Wavelets e previsões de séries de tempo : uma análise empírica
- Nunes, Rodrigo Novinski; Homsy, Guilherme Vampre; Portugal, Marcelo Savino; Araujo, Jorge Paulo de
Age based preferences in paired kidney exchange
- Nicolò, Antonio; Rodríguez Álvarez, Carmelo
We consider a model of Paired Kidney Exchange (PKE) with feasibility constraints on the number of patient-donor pairs involved in exchanges. Patients' preferences are restricted so that patients prefer kidneys from compatible younger donors to kidneys from older donors. In this framework, patients with compatible donors may enroll on PKE programs to receive an organ with higher expected graft survival than that of their intended donor. PKE rules that satisfy individual rationality, eciency, and strategy-proofness necessarily select pairwise exchanges. Such rules maximize the number of transplantations among pairs with the youngest
donors, and sequentially among pairs with donors of dierent age...
Deliberation, leadership and information aggregation
- Rivas, Javier; Rodríguez Álvarez, Carmelo
We analyse committees of voters who take a decision between two options as a two- stage process. In a discussion stage, voters share non-verifiable information about a private signal concerning what is the best option. In a voting stage, votes are cast and one of the options is implemented. We introduce the possibility of leadership whereby a certain voter, the leader, is more influential than the rest at the discussion stage even though she is not better informed. We study information transmission and characterize the effects of the leader on the deliberation process. We find, amongst others, that both the...
Currency hedging strategies, strategic benchmarks and the Global and Euro Sovereign financial crises
- Caporin, Massimiliano; Jiménez Martín, Juan Ángel; González Serrano, Lydia
This paper investigates dynamic currency hedging benefits, with a further focus on the impact of currency hedging before and during the recent financial crises originated from the subprime and the Euro sovereign bonds. We take the point of view of a Euro-based institutional investor who considers passive investment strategies in portfolios holding European, British and US assets. We analyze the impact of the model specification to improve the risk-return tradeoff when currency risk is hedged. Hedging strategies of currency risk, using exchange rates futures and driven by several multivariate GARCH models, depend on the portfolio composition and period analyzed. Dynamic...
A Theory of Investment and Energy Use
- Díaz, Antonia; Puch González, Luis A.
In this paper we propose a theory of investment and energy use to study the response of macroeconomic aggregates to energy price shocks. In our theory this response depends on the interaction between the energy eﬃciency built in capital goods (which is irreversible throughout their lifetime) and the growth rate of Investment Speciﬁc Technological Change (ISTC hereafter).
We show that ISTC is a sort of energy-saving technical change and, therefore, a substitute of energy eﬃciency: it rises the productivity of capital without rising energy use, which increases eﬀective energy eﬃciency (i.e., the amount of energy use required per unit of quality-adjusted...
Ranking Leading Econometrics Journals Using Citations Data from ISI and RePEc
- Chang, Chia-Lin; McAleer, Michael
The paper focuses on the robustness of rankings of academic journal quality and research impact of 10 leading econometrics journals taken from the Thomson Reuters ISI Web of Science (ISI) Category of Economics, using citations data from ISI and the highly accessible Research Papers in Economics (RePEc) database that is widely used in economics, finance and related disciplines. The journals are ranked using quantifiable static and dynamic Research Assessment Measures (RAMs), with 15 RAMs from ISI and 5 RAMs from RePEc. The similarities and differences in various RAMs, which are based on alternative weighted and unweighted transformations of citations, are...
A Capital Adequacy Buffer Model
- Allen, David E.; McAleer, Michael; Powell, Robert J.; Singh, Abhay K.
In this paper, we develop a new capital adequacy buffer model (CABM) which is sensitive to dynamic economic circumstances. The model, which measures additional bank capital required to compensate for fluctuating credit risk, is a novel combination of the Merton structural model which measures distance to default and the timeless capital asset pricing model (CAPM) which measures additional returns to compensate for additional share price risk.
Risk-averse and Risk-seeking Investor Preferences for Oil Spot and Futures
- Lean, Hooi Hooi; McAleer, Michael; Wong, Wing-Keung
This paper examines risk-averse and risk-seeking investor preferences for oil spot and futures prices by using the mean-variance (MV) criterion and stochastic dominance (SD) approach. The MV findings cannot distinguish between the preferences of spot and futures markets. However, the SD tests show that spot dominates futures in the downside risk, while futures dominate spot in the upside profit. On the other hand, the SD findings suggest that spot dominates futures in downside risk, while futures dominate spot in upside profit. Risk-averse investors prefer investing in the spot index. Risk seekers are attracted to the futures index to maximize their...
The Impact of China on Stock Returns and Volatility in the Taiwan Tourism Industry
- Chang, Chia-Lin; Hsu, Hui-Kuang; McAleer, Michael
This paper investigates the stock returns and volatility size effects for firm performance in the Taiwan tourism industry, especially the impacts arising from the tourism policy reform that allowed mainland Chinese tourists to travel to Taiwan. Four conditional univariate GARCH models are used to estimate the volatility in the stock indexes for large and small firms in Taiwan. Daily data from 30 November 2001 to 27 February 2013 are used, which covers the period of Cross-Straits tension between China and Taiwan. The full sample period is divided into two subsamples, namely prior to and after the policy reform that encouraged...
Market Integration Dynamics and Asymptotic Price Convergence in Distribution
- García Hiernaux, Alfredo; David E. , Guerrero; McAleer, Michael
In this paper we analyse the market integration process of the relative price distribution, develop a model to analyze market integration, and present a formal test of increasing market integration. We distinguish between the economic concepts of price convergence in mean and in variance. When both types of convergence occur, prices are said to converge in distribution. We present concepts and denitions related to the market integration process, link this to price convergence in distribution, argue that the Law of One Price (LOP) is not a sucient condition for market integration, and present a formal test of price convergence in...
Volatility Smirk as an Externality of Agency Conict and Growing Debt
- Jaskowski, Marcin; McAleer, Michael
Since Black (1976), the source of the stock price volatility smirk has remained a controversy. The volatility smirk is a side eect of agency conict. An important distinction is that the smirk occurs in the optimum, even after agency conict has been resolved. The slope of the smirk is found to increase with the severity of the initial agency conict between management and investors. It is predicted that the higher is the compensation of the manager, the steeper
will be the volatility smirk, both for time series and cross sections of companies. These results may help to disentangle the leverage eect...
International Technology Diffusion of Joint and Cross-border Patents
- Chang, Chia-Lin; McAleer, Michael; Tang, Ju-Ting
With the advent of globalization, economic and financial interactions among countries have become widespread. Given technological advancements, the factors of production can no longer be considered to be just labor and capital. In the pursuit of economic growth, every country has sensibly invested in international cooperation, learning, innovation, technology diffusion and knowledge. In this paper, we use a panel data set of 40 countries from 1981 to 2008 and a negative binomial model, using a novel set of cross-border patents and joint patents as proxy variables for technology diffusion, in order to investigate such diffusion. The empirical results suggest that,...
Realized volatility risk
- Allen, David E.; McAleer, Michael; Scharth, Marcel
In this paper we document that realized variation measures constructed from high-frequency returns reveal a large degree of volatility risk in stock and index returns, where we characterize volatility risk by the extent to which forecasting errors in realized volatility are substantive. Even though returns standardized by ex post quadratic variation measures are nearly gaussian, this unpredictability brings considerably more uncertainty to the empirically relevant ex ante distribution of returns. Explicitly modeling this volatility risk is fundamental.
We propose a dually asymmetric realized volatility model, which incorporates the fact that realized volatility series are systematically more volatile in high volatility periods....
Herding, Information Cascades and Volatility Spillovers
in Futures Markets
- McAleer, Michael; Radalj , Kim
Economists and financial analysts have begun to recognise the importance of the actions of other agents in the decision-making process. Herding is the deliberate mimicking of the decisions of other agents. Examples of mimicry range from the choice of restaurant, fashion and financial market participants, to academic research. Herding may conjure negative images of irrational agents sheepishly following the actions of others, but such actions can be rational under asymmetric information and uncertainty. This paper uses futures position data in nine different markets of the Commodity Futures Trading Commission (CFTC) to provide a direct test of herding behaviour, namely the...
Optimal time-consistent fiscal policy under endogenous growth with elastic labour supply
- Novales Cinca, Alfonso; Pérez Sánchez, Rafaela María; Ruiz Andújar, Jesús
In an endogenous growth model with public consumption and investment and an elastic labour supply, we explore the time-consistent optimal choice for two policy instruments: an income tax rate and the split of government spending between consumption and investment. We compare the Markovian optimal policy with the Ramsey policy, extending previous works that characterized optimal fiscal policy either in an exogenous growth framework, assuming an exogenously given split of income between consumption and investment, or an inelastic supply of labour. The Markov-perfect policy implies a higher income tax rate. To compensate for the lower disposable income, a larger proportion of...
Optimal time-consistent fiscal policy in an endogenous growth economy with public consumption and capital
- Novales Cinca, Alfonso; Pérez Sánchez, Rafaela María; Ruiz Andújar, Jesús
In an endogenous growth model with public consumption and public investment, we explore the time-consistent optimal choice for two policy instruments: an income tax rate and the split of government spending between consumption and investment. We show that under the time-consistent, Markov policy, the economy lacks any transitional dynamics and also that there is local and global determinacy of equilibrium. We compare the Markovian optimal policy with the Ramsey policy as well as with the solution to the planner’s problem under lump-sum taxation. For empirically plausible parameter values we find that the Markov-perfect policy implies a higher tax rate and...
Risk Modelling and Management: An Overview
- Chang, Chia-Lin; Allen, David E.; McAleer, Michael; Pérez Amaral, Teodosio
The papers in this special issue of Mathematics and Computers in Simulation are substantially revised versions of the papers that were presented at the 2011 Madrid International Conference on “Risk Modelling and Management” (RMM2011). The papers cover the following topics: currency hedging strategies using dynamic multivariate GARCH, risk management of risk under the Basel Accord: A Bayesian approach to forecasting value-at-risk of VIX futures, fast clustering of GARCH processes via Gaussian mixture models, GFC-robust risk management under the Basel Accord using extreme value methodologies, volatility spillovers from the Chinese stock market to economic neighbours, a detailed comparison of Value-at-Risk estimates,...
Ten Things You Should Know About the Dynamic Conditional Correlation Representation
- Caporin, Massimiliano; McAleer, Michael
The purpose of the paper is to discuss ten things potential users should know about the limits of the Dynamic Conditional Correlation (DCC) representation for estimating and forecasting time-varying conditional correlations. The reasons given for caution about the use of DCC include the following: DCC represents the dynamic conditional covariances of the standardized residuals, and hence does not yield dynamic conditional correlations; DCC is stated rather than derived; DCC has no moments; DCC does not have testable regularity conditions; DCC yields inconsistent two step estimators; DCC has no asymptotic properties; DCC is not a special case of GARCC, which has...
The term structure of interest rates as predictor of stock returns: Evidence for the IBEX 35 during a bear market
- Fernandez-Perez, Adrian; Fernández-Rodríguez, Fernando; Sosvilla-Rivero, Simón
We present a model to forecast the probability of bear markets in the Spanish IBEX 35 with a congruent and concise parameterization which selects the explanatory factors from a wide set of variables like the yield curve of Spain, US and Europe, as well as several macro variables, and numerous leading indicators.
To this end, we first use a data-guided algorithm to select an in-sample optimal Probit model that is employed as a benchmark. We then form alternative Probit models obtained from combinations of levels, slopes and/or curvatures in the yield curve of Spain, US and Europe, as well as several...
Profiteering from the Dot-com Bubble, Sub-Prime Crisis and Asian Financial Crisis
- McAleer, Michael; Suen, John; Wong, Wing-Keung
This paper explores the characteristics associated with the formation of bubbles that occurred in the Hong Kong stock market in 1997 and 2007, as well as the 2000 dot-com bubble of Nasdaq. It examines the profitability of Technical Analysis (TA) strategies generating buy and sell signals with knowing and without trading rules. The empirical results show that by applying long and short strategies during the bubble formation and short strategies after the bubble burst, it not only produces returns that are significantly greater than buy and hold strategies, but also produces greater wealth compared with TA strategies without trading rules....