quantile dependence of oil price movements and stock returns we examine the impact of quantile and interquantile oil price movements on different stock return quantiles by testing the hypothesis of equality in conditional and unconditional quantile distribution functions of stock returns we capture quantile dependence under different stock market conditions while taking into account different kinds of oil price movements by computing unconditional and conditional stock return quantiles through marginal models for stock returns and copula functions for oil stock dependence analyzing stock return data for three developed economies the us the uk and the european monetary union and the five brics countries brazil russia india china and south africa for 2000 to 2014 our results indicate that 1 the impact of extreme upward and downward oil price changes on upper and lower stock price quantiles was much smaller before compared to after crisis onset 2 the downside spillover effects were larger than the upside spillover effects for most countries before crisis onset and for all countries after crisis onset and 3 small positive and negative oil price movements had no impact on any stock return quantiles neither before nor after crisis onset

small and large stakes risk aversion implications of concavity calibration for decision theory abstract a growing literature reports the conclusions that a expected utility theory does not provide a plausible theory of risk aversion for both small stakes and large stakes gambles and b this decision theory should be replaced with an alternative theory characterized by loss aversion this paper explains that the arguments in previous literature fail to support these conclusions either concavity calibration has no general implication for expected utility theory or it has problematic implications for all decision theories that involve concave transformations utility or value functions of positive money payoffs which makes loss aversion irrelevant to the argument

preference heterogeneity in experiments comparing the field and laboratory do laboratory experiments provide a reliable basis for measuring field preferences economists recognize that preferences can differ across individuals but only a few attempts have been made to elicit individual preferences for representative samples of a population in a particular geographical area region or country our primary objective is to directly compare estimates of preferences elicited from a convenience sample and the estimates for the wider population from which that sample is drawn we examine the strengths and weaknesses of laboratory and field experiments to detect differences in preferences over risk and time that are associated with standard observable characteristics of the individual

keep up with the winners experimental evidence on risk taking asset integration and peer effects the paper reports the result of an experimental game on asset integration and risk taking we find some evidence that winnings in earlier rounds affect risk taking in subsequent rounds but no evidence that real life wealth outside the experiment affects risk taking controlling for past winnings participants receiving a low endowment in a round engage in more risk taking we test a keeping up with the joneses hypothesis and find that subjects seek to keep up with winners though not necessarily with average earnings overall the evidence suggests that risk taking tracks a reference point affected by social comparisons

dynamic spillover effects among crude oil precious metal and agricultural commodity futures markets abstract this paper examines spillover effects among six commodity futures markets gold silver west texas intermediate crude oil corn wheat and rice by employing the multivariate deco garch model and the spillover index specifically we investigate the dynamics of return and volatility spillover indices to reveal the intensity and direction of transmission during the recent global financial and european sovereign debt crises our empirical results are as follows first we estimate a positive equicorrelation between commodity futures market returns and find that it increased sharply during the crises this effect can persist during periods of economic and financial turmoil diminishing the benefits of international portfolio diversification for investors second we identify bidirectional return and volatility spillovers across commodity futures markets and find more pronounced trends in their levels in the post crisis period this indicates the strong impact of spillovers during crisis periods third both gold and silver are information transmitters to other commodity futures markets while the remaining four commodity futures investigated were receivers of spillovers during recent periods of financial stress finally we analyse the optimal portfolio weights and time varying hedge ratios between metal and other commodities futures markets overall our findings provide new insights into channels of information transmission which may improve investment decisions and inform portfolio investors trading strategies

anomalies risk aversion economists ubiquitously employ a simple and elegant explanation for risk aversion it derives from the concavity of the utility of wealth function within the expected utility framework we show that this explanation is not plausible in most applications since anything more than economically negligible risk aversion over moderate stakes requires a utility of wealth function that is so concave that it predicts absurdly severe risk aversion over very large stakes we present examples of how the expected utility framework has misled economists and why we believe a better explanation for risk aversion must incorporate loss aversion and mental accounting

period specific volatility spillover based connectedness between oil and other commodity prices and their portfolio implications abstract this paper analyses the changing impact of oil price shocks on a bouquet of metal and agro prices and their implications for investment decisions during different oil price regimes separated by structural breaks endogenously identifying the structural breaks we use network analysis to decipher the nature and extent of such shock transfer across different sub periods we suggest optimal portfolios based on conditional variance estimates to hedge oil shocks during each period this is the first study to analyse the portfolio decisions during specific oil price regimes the results are of significant interest to investors and policy makers

please or squeeze brand performance implications of constrained and unconstrained multi item promotions existing research on price promotions typically investigates the effects of single product promotions however brand managers often promote multiple items simultaneously to bolster the performance of a complete brand line this paper investigates the brand performance implications of such multi item promotions we distinguish between two types of multi item promotions traditional unconstrained multi item promotions that grant a discount irrespective of the size or composition of the purchase set and constrained multi item promotions that require consumers to purchase specific quantities self bundling or even predetermined combinations fixed bundling of promoted items using a normative consumer decision model the authors analyze the relative effectiveness of these promotions in terms of unit sales and revenue impact and show that promotion performance is moderated by consumers preference for variety the authors find that unconstrained multi item promotions outperform single item promotions especially in markets without variety seeking in markets with variety seeking unconstrained multi item promotions are not as effective in stealing extra sales from competition because consumers prefer to spread their purchases across all items including competitive ones however in those markets self bundling promotions are particularly effective because they force consumers to adopt larger amounts of the promoted items at the expense of competitors finally in neither type of market does fixed bundling substantially improve promotion performance

the relationship between spot and futures oil prices do structural breaks matter abstract this paper examines the effect of structural breaks on the spot futures oil prices relationship we explore the impact of structural breaks on four critical issues including cointegrating relationships market efficiency under the expectation hypothesis and the no arbitrage rule causalities and forecasting performance of futures oil volatility as far as our empirical results exhibit the structural break we detect endogenously causes some influences on these issues which is in sharp contrast to the conclusions of existing studies our findings offer some implications and suggestions to researchers investors and policymakers

financialization in commodity markets a passing trend or the new normal abstract in this paper we show that large inflows into commodity investments a recent phenomenon known as financialization has changed the behavior and dependence structure between commodities and the general stock market the common perception is that the increase in comovements is the result of distressed investors selling both assets during the 2007 2009 financial crisis we show that financial distress alone cannot explain the size and persistence of comovements instead we argue that commodities have become an investment style for institutional investors given that institutional investors continue to target funds into commodities we predict spillovers between commodities and the stock market to remain high in the future

does oil move equity prices a global view many studies indicate that oil price shocks have an adverse effect on real output and hence an adverse effect on corporate profits where oil is used as a key input the present study examines whether and to what extent the adverse effect of oil price shocks impacts stock market returns to this end we analyse 35 datastream global industry indices for the period from april 1983 to september 2005 our findings indicate that oil price rises have a negative impact on equity returns for all sectors except mining and oil and gas industries generally these results are consistent with economic theory and evidence provided by previous empirical studies little evidence of any asymmetry is detected in the oil price sensitivities in light of our findings we recommend that international portfolio investors consider hedging oil price risk

oil price shocks policy uncertainty and stock returns of oil and gas corporations abstract this paper investigates the effects of oil price shocks and economic policy uncertainty on the stock returns of oil and gas companies we find that an oil demand side shock has a positive effect on the return of oil and gas companies on average whereas shocks to policy uncertainty have a negative effect on the return historical decomposition shows that the effects of oil shocks on the stock return are amplified by the endogenous policy uncertainty responses these results are consistent with those for major integrated oil and gas companies the return responses however show heterogeneous effects of structural shocks on upstream midstream and downstream oil and gas companies suggesting that a well diversified portfolio is obtainable

volatility spillovers between oil prices and stock sector returns implications for portfolio management abstract in this article we take a recent generalized var garch approach to examine the extent of volatility transmission between oil and stock markets in europe and the united states at the sector level the empirical model is advantageous in that it typically allows simultaneous shock transmission in the conditional returns and volatilities insofar as volatility transmission across oil and stock sector markets is a crucial element for portfolio designs and risk management we also analyze the optimal weights and hedge ratios for oil stock portfolio holdings with respect to the results our findings point to the existence of significant volatility spillover between oil and sector stock returns however the spillover is usually unidirectional from oil markets to stock markets in europe but bidirectional in the united states our back testing procedures finally suggest that taking the cross market volatility spillovers estimated from the var garch models often leads to diversification benefits and hedging effectiveness better than those of commonly used multivariate volatility models such as the ccc garch of bollerslev 1990 the diagonal bekk garch of engle and kroner 1995 and the dcc garch of engle 2002

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

modelling asymmetric volatility in oil prices under structural breaks abstract this paper shows that accounting for endogenously determined structural breaks within an asymmetric garch model reduces volatility persistence in oil prices more importantly we find that both good and bad news have significantly more impact on volatility if structural breaks are accounted for in a model thus previous studies have significantly underestimated the impact of news on volatility as they have inadvertently ignored these structural breaks in volatility our empirical results suggest that it is best to include both asymmetric effects and structural breaks in a garch model to accurately estimate oil price volatility dynamics our results have important practical implications not only for option valuation and hedging decisions but also have major consequences for broader financial markets the energy industry and the overall economy

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

metal volatility in presence of oil and interest rate shocks abstract this study uses three two factor volatility models of the garch family to examine the volatility behavior of three strategic commodities gold silver and copper in the presence of crude oil and interest rate shocks the results of the standard garch models suggest that gold and silver have almost the same volatility persistence which is greater than that of copper the cgarch estimates indicate that the short run transitory component of volatility converges to zero much faster for copper than for gold and silver in this sequence however the permanent volatility component demonstrates equally strong persistence in the long run for all three metals the egarch results suggest that the leverage effect is present and significant for copper only implying that gold and silver can be good investment in anticipation of bad times past oil shock does not impact all three metals similarly monetary policy and to leaser extent the oil shocks have calming effects on precious metals but not on copper if the t bill rate is used crises such as the 2003 iraq war heighten metal volatility these results have implications for derivatives valuations using gold as a reserve asset risk analysis and for the commodity exporting countries and commodity producing firms

a behavioral analysis of stochastic reference dependence we examine the reference dependent risk preferences of k oszegi and rabin 2007 focusing on their choice acclimating personal equilibria concept we relate their model to other existing generalizations of expected utility we demonstrate that linear gain loss choice acclimating personal equilibria is equivalent to the intersection of quadratic utility and pessimistic rank dependent utility however it has only a trivial intersection i e expected utility with other referencedependent preferences we use these relationships to extend our understanding of k oszegi and rabin s model linking their functional form to behavior demonstrating new applications and deriving new tests and looking for support in existing experimental data 98 words

structural breaks in renewable energy in south africa a bai perron break test application abstract in order to remedy the continuous problem of sustainable energy supply the south african government committed itself to pursuing renewable energies re as a viable alternative to traditional sources such as fossil fuels the aim of this study is to understand whether the policies pursued by the south african government in the period 1990 2010 have had any effect on the consumers and producers of re to do so the bai perron 1998 2003 break test methodology is employed to examine the evolution of re production and consumption deviations from the base case are then explained in the south african economic and policy context

a simultaneous approach to the estimation of risk aversion and the subjective time discount rate in this paper we analyze a sample of 1832 individuals who responded to six randomly generated lottery questions that differ with respect to chance prize and the timing of the draw using a model that explicitly allows for consumption smoothing we obtain an estimate of relative risk aversion of 82 instead assuming consumption to be immediate gives an estimate of 2 close to what is traditionally reported while a model of full asset integration gives estimates higher by several orders of magnitude our results show that estimated risk aversion is sensitive to the assumptions made with respect to the consumption profile and that it is possible to determine the level of asset integration endogenously the average subjective time discount rate which includes a preference for the present equals 6 percent per month it is found that both parameters vary strongly over individuals and that the variation can be explained by income age gender and entrepreneurship consistent with the majority of previous evidence

optimal inventory decisions for a risk averse retailer when offering layaway abstract layaway allows economically disadvantaged budget constrained consumers to purchase expensive items through amortized payments and nominal program fees as opposed to using high interest financing options such as credit cards and payday loans we consider a risk averse retailer s ordering decisions when offering a layaway program we use the net loss and total loss functions found in the literature to determine a risk averse retailer s optimal order quantity under conditional value at risk cvar we next analyze the effects of the model parameters retailer s risk aversion the market default rate enrollment fee cancellation fee and so on on the optimal order quantity decisions we show that the optimal order quantity depends on different loss functions and different demand distribution functions further we show that as market default rate increases or the retailer becomes more risk averse then a rational retailer will not offer a layaway program

small stakes risk aversion in the laboratory a reconsideration evidence of risk aversion in laboratory settings over small stakes leads to a priori implausible levels of risk aversion over large stakes under certain assumptions one core assumption in statements of this calibration puzzle is that small stakes risk aversion is observed over all levels of wealth or over a sufficiently large range of wealth although this assumption is viewed as self evident from the vast experimental literature showing risk aversion over laboratory stakes it actually requires that lab wealth be varied for a given subject as one evaluates the risk attitudes of the subject we consider evidence from a simple design that tests this assumption and find that the assumption is strikingly rejected for a large sample of subjects from a population of college students we conclude that the implausible predictions that flow from these assumptions do not apply to one specialized population widely used to study economic behavior in laboratory experiments

asset integration and attitudes to risk theory and evidence measures of risk attitudes derived from experiments are often questioned because they are based on small stakes bets and do not account for the extent to which the decision maker integrates the prizes of the experimental tasks with personal wealth we exploit the existence of detailed information on individual wealth of experimental subjects in denmark and directly estimate risk attitudes and the degree of asset integration consistent with observed behavior the behavior of the adult danes in our experiments is consistent with partial asset integration they behave as if some small fraction of personal wealth is combined with experimental prizes in a utility function and that this combination entails less than perfect substitution our subjects do not perfectly asset integrate the implied risk attitudes from estimating these specifications imply risk premia and certainty equivalents that are a priori plausible under expected utility theory or rank dependent utility models these are reassuring and constructive solutions to payoff calibration paradoxes in addition the rigorous structural modeling of partial asset integration points to a rich array of neglected questions in risk management and policy evaluation in important field settings

oil and the macroeconomy since world war ii all but one of the u s recessions since world war ii have been preceded typically with a lag of around three fourths of a year by a dramatic increase in the price of crude petroleum this does not mean that oil shocks caused these recessions evidence is presented however that even over the period 1948 72 this correlation is statistically significant and nonspurious supporting the proposition that oil shocks were a contributing factor in at least some of the u s recessions prior to 1972 by extension energy price increases may account for much of post opec macroeconomic performance

dynamics of oil price precious metal prices and exchange rate this study examines the co movements and information transmission among the spot prices of four precious metals gold silver platinum and palladium oil price and the us dollar euro exchange rate we find evidence of a weak long run equilibrium relationship but strong feedbacks in the short run the spot precious metal markets respond significantly but temporarily to a shock in any of the prices of the other metal prices and the exchange rate furthermore we discover some evidence of market overreactions in the palladium and platinum cases as well as in the exchange rate market in conclusion whether there are overreactions and re adjustments or not investors may diversify at least a portion of the risk away by investing in precious metals oil and the euro policy implications are provided

oil price shocks and stock market returns evidence for some european countries abstract in this paper we examine the impact of oil price shocks on stock returns in 12 oil importing european economies using vector autoregressive var and vector error correction models vecm for the period 1973 02 2011 12 we propose an alternative oil price shock specification that takes into account both world oil production and world oil prices in order to disentangle oil supply and oil demand shocks we find that the response of the european real stock returns to an oil price shock may differ greatly depending on the underlying causes of the oil price change the results suggest the existence of a negative and significant impact of oil price changes on most european stock market returns furthermore we find that stock market returns are mostly driven by oil supply shocks

modeling volatility and correlations between emerging market stock prices and the prices of copper oil and wheat abstract increased financial integration between countries and the financialization of commodity markets are providing investors with new ways to diversify their investment portfolios this paper uses varma agarch and dcc agarch models to model volatilities and conditional correlations between emerging market stock prices copper prices oil prices and wheat prices the dynamic conditional correlation model is found to fit the data the best and used to generate dynamic conditional correlations hedge ratios and optimal portfolio weights emerging market stock prices and oil prices display leverage effects where negative residuals tend to increase the variance conditional volatility more than positive ones correlations between these assets increased considerably after 2008 and have yet to return to their pre 2008 values on average oil provides the cheapest hedge for emerging market stock prices while copper is the most expensive but given the variability in the hedge ratios one should probably not put too much emphasis on average hedge ratios

u s stock returns and oil prices the tale from daily data and the 2008 2009 financial crisis abstract using daily data from january 1999 to december 2011 we examine u s stock returns s p 500 dow jones nasdaq and russell 2000 based on a wide range of information including equity vix volatility inflation expectations interest rates gold prices and the usd euro exchange rate the focus is on oil price returns which have been previously found to exert mostly negative effects on u s stock returns identifying the crisis of 2008 2009 as a significant period of economic contraction and subsequent recovery we check the stability of the stock oil relationship by garch and mgarch dcc models prior to the financial crisis stock returns are slightly negatively affected by oil prices and by the usd euro for the subsample of mid 2009 onwards however stock returns are positively affected by oil prices and a weaker usd euro as with inflation expectations we interpret these findings as u s stocks responding positively to expectations of recovery worldwide our proposed explanation is due to the changing correlation between stock markets and oil either by standard garch models or by mgarch dcc models allowing the implied correlation to vary over time

oil prices and real estate investment trusts reits gradual shift causality and volatility transmission analysis abstract according to literature oil price shocks and volatility can have sector specific impacts in the market while these studies include most asset groups the dynamic relationship between the oil market and real estate investment trusts reits has not been tested this study examines the role of oil price shocks and volatility on six reit categories residential hotel healthcare retail mortgage and warehouse industrial reits for the january 2005 december 2013 period in addition a new causality approach is proposed by augmenting the toda yamamoto method with a fourier approximation this approach is capable of capturing gradual or smooth shifts and does not require a prior knowledge regarding the number dates and form of structural breaks the so called fourier toda yamamoto causality mean spillover test finds uni directional causality running from oil prices to all reits except for the mortgage reits in the latter case the causality is reversed in addition the relatively new and simple causality in variance test shows that there is bi directional volatility transmission between the oil market and all reits our results have important implications for reit managers and investors

is expected utility theory applicable a revealed preference test we proffer a method to assess the adequacy of expected utility theory eut in empirical studies involving discrete and continuous choices the method calibrates a utility function to revealed choices and rejects eut for absurd degrees of implied concavity over the wealth at risk we find eut rejections in cases where risk averse choices are made between gambles with similar stakes regardless of their absolute sizes eut is shown to be applicable only when expected payoffs of gambles are similar or when more than half of wealth is at risk we illustrate our method with an application to agricultural production

risk aversion in the large and in the small estimates of agents risk aversion differ between market studies and experimental studies we demonstrate that these estimates can be reconciled through consistent treatment of agents propensity for narrow framing

bargaining with a residual claimant an experimental study we conduct an experiment of two player bargaining in which the payo to one player is subject to ex post risk while the other player receives a xed payment eectively making the player exposed to risk a residual claimant contrary to intuition recent theoretical work argues that exposure to risk may actually be benecial to the residual claimant and we test this in a controlled lab experiment our results suggest that asymmetric exposure to risk creates dierent self serving notions of fairness for the two types of players which leads to bargaining conict and even disagreements residual claimants are able to extract a larger share of the pie when bargaining over a risky distribution moreover some residual claimants actually do better in an expected utility sense by being exposed to risk however contrary to the theoretical prediction it is the comparatively less risk averse residual claimants who appear to benet the most through their exposure to risk in a subsequent study where residual claimants are able to choose between a less risky or a more risky distribution over which to bargain few choose the riskier distribution except when the possibility of an ex pose fair split exists consistent with our earlier results the relatively less risk averse residual claimants are more likely to choose the riskier distribution

oil prices and financial stress a volatility spillover analysis this paper examines whether there is a volatility transmission between oil prices and financial stress by means of the volatility spillover test we employ wti crude oil prices and cleveland financial stress index for the period 1991 2014 and divide the sample into pre crisis in crisis and post crisis periods due to the downward trend in oil price in 2008 the volatility model estimations indicate that oil prices and financial stress index are dominated by long run volatility the volatility spillover causality test supports evidence on risk transfer from oil prices to financial stress before the crisis and from financial stress to oil prices after the crisis the impulse response analysis shows that the volatility transmission pattern has similar dynamics before and after the crisis and is characterized by higher and long lived effects during the crisis our results have implications for both policy makers and investors and for future work

oil price shocks and agricultural commodity prices abstract while the impacts of oil price changes on agricultural commodity markets are of great interest to economists previous studies do not differentiate oil specific shocks from aggregate demand shocks in this paper we address this issue using a structural var analysis our findings indicate that the responses of agricultural commodity prices to oil price changes depend greatly on whether they are caused oil supply shocks aggregate demand shocks or other oil specific shocks mainly driven by precautionary demand oil shocks can explain a minor friction of agricultural commodity price variations before the food crisis in 2006 2008 whereas in post crisis period their explanatory abilities become much higher after crisis the contributions of oil specific factors to variations in agricultural commodity prices are greater than those of aggregate demand shocks the results from an alternative svar confirm the robustness of our main findings

anatomy of a crisis the causes and consequences of surging food prices although the potential causes and consequences of recent rising international food prices have attracted widespread attention many existing appraisals are superficial and or piecemeal this article attempts to provide a more comprehensive review of these issues based on the best and most recent research as well as on fresh theoretical and empirical analysis we first analyze the causes of the current crisis by considering how well standard explanations hold up against relevant economic theory and important stylized facts some explanations turn out to hold up much better than others especially rising oil prices the depreciation of the u s dollar biofuels demand and some commodity specific explanations we then provide an appraisal of the likely macro and microeconomic impacts of the crisis on developing countries we observe a large gap between macro and micro factors which when identifying the most vulnerable countries often point in different directions we conclude with a brief discussion of what ought to be learned from this crisis

a wavelet analysis of mean and volatility spillovers between oil and brics stock markets this paper investigates the spillover effects of volatility and shocks between oil prices and the brics stock markets using multivariate approach and wavelet analysis at different time horizons hence we combine a multivariate arma garch model and wavelet multiresolution analysis to study this phenomenon a bivariate arma 1 1 garch 1 1 cdcc student t model was joined with modwt filter to capture a broad range of possible spillover effects in mean and variances of level prices at various time horizons generally empirical results provide strong evidence of time varying volatility in all markets under study however our proposed approach shows that oil price and stock market prices are directly affected by their own news and volatilities and indirectly affected by the volatilities of other prices and wavelet scale the results show also that mean and volatility spillover effects was decomposed into many sub spillovers on different time scales according to heterogeneous investors and market participants the practical implications of this study are critical innovative and useful for the local and international investors and also for the portfolio managers they can utilize this study to formulate the optimal oil bricks stock portfolios as well as lead to more accurate predictions of volatility spillovers patterns also in developing their hedging strategies

poverty risk aversion and path dependence in low income countries experimental evidence from ethiopia in most low income countries rural households depend on mixed rain fed agriculture livestock production which is very risky due to numerous market failures there are few ways to shift risks to third parties the literature has focused on what determines the responses of households in such environments of special concern are path dependencies in which households experiencing failure are prone to further failure and potential poverty traps this paper estimates levels and determinants of risk aversion in the highlands of ethiopia we find high risk aversion and evidence that constraints have important impacts on risk averting behavior with perhaps significant implications for long term poverty the results also suggest the possibility of path dependence and offer insights into links between risk aversion and poverty traps copyright 2009 oxford university press

how is volatility in commodity markets linked to oil price shocks abstract this study investigates the effects of oil price shocks on volatility of agricultural and metal commodities we decompose an oil price shock to its underlying components including macroeconomics and oil specific shocks the applied method is the structural vector autoregressive svar model and the time span is from april 1983 to may 2014 the investigation is divided into two subsamples before and after may 2006 for agriculture taking into account the 2006 2008 food crisis and change in u s ethanol production policy and before and after january 2008 for metals considering the recent global financial crisis we find that based on impulse response functions the response of volatility of each commodity to an oil price shock differs significantly depending on the underlying cause of the shock for the both periods moreover according to variance decomposition the explanatory power of oil shocks becomes stronger after the crisis the different responses of commodities are described in detail by investigating market characteristics in each period

interaction between oil and us dollar exchange rate nonlinear causality time varying influence and structural breaks in volatility abstractthis article examines the nonlinear granger causality and time varying influence between crude oil prices and the us dollar usd exchange rate using the hiemstra and jones hp test the diks and panchenko dp test and the time varying parameter structural vector autoregression model by applying the iterated cumulative sums of squares icss algorithm and the dcc garch model the effects of structural breaks in volatility of the two markets are also investigated the empirical analysis indicates that first crude oil prices are the nonlinear granger cause of the usd exchange rate but not vice versa second the usd exchange rate exerts a stronger and more stable negative influence on crude oil prices in the short term and the influence gradually weakens after 2012 finally ignoring structural breaks can increase the negative volatility correlation between the oil and usd exchange rate markets which is particularly remarkable during the financial crisis

dynamic spillovers between oil and stock markets in the gulf cooperation council countries this article exploits a new spillover directional measure proposed by diebold and yilmaz 2009 2012 to investigate the dynamic spillover of return and volatility between oil and equities in the gulf cooperation council countries during the period 2004 to 2012 our results indicate that return and volatility transmissions are bi directional albeit asymmetric in particular the oil market gives other markets more than it receives in terms of both returns and volatilities these trends were more pronounced in the aftermath of the global financial crisis in 2008 as the net contribution of oil has intensified after a burst during the crisis the empirical evidence from the sample is consistent with a system in which oil is playing the dominant role in the information transmission mechanism between oil and equities in the gcc countries

crude oil and stock markets stability instability and bubbles abstract we analyze the long run relationship between the world price of crude oil and international stock markets over 1971 1 2008 3 using a cointegrated vector error correction model with additional regressors allowing for endogenously identified breaks in the cointegrating and error correction matrices we find evidence for breaks after 1980 5 1988 1 and 1999 9 there is a clear long run relationship between these series for six oecd countries for 1971 1 1980 5 and 1988 2 1999 9 suggesting that stock market indices respond negatively to increases in the oil price in the long run during 1980 6 1988 1 we find relationships that are not statistically significantly different from either zero or from the relationships of the previous period the expected negative long run relationship appears to disintegrate after 1999 9 this finding supports a conjecture of change in the relationship between real oil price and real stock prices in the last decade compared to earlier years which may suggest the presence of several stock market bubbles and or oil price bubbles since the turn of the century

dynamic impacts of high oil prices on the bioethanol and feedstock markets this study investigates the impacts of high international oil prices on the bioethanol and corn markets in the us between 2007 and 2008 the prices of major grain crops had increased sharply reflecting the rise in international oil prices these dual price shocks had caused substantial harm to the global economy employing a structural vector auto regression model svar we analyze how increases in international oil prices could impact the prices of and demand for corn which is used as a major bioethanol feedstock in the us the results indicate that an increase in the oil price would increase bioethanol demand for corn and corn prices in the short run and that corn prices would stabilize in the long run as corn exports and feedstock demand for corn decline consequently policies supporting biofuels should encourage the use of bioethanol co products for feed and the development of marginal land to mitigate increases in the feedstock price

oil price agricultural commodity prices and the dollar a panel cointegration and causality analysis abstract this study examines the dynamic relationship between world oil prices and twenty four world agricultural commodity prices accounting for changes in the relative strength of us dollar in a panel setting we employ panel cointegration and granger causality methods for a panel of twenty four agricultural products based on monthly prices ranging from january 1980 to february 2010 the empirical results provide strong evidence on the impact of world oil price changes on agricultural commodity prices contrary to the findings of many studies in the literature that report neutrality of agricultural prices to oil price changes we find strong support for the role of world oil prices on prices of several agricultural commodities the positive impact of a weak dollar on agricultural prices is also confirmed

hedging emerging market stock prices with oil gold vix and bonds a comparison between dcc adcc and go garch while much research uses multivariate garch to model volatility dynamics and risk measures one particular type of multivariate garch model go garch has been underutilized this paper uses dcc adcc and go garch to model volatilities and conditional correlations between emerging market stock prices oil prices vix gold prices and bond prices a rolling window analysis is used to construct out of sample one step ahead forecasts of dynamic conditional correlations and optimal hedge ratios in most of the situations we study oil is the best asset to hedge emerging market stock prices hedge ratios from the adcc model are preferred most effective for hedging emerging market stock prices with oil vix or bonds hedge ratios estimated from the go garch are most effective for hedging emerging market stock prices with gold in some instances these results are reasonably robust to choice of model refits forecast length and distributional assumptions

choice under uncertainty evidence from ethiopia india and uganda we review experimental evidence collected from risky choice experiments using poor subjects in ethiopia india and uganda using these data we estimate that just over 50 of our sample behaves in accordance with expected utility theory and that the rest subjectively weight probability according to prospect theory our results show that inferences about risk aversion are robust to whichever model we adopt when we estimate each model separately however when we allow both models to explain portions of the data simultaneously we infer risk aversion for subjects behaving according to expected utility theory and risk seeking behaviour for subjects behaving according to prospect theory

narrow bracketing and dominated choices an experiment by tversky and kahneman 1981 illustrates that people s tendency to evaluate risky decisions separately can lead them to choose combinations of choices that are first order stochastically dominated by other available combinations we investigate the generality of this effect both theoretically and experimentally we show that for any decisionmaker who does not have constant absolute risk averse preferences and who evaluates her decisions one by one there exists a simple pair of independent binary decisions where the decisionmaker will make a dominated combination of choices we also characterize as a function of a person s preferences the amount of money that she can lose due to a single mistake of this kind the theory is accompanied by both a real stakes laboratory experiment and a large sample survey from the general u s population replicating tversky and kahneman s original experiment where decisionmakers with prototypical prospect theory preferences will choose a dominated combination we find that 28 of the participants do so in the survey we ask the respondents about several hypothetical large stakes choices and find higher proportions of dominated choice combinations a statistical model that estimates preferences from the survey results is best fit by assuming people have utility functions that are close to prospect theory value functions and that about 83 of people bracket narrowly none of these results varies strongly with the personal characteristics of participants we also demonstrate directly that dominated choices are driven by narrow bracketing when we eliminate the possibility of narrow bracketing by using a combined presentation of the decisions the dominated choices are eliminated in the laboratory experiment and are greatly reduced in the survey

risk aversion and wealth evidence from person to person lending portfolios we estimate risk aversion from investors financial decisions in a person to person lending platform we develop a method that obtains a risk aversion parameter from each portfolio choice since the same individuals invest repeatedly we construct a panel data set that we use to disentangle heterogeneity in attitudes toward risk across investors from the elasticity of risk aversion to changes in wealth we find that wealthier investors are more risk averse in the cross section and that investors become more risk averse after a negative housing wealth shock thus investors exhibit preferences consistent with decreasing relative risk aversion and habit formation data as supplemental material are available at http dx doi org 10 1287 mnsc 2015 2317 this paper was accepted by amit seru finance

incentives in experiments a theoretical analysis experimental economists currently lack a convention for how to pay subjects in experiments with multiple tasks we provide a theoretical framework for analyzing this question assuming statewise mo

speculation and volatility spillover in the crude oil and agricultural commodity markets a bayesian analysis this paper assesses factors that potentially influence the volatility of crude oil prices and the possible linkage between this volatility and agricultural commodity markets stochastic volatility models are applied to weekly crude oil corn and wheat futures prices from november 1998 to january 2009 model parameters are estimated using bayesian markov chain monte carlo methods speculation scalping and petroleum inventories are found to be important in explaining the volatility of crude oil prices several properties of crude oil price dynamics are established including mean reversion an asymmetry between returns and volatility volatility clustering and infrequent compound jumps we find evidence of volatility spillover among crude oil corn and wheat markets after the fall of 2006 this can be largely explained by tightened interdependence between crude oil and these commodity markets induced by ethanol production

volatility spillover between oil and agricultural commodity markets abstract this study examines volatility transmission between oil and selected agricultural commodity prices wheat corn soybeans and sugar we apply the newly developed causality in variance test and impulse response functions to daily data from 01 january 1986 to 21 march 2011 in order to identify the impact of the food price crisis the data are divided into two sub periods the pre crisis period 01 january 1986 to 31 december 2005 and the post crisis period 01 january 2006 21 march 2011 the variance causality test shows that while there is no risk transmission between oil and agricultural commodity markets in the pre crisis period oil market volatility spills on the agricultural markets with the exception of sugar in the post crisis period the impulse response analysis also indicates that a shock to oil price volatility is transmitted to agricultural markets only in the post crisis period this paper thereby shows that the dynamics of volatility transmission changes significantly following the food price crisis after the crisis risk transmission emerges as another dimension of the dynamic interrelationships between energy and agricultural markets

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 effect of risk preferences on household use of water treatment abstract this paper uses mexican household data on water treatment to provide empirical evidence on the relationship between risk preferences and use of preventive health measures the main finding is that in households with children more risk averse mothers are more likely to treat the water the household consumes this result suggests that while households may face external constraints on their behaviour personal preferences are also determinants of their choices

risk aversion and expected utility of consumption over time the calibration theorem by rabin rabin m 2000a risk aversion and expected utility theory a calibration theorem econometrica 68 1281 1292 rabin m 2000b diminishing marginal utility of wealth cannot explain risk aversion in kahneman d tversky a eds choices values and frames cambridge university press implies that seemingly plausible small stake choices under risk imply implausible large stake risk aversion this theorem is derived based on the expected utility of wealth model however cox and sadiraj cox j c sadiraj v 2006 small and large stakes risk aversion implications of concavity calibration for decision theory games econ behav 56 45 60 show that such implications do not follow from the expected utility of income model one may then wonder about the implications for more applied consumption analysis the present paper therefore expresses utility as a function of consumption in a standard life cycle model and illustrates the implications of this model with experimental small and intermediate stake risk data from holt and laury holt c a laury s k 2002 risk aversion and incentive effects amer econ rev 92 1644 1655 the results suggest implausible risk aversion parameters as well as unreasonable implications for long term risky choices thus the conventional intertemporal consumption model under risk appears to be inconsistent with the data c 2009 elsevier inc all rights reserved less

a multi country study of power arch models and national stock market returns abstract ding et al 1993 ding z granger c w j engle r f 1993 a long memory property of stock market returns and a new model journal of empirical finance 1 83 106 suggested a model which extends the arch family of models for analyzing a wider class of power transformations than simply taking the absolute value or squaring the data as in the conventional conditional heteroscedastic models this paper analyzes the applicability of these power arch parch models to national stock market returns for 10 countries plus a world index we find the parch model to be generally applicable once garch and leverage effects are taken into consideration in addition we also find that the optimal power transformation is remarkably similar across countries

dynamic spillover between commodities and commodity currencies during united states q e abstract this paper comprehensively discusses the dynamic relationship between commodities and commodity currencies particularly during the u s quantitative easing qes by integrating the generalized spillover index into a fractionally integrated var fivar model our empirical analyses reach the following conclusions first the static return and volatility spillovers analyses show that the food is the only net receiver among all the commodity price indices second the dynamic total return and volatility spillover accelerated growth in term of the index by roughly between 15 and 25 for four regional groups during the initiation of the qe1 and subsequently remained across the first two rounds of the u s qe nevertheless both the total return and volatility spillover declined in the midst of the qe3 as the u s federal reserve signaled the qe tapering due to the anticipated u s economic recovery third the energy and metals components were the largest net transmitters of return and volatility spillovers during the u s qes a possible interpretation is that demand for energy and metals increase associated with an increase in economic activity that is triggered by the u s qes last almost all the sample commodity currencies acted as net receivers of return and volatility spillovers during the u s qes supporting the pass through of commodities to commodity currencies

dynamic spillovers among major energy and cereal commodity prices abstract over the past decade the sharp increases in the prices of oil and agricultural commodities have raised serious concerns about the heightened volatility of these markets and the possible negative interactions between them this article deals with the dynamic return and volatility spillovers across international energy and cereal commodity markets it also examines the impacts of three types of opec news announcements on the volatility spillovers and persistence in these markets for this purpose we make use of the var bekk garch and var dcc garch models for the daily spot prices of eight major commodities including wti oil europe brent oil gasoline heating oil barley corn sorghum and wheat our results provide evidence of significant linkages between these energy and cereal markets moreover the opec news announcements are found to exert influence on the oil markets as well as on the oil cereal relationships finally we show that the persistence of volatility decreases increases for the crude oil and heating oil gasoline returns after accounting for the opec announcements in these multivariate garch models however the results are more mixed for the cereal markets overall our results can be used to improve the risk adjusted performance by having more diversified portfolios and also serve to hedge the oil risk more effectively

modeling asymmetric comovements of asset returns existing time varying covariance models usually impose strong restrictions on how past shocks affect the forecasted covariance matrix in this article we compare the restrictions imposed by the four most popular multivariate garch models and introduce a set of robust conditional moment tests to detect misspecification we demonstrate that the choice of a multivariate volatility model can lead to substantially different conclusions in any application that involves forecasting dynamic covariance matrices like estimating the optimal hedge ratio or deriving the risk minimizing portfolio we therefore introduce a general model which nests these four models and their natural asymmetric extensions the new model is applied to study the dynamic relation between large and small firm returns article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

risk attitudes over small and large stakes recalibrated abstract in this paper i provide bounds on the marginal rate of substitution between losing x and winning y starting from wealth level w for a risk averse individual that rejects a small stake gamble for a range of initial wealth levels i then prove a theorem that can be used to identify the kinds of large stakes that would be rejected by any such individual the theorems allow us to understand how much risk aversion is embedded in anyone s rejections of certain small stakes gambles and provide tighter connections between the results in rabin 2000 and the received theory of decision making under risk