Investigating the nexus between fuel ethanol and CO2 emissions. A panel smooth transition regression approach

In this paper, we fill the gap in the literature by identifying a negative relationship between fuel ethanol consumption and CO2 emissions, building on a sample of 17 European countries covering seven years, from 2010 to 2016. Based on a Panel Smooth Transition Regression approach we show that countries with high levels of income inequality have difficulties in avoiding environmental degradation by promoting policies and regulations for more intense use of biofuels. Furthermore, we bring strong empirical evidence suggesting that biofuels could be an alternative in the future to reducing CO2 emissions. In our opinion, this non-linear analysis could provide the scientific basis for authorities, especially the European Commission to promote environmental policies to a specific country with different levels of carbon emissions rather than to the entire group

How Risk Aversion and Financial Literacy Shape Young Adults’ Investment Preferences

This study investigates the relationship between risk aversion, financial literacy, and investment preferences of young adults in higher education in Romania. For this purpose, we conducted a survey that measured the basic, advanced and overall financial literacy, risk aversion, and parental financial behaviours. We had 479 respondents and a similar number of useable surveys. Resorting to OLS and IV econometric methods, we show that financial literacy, regardless of its level, contributes to reducing risk aversion quantified by the risk premium. Moreover, positive financial behaviours of parents also decrease the risk aversion. This finding is invalid in the case of a self-assessed risk tolerance. We also found that young adults' investment preferences are influenced by the self-assessed risk tolerance and not by the risk aversion. However, financial literacy increases the probability of young adults to select bonds or funds as investment options, but does not have a statistically significant influence on the selection of stocks, which is mainly driven by the self-assessed risk profile as well as bank deposits

Are cryptocurrencies safe havens during the COVID-19 pandemic? A threshold regression perspective with pandemic-related benchmarks

The paper employs a threshold regression framework conditioned by two COVID-19 related proxies, to investigate whether Bitcoin and Ether exhibit short-term safe haven or diversiefir features for stock and bond markets. Both cryptocurrencies fulfil a diversiefir role for the responsible investments represented by sustainable stock market indices, a safe haven role for major bond markets and a mixed role for a selection of representative stock market indices. Furthermore, in times characterized by an increasing number of COVID-19 daily cases or deaths the statistical relationship between both cryptocurrencies and the main nfiancial market determinants weakens

Probability of informed trading during the COVID-19 pandemic: the case of the Romanian stock market

Abstract Using data from the Bucharest Stock Exchange, we examine the factors influencing the probability of informed trading (PIN) during February—October 2020, a COVID-19 pandemic period. Based on an unconditional quantile regression approach, we show that PIN exhibit asymmetric dependency with liquidity and trading costs. Furthermore, building a customized database that contains all insider transactions on the Bucharest Stock Exchange, we reveal that these types of orders monotonically increase the information asymmetry from the 50th to the 90th quantile throughout the PIN distribution. Finally, we bring strong empirical evidence associating the level of information asymmetry to the level of fake news related to the COVID-19 pandemic. This novel result suggests that during episodes when the level of PIN is medium to high (between 15 and 50%), any COVID-19 related news classified as misinformation released during the lockdown period, is discouraging informed traders to place buy or sell orders conditioned by their private information

For better and worse: heterogeneity in the fiscal response in EU countries

Stoian A, Bökemeier B, Dumitrescu BA, Cepoi CO. For better and worse: heterogeneity in the fiscal response in EU countries. Applied Economics Letters . 2022.In this paper, using a panel of annual observations ranging from 2005 to 2018, we employ the novel unconditional quantile regression by resorting to an augmented fiscal reaction function model to examine the distribution-varying fiscal response for 26 European Union countries. The results point to significant asymmetries regarding the fiscal response measured in terms of the cyclically adjusted primary balance to different covariates. More specifically, we report a U-shaped fiscal reaction to debt changes suggesting more explicit debt stabilization concerns during high-deficit periods. We also show a varying response when debt exceeds the 60% threshold, which is conditioned by the size of the fiscal position. In addition, we reveal a procyclical fiscal behaviour when balance is highly deteriorated

Gazing through the bubble: an experimental investigation into financial risk-taking using eye-tracking

Abstract Eye tracking can facilitate understanding irrational decision-making in contexts such as financial risk-taking. For this purpose, we develop an experimental framework in which participants trade a risky asset in a simulated bubble market to maximize individual returns while their eye movements are recorded. Returns are sensitive to eye movement dynamics, depending on the presented visual stimuli. Using eye-tracking data, we investigated the effects of arousal, attention, and disengagement on individual payoffs using linear and nonlinear approaches. By estimating a nonlinear model using attention as a threshold variable, our results suggest that arousal positively influences trading returns, but its effect becomes smaller when attention exceeds a certain threshold, whereas disengagement has a higher negative impact on reduced attention levels and becomes almost irrelevant when attention increases. Hence, we provide a neurobehavioral metric as a function of attention that predicts financial gains in boom-and-bust scenarios. This study serves as a proof-of-concept for developing future psychometric measures to enhance decision-making

Bank bailout programs in Europe: a sequential analysis of drivers and outcomes

The determinants and effects of bank bailout programs on the economy and society are still controversial. Using a Propensity Score Matching approach relying on 22 European countries, it was identified economic growth, economic freedom, total banking assets, and liquid assets to deposits and short-term funding ratio as the main drivers for the decision to adopt a bank bailout program. The results show that the adoption of bank bailout programs did not lead to an improvement in the banks’ solvency indicators or financial performance. Still, it has amplified financial stress and income inequality instead, hampering political stability, as well as social and economic conditions. The novelty of this research resides in adding a contribution to scarce literature covering the determinants of the decision to adopt a bank bailout program, also by comprehensively expanding the set of candidate variables that may have impacted the decision for Government intervention