Search results for "Volatility"
showing 10 items of 245 documents
Volatility Effects on the Escape Time in Financial Market Models
2008
We shortly review the statistical properties of the escape times, or hitting times, for stock price returns by using different models which describe the stock market evolution. We compare the probability function (PF) of these escape times with that obtained from real market data. Afterwards we analyze in detail the effect both of noise and different initial conditions on the escape time in a market model with stochastic volatility and a cubic nonlinearity. For this model we compare the PF of the stock price returns, the PF of the volatility and the return correlation with the same statistical characteristics obtained from real market data.
The non-random walk of stock prices: The long-term correlation between signs and sizes
2007
We investigate the random walk of prices by developing a simple model relating the properties of the signs and absolute values of individual price changes to the diffusion rate (volatility) of prices at longer time scales. We show that this benchmark model is unable to reproduce the diffusion properties of real prices. Specifically, we find that for one hour intervals this model consistently over-predicts the volatility of real price series by about 70%, and that this effect becomes stronger as the length of the intervals increases. By selectively shuffling some components of the data while preserving others we are able to show that this discrepancy is caused by a subtle but long-range non-…
SEA presidential address: Group connectivity and cooperation
2011
A model-free methodology is used for the first time to estimate a daily volatility index (VIBEX-NEW) for the Spanish financial market.We use a public data set of daily option prices to compute this index and showthat daily changes in VIBEXNEW display a negative, tight contemporaneous relationship with IBEX daily returns, contrary to other common volatility indicators, as an implied volatility indicator or a GARCH(1,1) conditional volatility model. This relationship is approximately symmetric to the sign on VIBEX-NEW changes and asymmetric to the IBEX-35 returns sign, which make it clearly a suitable volatility index for the Spanish stock market. We also examine the relationship between curr…
Forecasting the Size Premium Over Different Horizons
2011
In this paper, we provide evidence that the small stock premium is predictable both in-sample and out-of-sample through the use of a set of lagged macroeconomic variables. We find that it is possible to forecast the size premium over time horizons that range from one month to one year. We demonstrate that the predictability of the size premium allows a portfolio manager to generate an economically and statistically significant active alpha.
The determinants of public deficit volatility
2009
This paper empirically analyzes the political, institutional and economic sources of public deficit volatility. Using the system-GMM estimator for linear dynamic panel data models and a sample of 125 countries analyzed from 1980 to 2006, we show that higher public deficit volatility is typically associated with higher levels of political instability and less democracy. In addition, public deficit volatility tends to be magnified for small countries, in the outcome of hyper-inflation episodes and for countries with a high degree of openness.
Asset Return Dynamics under Alternative Learning Schemes
2009
In this paper we design an artificial financial market where endogenous volatility is created assigning to the agents diverse prior beliefs about the joint distribution of returns, and, over time, making agents rationally update their beliefs using common public information. We analyze the asset price dynamics generated under two learning environments: one where agents assume that the joint distribution of returns is IID, and another where agents believe in the existence of regimes in the joint distribution of asset returns. We show that the regime switching learning structure can generate all the most common stylized facts of financial markets: fat tails and long-range dependence in volati…
Are green bonds a different asset class? Evidence from time-frequency connectedness analysis
2021
Abstract This paper investigates the time-frequency connectedness across the global green bond market and several mainstream financial and energy markets in an attempt to figure out whether green bonds represent a different asset class. The connectedness methodology proposed by Barunik and Křehlik (2018) is employed for that purpose. This approach enables quantifying the dynamics of connectedness in terms of return and volatility over time and across time scales simultaneously. The empirical results indicate that connectedness between the global green bond market and the conventional financial and energy markets mainly occurs at shorter time horizons, suggesting that shocks are rapidly tran…
Anatomy of Risk Premium in UK Natural Gas Futures
2015
In many futures markets, trading is concentrated in the front contract and positions are rolled-over until the strategy horizon is attained. In this paper, a pair-wise comparison between the conventional risk premium and the accrued risk premium in rolled-over positions in the front contract is carried out for UK natural gas futures. Several novel results are obtained. Firstly, and most importantly, the accrued risk premium in rollover strategies is significatively larger than conventional risk premiums and increases with the time to delivery. Specifically, for strategy horizons between three and six months, this difference increases from 1% to 10%. Secondly, it is the first time that risk …
Volatility Transmission Models: A Survey
2005
This study reviews the literature on volatility transmission in order to determine what we have learnt about the different methodologies applied. In particular, GARCH, regime switching and stochastic volatility models are analysed. In addition, this study covers several concrete aspects such as their scope of application, the overlapping problem, the concept of efficiency and asymmetry modelling. Finally, emerging topics and unanswered questions are identified, serving as an agenda for future research.
Growth Volatility and the Structure of the Economy
2011
The aim of the chapter is twofold: (i) to propose a methodology to compute the growth rate volatility of an economy and (ii) to investigate the relationship between growth volatility and economic development through the lenses of the structural characteristics of an economy. We study a large cross-section of countries in the period 1970–2009, controlling for the stability of the estimates in two subperiods: 1970:1989 (Period I) and 1990:2009 (Period II). Our main findings are (i) the degree of trade openness has a destabilizing effect, while the degree of financial openness has not a significant effect; (ii) the size of the public sector displays a U-shaped relationship with growth volatili…