uncertainties and extreme risk spillover in the energy markets a time varying copula based covar approach abstract in this paper we explore the impact of uncertainties on energy prices by measuring four types of delta conditional value at risk covar using six time varying copulas three different measures of uncertainty economic policy financial markets and energy markets are considered and the magnitude and asymmetric effects of their influence are investigated our results suggest that there generally exists negative dependence between energy returns and changes in uncertainty the risks of clean energy and crude oil returns are more sensitive to uncertainties in the financial and energy markets while the impact of economic policy uncertainty is relatively weak the upside and downside covars and covars demonstrate significant asymmetric effects in response to extreme uncertainty movement our findings therefore have important implications for energy portfolio investment

modeling systemic risk and dependence structure between oil and stock markets using a variational mode decomposition based copula method abstract this study combines the variational mode decomposition vmd method and static and time varying symmetric and asymmetric copula functions to examine the dependence structure between crude oil prices and major regional developed stock markets s p500 stoxx600 djpi and tsx indexes during bear normal and bull markets under different investment horizons furthermore it analyzes the upside and downside short and long run risk spillovers between oil and stock markets by quantifying three market risk measures namely the value at risk var conditional var covar and the delta covar covar the results show that there is a tail dependence between oil and all stock markets for the raw return series by considering time horizons we show that there is an average dependence between the considered markets for the short run horizons however the tail dependence is also found for the long run horizons between the oil and stock markets with the exception of the s p500 index which exhibits average dependence with the oil market moreover we find strong evidence of up and down risk asymmetric spillovers from oil to stock markets and vice versa in the short and long run horizons finally the market risk spillovers are asymmetric over the time and investment horizons

commitment and costly signaling in decentralized markets i propose a search model of a decentralized market with asymmetric information in which sellers are unable to commit to asking prices announced ex ante relaxing the commitment assumption prevents sellers from using price posting as a signaling device to direct buyers search private information about the gains from trade and inefficient entry on the demand side then contribute to market illiquidity endogenous sorting among costly marketing platforms can facilitate the search process by segmenting the market to alleviate information frictions seemingly irrelevant but incentive compatible listing fees are implementable provided that the market is not already sufficiently active abstract from author

dynamic return volatility dependence and risk measure of covar in the oil market a time varying mixed copula model abstract this study investigates the risk level in the oil market measured by value at risk var and conditional var covar as well as the dynamic and asymmetric dependence between wti returns and crude oil volatility index ovx by constructing six time varying mixed copula models results show that mixed copula between t copula and the 270 degree rotated clayton copula is the optimal fitting copula to measure dynamic dependence the estimated time varying kendall coefficients indicate that wti returns and ovx present negative dependence most of the time there exists a structural change point of dependence between wti returns and ovx changes on april 17 2009 while the dependence characteristics within the subsamples are similar to that in the whole sample indicating the rationality of our time varying mixed copula models finally the tests show significant risk spillover from ovx to wti returns and also asymmetric effects for covars in response to different upside and downside extreme ovx movements

differentiating use and nonuse values for coastal pond water quality improvements this paper measures the benefits of water quality improvements in three coastal ponds on the island of martha s vineyard massachusetts u s a use option and existence values were elicited from martha s vineyard property owners by the contingent valuation method on average more than half of the total benefits are attributed to existence value results from the heckman selection model show that the exclusion of protest as well as missing bids does not cause significant bias in estimating respondents willingness to pay socioeconomic characteristics are found to have distinctively different influences on use option and existence values different model parameters are likely to be estimated depending on which value categories are measured by a selected valuation technique these findings emphasize the importance of nonuse values from water quality improvements and of socioeconomic characteristics for measuring different categories of values

heterogeneous beliefs regret and uncertainty the role of speculation in energy price dynamics abstract this paper proposes to investigate the impact of financialization on energy markets oil gas coal and electricity european forward prices during both normal times and periods of extreme fluctuation by using an original behavioral and emotional approach with this aim we propose a new theoretical and empirical framework based on a heterogeneous agents model in which fundamentalists and chartists co exist and are subject to regret and uncertainty we find significant evidence that energy markets are composed of heterogeneous traders who behave differently depending on the intensity of the price fluctuations and the uncertainty context in particular energy prices are governed primarily by fundamental and chartist agents that are neutral to uncertainty during normal times whereas these prices face irrational chartist investors averse to uncertainty during periods of extreme fluctuations in this context the recent surge in energy prices can be viewed as the consequence of irrational exuberance our new theoretical model is suitable for modeling energy price dynamics and outperforms both the random walk and the arma model in out of sample predictive ability

asymmetric and extreme influence of energy price changes on renewable energy stock performance abstract promoting the development of renewable energy has become the key factor to solve the problems of energy and climate change issues however its development is largely constrained by the prices of traditional fossil energy this paper explores the influence of various fossil energy price changes on renewable energy stock returns using a network approach specifically a positive and negative returns network and value at risk var network are constructed separately for identifying the asymmetric and extreme information spillover our findings show the fossil energy renewable energy network system has a relatively high level of interdependence the electricity market behaves as the major contributor to the changes of renewable energy returns in the returns connectedness network while oil and coal contribute most to the changes of renewable energy returns in the var connectedness network the dynamic results show that the contributions of fossil energy price changes to renewable energy returns have strong time varying pattern with high volatility over time the total connectedness in the positive returns network is slightly stronger than that in the negative returns network for most of the time during our sample period

rate fears gauges and the dynamics of fixed income and equity volatilities abstract while cboe s vix index is widely acknowledged as a broad based investor fear gauge for its strong inverse relationship with major equity indexes one cannot necessarily expect it to translate to the level of future turbulence or investor risk aversion in fixed income markets indeed expected volatilities in equity and interest rate markets as measured respectively by cboe s vix and their newly launched swap rate volatility index the srvx exhibit significantly distinct behavior the two indexes react to different events and risk factors thereby providing investors with complementary diversification hedging and risk taking tools

information diffusion cluster formation and entropy based network dynamics in equity and commodity markets this paper investigates the dynamic causal linkages among u s equity and commodity futures markets via the utilization of complex network theory we make use of rolling estimations of extended mat

systemic risk measurement multivariate garch estimation of covar abstract we modify adrian and brunnermeier s 2011 covar the var of the financial system conditional on an institution being in financial distress we change the definition of financial distress from an institution being exactly at its var to being at most at its var this change allows us to consider more severe distress events to backtest covar and to improve its consistency monotonicity with respect to the dependence parameter we define the systemic risk contribution of an institution as the change from its covar in its benchmark state defined as a one standard deviation event to its covar under financial distress we estimate the systemic risk contributions of four financial industry groups consisting of a large number of institutions for the sample period june 2000 to february 2008 and the 12 months prior to the beginning of the crisis we also investigate the link between institutions contributions to systemic risk and their characteristics

a conditional dependence approach to co2 energy price relationships abstract this paper uses the conditional vine copula approach to model the dependence structure between european based carbon allowances and major energy prices it makes two central contributions to the related literature first we extend the previous works of reboredo 2013 2014 by allowing for complete coverage of energy markets including natural gas coal and electricity beyond the carbon oil dependencies second we simultaneously investigate the multivariate dependence among all variables in the system so that each of them can interact with the others based on a rich variety of bivariate copula functions the consideration of the electricity market in this context offers the possibility to gauge its influences through the computation of the fuel switching mechanism we mainly find that there is a reliable and positive link between coal and gas prices and between coal and oil prices with or without the presence of electricity prices while a weak and positive link is detected between brent and gas prices carbon prices co move only weakly with energy prices and their link to oil and gas prices is negative moreover the switch from coal to gas does not occur when the relative price of fuels taking into account carbon costs is assessed this happens because the fuel switching mechanism is still more costly than carbon abatement our findings remain intact when alternative electricity prices are used

problems in valuing the benefits of biodiversity protection this paper considers two problems in valuing the benefits of biodiversity protection these are firstly that preferences for biodiversity protection may be lexicographic rather than utilitarian the more individuals for whom this is true the less is cost benefit analysis validated as a means of decision making for biodiversity protection since lexicographic preferences are incompatible with the kaldor hicks compensation test secondly people may be poorly informed about the meaning of biodiversity complicating the use of contingent valuation as a means of measuring preservation benefits this paper first discusses the meaning of biodiversity and trends in diversity over time we offer some empirical evidence with regard to lexicographic preferences consider the implications of having poorly informed consumers and then report the results of a contingent valuation study of biodiversity protection with varying levels of information we find that willingness to pay for biodiversity protection increases with the level of information provided

dynamic speculation and hedging in commodity futures markets with a stochastic convenience yield the main objective of this paper is to address in an a continuous time framework the issue of using storable commodity futures as vehicles for hedging purposes when in particular the convenience yield as well as the market prices of risk evolve randomly over time following the martingale route and by operating a suitable constant relative risk aversion utility function crra specific change of numeraire we solve the investor s dynamic optimization program to obtain quasi analytical solutions for optimal demands which can be expressed in terms of two discount bonds traded and synthetic contrary to the existing literature we explicitly derive the individual optimal proportions invested in the spot commodity in a discount bond and in the futures contracts which can be computed in a simple recursive way we suggest various decompositions allowing an investor to assess the sensitivity of the optimal demands to the state variables and to specify the role played by each risky asset empirical evidence shows that the convenience yield has a strong impact on the speculation and hedging positions and the interaction among time varying risk premia determines the magnitude and the sign of these positions

uncertainty and crude oil returns we use a copula approach to investigate the effect of uncertainty on crude oil returns using copulas to construct multivariate distributions of time series data permit the calculation of the dependence structure between the series independently of the marginal distributions further we implement the copula estimation using a rolling window method to allow for a time varying effect of equity and economic policy uncertainty on oil returns the results show that higher uncertainty as measured by equity and economic policy uncertainty indices significantly increase crude oil returns only during certain periods of time that is we find a positive dependence prior to the financial crisis and great recession interestingly estimation of the copula over the entire sample period leads to a negative dependence between the equity and economic policy indices and the crude oil return

is certainty in carbon policy better than uncertainty abstract uncertainty in the strictness of carbon policy can have significant impacts on power generating firms capacity investment decisions and market outcomes we investigate the effects of this policy uncertainty on firms expected profits consumers surplus and firms cost for reaching a co 2 emission target our results derived from a game theoretical model and applied to realistic data indicate that uncertainty in the carbon policy induces more capacity investments in fossil and renewable technologies we find that it is optimal for firms with higher risk aversion to invest more in renewable technologies than their less risk averse rivals for policy makers our results suggest counter intuitively that retaining the flexibility to update emission targets whilst causing uncertainty in the carbon policy is beneficial this is because it provides higher expected consumer surplus and lower expected electricity price power generating firms are also better off under the policy uncertainty by having lower expected costs for reaching the emission goal and higher expected profits when firms risk aversions are low these results support the approach employed in european power markets to periodically update the co 2 emission cap depending on the prevailing circumstances rather than having certainty in the decrements of the caps over a longer time horizon our insights can help policy makers and firms to make better decisions by understanding how carbon policy uncertainty impacts the optimal capacity investments and how these investments might depend on the firms heterogeneity in risk aversion

fluctuations in uncertainty this review article tries to answer four questions i what are the stylized facts about uncertainty over time ii why does uncertainty vary iii do fluctuations in uncertainty matter and iv did higher uncertainty worsen the great recession of 2007 2009 on the first question both macro and micro uncertainty appears to rise sharply in recessions on the second question the types of exogenous shocks like wars financial panics and oil price jumps that cause recessions appear to directly increase uncertainty and uncertainty also appears to endogenously rise further during recessions on the third question the evidence suggests uncertainty is damaging for short run investment and hiring but there is some evidence it may stimulate longer run innovation finally in terms of the great recession the large jump in uncertainty in 2008 potentially accounted for about one third of the drop in gdp

risk dependence of covar and structural change between oil prices and exchange rates a time varying copula model abstract this paper analyses the dynamic dependence between wti crude oil and the exchange rates of the united states and china taking structural changes of dependence into account by using six time varying copula models upside and downside conditional values at risk covars are introduced specifically to measure the upward and downward risk dependences between oil prices and exchange rates the findings indicate a structural break point of dependence exists between daily or weekly crude oil and the us dollar index the dependence between crude oil and the rmb exchange rate is faintly positive with lower tail dependence while the dependence between crude oil and the us dollar index is significantly negative with lower upper and upper lower tail dependence finally the covars results show that there is significant risk spillover from crude oil to chinese and the us exchange rate markets furthermore the spillover effect is significantly asymmetry in chinese exchange rate market in response to rising and falling oil returns while the asymmetry of spillover effect for the us dollar index is not significant

modeling and predicting the cboe market volatility index abstract this paper performs a thorough statistical examination of the time series properties of the daily market volatility index vix from the chicago board options exchange cboe the motivation lies not only on the widespread consensus that the vix is a barometer of the overall market sentiment as to what concerns investors risk appetite but also on the fact that there are many trading strategies that rely on the vix index for hedging and speculative purposes preliminary analysis suggests that the vix index displays long range dependence this is well in line with the strong empirical evidence in the literature supporting long memory in both options implied and realized variances we thus resort to both parametric and semiparametric heterogeneous autoregressive har processes for modeling and forecasting purposes our main findings are as follows first we confirm the evidence in the literature that there is a negative relationship between the vix index and the s p 500 index return as well as a positive contemporaneous link with the volume of the s p 500 index second the term spread has a slightly negative long run impact in the vix index when possible multicollinearity and endogeneity are controlled for finally we cannot reject the linearity of the above relationships neither in sample nor out of sample as for the latter we actually show that it is pretty hard to beat the pure har process because of the very persistent nature of the vix index

testing in models of asymmetric information this paper explores the role of testing in models of asymmetric information we demonstrate conditions under which testing for underlying characteristics can overcome adverse selection problems and lead to a full information competitive equilibrium this paper provides a more general statement of mirrlees result on the optimal use of infinite fines where testing cannot fully resolve the problems associated with asymmetric information we outline the source of the difficulties our results developed in the context of a labour market can be directly extended to other environments in problems with asymmetric information testing to discover an agent s chosen action or underlying characteristics may significantly reduce the cost of moral hazard and adverse selection

risk spillover between energy and agricultural commodity markets a dependence switching covar copula model abstract unlike previous studies we employ a relatively newer modelling technique a time varying copula with a switching dependence to characterise the conditional dependence between energy and agricultural commodity markets in a more realistic way because the dependence may switch between positive and negative correlation regimes over time a dependence switching copula more appropriately and realistically captures a dependence structure than a single copula regime our findings indicate that the lower tail dependence is much stronger in a bearish regime than in a bullish regime highlighting the importance of systematic risk spillovers during extreme downward movements furthermore the significant risk spillovers from energy to agricultural commodities are verified by measuring the conditional value at risk covar and delta covar finally some useful implications are summarized for investors portfolios and risk avoidance

downside and upside risk spillovers between exchange rates and stock prices abstract we examined downside and upside risk spillovers from exchange rates to stock prices and vice versa for a set of emerging economies we characterized the dependence structure between currency and stock returns using copulas and computed downside and upside value at risk and conditional value at risk we documented a positive relationship between stock prices and currency values in emerging economies with respect to the us dollar and the euro with downside and upside spillover risk effects transmitted both ways finally we also documented asymmetries in upside and downside risk spillovers and asymmetric differences in the size of risk spillovers when the domestic currency values against the us dollar and the euro our results consistent with flight to quality phenomena have implications for downside and upside risk management of international investor portfolios in emerging markets

existence values in benefit cost analysis and damage assessment existence values for obscure resources should not be ruled out a priori because consumers have limited time and resources for information gathering furthermore to the extent that environmental good things are highly substitutable existence values must be cautiously interpreted when evaluating public choice alternatives but similar concerns do not arise in damage assessments issues associated with adding up existence values across resources high per unit values and property rights in the existence of resources are also addressed

asymmetric risk spillover between financial market uncertainty and the carbon market a gas dcs copula approach abstract a thorough understanding the asymmetry in risk transferring mechanisms remains a challenge in the carbon market through the incorporation of the asymmetric tail distribution into the risk transferring mechanism the asymmetric response of the carbon market to financial market uncertainties can be explored herein we propose a generalized autoregressive score dynamic conditional score copula model to investigate the asymmetric risk spillover between financial market uncertainty and the carbon market we discover the existence of considerable asymmetric risk spillover from financial market uncertainty to the carbon market specifically the upper tail risk spillover effect is greater than the lower tail risk spillover effect the degree of risk spillover reached a peak during the european debt crisis also higher degrees of financial market uncertainty and especially uncertainty from the crude oil market cause a greater risk spillover to the carbon market than lower degrees of financial market uncertainty do in addition we discover that stock market uncertainty exhibits greater power than crude oil market uncertainty in transferring risk to the carbon market when systemic events occur our research provides meaningful information to investors and policy makers

disability insurance and the great recession the u s social security disability insurance ssdi program is designed to provide income support to workers who become unable to work because of a severe long lasting disability at present nearly nine million former workers receive ssdi benefits following several decades of rapid growth as the program has expanded observers have debated the degree to which this program growth is due to on the one hand past policy changes and anticipated growth in the insured population or on the other hand declining returns to labor force participation among low skilled workers underscoring the important role of labor markets is the evidence that ssdi payments in appalachia responded counter cyclically to local earnings shocks caused by the coal boom and bust of the 1970s and 1980s black daniel and sanders 2002 more recently linder and burdick 2013 show that the unemployment rate was positively associated with disability benefit claiming during and after the 2001 recession a finding that ssdi receipt is sensitive to economic cycles is of concern for several reasons the first is that there is little evidence that the incidence of severe disability is itself countercyclical because of this ssdi is designed to insure against permanent earnings shocks due to onset of disability and not transitory earnings shocks due to labor market conditions its strict eligibility rules lengthy application processing times and implicit work disincentives reflect this purpose and indeed very few ssdi beneficiaries ever return to substantial labor market activity it is thus problematic if displaced and discouraged workers turn to the ssdi program when they are in need of temporary assistance since they are unlikely to ever return to work once the labor market recovers one explanation for these business cycle effects is that they are driven by conditional applicants that is workers with health impairments who would prefer to remain in the labor force but who would apply for ssdi benefits if they lost their present job autor and duggan 2003 because applying for public ssdi benefits in the united states requires that one s earnings are below the threshold defining substantial gainful activity sga the opportunity cost of applying for benefits is reduced when one becomes unemployed thus not only should there be more ssdi applicants during economic downturns there should be notable compositional differences between those who apply during economic expansions and those who apply during economic recessions using survey data coe and rutledge 2013 find that ssdi applicants during recessions have higher past earnings and more recent work experience see also lindner and burdick 2013 in this study we use administrative data to estimate the effect of labor market conditions as measured by the unemployment rate on the number of ssdi applications the number and composition of initial allowances and denials and the timing of applications relative to disability onset we analyze the period of the great recession and compare this period with business cycle effects over the past two decades from 1992 through 2012 our analysis isolates the quantity and composition of applicants who are induced to apply for ssdi benefits when labor market opportunities decline and therefore provides important new evidence about the group for whom ssdi application is a substitute for labor force participation and their impact on the ssdi program