Comovements in Trading activity: A Multivariate Autoregressive Model of Time Series Count Data Using Copulas

This paper introduces the Multivariate Autoregressive Conditional Poisson model to deal with issues of discreteness, overdispersion and both auto- and cross-correlation, arising with multivariate counts. We model counts with a double Poisson and assume that conditionally on past observations the means follow a Vector Autoregression. We resort to copulas to introduce contemporaneous correlation. We advocate the use of our model as a feasible alternative to multivariate duration models and apply it to the study of sector and stock specific news related to the comovements in the number of trades per unit of time of the most important US department stores traded on the New York Stock Exchange. We show that the market leaders inside an specific sector, in terms of more sectorial information conveyed by their trades, are related to their size measured by their market capitalization.Continuousation; Factor model; Market microstructure.

Investors Facing Risk: Loss Aversion and Wealth Allocation Between Risky and Risk-Free Assets

This paper studies the impact of loss aversion on decisions regarding the allocation of wealth between risky and risk-free assets. We use a Value-at-Risk portfolio model with endogenous desired risk levels that are individually determined in an extended prospect theory framework. This framework allows for the distinction between gains and losses with respect to a subjective reference point as in the original prospect theory, but also for the influence of past performance on the current perception of the risky portfolio value. We show how the portfolio evaluation frequency impacts investor decisions and attitudes when facing financial losses and analyze the role of past gains and losses in the current wealth allocation. The perceived portfolio value exhibits distinct evolutions in two frequency segments delimitated by what we consider to be the optimal evaluation horizon of one year. Our empirical results suggest that previous research relying on VaR underestimates the aversion of real individual investors to financial losses.prospect theory, loss aversion, capital allocation, Value-at-Risk, portfolio evaluation

Investors Facing Risk II: Loss Aversion and Wealth Allocation When Utility Is Derived From Consumption and Narrowly Framed Financial Investments

This paper studies the attitude of non-professional investors towards financial losses and their decisions concerning wealth allocation among consumption, risky, and risk-free financial assets. We employ a two-dimensional utility setting in which both consumption and financial wealth fluctuations generate utility. The perception of financial wealth is modelled in an extended prospect-theory framework that accounts for both the distinction between gains and losses with respect to a subjective reference point and the impact of past performance on the current perception of the risky portfolio value. The decision problem is addressed in two distinct equilibrium settings in the aggregate market with a representative investor, namely with expected and non-expected utility. Empirical estimations performed on the basis of real market data and for various parameter configurations show that both settings similarly describe the attitude towards financial losses. Yet, the recommendations regarding wealth allocation are different. Maximizing expected utility results on average in low total-wealth percentages dedicated to consumption, but supports myopic loss aversion. Non-expected utility yields more reasonable assignments to consumption but also a high preference for risky assets. In this latter setting, myopic loss aversion holds solely when financial wealth fluctuations are viewed as the main utility source and in very soft form.prospect theory, Value-at-Risk, loss aversion, expected utility, non-expected utility

Illusionary Finance and Trading Behavior

One important aspect of financial market is that there might be some traders that intentionally mislead other market participants by creating illusions in order to obtain a profit. We call this new concept illusionary finance. We present an analysis of how illusions can be created and disseminated in financial markets based on certain psychological principles that explain agents’ decisions under time pressure and polysemous signals. We develop a simple model that incorporates the illusions in the price formation process. Furthermore, using powerful simulations, we show how illusions can be incorporated, directly or indirectly, in the expected prices of the traders.Illusionary Finance; Behavioral Finance; Evolutionary Finance; Neuroeconomics

Trading activity and liquidity supply in a pure limit order book market: An empirical analysis using a multivariate count data model.

In this paper we perform an empirical analysis of the trading process in a pure limit order book market, the Xetra system which operates at various European exchanges.We study how liquidity supply and demand as well as price volatility affect future trading activity and market resiliency, and discuss the results in the light of predictions implied by theoretical models of financial market microstructure. Parameter estimation and hypotheses testing is conducted using a new econometric methodology designed for the analysis of multivariate count processes.Market microstructure; Liquidity; Trading activity; Multivariate count process

Dynamics of Foreign Currency Lending in Turkey

On June 16 2009, in what authorities called ``a surprise development'' the Turkish Government removed a provision from its existing laws that had allowed Turkish residents to borrow in foreign currency from banks operating in Turkey. The development ended a long era of foreign currency lending in Turkey at least in the sense of consumer loans. This paper studies the determinants and consequences of foreign currency lending for banks in Turkey in the run-up to this significant policy change. Our analysis uses detailed foreign and Turkish currency composition bank data for 21 commercial banks in Turkey between 2002 and 2010. We evaluate drivers of saving and lending in foreign currency(FX) in Turkey along with consequences for the banking system in particular and for the economy in general. We highlight possible risks to the Turkish banking system as a result of system's heavy exposure to both channels. In doing so, we show that the policy change was not necessarily a surprise but a cautionary step in the right direction to help keep Turkish banking system stable.Dollarization, bank performance, bank profitability, Turkish economy

Intra-Daily FX Optimal Portfolio Allocation

We design and implement optimal foreign exchange portfolio allocations. An optimal allocation maximizes the expected return subject to a Value-at-Risk (VaR) constraint. Based on intradaily data, the optimization procedure is carried out at regular time intervals. For the estimation of the conditional variance from which the VaR is computed, we use univariate and multivariate GARCH models. The result for each model is given by the best intradaily investment recommendations in terms of the optimal weights of the currencies in the risk portfolio.Optimal portfolio selection; Value-at-risk; GARCH models; Foreign exchange markets

Econometric analysis of financial count data and portfolio choice : a dynamic approach.

This thesis contributes to the econometric literature in two ways. Firstly, it introduces a new multivariate count model that presents advances in several aspects. Our multivariate time series count model can deal with issues of discreteness, overdispersion (variance greater than the mean) and both cross- and serial correlation, all at the same time. We follow a fully parametric approach and specify a marginal distribution for the counts where, conditionally on past observations the means follow a vector autoregressive process (VAR). This enables to attain improved inference on coefficients of exogenous regressors relative to the static Poisson regression, while modelling the serial correlation in a flexible way. The method is also innovative in the use of copulas, which builds the dependence structure between variables with given marginal distributions. This makes it possible to model the contemporaneous correlation between individual series in a very flexible way. Secondly, this thesis introduces a new approach to estimate the multivariate reduced rank regressions when the normality assumption is not satisfied. We propose to use the copula tool to generate multivariate distributions and, we show that this method can be applied in multivariate settings. In terms of financial literature, this thesis provides two contributions. Firstly, with our multivariate count model we analyze diverse market microstructure issues about the submission of different types of orders by traders on stock markets. With this model, we can fully take into account the interactions between submissions of the various types of orders, which represent an advantage with respect to univariate models such as the autoregressive conditional duration model. Secondly, it contributes to portfolio research proposing a new dynamic optimal portfolio allocation model in a Value-at-Risk setup. This model allows for time varying skewness and kurtosis of portfolio distributions and the model parameters are estimated by weighted maximum likelihood in an increasing window setup. This last property allows us to have more accurate portfolio recommendations in terms of the amount to invest in the risk-free interest rate and in the risky portfolio.Copulas; Multivariate count model; Optimal portfolio allocation; Value-at-Risk; Market microstructure;

Relative power and efficiency as a main determinant of banks? profitability in Latin America

Despite the financial sector liberalization and openness that started in the earlier 90's and significant macroeconomic development as well as increasing inflow of capital toward the region, there is not any evidence of the reduction of interest rates as well as banks' profits in Latin America. In this paper we develop a model to estimate the determinants of Latin American banks' profitability and, try to understand the reasons why banks are reluctant to decrease their interest rate spreads even when change in competitiveness in the financial system is improving. By using Data Envelopment Analysis to better exploit the information of several variables at the same time and, by employing a sample of 200 Banks located in Argentina, Bolivia, Brazil, Costa Rica, Ecuador, El Salvador, Mexico, Nicaragua, Paraguay, Peru, Uruguay and Venezuela; we find that banks' profits grew consistently above the normal levels of profits adjusted by risk. Our results show that banks in Latin America have been profiting from their oligopolistic position in detriment of their clients in particular and of their whole economy in general

Calidad de servicio y satisfacción del usuario en el consultorio odontológico del Hospital II-E, Lamas, 2019

La presente investigación, tuvo como objetivo general establecer la relación entre la calidad de servicio y la satisfacción del usuario. El estudio fue de tipo descriptivo correlacional con diseño no experimental, la población estuvo compuesta por 825, y la muestra se obtuvo mediante el muestreo aleatorio simple con un total de 119 pacientes que asisten al consultorio odontológico. Se empleó como técnica la encuesta y como instrumento el cuestionario para cada una de las variables. Tuvo como hipótesis general: si existe relación entre la calidad de servicio y la satisfacción del usuario en el consultorio odontológico del Hospital II-E, Lamas, 2019. Los principales resultados demuestran que el estado de la calidad de servicio presenta una evaluación de 6.7% malo, 84.9% regular, 8.4% bueno. El grado de satisfacción del usuario fue determinado como 14.3% bajo, 68.1% medio y 17.6% alto. De esta manera se llegó a concluir que, existe correlación entre las variables calidad de servicio y satisfacción del usuario, además se obtuvo una correlación positiva muy baja de 0.187 y un nivel de significancia de 0.05, donde se confirma que la calidad de servicio influye en la satisfacción del usuario