410 research outputs found

    Two Essays in Financial Economics

    Get PDF
    The following dissertation contains two distinct empirical essays which contribute to the overall field of Financial Economics. Chapter 1, entitled “The Determinants of Dynamic Dependence: An Analysis of Commodity Futures and Equity Markets,” examines the determinants of the dynamic equity-commodity return correlations between five commodity futures sub-sectors (energy, foods and fibers, grains and oilseeds, livestock, and precious metals) and a value-weighted equity market index (S&P 500). The study utilizes the traditional DCC model, as well as three time-varying copulas: (i) the normal copula, (ii) the student’s t copula, and (iii) the rotated-gumbel copula as dependence measures. Subsequently, the determinants of these various dependence measures are explored by analyzing several macroeconomic, financial, and speculation variables over different sample periods. Results indicate that the dynamic equity-commodity correlations for the energy, grains and oilseeds, precious metals, and to a lesser extent the foods and fibers, sub-sectors have become increasingly explainable by broad macroeconomic and financial market indicators, particularly after May 2003. Furthermore, these variables exhibit heterogeneous effects in terms of both magnitude and sign on each sub-sectors’ equity-commodity correlation structure. Interestingly, the effects of increased financial market speculation are found to be extremely varied among the five sub-sectors. These results have important implications for portfolio selection, price formation, and risk management. Chapter 2, entitled, “US Community Bank Failure: An Empirical Investigation,” examines the declining, but still pivotal role, of the US community banking industry. The study utilizes survival analysis to determine which accounting and macroeconomic variables help to predict community bank failure. Federal Deposit Insurance Corporation and Federal Reserve Bank data are utilized to compare 452 community banks which failed between 2000 and 2013, relative to a sample of surviving community banks. Empirical results indicate that smaller banks are less likely to fail than their larger community bank counterparts. Additionally, several unique bank-specific indicators of failure emerge which relate to asset quality and liquidity, as well as earnings ratios. Moreover, results show that the use of the macroeconomic indicator of liquidity, the TED spread, provides a substantial improvement in modeling predictive community bank failure

    Empirical research of the Chinese coastal coal freight index derivatives hedging effectiveness

    Get PDF

    Futures contracts as hedges on equity investments

    Get PDF
    Πτυχιακή εργασία--Πανεπιστήμιο Μακεδονίας, Θεσσαλονίκη, 2019.In this work we try to identify, assess and evaluate the hedging performance of derivative contracts on equity portfolios that are available in the financial markets. We specifically focus on the use of future contracts, such as gold and oil futures, as hedgers on equity indices. We first present in brief theory and basics of equity investments and financial derivatives. We further focus on the concept of hedging and the uses and characteristics of future contracts. The thesis continues with a literature review on how the optimal hedge ratio is defined and how it can be estimated with the implementation of econometric models. We then employ multivariate GARCH BEKK models in order to estimate the dynamic conditional variance of the assets returns and evaluate the performance of their hedge ratios. Finally, we discuss the results and conclude with investment proposals

    Co-Movement between Commodity and Equity Markets Revisited : An Application of the Thick Pen Method

    Get PDF
    The corresponding author acknowledge financial support from the Aberdeen-Curtin Alliance: The University of Aberdeen, UK and Curtin University, Australia . The authors are grateful to Agnieszka Jach for sharing the code for Multi-thickness Thick Pen Measure of Association. The authors are thankful to the anonymous reviewer, Dirk Baur and Xiaoyi Mu for the careful reading and thoughtful comments that helped improve the clarity of the paper.Peer reviewedPublisher PD

    Studies on African equity markets and global shocks : co-movement, contagion, and diversification

    Get PDF
    A Doctoral thesis submitted in fulfilment of the requirements for the award of Doctor of Philosophy degree in the field of Finance The Graduate school of Business Administration, University of the Witwatersrand, October 2016The global financial system has experienced turmoil in the past three decades, at the least. Although the shocks originate abroad, they possess some rippling effects on African economies. The essence of market integration and cross-border listings of stocks has fueled the need for African markets to be well integrated with the global economy. Despite this need, available empirical literature exploring the integration of African markets regionally, and with the rest of the world appear unclear. Moreover, the possibility of global shocks transmitting to Africa via its emerging equity markets remains underexplored. At the same time, such knowledge is critical for not only understanding the functioning of equity markets in particular, but also important for regulating the financial system in general. This thesis addresses these gaps inherent in extant literature and proffer empirical and theoretical solutions by exploring the nexus between African stock markets and global shocks. The emphasis is on contagion, co-movement, and diversification. The thesis is organized into four empirical essays, each deeply touching on specific theme (s) that form the core of the problems or research questions under investigation while employing advanced econometric techniques that underpin the modeling of asset returns. The first essay examines the capacity of African equity markets to act as ‗hubs‘ for portfolio investors during tranquil and turbulent conditions of global equity and commodity markets. The findings posit that African stock markets provide decorrelation from commodity and global equity markets during extreme market conditions. To the extent that the results reveal the strength of African stocks in cushioning international portfolio investors in a mean-variance stand-point during market crashes, the essay helps to decay doubts in the minds of investors on the perceived lack of capacity of the continent‘s stocks to yield higher expected risk-return trade-offs during global market sell-offs. The implication of the study is that given the recent history of commodities and global stocks, fund managers around the world seeking viable alternatives to compensate for losses from commodity shocks through uncorrelated markets may consider the equity markets in Africa, albeit on account of volatility persistence, present and past market conditions, markets stability, as well as size and liquidity issues. The second essay examines regional and global co-movement of African stock markets using the three-dimensional continuous Morlet wavelet transform methodology. The essay establishes evidence of stronger co-movements broadly narrowed to short-run fluctuations. The co-movements are time-varying and commonly non-homogeneous – with phase difference arrow vectors implying lead-lag African Equity Markets and Global Shocks 2016 © Gideon Boako Page iii relationships. The presence of lead-lag effects and stronger co-movements at short-run fluctuations may induce arbitrage and diversification opportunities to both local and international investors with long-term investment horizons. The findings also reveal that some African equity markets are, to a degree, segmented from volatilities of the dollar and euro exchange rates. The third essay sheds light on whether African equity markets decoupled from, and / or converged with regional and global markets from 2003 to 2014, and analyzes the implications of that for shocks spillovers. Although there is no evidence of African markets convergence either regionally or globally, shock propagation exists in a time-varying setting. Regional markets in Africa are not just ‗shock absorbers‘ but also ‗shock transmitters‘. In the last essay, the dependence structure and (extreme) downside developed equity markets and currency price risk spillover effects to African stock markets using value-at-risk (VaR) and conditional value-at-risk (CoVaR) based on stochastic copulas is modeled. The study finds evidence of non-homogenous weak negative dependence between stocks and the USD and EUR exchange rates. Except for Egypt, there is evidence of positive significant dependencies between all African markets and their developed counterparts. Although, evidence of both uni-directional and bidirectional causality, as well as upper and lower tail dependencies are found across the stocks and currency markets, only some minuscule evidence of downside spillover effects was recorded, albeit episodic. It is observed that propagation of shocks from the GFC had a second round effect in African stock markets. Thus, the impact of the GFC to African economies was not through the credit crunches and liquidity freezes in Phase I of the crisis, but rather through the global recession that followed into the second phase. The findings are consistent with the view that global shocks propagation to developing markets may stagger during crisis and intensify post-crisis. A practical implication from the results is that given the relatively scarce resources and levels of technological know-how available to African governments, efforts to wean the continent‟s equity markets from adverse effects of global market crashes should be geared towards plans and programmes to mitigate the shocks not at the early stages but latter stages, where the effects to Africa could be prominently felt. Three key arguments are deduced from all the essays. First, although financial market underdevelopment seems prima-facie, to help countries isolate themselves against immediate contagion, it also reduces the ability of the real economy to cushion the impact of the crisis. African Equity Markets and Global Shocks 2016 © Gideon Boako Page iv Therefore, the argument of the thesis is that despite the common fear that a highly integrated and developed market may present fertile grounds for shock spillover, Africa must continue to pursue programmes aimed at enhancing inter and intra-regional integration. However, the degree and extent of both inter- and intra-regional integration ought to be pegged at certain optimal levels in order to reap benefits from scale economies. Such endeavours at integration will not only help in risk diversification but also help smooth the impact of shocks. The second argument is that, the proposition of the ―decoupling theory‖ i.e. returns of African equity markets and global stocks are not jointly normal during crisis periods may not be entirely tenable, empirically. Thirdly, the thesis argues that the “shift-contagion” theory may not reflect the reality for Africa, particularly during initial stages of crisis. Instead, the thesis suggests an extension and argues for a “delayed-shift contagion” theory. Keywords: Decoupling, shift-contagion, spillover effects, CoVaR, exchange rates, commodities. JEL Classification: C40, C58, F31, F36, G10, G11, G15,GR201

    The History of the Quantitative Methods in Finance Conference Series. 1992-2007

    Get PDF
    This report charts the history of the Quantitative Methods in Finance (QMF) conference from its beginning in 1993 to the 15th conference in 2007. It lists alphabetically the 1037 speakers who presented at all 15 conferences and the titles of their papers.

    The effect of US economic policy uncertainty on market risk of international crude oil and the portfolio strategy

    Get PDF
    The paper investigates the impact of US economic policy uncertainty (EPU) on major crude oil markets. GARCH-tDDC-Copula model is constructed to study the spillover effect of US EPU on the international crude oil market risk, and then the median- CoVaR portfolio model is constructed to discuss the optimal portfolio strategy of crude oil importers when US EPU is in different states. Results show that the spillover effect of US EPU on international crude oil market risk is nonlinear, asymmetric and timevarying. When US EPU increases from the average level to the 0.95 quantile level, the price reduction risk of crude oil market in Brent, Dubai and Western Texas increases by 37.26%, 42.66%, and 39.28% respectively, and the price increase risk increases by 7.22%, 6.64%, and 7.53% respectively. Compared with the median-VaR portfolio strategy and the equal-weight combination portfolio strategy, the advantage of the median-CoVaR model is that it can achieve ‘targeted’ management for asset risk under specific conditions. When US EPU peak occurs, crude oil importers can formulate a basket price strategies with dynamic weighted based on the median-CoVaR model, which can better reduce the depreciation risk of crude oil assets. The findings have important implications for importers and investors

    Empirical Analysis of Natural Gas Markets

    Get PDF
    Recent developments in the natural gas industry warrant new analysis of related issues. Environmental, social, and governance (ESG) investments have accelerated the shift away from coal as the dominant source of electricity. Its low environmental impact, reduced volume, and broad availability make liquefied natural gas (LNG) a popular alternative, during this time of transition between traditional fuels and newer options. In the United States, the shale gas revolution has made natural gas a game changer. In this book, we focus on empirical analyses of the natural gas market and its growing relevance worldwide

    Estrategias de cobertura de carteras e índices de renta variable: el mercado español

    Get PDF
    En línea con la creciente importancia de la cobertura de riesgos, la eficacia de las diferentes estrategias y las posibilidades de mejorar a través de diferentes modelos estocásticos han sido analizados en un gran número de estudios académicos en diferentes campos, activos financieros, energía, petróleo, etc. La controversia en la literatura sobre estrategias de cobertura se concentra en torno a tres aspectos principals. En primer lugar, una cuestión clave es la elección de la medida de eficacia que va a determinar la función de optimizar. Entre las diferentes medidas propuestas, la reducción de la varianza es el enfoque más simple y común. Muchos autores consideran que otros criterios, como diferentes especificaciones de funciones de utilidad, el riesgo de pérdidas o la variación de la rentabilidad ,se deben tomar en cuenta con el fin de medir la efectividad de cobertura. Estos criterios derivan en diferentes medidas de efectividad de cobertura como el equivalente cierto (CE), Valor en Riesgo (VaR), Valor en Riesgo Condicional (CVaR) o Pérdida Esperada (ES), Momentos parciales inferiores (LPM), semi-varianza, etc. . Un examen de las principales aportaciones de la literatura muestra la falta de uniformidad o resultados concluyentes en favor de una u otra estrategia. En segundo lugar, otro tema importante es la evolución temporal de la relación de cobertura. Hay una controversia en la literatura en cuanto a si la cobertura dinámica, utilizando relaciones que incorporan la nueva información que llega al mercado, es superior a relaciones estáticas, como la cobertura unitaria o la de mínimos cuadrados. En tercer lugar, cuando se trata de estimar los ratios de cobertura, se emplean muchas técnicas diferentes, que van desde los modelos más simples a enfoques dinámicos muy complejos. Sin embargo, no está claro que estos modelos complejos mejoren la eficacia global y en nuestra opinión, no resuelven favorablemente el compromiso entre complejidad y efectividad..
    corecore