learning from others outcomes i develop a simple model of social learning in which players observe others outcomes but not their actions a continuum of players arrives continuously over time and each player chooses once and for all between a safe action which succeeds with known probability and a risky action which succeeds with fixed but unknown probability depending on the state of the world the actions also differ in their costs before choosing a player observes the outcomes of k earlier players there is always an equilibrium in which success is more likely in the good state and this alignment property holds whenever the initial generation of players is not well informed about the state in the case of an outcome improving innovation where the risky action may yield a higher probability of success players take the correct action as k in the case of a cost saving innovation where the risky action involves saving a cost but accepting a lower probability of success inefficiency persists as k in any aligned equilibrium whether inefficiency takes the form of under adoption or over adoption also depends on the nature of the innovation convergence of the population to equilibrium may be non monotone

quality and accountability in health care delivery audit study evidence from primary care in india we present unique audit study evidence on health care quality in rural india and find that most private providers lacked medical qualifications but completed more checklist items than public providers and recommended correct treatments equally often among doctors with public and private practices all quality metrics were higher in their private clinics market prices are positively correlated with checklist completion and correct treatment but also with unnecessary treatments however public sector salaries are uncorrelated with quality a simple model helps interpret our findings where public sector effort is low the benefits of higher diagnostic effort among private providers may outweigh costs of potential overtreatment

recommender systems as mechanisms for social learning this article studies how a recommender system may incentivize users to learn about a product collaboratively to improve the incentives for early exploration the optimal design trades off fully transparent disclosure by selectively overrecommending the product or spamming to a fraction of users under the optimal scheme the designer spams very little on a product immediately after its release but gradually increases its frequency she stops it altogether when she becomes sufficiently pessimistic about the product the recommender s product research and intrinsic naive users seed incentives for user exploration and determine the speed and trajectory of social learning potential applications for various internet recommendation platforms and implications for review ratings inflation are discussed

learning about a new technology pineapple in ghana this paper investigates the role of social learning in the diffusion of a new agri cultural technology in ghana we use unique data on farmers communication patterns to define each individual s information neighborhood conditional on many potentially confounding variables we find evidence that farmers adjust their inputs to align with those of their information neighbors who were surpris ingly successful in previous periods the relationship of these input adjustments to experience further indicates the presence of social learning in addition applying the same method to input choices for another crop of known technol ogy correctly indicates an absence of social learning effects jel d83 013 033 q16

heterogeneous information arrivals and return volatility dynamics uncovering the long run in high frequency returns recent empirical evidence suggests that the interdaily volatility clustering for most speculative returns are best characterized by a slowly mean reverting fractionally integrated process meanwhile much shorter lived volatility dynamics are typically observed with high frequency intradaily returns the present article demonstrates that by interpreting the volatility as a mixture of numerous heterogeneous short run information arrivals the observed volatility process may exhibit long run dependence as such the long memory characteristics constitute an intrinsic feature of the return generating process rather than the manifestation of occasional structural shifts these ideas are confirmed by our analysis of a one year time series of fiveminute deutschemark u s dollar exchange rates among the most puzzling issues is the behavior of volatility while the general properties of volatility remain elusive perhaps the most intriguing feature revealed by empirical work on volatility is its long persistence such behavior has sparked a search almost akin to that for the holy grail for the perfect garch model but the underlying question of why such volatility persistence endures remains unanswered we conjecture that the ability to analyze higher frequency data may be particularly useful in pursuing this issue goodhart and o hara 1997 the pronounced volatility clustering is arguably one of the most striking features of financial price series recorded at daily or weekly intervals and a large body of literature seeking to characterize this aspect of speculative returns has emerged over the past decade 1 at the same time convincing theoretical explanations for the underlying sources of long run persistence in volatility remain elusive the recent advent of comprehensive high frequency andersen is from the j l kellogg graduate school of management of northwestern university bollerslev is from the university of virginia and is a research associate at the national bureau of economic research we gratefully acknowledge the financial support provided by a research grant from the institute for quantitative research in finance the q group special thanks are due to olsen and associates for making the intradaily exchange rate quotes and reuter s news tape available we have received valuable comments from wake epps clive w j granger stephen f gray j huston mcculloch as well as seminar participants at the december 1996 triangle econometrics workshop the 1997 afa meetings in new orleans academia sinica the wharton school usc and georgetown and york universities we remain fully responsible for the content 1 see bollerslev chou and kroner 1992 for a survey of this literature using arch type

weather and intraday patterns in stock returns and trading activity abstract we examine the relation between weather in new york city and intraday returns and trading patterns of nyse stocks while stock returns are found to be generally lower on cloudier days cloud cover has a significant influence on stock returns only at the market open there are significantly more seller initiated trades when there is more cloud cover at the market open which is consistent with the return results cloudy skies are associated with higher volatility and less market depth over the entire trading day finally cloud cover is not significantly correlated with spread measures and turnover ratios the findings overall suggest that weather has a significant influence on investors intraday trading behavior

patterns in three centuries of stock market prices this article applies autoregression and rescaled range statistics to very long stock market series to test the hypothesis that long term temporal dependencies are present in financial data for the annual capital appreciation returns to the london stock exchange evidence of persistence in raw returns greater than five years and of mean reversion in deviations from rolling twenty year averages is found similar patterns are observed for the new york stock exchange however they are not significant at traditional confidence levels copyright 1993 by university of chicago press

similarities in the distribution of stock market price changes between the eighteenth and twentieth centuries are all financial time series alike this article raises that question by establishing that eighteenth and twentieth century equity market time series behave similarly the distribution of price changes now and then both exhibit the same patterns or regularities in particular the distribution of price changes is leptokurtic and fluctuations in variance are persistent this article provides further evidence that financial market regularities are stable and not contingent on specific times and places the historical evidence shows that eighteenth century stock market and traders are not so different from those of today copyright 1998 by university of chicago press

labor market flows in the cross section and over time many theoretical models of labor market search imply a tight link between worker flows hires and separations and job gains and losses at the employer level we use rich establishment level data to assess several theoretical models and to study the relationship between worker flows and jobs flows hires quits and layoffs exhibit strong highly nonlinear relationships to employer growth rates in the cross section simple statistical models of these relationships greatly improve our ability to account for fluctuations in aggregate worker flows and enable us to construct synthetic measures of hires separations quits and layoffs back to 1990

structural breaks and garch models of exchange rate volatility we investigate the empirical relevance of structural breaks for garch models of exchange rate volatility using both in sample and out of sample tests we find significant evidence of structural breaks in the unconditional variance of seven of eight us dollar exchange rate return series over the 1980 2005 period implying unstable garch processes for these exchange rates and garch 1 1 parameter estimates often vary substantially across the subsamples defined by the structural breaks we also find that it almost always pays to allow for structural breaks when forecasting exchange rate return volatility in real time combining forecasts from different models that accommodate structural breaks in volatility in various ways appears to offer a reliable method for improving volatility forecast accuracy given the uncertainty surrounding the timing and size of the structural breaks copyright 2008 john wiley sons ltd

common persistence in conditional variances since the introduction of the autoregressive conditional heteroskedastic arch model in engle 1982 numerous applications of this modeling strategy have already appeared a common finding in many of these studies with high frequency financial or monetary data concerns the presence of an approximate unit root in the autoregressive polynomial in the univariate time series representation for the conditional second order moments of the process as in the so called integrated generalized arch igarch class of models proposed in engle and bollerslev 1986 in the igarch models shocks to the conditional variance are persistent in the sense that they remain important for forecasts of all horizons this idea is readily extended to a multivariate framework even though many time series may exhibit persistence in variance it is likely that several different variables share the same common long run component in that situation the variables are naturally defined to be co persistent in variance and the co persistent linear combination is interpretable as a long run relationship conditions for co persistence to occur in the multivariate linear garch model are presented these conditions parallel the conditions for linear co integration in the mean as developed by engle and granger 1987 the presence of co persistence has important implications for asset pricing relationships and in optimal portfolio allocation decisions an empirical example relating to the time series properties of nominal u s dollar exchange rates for the deutschemark and the british pound provides a simple illustration of the ideas

price dispersion and incomplete learning in the long run abstract in each period a seller chooses a price and the customer for that period buys either one unit or nothing the relationship between price and purchase probability is one of two linear functions it is shown that the seller behaving optimally does not necessarily learn which function is the actual relationship since there can be a positive probability of sequences of prices converging to the price at which the two functions give the same purchase probability

allocative disturbances and specific capital in real business cycle theories chanted albeit in varying degree with business cycle theories that either posit unexplained nominal wage and price rigidities or rely on misperceptions about nominal variables as a key driving force one response to this disenchantment has been a concentration of research effort on real business cycle theories aside from dissatisfaction with competitor theories the very visible oil price shock episodes of the 1970 s lent plausibility to the view that exogenous real disturbances cause large fluctuations in aggregate economic activity this essay on real business cycle theory considers the role of allocative disturbances in aggregate economic fluctuations when human and physical capital are specialized by allocative disturbances i mean events that impinge on the economy by inducing a costly time consuming reallocation of specialized resources at least since the publication of ricardo s principles in 1817 economists have recognized some of the potentially important aggregate consequences of allocative disturbances ricardo writes

long horizon mean reverting stock prices revisited this paper reexamines long horizon stock returns and finds that previous work overstates the evidence of mean reversion the overstatement is largely due to the implicit weighting of ordinary least squares tests which place more weight on the depression and world war ii observations which have both large error variances and stronger mean reverting tendencies additionally the reliance on asymptotic statistics and the improper focus on only the most negative estimates of mean reversion contribute to the overstatement using generalized least squares randomization tests on the 1926 to 1987 period the random walk cannot be rejected for value or equally weighted real returns at any of 10 return horizons or by joint tests over all 10 horizons simultaneously additionally the random walk cannot be rejected for the extended 1871 to 1987 period

multivariate stochastic volatility via wishart processes financial models for asset and derivatives pricing risk management portfolio optimization and asset allocation rely on volatility forecasts time varying volatility models such as generalized autoregressive conditional heteroscedasticity and stochastic volatility svol have been successful in improving forecasts over constant volatility models we develop a new multivariate svol framework for modeling financial data that assumes covariance matrices stochastically varying through a wishart process in our formulation scalar variances naturally extend to covariance matrices rather than to vectors of variances as in traditional svol models model fitting is performed using markov chain monte carlo simulation from the posterior distribution because of the model s complexity an efficiently designed gibbs sampler is described that produces inferences with a manageable amount of computation our approach is illustrated on a multivariate time series of monthly industry portfolio returns a test of the ec

the asymmetric impact of oil prices interest rates and oil price uncertainty on unemployment in the us abstract in this study we investigate the presence of asymmetric interactions between oil prices oil price uncertainty interest rates and unemployment in a cointegration framework utilizing the nonlinear auto regressive distributed lag nardl approach we show the asymmetric responses of unemployment to changes in oil prices oil price uncertainty and interest rates in the long run more specifically the results of our analyses suggest that an increase in oil price results in increased unemployment while there is no significant impact of reduced oil prices on the one hand reduced oil price uncertainty leads to a decrease in unemployment whereas an increase in oil price uncertainty does not have an impact we also observe increased unemployment in response to a decrease in interest rates as the impact of increased interest rates is not significant last but not least we find that option implied oil price volatility as a measure of oil price uncertainty outperforms the conditional volatility of crude oil prices in predicting unemployment this study provides valuable implications for policymakers to design sound economic policies

option markets and implied volatility past versus present abstract traders in the nineteenth century appear to have priced options the same way that twenty first century traders price options empirical regularities relating implied volatility to realized volatility stock prices and other implied volatilities including the volatility skew are qualitatively the same in both eras modern pricing models and centralized exchanges have not fundamentally altered pricing behavior but they have generated increased trading volume and a much closer conformity in the level of observed and model prices the major change in pricing is the sharp decline in implied volatility relative to realized volatility evident immediately upon the opening of the cboe

a new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the business cycle abstract this paper introduces a general procedure for decomposition of non stationary time series into a permanent and transitory component allowing both components to be stochastic the permanent component is shown to be a random walk with drift and the transitory or cyclical component is a stationary process with mean zero the decomposition methodology which depends only on past data and therefore is computable in real time is applied to the problem of measuring and dating business cycles in the portwar u s economy we find that measured expansions and contractions are of roughly equivalent duration and that our dating of cyclical episodes tends to lead the traditional nber dating and to a lesser extent the growth cycle chronology of zarnowitz and boschan 1977

on the dynamic effects of oil price shocks a study using industry level data abstract this paper analyzes the effects of oil price shocks on demand and supply in various industries the impulse responses of identified var models indicate that for industries that have a large cost share of oil such as petroleum refinery and industrial chemicals oil price shocks mainly reduce supply in contrast for many other industries with the automobile industry being a particularly important example oil price shocks mainly reduce demand the paper suggests that oil price shocks influence economic activities beyond that explained by direct input cost effects possibly by delaying purchasing decisions of durable goods

forecasting volatility of crude oil markets abstract this article investigates the efficacy of a volatility model for three crude oil markets brent dubai and west texas intermediate wti with regard to its ability to forecast and identify volatility stylized facts in particular volatility persistence or long memory in this context we assess persistence in the volatility of the three crude oil prices using conditional volatility models the cgarch and figarch models are better equipped to capture persistence than are the garch and igarch models the cgarch and figarch models also provide superior performance in out of sample volatility forecasts we conclude that the cgarch and figarch models are useful for modeling and forecasting persistence in the volatility of crude oil prices

asymmetries in the responses of regional job flows to oil price shocks this paper studies the effect of oil price innovations on manufacturing job flows across u s states first i estimate a nonlinear structural equation model and compute impulse response functions by monte carlo integration i find asymmetries in the responses of job flows to positive and negative oil price innovations yet these asymmetries do not pass a test of symmetry on the impulse responses especially after accounting for data mining third i use a test for the absence of job reallocation to evaluate whether an unexpected increase in the real price of oil price triggers an important change in job reallocation i find that oil price shocks have limited regional allocative effects

impulse response function for conditional volatility in garch models this article defines and analyzes the impulse response function for conditional volatility in generalized autoregressive conditional heteroscedasticity garch models it first derives the function from a vector autoregressive and moving average representation of the garch models and obtains the corresponding standard errors from the first order derivatives of the function and the covariance matrix of the estimated parameters then this article employs a monte carlo study to assess the finite sample properties of the standard errors and provides an empirical example of the dependence of exchange rate volatility to demonstrate its use in empirical applications

medical care costs how much welfare loss hardly a week goes by without a front page newspaper article on rising health care costs and the uninsured in this article i focus mainly on costs arguing that the issue has been somewhat misconceived while the level of medical care spending in the u s is a cause for concern the welfare losses associated with rises in that level of spending may not be as large as the public rhetoric can make them seem in fact cost containment may not be as urgent as is widely supposed and some proposed cost containment policies may result in welfare losses for the insured and even increase the number of uninsured

oil price uncertainty and the u s stock market analysis based on a garch in mean var model abstract this paper uses a bivariate garch in mean var model to examine the effect of oil price uncertainty on the u s real stock returns at the aggregate and sectoral levels estimation results suggest that there is no statistically significant effect of oil price volatility on the u s stock returns the absence of an uncertainty effect might be explained by the fact that companies are likely to hedge against fluctuations in oil prices it could also stem from the ability of most companies to transfer the higher cost of oil to customers moreover the impulse responses indicate that accounting for oil price uncertainty oil price increases and decreases have symmetric effects on the u s aggregate stock returns in that energy price increases and decreases are estimated to have equal and opposite effects on the u s financial market however this symmetric effect doesn t hold across all the sectors studied in this paper

asymmetries in the response of economic activity to oil price increases and decreases abstract it has been common to assume that the relationship between economic activity and oil prices is asymmetric theoretical underpinnings for this asymmetry include costly sectoral reallocation partial equilibrium models of irreversible investment and some version of precautionary savings yet recent studies that use new methodologies to test for asymmetries in u s data have cast some doubts on that premise in this paper we use state of the art techniques to evaluate the presence of asymmetries for a set of oecd countries containing both oil exporters and oil importers we find very little support for the hypothesis that the response of industrial production to oil price increases and decreases is asymmetric our results have important implications for theoretical models of the transmission of oil price shocks they point towards the importance of direct supply and direct demand transmission channels as well as indirect transmission channels that imply a symmetric response

the effects of oil price shocks on job reallocation we investigate the effect of oil price innovations on u s manufacturing job flows using a simultaneous equation model that nests symmetric and asymmetric responses we find no evidence of asymmetry in the response of job flows to positive and negative oil price innovations we then inquire whether firms when facing positive shocks shed jobs faster than they create jobs we show that positive innovations lead to a decline in net employment and an increase in job reallocation possibly due to search and matching issues yet the latter effect becomes statistically insignificant when we control for data mining we demonstrate that the cumulative one year effect of oil price shocks on job creation and destruction was smaller during the great moderation but it was larger for gross job reallocation these variations were caused by a change in the transmission channel and not by smaller oil price shocks

nonlinearities in the response of real gdp to oil price shocks abstract this paper re examines whether real gdp growth responds asymmetrically to real oil price increases and decreases using a sample that includes the recent oil price declines i follow kilian and vigfusson 2011a and conduct a test of symmetry i find no evidence against the null of symmetry using the 3 year net oil price increase specification moreover i find that the results are not stable for different nonlinear transformations of the real price of oil finally evidence of asymmetry vanishes after computing specification robust critical values

commodities for the long run using a novel dataset consisting of daily futures prices going back to 1877 we find that returns of commodity futures indices have on average been positive over the long run although return premiums are associated with both carry and spot returns commodity returns in different economic states inflation up down expansion recession vary mostly as a result of moves in the underlying spot price these economic states are important drivers of commodity returns even after conditioning on whether commodity markets are in backwardation or contango the evidence supports commodities as a potentially attractive asset class in portfolios of stocks and bonds

stock prices and volume the authors undertake a comprehensive investigation of price and volume co movement using daily new york stock exchange data from 1928 to 1987 they adjust the data to take into account well known calendar effects and long run trends to describe the process they use a seminonparametric estimate of the joint density of current price change and volume conditional on past price changes and volume four empirical regularities are found 1 positive correlation between conditional volatility and volume 2 large price movements are followed by high volume 3 conditioning on lagged volume substantially attenuates the leverage effect and 4 after conditioning on lagged volume there is a positive risk return relation article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

a neoclassical model of unemployment and the business cycle this paper investigates a general equilibrium model of unemployment and the business cycle in which specialization of labor plays a key role a rational expectations equilibrium with fully flexible wages and prices can exhibit unemployment in which the marginal product of employed workers exceeds the reservation wage of those who are without jobs workers are unemployed either because they are in the process of relocating for a better job or because they are waiting for conditions in the depressed sector to improve moreover seemingly small disruptions in the supplies of primary commodities such as energy could be the source of fluctuations in aggregate employment and can exert surprisingly large effects on real output

where do jobs go when oil prices drop abstract in this paper we estimate a factor augmented vector autoregressive favar model to investigate the effect of oil price shocks on total private job flows as well as on industry level job creation and destruction following an unexpected oil price drop in the first year we find that in oil and gas extraction and support activities for mining exhibit a reduction in job creation and an increase in job destruction instead industries in construction manufacturing and services exhibit an increase in the net employment change an unexpected decline in the real oil price slows down the pace of gross job reallocation we demonstrate that the increase decrease in private job destruction creation observed during the first year is primarily driven by the response of closing expanding firms in services and manufacturing

heteroskedasticity in stock return data volume versus garch effects this paper provides empirical support for the notion that autoregressive conditional heterqskedasticity arch in daily stock return data reflects time dependence in the process generating information flow to the market daily trading volume used as a proxy for information arrival time is shown to have significant explanatory power regarding the variance of daily returns which is an implication of the assumption that daily returns are subordinated to intraday equilibrium returns furthermore arch effects tend to disappear when volume is included in the variance equation the autoregressive conditiqnal heteroskedasticity arch process of engle 1982 has been shown to provide a good fit for many financial return time series 1 arch imposes an autoregressive structure on conditional variance allqwing volatility shocks to persist over time this persistence captures the propensity of returns of like magnitude to clu ter in time and can explain the well documented nonnormality and nonstability of empirical asset return distributions see especially fama 1965 an appealing explanation for the presence of arch is based upon the hypothesis that daily returns are generated by a maiture of distributions in which the rate of daily information arrival is the stochastic mixing variable as suggested by diebold 1986 gallant hsieh and tauchen 1988 and stock 1987 1988 arch might capture the time series properties e g serial correlation of this mixing variable hqwever this linkage has not been broadly documented with the datia the objective of this study is to examine the validity of this explanation for daily stock returns the empirical strategy exploits the implication of the mixture model that the variance of daily price increments is heteroskedastic specifically positively related to the rate of daily information arrival using daily trading volume as a proxy for the mixing variable we show that for a sample of 20 common stocks arch effects vanish when volume is included as an explanatory variable in the conditional variance equation

arch models properties estimation and testing abstract the aim of this survey paper is to provide an account of some of the important developments in the autoregressive conditional heteroskedasticity arch model since its inception in a seminal paper by engle 1982 this model takes account of many observed properties of asset prices and therefore various interpretations can be attributed to it we start with the basic arch models and discuss their different interpretations arch models have been generalized in different directions to accommodate more and more features of the real world we provide a comprehensive treatment of many of the extensions of the original arch model next we discuss estimation and testing for arch models and note that these models lead to some interesting and unique problems there have been numerous applications and we mention some of these as we present different models the paper includes a glossary of the acronyms for the models we describe

this is what happened to the oil price macroeconomy relationship abstract many of the quarterly oil price increases observed since 1985 are corrections to even bigger oil price decreases the previous quarter when one looks at the net increase in oil prices over the year recent data are consistent with the historical correlation between oil shocks and recessions

oil price shocks and u s economic activity abstract our understanding of the sources of oil price fluctuations and their effects on the u s economy has undergone important transformations in the last decades first several studies have demonstrated the importance of identifying the causes of oil price fluctuations whether they are driven by demand or supply shocks instead of assuming that oil price changes are exogenous to the evolution of the world s economic activity second new methodologies have allowed researchers to re evaluate the functional form of the relationship between oil prices and u s gdp its components and job flows third significant advances have been made in understanding the relationship between oil price uncertainty news economic policy uncertainty and aggregate economic activity finally investigations into the time varying nature of oil price macroeconomy relationship have provided important insights into the reasons why unexpected increases in oil prices appear to shock less now than in the 1970s this paper reviews the studies that have contributed to these different aspects of the literature

how sensitive are consumer expenditures to retail energy prices abstract there is growing evidence that the primary effect of energy price shocks on the u s economy involves a reduction in consumer spending we quantify the direct effect on real consumption of unanticipated changes in discretionary income shifts in precautionary savings and changes in the operating cost of energy using durables the possibility of asymmetries in the response of real consumption to energy price shocks is also considered we demonstrate that linear models are consistent with the symmetric behavior of real consumption in 1979 when energy prices increased sharply and in 1986 when they fell sharply it is shown that historically energy price shocks have been an important factor in explaining u s real consumption growth but by no means the dominant factor

new empirical evidence on the bid ask spread in this article we model the determinants of spread for 734 firms listed on the nyse over the period 1 january 1998 to 31 december 2008 we propose a panel data model of the determinants of spread there are four main messages emerging from our work we find a statistically significant effect of volume on spread inconsistent with the work of johnson 2008 on price we find mixed results consistent with the literature on the effect of price volatility on spread our results are completely the opposite of the cross sectional literature but sides with the relatively recent work of chordia et al 2001 we allow for persistence of spread as a determinant of spread and find significant evidence of spread persistence across all 16 sectors finally we examine size effects and find statistically strong evidence of size effects based on the relationship between price and spread persistence and spread and volatility and spread

oil price uncertainty and unemployment abstract in this study we empirically search the effects of oil price uncertainty and oil price shocks on u s unemployment rate using a garch in mean var model for the period 1974 q2 2017 q4 based on our findings we show that oil price uncertainty significantly increases unemployment rate in the u s economy likewise our impulse response analysis affirms that a positive oil price shock increases unemployment while the response of unemployment to a negative oil price shock is negative moreover we reveal that unemployment rate reacts to positive and negative shocks asymmetrically more specifically the response of unemployment to negative oil price shocks is negative and slighter in size besides oil price uncertainty is found to magnify the rise in the u s unemployment rate these findings are in keeping with the real options theory which reveals that the uncertainty about goods prices leads firms to postpone or abandon their production and investment and they seem to be robust to the use of different real oil price measures

asymmetric responses of consumer spending to energy prices a threshold var approach abstract we document asymmetric responses of consumer spending to energy price shocks using a threshold vector autoregressive model estimated with bayesian methods on u s data with high and low real energy inflation regimes positive energy price shocks have a greater negative effect on consumption compared with the increase in consumption that arises from negative energy price shocks for large shocks the cumulative consumption responses are three to five times greater for positive than negative shocks in disaggregated spending data the asymmetric responses are strongest for durable goods consumption but asymmetries are also present in the responses of nondurables and services consumption

regularities in volatility and the price of risk following large stock market movements in the us and japan abstract we examine the effects of large price changes on volatility and the price of risk of two broad stock indices the crsp value weighted index of nyse and amex stocks and the topix of the tokyo stock exchange volatility generally rises after large price changes of either sign but usually revert to pre jump levels within a week or two in contrast the price of risk except for the first day after a jump typically declines following large price increases and rises following large price declines with little apparent tendency to revert toward pre jump levels before the arrival of the next jump

oil and the macroeconomy when prices go up and down an extension of hamilton s results in an important paper hamilton 1983 demonstrated a strong correlation between oil price changes and gross national product growth in u s data however his study pertained to a period in which all the large oil price movements were upward and thus it left unanswered the question whether the correlation persists in periods of price decline moreover the price variable he used was somewhat distorted by price controls in the 1970s this note investigates whether hamilton s results continue to hold when the sample is extended to include the recent oil market collapse and the oil price variable is corrected for the effects of price controls particular attention is given to the possibility of asymmetric responses to oil price increases and decreases as suggested in the structural employment literature loungani 1986 davis 1987 hamilton 1988 like hamilton i based my investigation on the gnp equation in sims s 1 980b six variable quarterly vector autoregressive model

the time variation of expected returns and volatility in foreign exchange markets this article analyzes the time variation in conditional means and variances of monthly and quarterly excess dollar returns on eurocurrency investments all results are based on a vector autoregression with weekly sampled data on exchange rate changes and forward premiums of three currencies both past exchange rate changes and forward premiums predict future forward market returns moreover past forward premium volatilities predict the volatility of exchange rates expected forward market returns are very variable and persistent and exhibit marked comovements these results carry over to cross rate e g yen mark investments as well

a crude shock explaining the short run impact of the 2014 16 oil price decline across exporters abstract the sharp long lasting decline in oil prices in 2014 16 tested the resilience of oil exporters we examine the degree to which economic fundamentals entering the oil price decline explain the impact on economic growth across oil exporting economies and derive policy implications as to what factors help to mitigate the negative effects we find that pre existing fundamentals account for about half of the cross country variation in the impact of the shock oil exporters that weathered the shock better tended to have a stronger fiscal position higher foreign currency liquidity buffers a more diversified export base a history of price stability and a more flexible exchange rate regime within this group of countries the impact of the shock is not found to be related to the size of oil exports or the share of oil in fiscal revenue or economic activity

oil price uncertainty and u s employment growth abstract this paper studies the effects of oil price changes on u s aggregate and sectoral employment growth in the presence of time varying oil price uncertainty we estimate a bivariate garch in mean var model using u s monthly data of oil prices and employment growth for the period 1974 m2 2018 m11 based on the results we show that an increase in oil prices reduces total employment growth and that in most private sectors but the public sector is largely unaffected the effects on employment growth in various hub sectors are also different furthermore employment growths at both aggregate and disaggregate levels respond asymmetrically to positive and negative oil price shocks which could possibly be attributed to oil price uncertainty this asymmetric impact is more evident when the model is estimated on the entire sample than on the 1970s sample implying that the role of oil price uncertainty in accounting for variations in employment growth can differ over time these findings underline the empirical relevance of oil price uncertainty for the u s labor market dynamics

segment shifts and capacity utilization in the u s automobile industry an important school of thought argues that sectoral shifts may account for a substantial portion of aggregate fluctuations e g david lilien 1982 fischer black 1987 steven davis 1987 events such as the oil shocks of the 1970 s exchange rate fluctuations and shifts in government spending have their direct effect on the composition of economic activity the sectoral shift literature argues that they may affect the level and the dynamics of output and employment as well the typical story is of a slowly functioning labor market after a sectoral shock search behavior matching problems and a time cost of switching sectors slow the reallocation of workers across sectors this focus however misses important elements of the reallocation problem as black 1987 has argued not only sector specific human capital but also complementary physical and managerial engineering organization etc capital must be reallocated or recreated in response to sectoral shocks if jobs are linked to capital then the slow adjustment of labor may be attributable in part to the sluggishness in the adjustment of capital this paper presents an empirical study of the impact of oil shock sectoral shifts within the u s automobile industry from an analytical perspective a sectoral shift is any event that raises desired output and employment in some sectors and lowers them in others for our purposes a sector is a size class of automobiles within the automobile industry we will be able to study two distinct questions first did the oil priceinduced shocks to the composition of demand interact with short run rigidities in supply to limit industry wide capacity utilization we will quantify the extent to which the changing composition of demand was reflected in a lower aggregate output level with obvious consequences for the employment of capital and of labor and for the return to firms knowledge capital our second question concerns the pace of the intermediate run adjustment to sectoral shocks how rapidly could capital and labor be reallocated to new demand conditions such considerations determine the impact of sectoral shocks on employment and capacity utilization dynamics

learning and information aggregation in an exit game we analyze information aggregation in a stopping game with uncertain common payos players learn from their own private experiences as well as by observing the actions of other players we give a full characterization of the symmetric mixed strategy equilibrium and show that information aggregates in randomly occurring exit waves observational learning induces the players to stay in the game longer the equilibria display aggregate randomness even for large numbers of players

volatility spillovers and cross hedging between gold oil and equities evidence from the gulf cooperation council countries the paper examines the return and volatility spillovers between crude oil gold and equities and investigates the usefulness of the two commodities in hedging equity portfolios using daily data from january 20043 to may 2016 for the gulf cooperation council countries a dcc garch model is used to estimate dynamic correlations and hedge ratios we find significant spillovers from oil to equities highlighting the heavy dependence of the local economies on oil moreover the spillovers of gold on the stock markets are insignificant suggesting that gold price fluctuations do not necessarily influence equity investment decisions in the opposite direction we find that equities do not exert significant influence on the two commodities which we attribute to the relatively small capitalisation of the exchanges our results reveal low dynamic correlations and hedge ratios with a few spikes during crises indicating that oil and gold are cheap hedges for stocks albeit not good ones while they could be considered as weak safe havens but at a considerable cost

the dynamics of time varying volatilities in different size second hand ship prices of the dry cargo sector this paper examines the dynamics of conditional volatilities in the world dry bulk market for second hand ships in particular it models and compares volatility estimates between different size vessels using monthly data the recently developed class of autoregressive conditional heteroskedasticity arch models are utilized for this purpose it is found that broadly speaking prices of small vessels are less volatile than larger ones and the nature of these volatilities vary across sizes panamax volatilities are mostly driven by old news while new shocks are more important for handysize and capesize volatilities furthermore conditional volatilities of handysize and panamax prices are positively related to interest rates and capesize to time charters

the gaussian mixture dynamic conditional correlation model parameter estimation value at risk calculation and portfolio selection a multivariate generalized autoregressive conditional heteroscedasticity model with dynamic conditional correlations is proposed in which the individual conditional volatilities follow exponential generalized autoregressive conditional heteroscedasticity models and the standardized innovations follow a mixture of gaussian distributions inference on the model parameters and prediction of future volatilities are addressed by both maximum likelihood and bayesian estimation methods estimation of the value at risk of a given portfolio and selection of optimal portfolios under the proposed specification are addressed the good performance of the proposed methodology is illustrated via monte carlo experiments and the analysis of the daily closing prices of the dow jones and nasdaq indexes

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

long range dependence in the conditional variance of stock returns abstract we examine persistence in the conditional variance of u s stock returns indexes our results show evidence of long memory in high frequency data suggesting that models of conditional heteroskedasticity should be made flexible enough to accommodate these empirical findings

common stochastic trends in a system of exchange rates univariate tests reveal strong evidence for the presence of a unit root in the univariate time series representation for seven daily spot and forward exchange rate series furthermore all seven spot and forward rates appear to be cointegrated that is the forward premiums are stationary and one common unit root or stochastic trend is detectable in the multivariate time series models for the seven spot and forward rates respectively this is consistent with the hypothesis that the seven exchange rates possess one longrun relationship and that the disequilibrium error around that relationship partly accounts for subsequent movements in the exchange rates a general consensus has emerged in recent years that many macroeconomic time series such as gnp consumption expenditures disposable income etc can be characterized by a stochastic trend model in particular nelson and plosser 22 described this property as one of being difference stationary so that the first difference of a time series is stationary an alternative trend stationary model where a stationary component is added to a deterministic trend term has generally been found to be less appropriate 1 similarly it has long been recognized that many financial time series such as foreign exchange rates are nonstationary e g in meese and singleton 21 the issue of nonstationary is not merely a statistical curiosity but has several important implications for the modeling of exchange rates for instance many models of exchange rate determination under rational expectations require stationarity assumptions when solving out the expected future values of the fundamentals further there has been some controversy over the appropriate transformations to use when conducting tests of whether the forward rate is an unbiased and efficient predictor of the future spot exchange rate 2 some authors e g frenkel 11 12 have conducted tests in levels while geweke and feige 14