Search results for "premium"
showing 10 items of 84 documents
An index of financial connectedness applied to variance risk premia
2014
The purpose is to construct an index of financial connectedness among France, Germany, UK, Switzerland and the Netherlands variance risk premia. The variance risk premium of each country stock market is measured by the difference between the (square) of implied volatility and expected realized variance of the stock market for next month. The total and directional indices of financial connectedness are obtained from the forecast error variance decomposition of a Vector Autoregressive Model, VAR, as recently suggested by Diebold and Yilmaz. While the authors main focus is on connectedness among financial returns, they base their analysis on a short memory stationary VAR. Given the long memory…
Futures pricing in electricity markets based on stable CARMA spot models
2012
We present a new model for the electricity spot price dynamics, which is able to capture seasonality, low-frequency dynamics and the extreme spikes in the market. Instead of the usual purely deterministic trend we introduce a non-stationary independent increments process for the low-frequency dynamics, and model the large uctuations by a non-Gaussian stable CARMA process. The model allows for analytic futures prices, and we apply these to model and estimate the whole market consistently. Besides standard parameter estimation, an estimation procedure is suggested, where we t the non-stationary trend using futures data with long time until delivery, and a robust L 1 -lter to nd the states of …
Revamping Research on Unrelated Diversification Strategy: Perspectives, Opportunities and Challenges for Future Inquiry
2015
With the aim of achieving an advanced understanding of current research on unrelated diversification and providing fruitful groundwork to foster active interchange between disciplinary traditions, this paper detects articles from two relevant research streams; i.e., strategic management and financial economics. We first provide a brief overview of management thinking on unrelated diversification strategy. Then, we present a conceptual map that offers a comprehensive appreciation of unrelated diversification strategy antecedents (i.e., environmental and institutional, organizational value-enhancing, and managerial drivers), implementation process (i.e., managerial complexity, misallocation o…
Stock Return Volatility on Scandinavian Stock Markets and the Banking Industry: Evidence from the Years of Financial Liberalisation and Banking Crisis
1999
This paper investigates the evolution of the (conditional) volatility of returns on three Scandinavian markets (Finland, Norway and Sweden) over the turbulent period of the past decade, namely the overlapping periods of financial liberalisation, drastically changing macroeconomic conditions and banking crisis. We find that even over this relatively turbulent period volatility is in most cases successfully captured by past volatility and shocks to past volatility, ie by a (symmetric) GARCH process. In each country banking crisis has induced regime shifts in (unconditional) volatility. We also find evidence for cross-country volatility spillovers during the banking crisis episodes. The estima…
The Effects of Internationalization on CEO Compensation
2004
This study examines the relation between the internationalization of firms and CEO compensation. Starting from a sample of Norwegian and Swedish listed firms, we analyze the effects of internationalization as manifest in the capital market (international cross-listing), the market for corporate control (foreign board membership), and the product and service market (export and foreign sales). We conclude that all three markets contribute positively to the compensation level of CEOs. We argue that part of the higher CEO compensation in internationally oriented firms - as compared to less internationalized firms within the same country - reflects a risk premium for reduction in job security.Pu…
Robustness of the risk–return relationship in the U.S. stock market
2008
Abstract Using GARCH-in-Mean models, we study the robustness of the risk–return relationship in monthly U.S. stock market returns (1928:1–2004:12) with respect to the specification of the conditional mean equation. The issue is important because in this commonly used framework, unnecessarily including an intercept is known to distort conclusions. The existence of the relationship is relatively robust, but its strength depends on the prior belief concerning the intercept. The latter applies in particular to the first half of the sample, where also the coefficient of the relative risk aversion is smaller and the equity premium greater than in the latter half.
Illiquidity Risk and the Long-Run Underperformance of Seasoned Equity Issues in the Spanish Market
2008
This paper presents new evidence on potential risk-based explanations for the low SEO returns in the year after the issue. Specifically, we analyse whether the issue leads to a long-term higher stock liquidity that implies that SEO stocks have lower expected return due to lower exposure to liquidity risk factor. Therefore, we investigate if Spanish SEO firms experience significant changes in long-term liquidity after the issue. Results suggest that SEO-firm liquidity increases significantly in the year after the issue. Finally, we explore the post-performance of SEO firms explicitly accounting for liquidity risk. In particular, we employ the three factor model by Fama and French (1993) exte…
Exchange Rate and Inflation Risk Premia in the UME
2012
This paper tests the effects of exchange rate and inflation risk factors on asset pricing in the European Union (EU) stock markets. This investigation is motivated by the results of Vassalou (2000) [Journal of International Money and Finance, 19, 433-70] showing that both exchange rate and foreign inflation are generally priced in equity returns, and the opportunity to evaluate the causality between these sources of risk after the elimination of the EU currency risks because of the adoption of the single currency. Our results show that both exchange rate and inflation risks are significantly priced in the pre- and post-euro periods. Moreover, the size of exchange rate and inflation risk pre…
Dynamic Asset Allocation Strategies Based on Unexpected Volatility
2013
In this paper we document that at the aggregate stock market level the unexpected volatility is negatively related to expected future returns and positively related to future volatility. We demonstrate how the predictive ability of unexpected volatility can be utilized in dynamic asset allocation strategies that deliver a substantial improvement in risk-adjusted performance as compared to traditional buy-and-hold strategies. In addition, we demonstrate that active strategies based on unexpected volatility outperform the popular active strategy with volatility target mechanism and have the edge over the widely reputed market timing strategy with 10-month simple moving average rule.
Essays On European Natural Gas Market
2018
La presente tesis ha cubierto diferentes aspectos de los mercados europeos del gas natural y la electricidad, en particular algunas propiedades que afectan a la efectividad de la cobertura, como la estacionalidad en varianza y en precios. Asimismo, se ha realizado un estudio de la prima de riesgo del gas natural, su relación con las variables de riesgo y su descomposición en una prima de riesgo de reinversión o ‘rollover’ y una prima de ‘preferencia por liquidez’ relacionada con el plazo. La tesis se compone de tres capítulos: el Capítulo I estudia la estacionalidad en los precios y la volatilidad y cómo mejora la efectividad de la cobertura teniendo en cuenta dicha estacionalidad; el Capít…