Search results for "Econometrics"
showing 10 items of 3730 documents
Information and hierarchical structure in financial markets
1999
I investigate the information content present in the time series of stock prices of a portfolio of stocks traded in a financial market. By investigating the correlation coefficient between pairs of stocks I provide a working definition of a generalized distance between the stocks of the portfolio. This generalized distance is used to obtain an ultrametric distance matrix between the stocks. The ultrametric structure of the portfolio investigated has associated a taxonomy which is meaningful from an economic point of view.
Evolution of Worldwide Stock Markets, Correlation Structure and Correlation Based Graphs
2011
We investigate the daily correlation present among market indices of stock exchanges located all over the world in the time period Jan 1996 - Jul 2009. We discover that the correlation among market indices presents both a fast and a slow dynamics. The slow dynamics reflects the development and consolidation of globalization. The fast dynamics is associated with critical events that originate in a specific country or region of the world and rapidly affect the global system. We provide evidence that the short term timescale of correlation among market indices is less than 3 trading months (about 60 trading days). The average values of the non diagonal elements of the correlation matrix, corre…
Finite Sample Sizes of the GRS Test in the Presence of Dynamic Correlation and Conditional Heteroskedasticity
2017
This paper investigates the finite sample properties of the widely-used Gibbons, Ross, Shanken (1989) (GRS) test in the presence of both conditional correlation and conditional heteroskedasticity. It finds that the GRS test exhibits serious size distortions resulting in potentially misleading statistical inferences. The correct critical values, as reported in the study, are considerably larger than suggested by the GRS test.
Taxonomic flux as a measure of evolutionary turnover
2021
We introduce a new metric, "taxonomic flux", to quantify evolutionary trends both within and across taxonomic boundaries. This metric is normalized, which reduces the effect of sample size disparity between biologic groups and time intervals. Furthermore, this methodology considers stratigraphic range data as a whole, and measures relative growth or decline of diversity values as they deviate from system stability. Such trends may yield key information relating to evolutionary processes and forcing functions, especially if these trends are correlative within particular taxa or niche occupancy. Thus far, scientists and researchers have been stymied by absolute values derived from unequal dat…
Incentive systems for risky investment decisions under unknown preferences
2017
Abstract Our paper examines how to design incentive systems for managers making multi-period risky investment decisions. We show how compensation functions and performance measures must be designed to ensure that managers implement the expected value-maximizing set of projects. The Relative Benefit Cost Allocation (RBCA) Scheme 1 and its extensions revealed in literature on unknown time preferences generally fail to do so under unknown time and risk preferences. We illustrate that when coping with such unknown preferences in a risky setting, a specific state-dependent allocation rule is required. We introduce such an allocation scheme, which we refer to as the State-Contingent RBCA Scheme, …
Illegal fishing in Isla del Coco National Park: Spatial-temporal distribution and the economic trade-offs
2020
Abstract The Isla del Coco National Park, located on the Pacific coast of Costa Rica, is rich in biodiversity and has a high concentration of pelagic species. This high marine biodiversity makes the Isla del Coco National Park (PNIC) a very attractive place for illegal fishers. We analyzed a dataset covering 8 years (2003–2010) of patrol records from PNIC with the aim of determining, a) the spatial-temporal distribution of illegal fishing, b) other areas that could be prone to illegal fishing but are currently undetected, c) the most profitable areas for this activity and d) the economic trade-offs of this illegal activity in relation to potential gains and the costs. Residuals Autocovariat…
Labor Productivity Growth: Disentangling Technology and Capital Accumulation
2014
We adopt a counterfactual approach to decompose labor productivity growth into growth of Technological Productivity (TEP), growth of the capital-labor ratio and growth of Total Factor Productivity (TFP). We bring the decomposition to the data using international countrysectoral information spanning from the 1960s to the 2000s and a nonparametric generalized kernel method, which enables us to estimate the production function allowing for heterogeneity across all relevant dimensions: countries, sectors and time. As well as documenting substantial heterogeneity across countries and sectors, we nd average TEP to account for about 44% of labor productivity growth and TEP gaps with respect to the…
Breakup and default risks in the great lockdown
2023
Abstract In this paper, we exploit CDS quotes for contracts denominated in different currencies and with different default clauses to estimate the risk of a breakup of the Eurozone and the propagation of breakup and default risks after the COVID-19 shock. Our main result is that the risk of a Eurozone breakup is significant although, quantitatively, it is not larger than in the period before the COVID-19 shock. In addition, we find that an increase in the redenomination risk in one country is associated with an increase in default premia and bond spreads in other Eurozone countries. Finally, we find that a sizeable fraction of the changes in the cost of insuring against redenomination and d…
Robust Recovery Risk Hedging: Only the First Moment Matters
2009
Credit derivatives are subject to at least two sources of risk: the default time and the recovery payment. This paper examines the impact of modeling the recovery payment on hedging strategies in a reduced-form model as well as a structural model. We show that all hedging approaches based on a quadratic criterion do only depend on the expected recovery payment at default and not the whole shape of the recovery payment distribution if the underlying hedging instrument (say, a defaultable zero coupon bond) jumps to or reaches a pre-specified value when the credit event occurs. This justifies assuming a \emph{certain} recovery rate conditional on default time and interest rate level. Hence, th…
Pricing sovereign contingent convertible debt
2018
We develop a pricing model for Sovereign Contingent Convertible bonds (S-CoCo) with payment standstills triggered by a sovereign's Credit Default Swap (CDS) spread. We model CDS spread regime switching, which is prevalent during crises, as a hidden Markov process, coupled with a mean-reverting stochastic process of spread levels under fixed regimes, in order to obtain S-CoCo prices through simulation. The paper uses the pricing model in a Longstaff-Schwartz American option pricing framework to compute future state contingent S-CoCo prices for risk management. Dual trigger pricing is also discussed using the idiosyncratic CDS spread for the sovereign debt together with a broad market index. …