is international diversification really beneficial abstract previous research claims that low constant correlations among international stock indices create substantial risk reduction from diversification we contend that only using constant correlations is too simplistic an approach we examine international diversification by 1 using conditional correlations 2 evaluating tail risk including the effect of skewness and kurtosis and 3 examining the possible tradeoffs of standard deviation with correlation skewness and kurtosis we show that conclusions concerning diversification based solely on constant correlations across markets can be misleading since the diversification benefits are time varying are affected by non normality and depend on the benchmark country employed finally tradeoffs do exist between standard deviation and the other risk factors

dynamic inefficiency endogenous growth and ponzi games we show that in competitive endogenous growth models without externalities balanced growth equilibria are dynamically efficient with learning by doing externalities dynamic inefficiency may exist but due to the mix of capital rather than its scale these results are obtained independent of whether or not lifetimes are finite or generations overlap in olg models with externalities we show that ponzi games may be feasible even though equilibria are characterized by undersaving

capm and apt like models with risk measures abstract the paper deals with optimal portfolio choice problems when risk levels are given by coherent risk measures expectation bounded risk measures or general deviations both static and dynamic pricing models may be involved unbounded problems are characterized by new notions such as strong compatibility between prices and risks surprisingly the lack of bounded optimal risk and or return levels arises for important pricing models black and scholes and risk measures var cvar absolute deviation etc bounded problems present a market price of risk and generate a pair of benchmarks from these benchmarks we introduce apt and capm like analyses in the sense that the level of correlation between every available security and some economic factors explains the security expected return the risk level non correlated with these factors has no influence on any return despite the fact that we are dealing with risk functions beyond the standard deviation

uncertainty effects on production mix and on hedging decisions the case of brazilian ethanol and sugar abstract the use of food crops to produce biofuels has been subject of interest in literature the relationship between food and fuel prices can remarkably affect production strategies these prices are subject to high uncertainty and producers must adopt hedging and storage strategies in order to avoid financial losses this study investigates the effect of uncertainty on production storage and hedging of ethanol and sugar in brazilian mills a robust optimization model to define production storage and hedging strategies is proposed uncertainty sets on returns are constructed based on a state space model kalman filter the presented model was applied to brazilian ethanol and sugar markets in different economic scenarios the study analyses efficient frontiers and optimal strategies and the results indicate that even adopting good price forecast models the optimal strategies can be deeply affected by uncertainty

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

on the co movement between coffee and cocoa prices in international markets in this article we study the movement between cocoa and coffee prices two close substitute commodities using the ardl approach developed by pesaran et al 2001 we found that the two prices are cointegrated the long run elasticity of coffee price with respect to the cocoa one is estimated at 0 88 also using the lag augmented var approach of toda and yamamoto 1995 which is valid whatever the order of integration of the data the cocoa price is found to granger cause the coffee price and not vice versa this finding suggests that models aiming at forecasting coffee prices should incorporate cocoa prices as well

structural causes of the global financial crisis a critical assessment of the new financial architecture we are in the midst of the worst financial crisis since the great depression this crisis is the latest phase of the evolution of financial markets under the radical financial deregulation process that began in the late 1970s this evolution has taken the form of cycles in which deregulation accompanied by rapid financial innovation stimulates powerful financial booms that end in crises governments respond to crises with bailouts that allow new expansions to begin as a result financial markets have become ever larger and financial crises have become more threatening to society which forces governments to enact ever larger bailouts this process culminated in the current global financial crisis which is so deeply rooted that even unprecedented interventions by affected governments have thus far failed to contain it in this paper we analyse the structural flaws in the financial system that helped bring on the current crisis and discuss prospects for financial reform

estimating the effects of free trade agreements on international trade flows using matching econometrics abstract this paper provides the first cross section estimates of long run treatment effects of free trade agreements on members bilateral international trade flows using nonparametric matching econometrics our nonparametric cross section estimates of ex post long run treatment effects are much more stable across years and have more economically plausible values than corresponding ols cross section estimates from typical gravity equations we provide plausible estimates of the long run effects of membership in the original european economic community eec and the central american common market cacm between 1960 and 2000 and the estimates confirm anecdotal reports of these agreements effectiveness

index investment and financialization of commodities the authors found that concurrent with the rapidly growing index investment in commodity markets since the early 2000s prices of non energy commodity futures in the united states have become incr

a mechanism for booms and busts in housing prices the paper studies the dynamics of housing prices in a pure exchange overlapping generations framework a la samuelson 1958 and gale 1973 which is extended to include housing as a utility yielding durable good and a credit sector we completely characterize the equilibrium dynamics which alternates between an expansive regime where leveraged borrowing increases housing prices and a contractive regime where these variables decrease regime switches occur due to small but persistent income changes giving rise to boom bust cycles in housing prices price deviations from fundamentals are caused by leveraged borrowing and turn out to be fully welfare neutral

heterogeneous trade agreements wto membership and international trade an analysis using matching econometrics this article explores the heterogeneous effects of trade agreements tas and world trade organization wto membership on the volume of international trade we extend baier and bergstrand s 2009a application of matching econometrics by distinguishing between different types of tas and wto participation and account for the endogenous nature of trade policy for a panel data set covering 1960 2005 and 187 countries we find that the treatment effect on international trade systematically varies with the type of ta and wto membership

should investors include commodities in their portfolios after all new evidence abstract this paper investigates whether an investor is made better off by including commodities in a portfolio that consists of traditional asset classes first we revisit the posed question within an in sample setting by employing mean variance and non mean variance spanning tests then we form optimal portfolios by taking into account the higher order moments of the portfolio returns distribution and evaluate their out of sample performance under the in sample setting we find that commodities are beneficial only to non mean variance investors however these benefits are not preserved out of sample our findings challenge the alleged diversification benefits of commodities and are robust across a number of performance evaluation measures utility functions and datasets the results hold even when transaction costs are considered and across various sub periods not surprisingly the only exception appears over the 2005 2008 unprecedented commodity boom period

managing credit bubbles we study a dynamic economy where credit is limited by insu cient collateral and as a result investment and output are too low in this environment changes in investor sentiment or market expectations can give rise to credit bubbles that is expansions in credit that are backed not by expectations of future pro ts i e fundamental collateral but instead by expectations of future credit i e bubbly collateral credit bubbles raise the availability of credit for entrepreneurs this

the international transmission of credit bubbles theory and policy we live in a new world economy characterized by nancial globalization and historically low interest rates this environment is conducive to countries experiencing credit bubbles that have large macroeconomic eects at home and are quickly propagated abroad in previous work we built on the theory of rational bubbles to develop a framework to think about the origins and domestic eects of these credit bubbles this paper extends that framework to include many countries and general preferences and uses it to study how nancial integration aects the properties of credit bubbles how the latter are transmitted across countries and the role of international policy coordination

are rta agreements with environmental provisions reducing emissions article i nfo this paper investigates whether rtas with environmental provisions affect relative and absolute pollution levels in order to do so the determinants of carbon dioxide emissions convergence are estimated for a cross section of 182 countries over the period 1980 to 2008 a propensity score matching approach is com bined with difference in differences techniques to effectively isolate the effect of the regional trade agree ment rta variable the usual controls for scale composition and technique effects are added to the estimated model and the endogeneity of income and trade variables is modeled using instruments the main results indicate that the co2 emissions of the pairs of countries that belong to an rta with environmen tal provisions tend to converge and are lower in absolute terms whereas this is not the case for rtas without environmental provisions as regards specific agreements we find that emissions converge more rapidly for nafta than for eu 27 and euro med countries we find consistent evidence that only rtas with environ mental harmonization policies affect relative and absolute pollution levels

does gold offer a better protection against losses in sovereign debt bonds than other metals it is a commonly held view that gold protects investors wealth in the event of negative economic conditions in this study we test whether other metals offer similar or better investment opportunities in periods of market turmoil using a sample of 13 sovereign bonds we show that other precious metals palladium in particular offer investors greater compensation for their bond market losses than gold we also find that industrial metals especially copper tend to outperform gold and other precious metals as hedging vehicles and safe haven assets against losses in sovereign bonds however the outcome of the hedge and safe haven properties is not always consistent across the different bonds finally our analysis suggests that copper is the best performing metal in the period immediately after negative bond price shocks

the effect of ethanol listing on corn prices evidence from spot and futures markets abstract the use of corn for ethanol has been the topic of heated discussions in the media and among policy makers as part of this debate some observers have argued that the use of corn in the production of ethanol has had adverse effects on corn prices this paper contributes to this reviving debate by examining the impact of the listing of ethanol futures in the chicago board of trade on the spot and futures prices for corn we find a significant listing effect indicating that the listing of ethanol has had a positive contribution to both price and volatility in the corn market especially in the spot and the shorter maturity futures contracts and mostly through its interaction with trading volume in the corn market we discuss the policy implications of the findings for investors and its relevance for the ongoing debate on us energy policy we conclude with some suggestions for future research

liquidity commonality in commodities abstract we examine liquidity commonality in commodity futures markets using data from 16 agricultural energy industrial metal precious metal and livestock commodities we show there is a strong systematic liquidity factor in commodities liquidity commonality was present in 1997 2003 when commodity prices were relatively stable and during the recent boom there is some support for both supply side and demand side explanations for this commonality we find no evidence of a consistent link between stock and commodity liquidity in general energy commodities appear to provide a better hedge against equity market liquidity risk than the other commodity families

minimizing cvar and var for a portfolio of derivatives value at risk var and conditional value at risk cvar are the most frequently used risk measures in current risk management practice as an alternative to var cvar is attractive since it is a coherent risk measure we analyze the problem of computing the optimal var and cvar portfolios in particular we illustrate that var and cvar minimization problems for derivatives portfolios are typically ill posed for example the var and cvar minimizations based on delta gamma approximations of the derivative values typically have an infinite number of solutions in this paper we focus on the portfolio selection problem which yields a portfolio of the minimum cvar with a specified rate of return we propose to include cost as an additional preference criterion for the cvar optimiza tion problem we demonstrate that with the addition of a proportional cost it is possible to compute an optimal cvar derivative investment portfolio with significantly fewer instru ments and comparable cvar and var a computational method based on a smoothing technique is proposed to solve a simulation based cvar optimization problem efficiently comparison is made with the linear programming approach for solving the simulation based cvar optimization problem

estimating the effects of kyoto on bilateral trade flows using matching econometrics many kyoto countries fear a loss of competitiveness due to unilateral climate policy efforts policymakers therefore call for carbon related border tax adjustments with this paper we attempt to estimate the treatment effect of kyoto commitment on bilateral export flows using regression adjusted differences in differences matching techniques the gravity and international environmental agreement formation literatures provide guidelines for the choice of matching variables we find that kyoto countries exports are reduced by 13 to 14 per cent due to kyoto commitment trade effects are largest in energy intensive homogeneous industries such as iron and steel non ferrous metals organic and inorganic chemicals but also in machinery and equipment

globalization and financial development a model of the dot com and the housing bubbles abstract in the last decade the united states experienced the burst of the dot com and the housing bubbles i develop a model to study the relationship between globalization and the emergence of rational bubbles i also analyze how the effect of globalization on house prices depends on the type of bubble i show that bubbles cannot arise in a financially developed country in autarky in contrast as globalization progresses bubbles are more likely to appear in the financially developed country i also show that house prices increase with globalization only when the bubble is attached to houses this prediction is consistent with empirical evidence for u s metropolitan areas

super cycles of commodity prices since the mid nineteenth century summary decomposition of real commodity prices suggests four super cycles during 1865 2010 ranging between 30 and 40 years with amplitudes 20 40 higher or lower than the long run trend non oil price super cycles follow world gdp indicating they are essentially demand determined causality runs in the opposite direction for oil prices the mean of each super cycle of non oil commodities is generally lower than for the previous cycle supporting the prebisch singer hypothesis tropical agriculture experienced the strongest and steepest long term downward trend through the twentieth century followed by non tropical agriculture and metals while real oil prices experienced a long term upward trend interrupted temporarily during the twentieth century

the wto trade effect this paper reexamines the gatt wto membership efiect on bilateral trade ows using nonparametric methods including pair matching permutation tests and a rosenbaum 2002 sensitivity analysis together these methods provide an estimation framework that is robust to misspeciflcation biases allows general forms of heterogeneous treatment efiects and addresses potential hidden selection biases this is in contrast to most conventional parametric studies on this issue our results suggest large gatt wto trade promoting efiects robust to various restricted matching criteria alternative indicators for gatt wto involvement different matching methodologies non random incidence of positive trade ows and inclusion of multilateral resistance terms

economic growth with bubbles this paper presents a stylized model of economic growth with bubbles this model views asset price bubbles as a market generated device to moderate the effects of frictions in financial markets improving the allocation of investments and raising the capital stock and welfare the model illustrates various channels through which asset price bubbles affect the incentives for innovation and economic reforms and therefore the rate of economic growth the model also offers a new perspective on the effects of financial development on asset price bubbles and economic growth

time series analysis for financial market meltdowns abstract there appears to be a consensus that the recent instability in global financial markets may be attributable in part to the failure of financial modeling more specifically it is alleged that current risk models have failed to properly assess the risks associated with large adverse stock price behavior in this paper we first discuss the limitations of classical time series models for forecasting financial market meltdowns then we set forth a framework capable of forecasting both extreme events and highly volatile markets based on the empirical evidence presented in this paper our framework offers an improvement over prevailing models for evaluating stock market risk exposure during distressed market periods

portfolio optimization in the presence of dependent financial returns with long memory a copula based approach abstract in this paper we seek to examine the effect of the presence of long memory on the dependence structure between financial returns and on portfolio optimization first we focus on the dependence structure using copulas to select the best copula in addition to the goodness of fit tests we employ a graphical method based on visual comparison of the fitted copula density and the smoothed copula density estimated by wavelets moreover we check the stability of the copula parameter the empirical results show that the long memory affects the dependence structure second we analyze the impact of this dependence structure on the optimal portfolio we propose a new approach based on minimizing the conditional value at risk and assuming that the dependence structure is modeled by the copula parameter the empirical results show that our approach outperforms the traditional minimizing variance approach where the dependence structure is represented by the linear correlation coefficient

understanding bubbly episodes over the last two decades us aggregate wealth has fluctuated substantially against the backdrop of the great recession the effects of these boom and bust cycles have come to dominate academic and policy discussions how can we explain these fluctuations in wealth why are these fluctuations associated with changes in consumption investment and output in this note we argue that answers to these questions entail the addition of two ingredients to existent macroeconomic models rational bubbles and financial frictions we explain why each of these building blocks is crucial to understand recent events and how they can be seamlessly integrated in standard models

extent and possible causes of intrayear agricultural commodity price volatility wheat corn rice soybeans and cotton experienced higher volatility in the second half of the 2000s for the sample at hand the unit root tests only validate a new period of high volatility for wheat and cotton if in the next couple of years however corn rice and soybeans maintain their higher volatility a new period of high volatility may also be validated statistically regarding the factors driving the intrayear volatility gmm estimates show that commodity market fundamentals i e the stock to use ratio and to a lesser extent the degree of internationalization are the most systematically statistically significant coefficients among commodities over time consecutive low stock to use ratios and a thin international market provoke typically high volatility speculative activity and liquidity in the agricultural derivative market have a stabilizing effect on the spot price if any finally common macro factors significantly impact volatility especially the volatility of petrol and of exchange rates their dispersion importance over the sample is quite sizeable however it is difficult to establish a link between on the one hand loose monetary policy business cycle and inflation and on the other hand commodity price volatility as the sign of the estimated coefficient changes depending on the commodity and the estimated elasticities are quite low

commodity market risk from 1995 to 2013 an extreme value theory approach in this article we examine whether extreme risk has increased in the agricultural commodity market during the period 1995 2013 we add to the literature on food price volatility by analysing the tail segment of futures price return distributions food price variability is a concern for governments and regulators worldwide as most nations trade in food high food price variability can contribute to poverty and malnourishment in particular for people in less economically developed economies we find no indications of systematically increasing tail risk for the commodities in our sample analysis of estimated shape parameters of the generalized extreme value distribution further supports the conclusion that there is no general systematic change in the extreme risk associated with these commodity investments

food versus fuel what do prices tell us abstract sorting out the impacts of biofuels on global agricultural commodity prices is impossible without turning to data and distinguishing between the short run versus the long run impacts using time series prices on fuels and agricultural commodities the aim is to investigate the long run cointegration of these prices simultaneously with their multivariate short run interactions results indicate no direct long run price relations between fuel and agricultural commodity prices and limited if any direct short run relationships in terms of short run price movements sugar prices are influencing all the other agricultural commodity prices except rice with sugar the number one world input for ethanol results indicate increased ethanol production is potentially influencing short run agricultural commodity prices overall results support the effect of agricultural commodity prices as market signals which restore commodity markets to their equilibria after a demand or supply event shock

bubbles and capital flows abstract this paper presents a stylized model of international trade and asset price bubbles its central insight is that bubbles tend to appear and expand in countries where productivity is low relative to the rest of the world these bubbles absorb local savings eliminating inefficient investments and liberating resources that are in part used to invest in high productivity countries through this channel bubbles act as a substitute for international capital flows improving the international allocation of investment and reducing rate of return differentials across countries this view of asset price bubbles could eventually provide a simple account of some real world phenomena that have been difficult to model before such as the recurrence and depth of financial crises or their puzzling tendency to propagate across countries

do we really know that the wto increases trade comment in a recent article in the american economic review andrew k rose 2004 finds that countries belonging to the general agreement on tariffs and trade gatt and its successor the world trade organization wto did not trade more than countries that abstained from membership a vast literature on the gatt and the wto presupposes that these organizations were important but until rose there were few systematic efforts to test the assumption that membership increased trade rose s contribution is striking because he assembles a large dataset performs a myriad of analyses and uncovers scant evidence that the gatt and the wto had any impact rose describes his negative findings as an interesting mystery 112 the solution to this mystery lies in understanding who actually participated in the gatt we show that rose has overlooked a large proportion of countries to which the agreement applied and mistakenly classified them as nonparticipants when in fact they had rights and obligations under the agreement this causes a downward bias in his estimates of the gatt s effect on trade because his gravity regressions

confidence and the real value of money in an overlapping generations economy we demonstrate that stochastic bubbles which have a constant exogenous probability of collapsing may exist in general equilibrium on an intrinsically useless and unbacked asset money this may happen provided that the probability q that the bubble will persist next period is large enough and exceeds a threshold level q which we call the minimum rate of confidence this condition is always violated when the economy without bubble is dynamically efficient it is more likely to be satisfied in dynamically inefficient economies the larger the size of the inefficiency as measured by the excess of the growth rate over the no bubble interest rate we study both exchange and production economies

a roller coaster ride an empirical investigation of the main drivers of the international wheat price over the last decade commodity prices have registered substantial booms and busts marked by extreme volatility wheat in particular one of the main nonoil commodities has registered a roller coaster in price levels which seems to be inconsistent with supply and demand fundamentals to acutely investigate the drivers of wheat prices and quantify their impact a vector error correction model vecm has been used the exogenous variables have been distinguished into four groups market specific factors broad macroeconomic determinants speculative components and weather variables the quadriangulation of the determinants will enable us to better understand the movements in wheat price and identify the specific role of each component the results show that a mix of factors are contributing to wheat price movements including speculation global demand and real effective exchange rate

co movements in commodity prices a note based on network analysis this article analyses co movements in a wide group of commodity prices during the time period 1992 2010 our methodological approach is based on the correlation matrix and the networks inside through this approach we are able to summarize global interaction and interdependence capturing the existing heterogeneity in the degrees of synchronization between commodity prices our results produce two main findings a we do not observe a persistent increase in the degree of co movement of the commodity prices in our time sample however from mid 2008 to the end of 2009 co movements almost doubled when compared with the average correlation b we observe three groups of commodities which have exhibited similar price dynamics metals oil and grains and oilseeds and which have increased their degree of co movement during the sampled period

rational bubbles and public debt policy a quantitative analysis abstract do empirically plausible dynastic general equilibrium models admit bubbles and ponzi schemes under rational expectations contrary to conventional wisdom the answer is affirmative the central assumption is that current securities do not represent claims to all future profits calibrating the model to u s data we find that it is consistent with the presence of rational bubbles the observed level of public debt is entirely a ponzi scheme there are large welfare gains from eliminating bubbles on private assets and lodging all the non fundamental asset value in public debt paying off public debt benefits only a small group of wealthy individuals

a generalized design for bilateral trade flow models abstract this paper suggests a full interaction effects design to analyze bilateral trade flows this is illustrated with an unbalanced panel of bilateral trade between the triad eu15 usa and japan economies and their 57 most important trading partners over the period 1986 1997 our full interaction model finds empirical support for the new trade theory and linder s hypothesis we show that the omission of one or more interaction effects can result in biased estimates and misleading inference

portfolio optimization through kriging methods abstractthis article presents a new methodology for optimizing financial asset portfolios the proposed methodology based on the kriging method allows for approximating the risk surface and thus the optimal solution to the problem in a generalized fashion relaxing every restrictive hypothesis inherent to the available methods and with the ability to estimate the error in the risk surface approximation illustratively the proposed methodology is applied to the portfolio problem with the variance var and cvar as objective functions the results are compared to those obtained using the khun tucker technique for the former and the rockafellar method for the latter

cattle as a consistently resilient agricultural commodity this study compares a range of agricultural commodities over periods of varying economic circumstances these commodities are examined over three categories including returns risk and contributi

more than a feeling confidence uncertainty and macroeconomic fluctuations economists observers and policy makers often emphasize the role of sentiment as a potential driver of the business cycle in this paper we provide three contributions to this debate first we give an overview of the recent literature on the nexus between sentiment considering both confidence and uncertainty and economic activity second we review existing empirical measures of sentiment in particular consumer confidence stock market volatility smv and economic policy uncertainty epu on monthly data for 27 countries 1985 2016 third we identify some new stylized facts based on international evidence while different measures are surprisingly lowly correlated on average in each country they are typically highly positively correlated across countries suggesting the existence of a global factor or sizeable international spillovers of sentiment consumer confidence has the closest co movement with economic and financial variables and most of the correlations are contemporaneous or forward looking consistent with the view that economic sentiment is indeed a driver of activity

do trade agreements stimulate international trade differently evidence from 296 trade agreements in a seminal article rose 2004 found that the assumed positive impact of the wto on international trade was questionable this finding has been scrutinised and modified in subsequent research using different data sets econometric methods and separating the wto from other forms of trade agreements a key characteristic of the subsequent literature is the rather simplistic way in which trade agreements are treated whereby all trade agreements are lumped together trade agreements come however in many different forms and shapes this study addresses these differences in trade agreements using a unique database of 296 trade agreements we distinguish 17 trade related policy domains and indicate whether the agreements contain legally enforceable commitments this extensive and novel taxonomy of trade agreements enables us to allow for the possible heterogeneity of the impact of trade agreements on international trade using a gravity model we find that trade agreement heterogeneity indeed matters for international trade and that countries experience significant trade increases due to comprehensive trade agreements even if not all participants are in the wto

on the diversification benefits of commodities from the perspective of euro investors abstract this paper investigates the diversification contribution of several commodities to a portfolio of traditional assets from the perspective of a euro investor the approach applied in our analysis has high informational content as it differentiates between the sources of the diversification benefits in a statistically significant way the results indicate that the diversification contribution varies greatly amongst the different commodities industrial metals agriculturals and livestock contribute to the reduction of risk while energy and precious metals contribute to both the reduction of the level of risk and to the improvement of return the differentiation between bull and bear markets reveals that investors can enhance the portfolio performance by changing exposure into individual commodities investors can benefit from the diversification gains through financial instruments as the diversification gains hold both in the sample of physical commodity and commodity futures overall the results confirm that commodities are valuable investments from the perspective of diversification

market interdependence and volatility transmission among major crops this article provides a comprehensive analysis of the dynamics of volatility across major agricultural commodities in the united states volatility interactions across markets may lower the effectiveness of diversification strategies to mitigate price risks and should be taken into account when analyzing the pricing behavior of different agricultural commodities we follow a multivariate garch approach to evaluate the time evolution of conditional correlations and volatility transmission across corn wheat and soybeans price returns on a daily weekly and monthly basis the period of analysis is from 1998 to 2012 the estimation results indicate a lack of lead lag relationships between corn wheat and soybeans price returns at the mean level we find however important volatility spillovers across commodities particularly at the weekly and monthly level wheat and corn seem to play a major role in terms of volatility transmission despite the supposed higher financial market integration of agricultural commodities we do not observe that agricultural markets have become more interdependent in recent years

assessing the trade impact of the european neighbourhood policy on the eu med free trade area the european neighbourhood policy enp set an additional objective for the southern mediterranean countries smcs the prospect of a stake in the internal market the launch of this new policy has been the occasion for a revival of empirical studies aimed at assessing the impact of the eu med partnership on bilateral trade the novelty of this work is twofold i to present nonparametric matching estimators besides gravity estimates ii to assume as a counterfactual of the treatment the ex post long run average treatment effects of the europe agreements by controlling for likely selection bias and country and time heterogeneity using both qualitative and quantitative measures of the policy variable we assess ex post the trade enhancing impact of the eu preferential agreements towards smcs and ex ante the actual efficacy of the enp

modeling and predicting oil vix internet search volume versus traditional mariables abstract as a key variable in option pricing models and monetary policy decisions volatility is an important factor in valuing and hedging investments this paper models and predicts the cboe crude oil volatility index using heterogeneous autoregressive har models that include traditional macro finance variables as well as abnormal search volume from google asvi we find that a pure har model fits oil volatility remarkably well when adding asvi we discover that this variable has a significant and positive relationship with oil volatility this relationship remains statistically significant when traditional financial and macroeconomic variables are accounted for therefore asvi is not only a good proxy for traditional macro finance variables but also carries additional information more importantly out of sample predictions show that asvi has high economic value allowing traders of volatility exposed portfolios to significantly increase returns

investor attention and crude oil prices evidence from nonlinear granger causality tests abstract using the google search volume index gsvi to measure investor attention this paper investigates the relationships between investor attention and crude oil prices for the main crude oil markets worldwide to account for possible structural breaks and nonlinearity in the relation between investor attention and oil returns fourier unit root test and nonlinear granger causality tests are employed the empirical results suggest that the bidirectional nonlinear granger causality exists only between investor attention and wti future crude oil return however wti crude oil return granger causes investor attention weakly for dubai spot daqing spot wti spot and brent future oil markets unidirectional nonlinear granger causality runs from investor attention to oil returns which is relatively weak

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

robust optimization of conditional value at risk and portfolio selection abstract this paper deals with a portfolio selection model in which the methodologies of robust optimization are used for the minimization of the conditional value at risk of a portfolio of shares conditional value at risk being in essence the mean shortfall at a specified confidence level is a coherent risk measure which can hold account of the so called tail risk and is therefore an efficient and synthetic risk measure which can overcome the drawbacks of the most famous and largely used var an important feature of our approach consists in the use of techniques of robust optimization to deal with uncertainty in place of stochastic programming as proposed by rockafellar and uryasev moreover we succeeded in obtaining a linear robust copy of the bi criteria minimization model proposed by rockafellar and uryasev we suggest different approaches for the generation of input data with special attention to the estimation of expected returns the relevance of our methodology is illustrated by a portfolio selection experiment on the italian market

asset bubbles and endogenous growth abstract we study the interaction between productive and nonproductive savings in economies with endogenous long run growth as in the neoclassical growth setting with overlapping generations asset bubbles can exist in an economy with endogenous growth provided that they are not too large and that the growth rate in the equilibrium without bubbles exceeds the interest rate here the existence conditions for bubbles reflect parameters of tastes and technology we find that bubbles when they exist retard the growth of the economy perhaps even in the long run and reduce the welfare of all generations born after the bubble appears

the impact of the acfta on asean prc trade estimates based on an extended gravity model for component trade this article uses an extended gravity model to examine the impact of the free trade agreement between the association of southeast asian nations asean and the people s republic of china prc on their trade flows and patterns new determinants are utilized to capture the growing importance of global production sharing and intraregional trade in parts and components in east asia we show that the free trade agreement leads to substantially higher and more pronounced bilateral trade flows between asean and the prc than what a conventional gravity model predicts and the increase is concentrated in asean countries that have stronger industrial linkages with the prc

portfolios in the ibex 35 before and after the global financial crisis abstractin this article we present an analysis of the effectiveness of various portfolio optimization strategies applied to the stocks included in the spanish ibex 35 index for a period of 14 years from 2001 until 2014 the period under study includes episodes of volatility and instability in financial markets incorporating the global financial crisis and the european sovereign debt crisis this implies a challenge in portfolio optimization strategies since the methodologies are restricted to the assignment of positive weights we have taken for asset allocation the daily returns with an estimation window equal to 1 year and we hold portfolio assets for another year this article attempts to influence the discussion over whether the naive diversification proves to be an effective strategy as opposed to portfolio optimization models for that we evaluate the out of sample performance of 15 strategies for asset allocation in the ibex 35 before and after of the global financial crisis our results sugg

the direct and relative effects of preferential market access abstract the proliferation of preferential trade agreements has resulted in a complex system of preferences in which market access conditions are often discriminatory in this paper we investigate how market access conditions have evolved between 2000 and 2009 and how this has affected international trade our results show that the proliferation of preferential access has increased bilateral trade not only due to lower tariffs but also because preferential access often resulted in higher preferential margins vis a vis foreign competitors the results also indicate that the evolution of the system of preferences has been disadvantageous for countries that did not actively engage in forming new trade agreements

take it to the limit innovative cvar applications to extreme credit risk measurement abstract the global financial crisis gfc demonstrated the devastating impact of extreme credit risk on global economic stability we develop four credit models to better measure credit risk in extreme economic circumstances by applying innovative conditional value at risk cvar techniques to structural models called xtreme s transition models xtreme t quantile regression models xtreme q and the author s unique itransition model xtreme i which incorporates industry factors into transition matrices we find the xtreme s and xtreme q models to be the most responsive to changing market conditions the paper also demonstrates how the models can be used to determine capital buffers required to deal with extreme credit risk

growth enhancing bubbles this article challenges the conventional wisdom that speculation in financial markets reduces long run growth it shows that the real impact of a rational deterministic speculative bubble depends on the type of asset that is being speculated on speculative bubbles on equity raise the market value of firms thus encouraging entrepreneurship firm creation investment and growth on the other hand speculation on other types of assets is shown to be unambiguously growth impairing the model can explain some stylized facts about financial development and growth finally regulatory implications are discussed briefly