Search results for "volatility"
showing 10 items of 245 documents
A new look at the meeting clustering effect
2021
PurposeThe study aims to test the existence of a meeting clustering effect in the Spanish Stock Exchange (SSE).Design/methodology/approachThis paper studies the relationship between the clustering of annual general meetings and stock returns in the SSE. A multivariate analysis is carried out in order to analyse the relationship between monthly returns and the clustering of general meetings in the SSE.FindingsThe authors show that meeting clustering exists and that some months exhibit significant and positive additional returns related to the holding of ordinary or extraordinary general meetings.Research limitations/implicationsThe authors have explored some possible explanations for the mee…
Exploring the Hedging Effectiveness of European Wheat Futures Markets during the 2007-2012 Period
2014
Abstract The hypothesis that speculative behaviour was the cause of the instability of commodity prices has brought renewed interest in futures markets. In this paper, the hedging effectiveness of European and US wheat futures markets were studied to test whether they were affected by the price instability observed after 2007. Indirectly, this could also be thought as a test of whether the increasing presence of speculators in futures markets have made them divorced from physical markets. A multivariate GARCH model was applied to compute optimal hedging ratios. No important evidence was found of a change in the hedging effectiveness after 2007.
Option-Implied Volatility-Managed Asset Pricing Risk Factors and Resurrection of the Value Factor
2019
Option-implied volatility-managed risk factor models produce higher maximum squared Sharpe ratios than the recently proposed six-factor model, which is used as a benchmark model in this study. A model that incorporates option-implied volatility-managed risk factors based on dynamic scaling factors that systematically overestimate the expected market risk, as measured by the VIX, is superior to other asset pricing model specifications. After the death of the value factor has been repeatedly declared, it is surprising news that multivariate spanning regressions reveal that both the option-implied volatility-managed momentum and value factor are the only option-implied volatility-managed risk …
Effects of renewables on the stylized facts of electricity prices
2015
Abstract Many countries around the world have increased their renewable installed capacity due to a greater awareness of climate concerns. Under this new framework, with renewables being among the main generation sources, the literature warns of a dramatic change in price behaviour. Some of the most commonly claimed effects of having a significant proportion of renewable generating sources in the total electricity production mix include: (i) a systematic decrease in overall wholesale market prices, (ii) a higher occurrence of price jumps, and (iii) a significant increase in price volatility. The goal of the present study is to test whether these changes in price behaviour have actually come…
Role of noise in a market model with stochastic volatility
2006
We study a generalization of the Heston model, which consists of two coupled stochastic differential equations, one for the stock price and the other one for the volatility. We consider a cubic nonlinearity in the first equation and a correlation between the two Wiener processes, which model the two white noise sources. This model can be useful to describe the market dynamics characterized by different regimes corresponding to normal and extreme days. We analyze the effect of the noise on the statistical properties of the escape time with reference to the noise enhanced stability (NES) phenomenon, that is the noise induced enhancement of the lifetime of a metastable state. We observe NES ef…
Asymmetric semi-volatility spillover effects in EMU stock markets
2018
Abstract The aim of this paper is to quantify the strength and the direction of semi-volatility spillovers between five EMU stock markets over the 2000–2016 period. We use upside and downside semi-volatilities as proxies for downside risk and upside opportunities. In this way, we aim to complement the literature, which has focused mainly on the contemporaneous correlation between positive and negative returns, with the evidence of asymmetry also in semi-volatility transmission. For this purpose, we apply the Diebold and Yilmaz (2012) methodology, based on a generalized forecast error variance decomposition, to downside and upside realized semi-volatility series. While the analysis of Diebol…
Public sector wage premium and output volatility in the European Union
2018
This study seeks to uncover the role played by the public sector wage premium in explaining the output volatility. Furthermore, the study also explores the factors that might substantiate the cross-country differences in the volatility of the public sector wage premium. Using cross-sectional regression analysis for the European Union countries, the findings indicate that more volatile public sector wage premium is associated with higher fluctuations in the private sector employment and less stable growth. Findings also suggest that volatility of the public sector wage premium tends to be larger in countries with smaller governments and in countries where collective bargaining is the predomi…
Cluster analysis for portfolio optimization
2005
We consider the problem of the statistical uncertainty of the correlation matrix in the optimization of a financial portfolio. We show that the use of clustering algorithms can improve the reliability of the portfolio in terms of the ratio between predicted and realized risk. Bootstrap analysis indicates that this improvement is obtained in a wide range of the parameters N (number of assets) and T (investment horizon). The predicted and realized risk level and the relative portfolio composition of the selected portfolio for a given value of the portfolio return are also investigated for each considered filtering method.
There's more to volatility than volume
2006
It is widely believed that fluctuations in transaction volume, as reflected in the number of transactions and to a lesser extent their size, are the main cause of clustered volatility. Under this view bursts of rapid or slow price diffusion reflect bursts of frequent or less frequent trading, which cause both clustered volatility and heavy tails in price returns. We investigate this hypothesis using tick by tick data from the New York and London Stock Exchanges and show that only a small fraction of volatility fluctuations are explained in this manner. Clustered volatility is still very strong even if price changes are recorded on intervals in which the total transaction volume or number of…
Mean Escape Time in a System with Stochastic Volatility
2007
We study the mean escape time in a market model with stochastic volatility. The process followed by the volatility is the Cox Ingersoll and Ross process which is widely used to model stock price fluctuations. The market model can be considered as a generalization of the Heston model, where the geometric Brownian motion is replaced by a random walk in the presence of a cubic nonlinearity. We investigate the statistical properties of the escape time of the returns, from a given interval, as a function of the three parameters of the model. We find that the noise can have a stabilizing effect on the system, as long as the global noise is not too high with respect to the effective potential barr…