Short-term spot rate models with nonparametric deterministic drift

Most studies assume stationarity when testing continuous-time interest-rate models. However, consistent with Bierens [Bierens, H. (1997). Testing the unit root with drift hypothesis against nonlinear trend stationary, with an application to the US price level and interest rate. Journal of Econometrics, 81, 29-64; Bierens, H. (2000). Nonparametric nonlinear co-trending analysis, with an application to interest and inflation in the United States. Journal of Business and Economics Statistics, 18, 323-337], our nonparametric test results support nonlinear trend stationarity. To accommodate nonstationarity, we detrend the interest-rate series and re-examine a variety of continuous-time models. The goodness-of-fit improves significantly for those models with drift-induced mean reversion and worsens for those with high volatility elasticity. The inclusion of a nonparametric trend component in the drift significantly reduces the level effect on the interest-rate volatility. These results suggest that the misspecification of the constant elasticity model should be attributed to the nonlinear trend component of the short-term interest-rate process.Generalized method of moment Nonlinear trend component Spectral kernel

The long swings in the spot exchange rates and the complex unit roots hypothesis

This paper addresses whether the spot exchange rates display long swings and whether these swings are persistent. The null from the naïve random walk theory is that they do not: if they would be unit roots with positive drifts they would converge to infinity. However, if they would be driftless unit roots they would assign negative values, which is unrealistic. We test this by examining whether the yearly changes of spot exchange rates display complex conjugate unit roots against the stationary hypothesis. We reject the hypothesis that the yearly changes in exchange rates are stationary in favor of cyclical, complex unit roots. The periodogram based cycle duration analysis reveals that the long swings in the exchange rates are persistent.

A nonparametric cointegration analysis of the forward rate unbiasedness hypothesis

The nonparametric cointegration method of Breitung (2002) is applied to test for the forward rate unbiasedness hypothesis (FRUH) using monthly data of the US dollar vis-à-vis two major currencies viz. the British pound and the Canadian dollar over the period spanned from 1973 to 2002. The results of the nonparametric test are compared with the parametric test suggested by Johansen (1988 and 1992) and Johansen and Juselius (1990). Robust cointegration is found between the spot and the forward rates but the FRUH is rejected. The result is robust whether the trend is included in the model or not.

Examining complex unit roots in the MENA countries industrial production indices

An estimation of complex unit roots is presented based on the standardized periodogram of the Jordanian and Israeli Industrial Production indices over the period 1982-2003. Both indices are found to have six complex cyclical unit roots contents. In contrast, the propagation mechanism rather than impulse tends to drive the business cycles in those economies. Propagation consists of those forces which carry the influences of the shock forward over time and cause deviation from the steady state to be persistent. The periodogram-based cycle duration analysis reveals that both Kitchin and Juglar cycles exist in the Israeli economy. However, no investment cycles are found in the Jordanian economy.

Price Limit and Volatility in Taiwan Stock Exchange: Some Additional Evidence from the Extreme Value Approach

We reexamine the effects of price limits on stock volatility of Taiwan Stock Exchange using a new methodology based on the Extreme-Value technique. Consistent with the advocates of price limits, we find that stock market volatility is sharply moderated under more restrictive price limits.Price limits, Extreme value theory, Volatility, Taiwan stock exchange

Value-at-risk under extreme values: the relative performance in MENA emerging stock markets

Purpose – The paper aims to investigate the relative performance of the most popular value-at-risk (VaR) estimates with an emphasis on the extreme value theory (EVT) methodology for seven Middle East and North Africa (MENA) countries. Design/methodology/approach – The paper calculates tails distributions of return series by EVT. This allows computing VaR and comparing the results with Variance-Covariance method, Historical simulation, and ARCH-type process with normal distribution, Student-t distribution and skewed Student-t distribution. The paper assesses the performance of the models, which are used in VaR estimations, based on their empirical failure rates. Findings – The empirical results demonstrate that the return distributions of the MENA markets are characterized by fat tails which implies that VaR measures relies on the normal distribution will underestimate VaR. The results suggest that the extreme value approach, by modeling the tails of the return distributions, are more relevant to measure VaR in most of the MENA. Research limitations/implications – The results show that the use of conventional methodologies such as the normal distribution model to estimate the financial market risk in MENA countries may lead to faulty estimation of risk in the world of volatile markets. Originality/value – The paper tried to fill the gap in the literature and perform an evaluation of the relative performance of the most popular VaR estimates with an emphasis on the EVT methodology in seven MENA emerging stock markets. A comparison of the performance between EVT and other VaR techniques should support the decision whether more or less sophisticated methods are appropriate in order to assess stock market risks in the MENA countries.Financial instruments, Financial risk, Middle East, North Africa, Stock markets

THE RELATIVE RISK PERFORMANCE OF ISLAMIC FINANCE: A NEW GUIDE TO LESS RISKY INVESTMENTS

We examine the relative risk performance of the Dow Jones Islamic Index (DJIS) and find that the index outperforms the Dow Jones (DJIM) WORLD Index in terms of risk. Using the most recent Value-at-Risk (VaR) methodologies (RiskMetrics, Student-t APARCH, and skewed Student-t APARCH) on the 1996–2005 period, and assuming one-day holding period for both indices with a moving window of 500 day data, we show that the value of VaR is greater for DJIM WORLD than for DJIS Islamic. We interpret the results mainly to the profit-and-loss sharing principle of Islamic finance where banks share the profits and bear losses (Mudarabah) or share both profits and losses (Musharaka) with the firm.Islamic investment, profit-and-loss sharing, risk performance, Value-at-Risk

The tail behavior of extreme stock returns in the Gulf emerging markets: An implication for financial risk management

Purpose – In this paper, the aim is to investigate the tail behavior of daily stock returns for three emerging stock in the Gulf region (Bahrain, Oman, and Saudi Arabia) over the period 1998-2005. In addition, the aim is also to test whether the distributions are similar across these markets. Design/methodology/approach – Following McNeil and Frey, Wanger and Marsh, and Bystrom, extreme value theory (EVT) methods are utilized to examine the asymptotic distribution of the tail for daily returns in the Gulf region. As a first step and to obtain independent and identically distributed residuals series, the returns are prefiltered with an ordinary time-series model, taking into account the observed Gulf return dynamics. Then, the “Peaks-Over-Threshold” (POT) model is applied to estimate the tails of the innovational distribution. Findings – Not only is the heavy tail found to be a facial appearance in these markets, but also POT method of modelling extreme tail quantiles is more accurate than conventional methodologies (historical simulation and normal distribution models) in estimating the tail behavior of the Gulf markets returns. Across all return series, it is found that left and right tails behave very different across countries. Research limitations/implications – The results show that risk models that are able to exploit tail behavior could lead to more accurate risk estimates. Thus, participants in the Gulf equity markets can rely on EVT-based risk model when assessing their risks. Originality/value – The paper extends previous studies in two aspects. First, it extends the classical unconditional extreme value approach by first filtering the data by using AR-FIAPARCH model to capture some of the dependencies in the stock returns, and thereafter applying ordinary extreme value techniques. Second, it provides a broad analysis of return dynamics of the Gulf markets.Persian Gulf States, Risk management, Stock markets, Stock returns

Imaging Patterns in Breast Cancer for Women Under 40 Years: A Descriptive Cohort Study

Background and Aim: Breast cancer is the most frequently occurring malignant disease in women and remains the leading cause of cancer-related deaths among females worldwide. The aim of this study is to evaluate the imaging findings of breast cancer in women under the age of 40 and analyze their pathological patterns. Method: A retrospective study was conducted from 2013 to 2019, involving 120 patients below 40 years of age with pathologically confirmed primary epithelial breast cancers. The data were collected from the electronic records of a tertiary hospital in Riyadh, Saudi Arabia. Mammograms were performed for 115 patients, ultrasounds were conducted for all patients, and MRI scans were carried out for 47 patients. Results: All radiological findings and clinical characteristics of the 120 cases were retrieved from our digital-based system. The majority of breast cancer patients (83.4%) were between 30 and 40 years old, and the most common clinical presentation was a mass (45.8%). Out of the 73 patients who underwent genetic tests, 32.9% tested positive for gene mutations. No statistically significant correlation was found between specific age groups and breast composition (P = 0.216), specific mammogram abnormalities such as masses (P = 0.262), or microcalcifications (P = 0.421). Ultrasonography was performed for all patients, with abnormalities detected in only one patient who was diagnosed with Paget’s disease of the nipple. Masses, with or without parenchymal changes, were the predominant feature in 88.3% of cases. Conclusion: The imaging findings in breast cancer cases typically involve masses with suspicious features, irregular shape, and spiculated margins on mammograms, and irregular shape with microlobulated or angular margins on ultrasound. MRI features commonly include masses with irregular shape and heterogeneous enhancement. The luminal B subtype was identified as the most prevalent pathological feature, characterized by a high proliferative index (Ki-67%). Graphical Abstract: [Figure not available: see fulltext.]The publication of this article was funded by Qatar National Library (QNL)