a key channel through which quantitative easing qe policies work we assess whether the investment behavior of insurance companies and pension funds in the united kingdom during the global financial crisis was consistent with such an effect by analyzing both sectoral and institution level data our results suggest qe led to institutional investors shifting their portfolios away from government bonds towards corporate bonds but did not lead to a shift into equities

the rationale of the mean standard deviation analysis skewness preference and the demand for money publisher summary this chapter discusses the rationale of the mean standard deviation analysis skewness preference and the demand for money in january 1969 issue of the review of economic studies karl borch and martin feldstein separately criticized the widely used mean variance analysis of portfolio selection borch contended that any system of upward sloping mean standard deviation e s indifference curves can be shown to be inconsistent with the basic axiom of choice under uncertainty he pointed out that one can always pick any two points on an upward sloping indifference curve to represent two bernoulli distributions with probability 1 p of gaining the same amount x in both the cases and probability p of gaining y1 in the case of one distribution and y2 in the case of the second distribution with y2 y1 if the second distribution represents the point to the northeast of the other point then by the dominance axiom the second distribution must be preferred to the first which contradicts the basic meaning of indifference curves feldstein by using a log utility function and a lognormal distribution for investment outcome showed that e s indifference curves for a risk averter need not be convex downwards though upward sloping they would change from convex to concave once the standard deviation of the outcome exceeds the mean multiplied by on the face of it this seems to suggest that risk aversion might decrease as risk is increased beyond a certain extent

economic growth and the evolution of material cycles an analytical framework integrating material flow and stock indicators abstract understanding the relationship between material cycles and economic growth is essential for relieving environmental pressures associated with material extraction production and consumption we developed an integrated analytical framework of dematerialization analysis incorporating both material flow and stock indicators a four quadrant diagram is designed to classify different stages of dematerialization based on the elasticity of material flow stock to economic output or well being we then conducted a case study on the long term evolution of aluminum cycle in the u s and found that different material flow and stock indicators decoupled from gross domestic product gdp growth in a clear sequential pattern flows closer to the beginning of the aluminum cycle e g primary aluminum production decoupled from gdp earlier than flows closer to the final consumption stage e g consumption of final products in use stock of aluminum decoupled from gdp much more slowly than any flow indicator and had just reached the status of relative decoupling around 2000 this phenomenon is determined by the fact that different causes of dematerialization such as import substitution and secondary material recycling take effect at different stages of economic development comprehensive understanding of dematerialization depends on in depth analysis on material economy relationships from an integrated stock and flow perspective

investor mood herding and the ramadan effect in view of evidence linking herding and social mood we examine whether the positive mood documented during ramadan translates into higher herding compared to non ramadan days drawing on a sample of seven majority muslim countries we report significant herding during ramadan in most of our sample markets additionally we show that herding appears significantly stronger within rather than outside ramadan for most tests whereby its significance is manifested on both ramadan and non ramadan days overall herding significance within outside ramadan exhibits some variation in its levels across markets in relation to variables reflective of market states both domestically market returns market volume and internationally us market returns us investors sentiment global financial crisis market states

a theory of disappointment aversion an axiomatic model of preferences over lotteries is developed it is shown that this model is consistent with the allais paradox includes expected utility theory as a special case and is only one parameter beta richer than the expected utility model allais paradox type behavior is identified with positive values of beta preferences with positive beta are said to be disappointment averse it is shown that risk aversion implies disappointment aversion and that the arrow pratt measures of risk aversion can be generalized in a straight forward manner to the current framework copyright 1991 by the econometric society

the macroeconomic effects of large scale asset purchase programmes the effects of asset purchase programs on macroeconomic variables are likely to be moderate we reach this conclusion after simulating the impact of the federal reserve s second large scale asset purchase program lsap ii in a dsge model enriched with a preferred habitat framework and estimated on u s data our simulations suggest that such a program increases gdp growth by less than half a percentage point although the effect on the level of gdp is very persistent the program s marginal contribution to infl ation is very small one key reason for our fi ndings is that we estimate a small degree of fi nancial market segmentation if we enrich the set of observables with a measure of long term debt the semi elasticity of the risk premium to the amount of debt in privatesector hands is substantially smaller than that reported in the recent empirical literature in this case our baseline estimates of the effects of lsap ii on the macroeconomy decrease by at least a factor of two throughout the analysis a commitment to an extended period at the zero lower bound for nominal interest rates increases the effects of asset purchase programs on gdp growth and infl ation

determinants of co2 emissions in a small open economy abstract the aim of the paper is to explore the relationship between economic development and carbon dioxide co2 emissions for a small open and industrialized country austria we test whether an environmental kuznets curve relationship also holds for a single country rather than concentrating on panel or cross section data for a set of countries a cubic i e n shaped relationship between gdp and co2 emissions is found to fit the data most appropriately for the period 1960 1999 and a structural break is identified in the mid seventies due to the oil price shock furthermore two variables are additionally significant import shares reflecting the well known pollution haven hypothesis and the share of the tertiary service sector of total production gdp accounting for structural changes in the economy emission projections derived from this single country specification support the widely held opinion that significant policy changes are asked for when implementing the kyoto protocol in order to bring about a downturn in future carbon emissions

herding behaviour in energy stock markets during the global financial crisis sars and ongoing covid 19 abstract environmental change created worldwide interest in investing in renewable energy less reliance on fossil fuels would have a substantial influence on investors for alternative energy especially renewable energy the literature has concentrated on empirical studies of herding behaviour in finance but not in renewable energy this paper fills the gap by investigating herding in renewable energy using daily closing prices in renewable and fossil fuel energy stock returns in the usa europe and asia for march 24 2000 may 29 2020 which covers the global financial crisis gfc 2007 2009 the coronavirus crises of sars 2003 and the ongoing covid 19 2019 2020 pandemic the paper shows that 1 for low extreme oil returns investors are more likely to display herding in the stock market 2 for sars and covid 19 herding is more likely during extremely high oil returns after the gfc and 3 herding is more likely during periods of extremely low oil returns during the coronavirus crises these results suggest that after the gfc investors are more sensitive to asset losses so they will be more likely to display herding in the stock market however during sars and covid 19 investors panic so they may unwisely sell their assets there are strong cross sector herding spillover effects from us fossil fuel energy to renewable energy especially before the gfc while the us fossil fuel energy market has a significant influence on the europe and asia renewable energy returns during covid 19 during sars which was not a pandemic us fossil fuels only had an impact on us renewable energy returns

individual preferences monetary gambles and stock market participation a case for narrow framing we argue that narrow framing whereby an agent who is offered a new gamble evaluates that gamble in isolation may be a more important feature of decision making than previously realized our starting point is the evidence that people are often averse to a small independent gamble even when the gamble is actuarially favorable we find that a surprisingly wide range of utility functions including many nonexpected utility specifications have trouble explaining this evidence but that this difficulty can be overcome by allowing for narrow framing our analysis makes predictions as to what kinds of preferences can most easily address the stock market participation puzzle

cumulative prospect theory option returns and the variance premium the variance premium and the pricing of out of the money otm equity index options are major challenges to standard asset pricing models we develop a tractable equilibrium model with cumulative prospect theory cpt preferences that can overcome both challenges the key insight is that the variance premium can be written as the expected return on a portfolio of otm call and put options and the probability weighting feature of cpt can explain the puzzlingly low returns observed for these options using gmm on a sample of u s index option returns between 1996 and 2010 we show that the cpt model ts well observed option prices and therefore the variance premium in a dynamic setting probability weighting and time varying equity return volatility combine to match the observed time series pattern of the variance premium

naive diversification strategies in defined contribution saving plans there is a worldwide trend toward defined contribution saving plans and growing interest in privatized social security plans in both environments individuals are given some responsibility to make their own asset allocation decisions raising concerns about how well they do at this task this paper investigates one aspect of the task namely diversification it is shown that some investors follow the 1 n strategy they divide their contributions evenly across the funds offered in the plan consistent with this naive notion of diversification it is found that the proportion invested in stocks depends strongly on the proportion of stock funds in the plan

linking analyses and environmental kuznets curves for aggregated material flows in the eu abstract the relationship between economy and environmental impacts has been an essential topic in the discussion on environmental problems for a long time from the 1990s this relationship has gained a position in environmental policy as well de coupling the use of natural resources from economic growth has been set as one of the policy goals in the sixth environmental action programme by the european commission in the scientific discussion the concept of environmental kuznets curve deals closely with the de coupling or de linking phenomenon aggregated material flows on the other hand have often been considered as a macro level proxy of environmental degradation different methods or approaches have been designed for sustainability or carrying capacity evaluation as well the objective of this article is i to discuss the possibilities and limitations of using environmental and economic indicators in the sustainability analysis at the macro level ii to present a theoretical framework for the linking analysis including a classification of the degrees of de linking re linking environmental impacts from to economic growth and iii to give an empirical example by using indicators of direct material flows as a proxy of environmental degradation and by applying the framework into the european union and its 15 member countries the results show that the trend in the european union is a weak de linking of material flows from economic growth during the years 1980 2000 in other words material intensity of the economy has generally decreased due to increased efficiency but the absolute amount of material use has increased although at a lower rate of increase than economic growth on the other hand there is a quite large variation between different eu member countries however absolute decrease in the use of materials cannot be found as a continuous trend between the years 1980 and 2000 in any of the studied eu member countries

do investors follow the herd in option markets we investigate the previously unexplored herding behaviour of investors in option markets by examining equity option contracts traded in the us between 1996 and 2012 we document strong herding effects in option trading activity that are conditional on a set of systematic factors related to periods of market stress more specifically we find that option investors tend to herd during periods of high market volatility risk on dates of macroeconomic announcements during the financial crisis of 2008 when a large number of market option positions is either opened or closed and during periods of a large average dispersion of analysts forecasts

what does monetary policy do to long term interest rates at the zero lower bound this article uses a structural var with daily data to identify the effects of monetary policy shocks on various longer term interest rates since the federal funds rate has been stuck at the zero lower bound the var is identified using the assumption that monetary policy shocks are heteroskedastic monetary policy shocks have especially high variance on days of fomc meetings and certain speeches while there is otherwise nothing unusual about these days a complementary high frequency event study approach is also used i find that stimulative monetary policy shocks lower treasury and corporate bond yields but the effects die off fairly fast

analyzing federal reserve asset purchases from whom does the fed buy abstract asset purchases have become an important monetary policy tool of the federal reserve in recent years to date most studies of the federal reserve s asset purchases have tried to measure the interest rate effects of the purchases and several provide evidence that these purchases do have important effects on longer term market interest rates the theory of how asset purchases work however is less well developed some of the empirical studies point to preferred habitat models in which investors do not have the same objectives and therefore prefer to hold different types and maturities of securities to study this more closely we exploit flow of funds data to assess the types of investors that are selling to the federal reserve and their portfolio adjustment after these sales which could provide a view to the plausibility of preferred habitat models and the transmission of unconventional monetary policy across asset markets we find that the federal reserve is ultimately buying from only a handful of investor types primarily households which includes hedge funds with a different reaction to changes in federal reserve holdings of longer term versus shorter term assets although not evident for all investors the key participants are shown to rebalance their portfolios toward more risky assets during this period these results can be interpreted as supporting at least in part the preferred habit theory and the view that the monetary policy transmission is working across asset markets

growth in global materials use gdp and population during the 20th century the growing industrial metabolism is a major driver of global environmental change we present an assessment of the global use of materials since the beginning of the 20th century based on the conceptual and methodological principles of material flow accounting mfa on the grounds of published statistical data data compilations and estimation procedures for material flows not covered by international statistical sources we compiled a quantitative estimate of annual global extraction of biomass fossil energy carriers metal ores industrial minerals and construction minerals for the period 1900 to 2005 this period covers important phases of global industrialisation and economic growth the paper analyses the observed changes in the overall size and composition of global material flows in relation to the global economy population growth and primary energy consumption we show that during the last century global materials use increased 8 fold humanity currently uses almost 60 billion tons gt of materials per year in particular the period after wwii was characterized by rapid physical growth driven by both population and economic growth within this period there was a shift from the dominance of renewable biomass towards mineral materials materials use increased at a slower pace than the global economy but faster than world population as a consequence material intensity i e the amount of materials required per unit of gdp declined while materials use per capita doubled from 4 6 to 10 3 t cap yr the main material groups show different trajectories while biomass use hardly keeps up with population growth the mineral fractions grow at a rapid pace we show that increases in material productivity are mostly due to the slow growth of biomass use while they are much less pronounced for the mineral fractions so far there is no evidence that growth of global materials use is slowing down or might eventually decline and our results indicate that an increase in material productivity is a general feature of economic development

investors fear and herding in the stock market in this article we examine herding in three developed stock markets testing for the impact of investors fear on herding estimations to this end we employ daily data of all listed stocks from

herding anti herding behaviour in metal commodities futures a novel portfolio based approach the purpose of this article is twofold motivated by the heated debate on the financialization of commodities we examine the existence of herding behaviour in metal commodities futures in order to identify any time dependent properties reflected in time varying parameters we employ the overlapping rolling window regression technique the empirical evidence confirms a time varying anti herding behaviour before the global financial crisis and the absence of herding or anti herding behaviour during the crisis next we attempt to formally establish the link between the documented anti herding behaviour and portfolio management with the use of dynamic conditional correlations via the dcc garch family multivariate modelling after specifying the correlations an in sample recursive dynamic markowitz portfolio is constructed and monitored by doing so we attribute the anti herding behaviour to different portfolio positioning and rebalancing on the other hand in the absence of herding or anti herding behavi

implications of herding behavior for earnings estimation risk assessment and stock returns experts earnings predictions exhibit positive bias and disappointing accuracy these shortcomings are usually attributed to some combination of incomplete knowledge incompetence and or misrepresentation this article suggests that the human desire for consensus leads to herding behavior among earnings forecasters herding results in a reduction in the dispersion and an increase in the mean of the distribution of expert forecasts creating positive bias and inaccuracy in published earnings estimates investors mistake reduced dispersion for reduced risk and positive bias for high future returns these misperceptions lead to abnormally low returns from stocks with unpredictable earning streams

behavioral portfolio theory we develop a positive behavioral portfolio theory bpt and explore its implications for portfolio construction and security design the optimal portfolios of bpt investors resemble combinations of bonds and lottery tickets consistent with friedman and savage s 1948 observation we compare the bpt efficient frontier with the mean variance efficient frontier and show that in general the two frontiers do not coincide optimal bpt portfolios are also different from optimal capm portfolios in particular the capm twofund separation does not hold in bpt we present bpt in a single mental account version bpt sa and a multiple mental account version bpt ma bpt sa investors integrate their portfolios into a single mental account while bpt ma investors segregate their port folios into several mental accounts bpt ma portfolios resemble layered pyramids where layers are associated with aspirations we explore a two layer portfolio where the low aspiration layer is designed to avoid poverty while the high aspiration layer is designed for a shot at riches

do finance professors invest like everyone else comparing the results of the fed s survey of consumer finances with those of a survey of finance professors at u s universities the authors found that finance professors are significantly more likely than others to invest in equities they also found that finance professors are less prone to behavioral biases because their decision not to invest in equities is based on neither the outcome of their past investments nor their short term expectations of the market see comments and response on this article

market microstructure and securities values evidence from the tel aviv stock exchange abstract this paper examines the value effects of improvements in the trading mechanism selected stocks on the tel aviv stock exchange were transferred gradually from a daily call auction to a mechanism where the call auction was followed by iterated continuous trading sessions this event was associated with a positive and permanent price appreciation the cumulative average market adjusted return over a period that started five days prior to the announcement and ended 30 days after the stocks started trading by the new method was approximately 5 5 in addition we find positive liquidity externalities spillovers across related stocks and improvements in the value discovery process due to the improved trading method finally there was a positive association between liquidity gains and price appreciation

asymmetric herding as a source of asymmetric return volatility abstract as a considerable source of asymmetry in return volatility this paper introduces asymmetric herding and extends the continuous beliefs system to account for its asymmetry and derive the asymmetric herding parameters that are easily estimated by using a maximum likelihood method based on the garch type econometric model this paper presents new empirical evidence for asymmetry in the exchange rates volatility of major currencies against the us dollar which have bilateral nature interestingly the asymmetry of japanese yen is the opposite of that of others and the global financial crisis highlights the opposite asymmetry some of traditional hypotheses such as the leverage effect and the volatility feedback effect do not adequately explain these findings however a significant asymmetric herding effect is observed and appears to be time varying further the clear link between asymmetric herding and volatility strongly supports the hypothesis of the asymmetric herding effect

do investors herd in emerging stock markets evidence from the taiwanese market abstract this paper has three main contributions to the literature on investor herds first it extends investor herding studies to an emerging yet relatively sophisticated taiwanese stock market at the sector level by using firm level data second it employs different methodologies designed to test the existence of investor herds to better understand the sources of herd behavior third it discusses the implications of different herding measures for investors exposed to systematic and unsystematic risks we find that the linear model based on the cross sectional standard deviation cssd testing methodology yields no significant evidence of herding however the non linear model proposed by chang et al 2000 and the state space based models of hwang and salmon 2004 lead to consistent results indicating strong evidence of herd formation in all sectors we also find that the herding effect is more prominent during periods of market losses our results suggest limited diversification opportunities for investors in this market especially during periods of market losses when diversification is most needed further research is necessary to see whether similar findings hold for other emerging markets

a theory of anticipated utility abstract a new theory of cardinal utility with an associated set of axioms is presented it is a generalization of the von neumann morgenstern expected utility theory which permits the analysis of phenomena associated with the distortion of subjective probability

a new environmental kuznets curve relationship between direct material input and income per capita evidence from industrialised countries abstract many studies have focused on the quantification of the input of materials into the economy however the insights provided by those studies have generally been limited this paper attempts to bring analytical value to the discussion on dematerialization considering direct material input dmi per capita as the dependent variable in a test of the environmental kuznets curve ekc the explanatory variable is as usual gross domestic product per capita the quadratic and cubic versions of the ekc are tested econometrically using panel data ranging from 1960 to 1998 for 16 industrialised countries the results indicate a strong and robust support for both the quadratic and cubic ekc relationships between material input and income in industrialised economies while the statistical support to both types of evolution may seem contradictory it suggests that as industrialised economies grow the intensity of material consumption first increases but eventually starts exhibiting a decreasing trend after a certain income threshold is reached the inverted u or quadratic relationship is confirmed even though for the ranges of income considered in this study the trend is mostly on the increasing part of the inverted u curve however the statistical support to the cubic specification suggests that these results need to be regarded with caution overall the statistically stronger models are the quadratic and cubic models with country random effects and the cubic model with country and year fixed effects

does futures trading increase stock market volatility the case of the nikkei stock index futures markets abstract we propose new tests to examine whether stock index futures affect stock market volatility these tests decompose spot portfolio volatility into the cross sectional dispersion and the average volatility of returns on the portfolio s constituent securities our tests show that for nikkei stocks spot portfolio volatility increased and cross sectional dispersion decreased compared with average volatility when nikkei futures began trading on the osaka securities exchange but not on the singapore international monetary exchange for non nikkei stocks no shift occurred when futures trading began on either exchange these findings are consistent with the hypotheses that futures trading increases spot portfolio volatility but that there is no volatility spillover to stocks against which futures are not traded however the increase in volatility attributable to futures trading is small compared with volatility shifts induced by changes in broad economic factors

household portfolio diversification a case for rank dependent preferences the proliferation of novel preference theories in financial economics is hampered by a lack of non experimental evidence and by the theories additional complexity which has not been shown to be critical in applications in this article i present arguments in support of preferences with rank dependency using the survey of consumer finances data i document two widespread patterns inconsistent with expected utility i many households simultaneously invest in well deversified funds and in poorly diversified portfolios of stocks and ii some households with substantial savings do not invest anything in equities i show that portfolio choice models with rank dependent preferences plausibly parameterized and under fully rational assumptions are quantitatively consistent with the observed diversification these results call for further efforts to integrate the models of rank dependent preferences in portfolio theory and asset pricing the decision theoretic literature has long acknowledged the shortcomings of the expected utility theory of von neumann and morgenstern 1944 several generalizations of the theory are inspired by the experimental evidence and aimed at improving its descriptive accuracy however there are few applications of new models of preferences in finance and expected utility continues to dominate the field 1 two principal hurdles slow the proliferation of novel preferences in financial economics first the lack of empirical non experimental or field data confirming that the behavior motivating non expected utilities is widespread outside the laboratory settings second the additional and often significant complexity of the alternative preferences which has not been shown to be critical in applications where the models based on expected utility fall short of reasonable predictions this article presents empirical and theoretical this paper was previously circulated under the title household portfolio diversification the paper has benefited from the comments of shlomo benartzi luca benzoni markus brunnermeier john dickhaut maria perozek raj singh hersh shefrin and workshop participants at minnesota finance bag lunch 2003 wharton conference household financial decision making and portfolio choice and 2003 summer meetings of econometric society i would like to thank cam harvey the editor and an anonymous referee for many helpful comments and suggestions a special thanks to jack kareken for comments and editorial help on an earlier draft i am grateful to donna zerwitz for editorial assistance the views expressed herein are those of the author and not necessarily of the federal reserve bank of minneapolis or the federal reserve system all errors and omissions are the sole responsibility of the author address correspondence to valery polkovnichenko finance 3 122 csom 319 19 th

quantifying u s aluminum in use stocks and their relationship with economic output abstract a dynamic material flow analysis model is developed to quantify aluminum in use stocks and old scrap recycling and recovery in the united states for the period of 1900 to 2007 the total in use aluminum stock in 2007 is estimated as 93 million metric tons which represents approximately 34 of the cumulative apparent consumption since 1900 alternately since 1900 nearly 40 of the cumulative discarded aluminum has not been recycled for domestic use in the u s or for export to foreign consumers statistical time series analysis is used to explore the relationship between model results of in use stocks and gross domestic product gdp unlike most previous studies of material consumption and economic activity which ignore the statistical properties of time series data to the detriment of model estimation and inference data stationarity is explicitly evaluated through unit root testing and model specification is adjusted accordingly the annual percentage change in gdp is found to have a large and significant association with the annual percentage change in net additions to in use stocks model sensitivity and uncertainty are quantified through the application of the fourier amplitude sensitivity test and alternate specifications of product lifetime probability density functions

developments in non expected utility theory the hunt for a descriptive theory of choice under risk this article reviews recent developments in the economic theory of individual decision making under risk since the 1950s it has been known that individual choices violate the standard model of expected utility in predictable ways considerable research effort has now been devoted to the project of developing a superior descriptive model following an overview of non expected utility theories which distinguishes between conventional and non conventional approaches the paper seeks to assess these alternative models in terms of empirical success using laboratory and field data and theoretical usefulness the closing sections reflect on some new directions emerging in this literature

dynamic models for managing durables using a stratified approach the case of tunja colombia in this paper dynamic models for managing durables are applied for the first time to an urban region in developing countries i e tunja in colombia the focus lies on the analysis of the material balance of furniture as an example in private households one of the major problems in calculating the material balances in regions in developing countries is the low availability of reliable data the investigations lead to the following conclusions 1 in developing countries regional stocks and fluxes of durables can be described using a dynamic model based on a stratified approach this allows for understanding the relevance of different social strata i e the use of goods in form of cascades identifying the parameters relevant for the system behavior estimating a plausible development pattern 2 the three behavioral parameters i stock saturation and residence time of the goods ii ratio of reused to new durables and iii ratio of deposited to recycled material drive the development of the regional furniture balance 3 to anticipate changes and problems in the management of durables in the region the potential changes of these behavioral parameters in each stratum have to be included in the analysis

what determines the dynamics of absolute excess returns on stock markets abstract in this paper we quantify the dynamics of absolute excess returns on stock markets depending on three factors the average of the absolute excess return the level of the stock price and stock market volatility we also argue that the absolute excess return can be regarded as an empirical measure of the herding behavior of financial investors our empirical results for the german stock index show that the absolute excess return depends significantly on all three factors although volatility may be seen as the strongest factor among them

examining risk preferences under high monetary incentives experimental evidence from the people s republic of china several experimental sessions were conducted to elicit certainty equivalents for a sequence of lotteries involving real monetary outcomes the opportunity to conduct sessions in the people s republic of china afforded the ability to offer very large monetary incentives relative to subjects living costs in the highest payoff condition subjects earned three times their normal monthly revenue in the course of a two hour experiment results indicate a statistically significant impact of the level of monetary incentives on revealed risk preferences however even under extreme monetary incentives subjects demanded amounts well in excess of expected value for low probability gain prospects copyright 1992 by american economic association

following the pied piper do individual returns herd around the market do equity returns indicate the presence of herd behavior on the part of investors during periods of market stress to test this proposition the cross sectional standard deviation of returns or dispersion is used to capture herd behavior when individual returns herd around the market consensus dispersions are predicted to be relatively low in contrast rational asset pricing models predict an increase in dispersion because individual returns are repelled away from the market return when stocks differ in their sensitivity to market movements the results for both daily and monthly returns are inconsistent with the presence of herding during periods of large price movements for example during extreme down markets when herding is expected to be most prevalent the magnitude of the increase in the dispersion of actual returns is mirrored by the increase in the dispersion of predicted returns that are estimated from a rational asset pricing model

herding behaviour and the declining value relevance of accounting information evidence from an emerging stock market abstractthis article sheds light on the underlying mechanisms behind the changes in the value relevance of accounting information in the karachi stock exchange kse during the 1999 2010 period we find that neither changes in earnings quality nor the earnings lack of timeliness hypothesis can explain the decline in the value relevance of accounting information in the kse based on the stylized facts associated with the growth of the kse and the broader economics literature we argue that the reduction in the explanatory power of accounting information vis a vis stock returns was caused by herding behaviour empirical estimates from state space model of herding behaviour confirm the existence of herding and we find that the value relevance of accounting information is significantly lower in periods characterized by herding behaviour this article is also amongst the first attempts to empirically demonstrate that an expansionary monetary policy and increases in foreign portfolio investment lead to increas

a simple preference foundation of cumulative prospect theory with power utility most empirical studies of rank dependent utility and cumulative prospect theory have assumed power utility functions both for gains and for losses as it turns out a remarkably simple preference foundation is possible for such models tail independence a weakening of comonotonic independence which underlies all rank dependent models together with constant proportional risk aversion suffice in the presence of common assumptions weak ordering continuity and first stochastic dominance to imply these models thus sign dependence the different treatment of gains and losses and the separation of decision weights and utility are obtained free of charge

all their eggs in one basket portfolio diversification of us households abstract this paper uses data from the survey of consumer finances to assess how well mean variance efficiency describes the portfolio diversification of us households it does not seem to work well the median stockholder owns a single publicly traded stock often in the company where he works looking at a sample of high income households who accounted for one third of all publicly traded stock the median holding is only ten stocks indirect stock ownership through mutual funds defined contribution pension plans ira s and trust funds is shown to have little power in explaining this poor diversification

correlation analysis of co 2 emissions material stocks and economic growth nexus evidence from chinese provinces abstract a better understanding of the economy material emissions nexus is fundamental in order to reveal the interactions between human development and the natural environment and more importantly to design integrated de carbonization and de materialization policies in this paper we conducted a decoupling analysis of fossil fuel induced co2 emissions and in use material stocks in infrastructure to economic growth at the provincial level in china and investigated the trilateral causal relationships among the three indicators the results show that the average elasticity of co2 emissions and material stocks to economic growth was smaller than 1 representing a status of relative decoupling however in many less developed provinces in central and western china we observed increasing trends of elasticity in the past three decades which suggest their economic growth became more tightly linked to co2 emissions and the accumulation of material stocks granger tests suggest that in the long run there existed a unidirectional causality running from co2 emissions economic growth and urbanization to material stocks in the short run a bi directional causality between co2 emissions and economic growth and a unidirectional causality from material stocks to co2 emissions were detected policy implications for the de carbonization and de materialization transition include enhancing renewable energy utilization upgrading industries to less carbon intensive ones developing compact cities prolonging the lifespan of infrastructure and strengthening the life cycle carbon management of infrastructure

wood and industrialization evidence and hypotheses from the case of spain 1860 1935 abstract the aim of this paper is to study wood consumption during the industrial expansion which took place in the western world in the second half of the nineteenth and the first decades of the twentieth century through the analysis of the case of spain for this purpose we present the series of spanish wood consumption both as a raw material wrm and as firewood fw between 1860 and 1935 and we carry out two exercises with these series the first calculates the intensity of use iou which relates wood consumption in physical terms with the evolution of the gdp the second more complex exercise estimates a standard consumption function that allows us to know the elasticity of wrm with respect to the gdp the spanish price of wood and the spanish price of a substitute material like iron based on our results we discuss the lower dependence of the spanish industrial economy on wood the liberation of forest areas that may have occurred in spain as a result of industrialization and to what extent the trends observed for the spanish case can be extrapolated internationally the main conclusion is that industrialization transformed the uses of wood and though the importance of this resource per unit of gdp decreased its overall consumption increased generating greater pressure on forests at an international level

does speculation in the oil market drive investor herding in emerging stock markets abstract this paper examines whether the time variation in the level of investor herding in the stock markets of major oil exporting nations relates to speculation and volatility in the global oil market we find that speculative activities in the oil market rather than oil price movements are positively correlated with anti herding in the stock markets of major exporters we argue that traders take the speculative signals from the oil market as a sign of positive expectations and try to generate superior profits by going against the crowd in their local market while this pattern largely holds during calm low volatility market periods we also find that significant herd behavior takes place during high volatility or crisis periods the findings suggest that policy makers who are concerned about stability in their stock markets should monitor measures of speculative activities in the energy market in order to model and monitor volatility and or risk transmissions into their markets

first order risk aversion and the equity premium puzzle abstract this paper integrates yaari s dual theory of choice under uncertainty into a multiperiod context and examines its implications for the equity premium puzzle an important property of these preferences is that of first order risk aversion which implies in our model that the risk premium for a small gamble is proportional to the standard deviation rather than the variance since the standard deviation of the growth rate in aggregate consumption is considerably larger than its variance the model can generate both a small risk free rate and a moderate equity premium

assessing the economy wide effects of quantitative easing this article examines the macroeconomic impact of the first round of quantitative easing qe by the bank of england we attempt to quantify the effects of these purchases by focusing on the impact of lower long term interest rates on the wider economy we use three different models to estimate the impact of qe on output and inflation a large bayesian vector autoregression var a change point structural var and a time varying parameter var our estimates suggest that qe may have had a peak effect on the level of real gdp of around and a peak effect on annual cpi inflation of about points