Systematic risk at the industry level: A case study of Australia

The cornerstone of the capital asset pricing model (CAPM) lies with its beta. The question of whether or not beta is dead has attracted great attention from academics and practitioners in the last 50 years or so, and the debate is still ongoing. Many empirical studies have been conducted to test the validity of beta within the framework of CAPM. However, it is a claim of this paper that beta at the industry level has been largely ignored in the current literature. This study is conducted to examine if beta, proxied for a systematic risk, should be considered valid in the application of the CAPM at the industry level for Australia using daily data on 2200 stocks listed on the Australian Securities Exchange from January 2007 to 31 December 2016. Various portfolio formations are utilized in this paper. General economic conditions such as interest rate, inflation, and GDP are examples of systematic risk. Findings from this study indicate that the selection of portfolio construction, estimation technique, and news about economic conditions significantly affects the view whether or not beta should be considered as a valid measure of systematic risk

Rent Seeking for Export Licenses: Application to the Vietnam Rice Market

The paper develops a model to examine rent seeking in innovation and export licenses, with an application to Vietnam rice exports. Firms can lobby for export restrictions or for free trade. Innovation is introduced as a cost-reducing technology. The analysis focuses on the innovation incentives of the firm lobbying for export restrictions, and the determinants of lobbying incentives. The analysis shows that firms lobbying for export restrictions may have lower incentives to adopt technological innovations under export restrictions than under free trade. The findings can help to identify economic inefficiency when the political elites use export restrictions to seek rents

Modelling the Relationship between Crude Oil and Agricultural Commodity Prices

The food-energy nexus has attracted great attention from policymakers, practitioners and academia since the food price crisis during the 2007-2008 Global Financial Crisis (GFC), and new policies that aim to increase ethanol production. This paper incorporates aggregate demand and alternative oil shocks to investigate the causal relationship between agricultural products and oil markets, which is a novel contribution. For the period January 2000 - July 2018, monthly spot prices of 15 commodities are examined, including Brent crude oil, biofuel-related agricultural commodities, and other agricultural commodities. The sample is divided into three sub-periods, namely: (i) January 2000 - July 2006; (ii) August 2006 - April 2013; and (iii) May 2013 - July 2018. The Structural Vector Autoregressive (SVAR) model, impulse response functions, and variance decomposition technique are used to examine how the shocks to agricultural markets contribute to the variance of crude oil prices. The empirical findings from the paper indicate that not every oil shock contributes the same to agricultural price fluctuations, and similarly for the effects of aggregate demand shocks on the agricultural market. These results show that the crude oil market plays a major role in explaining fluctuations in the prices and associated volatility of agricultural commoditie