1,668 research outputs found
Looking behind Granger causality
Granger causality as a popular concept in time series analysis is widely applied in empirical research. The interpretation of Granger causality tests in a cause-effect context is, however, often unclear or even controversial, so that the causality label has faded away. Textbooks carefully warn that Granger causality does not imply true causality and preferably refer the Granger causality test to a forecasting technique. Applying theory of inferred causation, we develop in this paper a method to uncover causal structures behind Granger causality. In this way we re-substantialize the causal attribution in Granger causality through providing an causal explanation to the conditional dependence manifested in Granger causality.Granger Causality; Time Series Causal Model; Graphical Model
The Impact of Short-Sale Constraints on Asset Allocation Strategies via the Backward Markov Chain Approximation Method
This paper considers an asset allocation strategy over a finite period under investment uncertainty and short-sale constraints as a continuous time stochastic control problem. Investment uncertainty is characterised by a stochastic interest rate and inflation risk. If there are no short-sale constraints, the optimal asset allocation strategy can be solved analytically. We consider several kinds of short-sale constraints and employ the backward Markov chain approximation method to explore the impact of short-sale constraints on asset allocation decisions. Our results show that the short-sale constraints do indeed have a significant impact on the asset allocation decisions.
THE TRANSITION PROCESS IN CHINA: AN ECONOMIC DEVELOPMENT PERSPECTIVE
During the last 25 years, the Chinese economy has experienced significant changes: the centrally planned economy has been reformed gradually into a market economy; the traditional agricultural economy is becoming more and more a modern industrial economy. In a dynamic two-sector-two-segment model we demonstrate that the economic reform has changed the industrialization mechanism in China. It released a decentralized industrialization process beside the centrally planned Soviet-type industrialization. This decentralized industrialization is shown to be the ultimate driving force of the transition from plan to market in China.Transition, Economic Reform, Industrialization, the Chinese Economy
Optimal Investment Strategies under Stochastic Volatility - Estimation and Applications
This paper studies the impact of stochastic volatility (SV) on optimal investment decisions. We consider three different SV models: an extended Stein/Stein model, the Heston Model and an extended Heston Model with a constant elasticity variance (CEV) process and derive the the long-term optimal investment strategies under each of these processes. Since volatility is not a directly observable quantity, extended Kalman filter techniques are adopted to deal with this partial information problem. Optimal investment strategies based on the CEV volatility model are obtained by adopting the Backward Markov Chain approximation method since analytical solutions are no longer available. We find in the empirical investigation that the Heston model is favored as a more parsimonious model compared with the other two models. All three investment strategies based on the three SV models contain a positive intertemporal hedging term in addition to the static mean-variance portfolio. However, in their details the three investment strategies differ from each other. We also ?nd that the investment strategies are sensitive to the CEV parameter.asset allocation; stochastic volatility; partial information problem; extended Kalman ?lter; the Heston model; CEV process
Intertemporal Investment Strategies under Inflation Risk
This paper studies intertemporal investment strategies under inflation risk by extending the intertemporal framework of Merton (1973) to include a stochastic price index. The stochastic price index gives rise to a two-tier evaluation system: agents maximize their utility of consumption in real terms while investment activities and wealth evolution are evaluated in nominal terms. We include inflation-indexed bonds in the agentsā investment opportunity set and study their effectiveness in hedging against inflation risk. A new multifactor term structure model is developed to price both inflation-indexed bonds and nominal bonds, and the optimal rules for intertemporal portfolio allocation, both with and without inflation-indexed bonds are obtained in closed form. The theoretical model is estimated using data of US bond yield, both real and nominal, and S&P 500 index. The estimation results are employed to construct the optimal investment strategy for an actual real market situation. Wachter (2003) pointed out that without inflation risk, the most risk averse agents (with an infinite risk aversion parameter) will invest all their wealth in the long term nominal bond maturing at the end of the investment horizon. We extend this result to the case with inflation risk and conclude that the most risk averse agents will now invest all their wealth in the inflation-indexed bond maturing at the end of the investment horizon.inflation-indexed bonds; intertemporal asset allocation; inflationary expectations
Measurement of [alpha subscript s]from energy-energy correlations in e+e- annihilation at 29 GeV
We have studied the energy-energy correlation in e[superscript]+e[superscript]- annihilation into hadrons at ās = 29 GeV using the TPC/2[gamma] Detector Facility at PEP. We found that [alpha][subscript]s = 0.161 Ā±.004 Ā±.011 for the average hadronic event sample using GKS matrix elements and LUND symmetric string fragmentation
Stochastic Correlation and Risk Premia in Term Structure Models
This paper proposes and analyses a term structure model that allows for both stochastic correlation between underlying factors and an extended market price of risk specification. The issues of invariant transformation and different normalization are then considered so that a comparison between different restrictions can be made. We show that significant improvement in bond fitting is obtained by both allowing the market price of risk to have an extended affine form, and allowing the correlation between underlying factors to be stochastic as well as of variable sign. The overall model fit is more negatively impacted by the restriction on the market price of risk than the restriction of correlated factors. However, the stochastic correlation is priced significantly by market participants, though its impact on the risk premia reduces gradually as time to maturity increases. In addition, stochastic correlation is vital in obtaining good hedged portfolio positions. Certainly, the best hedged portfolio is the one that is built based on the model that takes into account both stochastic correlation and extended market price of risk.Term structure; Stochastic correlation, Risk premium; Wishart; Affine; Extended affine; Multidimensional CIR
Small organizations and Title I of the ADA: A survey study in Region 2
While both small and large employers cite barriers to employing and advancing individuals with disabilities, some issues are more common among smaller employers than their larger counterparts. The purpose of the current survey study is two-fold: 1) to understand the barriers to effective implementation Title I of the ADA among small employers, 2) to identify effective ways to educate and support small employers as they implement the ADA. We began survey development with a literature review and a set of interviews with leadership or HR professionals who implement Title I within the small organizations. Through these interviews, we identified themes related to the implementation of the employment provisions of Title I of the ADA. The survey includes questions that examine organizational policy and processes, topical areas of interest, ways of accessing information, and respondent/organizational characteristics. The survey respondents were from New York, New Jersey, Puerto Rico, and the US Virgin Islands (representing Region 2). The survey results highlighted the need to (1) establish a basic understanding of the terms, including disability and reasonable accommodations, (2) provide more guidance on practical implementation of the Title I, (3) support systematic information gathering and an accommodation process that considers small business work setting, (4) promote disability awareness at the workplace and among human resources personnel
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