89,488 research outputs found
Self-organized global control of carbon emissions
There is much disagreement concerning how best to control global carbon
emissions. We explore quantitatively how different control schemes affect the
collective emission dynamics of a population of emitting entities. We uncover a
complex trade-off which arises between average emissions (affecting the global
climate), peak pollution levels (affecting citizens' everyday health),
industrial efficiency (affecting the nation's economy), frequency of
institutional intervention (affecting governmental costs), common information
(affecting trading behavior) and market volatility (affecting financial
stability). Our findings predict that a self-organized free-market approach at
the level of a sector, state, country or continent, can provide better control
than a top-down regulated scheme in terms of market volatility and monthly
pollution peaks.Comment: 4 pages, 4 figure
Long-run and short-run dynamics relationships between exchange rate fluctuations and foreign direct investment flows in China
This research explores the short-run and long-run dynamic
relationships between exchange rate fluctuations and foreign direct
investment (FDI) inflows in China. Monthly time series data from
the National Bureau of Statistics of the Peopleâs Republic of China
are analyzed by employing co-integration tests, vector error
correction models, Wald tests and impulse responses. The empirical
results indicate that a change in exchange rates negatively affects
FDI inflows in the long run while there exists no evidence of shortrun
dynamics and reciprocal feedback between exchange rate
fluctuations and FDI inflows. Furthermore, a structural break occurs
during the 2007-2009 Asian financial crisis shock to FDI inflows in
China
The Political Economy: Political Attitudes and Economic Behavior
It has long been recognized that voters bring their political behaviors in line with economic assessments. Recent work, however, suggests that citizens also engage in economic behaviors that align with their confidenceâor lack thereofâin the political system. This alignment can happen consciously or, as we suggest, unconsciously, in the same way that positivity carries over to other behaviors on a micro-level. Using monthly time series data from 1978 to 2008, we contribute further evidence of this relationship by demonstrating that political confidence affects consumer behavior at the aggregate level over time. Our analyses employ measures more closely tied to the theoretical concepts of interest while simultaneously accounting for the complex relationships between subjective and objective economic indicators, economic behavior, political attitudes, and the media. Our results suggest that approval of the president not only increases the electorateâs willingness to spend money, but also affects the volatility of this spending. These findings suggest that the economy is influenced by politics beyond elections, and gives the âChief Economistâ another avenue by which they can affect the behavior of the electorate
Determinants of power spreads in electricity futures markets: A multinational analysis. ESRI WP580, December 2017
The growth in variable renewable energy (vRES) and the need for flexibility in power
systems go hand in hand. We study how vRES and other factors, namely the price of substitute
fuels, power price volatility, structural breaks, and seasonality impact the hedgeable power
spreads (profit margins) of the main dispatchable flexibility providers in the current power
systems - gas and coal power plants. We particularly focus on power spreads that are hedgeable
in futures markets in three European electricity markets (Germany, UK, Nordic) over the time
period 2009-2016. We find that market participants who use power spreads need to pay
attention to the fundamental supply and demand changes in the underlying markets (electricity,
CO2, and coal/gas). Specifically, we show that the total vRES capacity installed during 2009-2016
is associated with a drop of 3-22% in hedgeable profit margins of coal and especially gas power
generators. While this shows that the expansion of vRES has a significant negative effect on the
hedgeable profitability of dispatchable, flexible power generators, it also suggests that the
overall decline in power spreads is further driven by the price dynamics in the CO2 and fuel
markets during the sample period. We also find significant persistence (and asymmetric effects)
in the power spreads volatility using a univariate TGARCH model
Liquidity, Volatility, and Equity Trading Costs Across Countries and Over Time
Actual investment performance reflects the underlying strategy of the portfolio manager and the execution costs incurred in realizing those objectives. Execution costs, especially in illiquid markets, can dramatically reduce the notional return to an investment strategy. This paper examines the interactions between cost, liquidity, and volatility, and analyzes their determinants using panel-data for 42 countries from September 1996 to December 1998. We document wide variation in trading costs across countries; emerging markets in particular have significantly higher trading costs even after correcting for factors affecting costs such as market capitalization and volatility. We analyze the inter-relationships between turnover, equity trading costs, and volatility, and investigate the impact of these variables on equity returns. In particular, we show that increased volatility, acting through costs, reduces a portfolio's expected return. However, higher volatility reduces turnover also, mitigating the actual impact of higher costs on returns. Further, turnover is inversely related to trading costs, providing a possible explanation for the increase in turnover in recent years. The results demonstrate that the composition of global efficient portfolios can change dramatically when cost and turnover are taken into account.http://deepblue.lib.umich.edu/bitstream/2027.42/39706/3/wp322.pd
Cross-border bank contagion in Europe
This paper analyses cross-border contagion in a sample of European banks from January 1994 to January 2003. We use a multinomial logit model to estimate the number of banks in a given country that experience a large shock on the same day (âcoexceedancesâ) as a function of variables measuring common shocks and coexceedances in other countries. Large shocks are measured by the bottom 95th percentile of the distribution of the first difference in the daily distance to default of the bank. We find evidence in favour of significant cross-border contagion. We also find some evidence that since the introduction of the euro cross-border contagion may have increased. The results seem to be very robust to changes in the specification
Realtime market microstructure analysis: online Transaction Cost Analysis
Motivated by the practical challenge in monitoring the performance of a large
number of algorithmic trading orders, this paper provides a methodology that
leads to automatic discovery of the causes that lie behind a poor trading
performance. It also gives theoretical foundations to a generic framework for
real-time trading analysis. Academic literature provides different ways to
formalize these algorithms and show how optimal they can be from a
mean-variance, a stochastic control, an impulse control or a statistical
learning viewpoint. This paper is agnostic about the way the algorithm has been
built and provides a theoretical formalism to identify in real-time the market
conditions that influenced its efficiency or inefficiency. For a given set of
characteristics describing the market context, selected by a practitioner, we
first show how a set of additional derived explanatory factors, called anomaly
detectors, can be created for each market order. We then will present an online
methodology to quantify how this extended set of factors, at any given time,
predicts which of the orders are underperforming while calculating the
predictive power of this explanatory factor set. Armed with this information,
which we call influence analysis, we intend to empower the order monitoring
user to take appropriate action on any affected orders by re-calibrating the
trading algorithms working the order through new parameters, pausing their
execution or taking over more direct trading control. Also we intend that use
of this method in the post trade analysis of algorithms can be taken advantage
of to automatically adjust their trading action.Comment: 33 pages, 12 figure
Sudden changes in volatility: The case of five central European stock markets
This is the post-print version of the final paper published in Journal of International Financial Markets, Institutions and Money. The published article is available from the link below. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. Copyright @ 2007 Elsevier B.V.This paper investigates sudden changes in volatility in the stock markets of new European Union (EU) members by utilizing the iterated cumulative sums of squares (ICSS) algorithm. Using weekly data over the sample period 1994â2006, the time period of sudden change in variance of returns and the length of this variance shift are detected. A sudden change in volatility seems to arise from the evolution of emerging stock markets, exchange rate policy changes and financial crises. Evidence also reveals that when sudden shifts are taken into account in the GARCH models, the persistence of volatility is reduced significantly in every series. It suggests that many previous studies may have overestimated the degree of volatility persistence existing in financial time series
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