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on Corporate Finance |
| By: | Michael McAleer (National Tsing Hua University, Taiwan, Econometric Institute Erasmus School of Economics Erasmus University Rotterdam, and Complutense University of Madrid, Spain); Christian M. Hafner (Universit� catholique de Louvain, Belgium) |
| Abstract: | One of the most popular univariate asymmetric conditional volatility models is the exponential GARCH (or EGARCH) specification. In addition to asymmetry, which captures the different effects on conditional volatility of positive and negative effects of equal magnitude, EGARCH can also accommodate leverage, which is the negative correlation between returns shocks and subsequent shocks to volatility. However, there are as yet no statistical properties available for the (quasi-) maximum likelihood estimator of the EGARCH parameters. It is often argued heuristically that the reason for the lack of statistical properties arises from the presence in the model of an absolute value of a function of the parameters, which does not permit analytical derivatives or the derivation of statistical properties. It is shown in this paper that: (i) the EGARCH model can be derived from a random coefficient complex nonlinear moving average (RCCNMA) process; and (ii) the reason for the lack of statistical properties of the estimators of EGARCH is that the stationarity and invertibility conditions for the RCCNMA process are not known. |
| Keywords: | Leverage, asymmetry, existence, random coefficient models, complex nonlinear moving average process |
| JEL: | C22 C52 C58 G32 |
| Date: | 2014–06–16 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20140069&r=cfn |
| By: | Victoria Atanasov (VU University Amsterdam, the Netherlands) |
| Abstract: | Empirical measures of world consumption growth risk have failed to rationalize the cross-section of country equity returns. We propose a new factor, termed “the global consumption factor”, to explain the patterns in risk premiums on international equity markets. We identify this factor as the difference between the return on a portfolio of equity market indices with high consumption growth rates and the return on a portfolio of equity market indices with low consumption growth rates. We show that the global consumption factor accounts for about 70% of the cross- sectional variation in equity returns from 47 developed and emerging market countries over a four-decade period. Our risk factor reflects changes in the cross-country consumption dispersion and commands a significant premium to compensate investors for taking on common macroeconomic risks. Empirically, we find that high consumption growth economies have considerably higher consumption dispersion risk than low consumption growth economies, and this can explain their higher average returns. |
| Keywords: | stock returns, asset pricing, macroeconomic risks, consumption dispersion |
| JEL: | G11 G12 |
| Date: | 2014–06–17 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20140070&r=cfn |
| By: | David E. Allen (University of Sydney, and University of South Australia, Australia); Michael McAleer (National Tsing Hua University, Taiwan; Erasmus University Rotterdam, Tinbergen Institute, the Netherlands; Complutense University Madrid, Spain); and Marcel Scharth (University of New South Wales, Australia) |
| Abstract: | In this paper we document that realized variation measures constructed from high-frequency returns reveal a large degree of volatility risk in stock and index returns, where we characterize volatility risk by the extent to which forecasting errors in realized volatility are substantive. Even though returns standardized by ex post quadratic variation measures are nearly gaussian, this unpredictability brings considerably more uncertainty to the empirically relevant ex ante distribution of returns. Explicitly modeling this volatility risk is fundamental. We propose a dually asymmetric realized volatility model, which incorporates the fact that realized volatility series are systematically more volatile in high volatility periods. Returns in this framework display time varying volatility, skewness and kurtosis. We provide a detailed account of the empirical advantages of the model using data on the S&P 500 index and eight other indexes and stocks. |
| Keywords: | Realized volatility, volatility of volatility, volatility risk, value-at-risk, forecasting, conditional heteroskedasticity |
| JEL: | C58 G12 |
| Date: | 2014–06–23 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20140075&r=cfn |
| By: | International Monetary Fund. Monetary and Capital Markets Department |
| Abstract: | In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country. |
| Keywords: | Financial Sector Assessment Program;Basel Core Principles;Banking sector;Bank supervision;Reports on the Observance of Standards and Codes;Austria;banking supervision, banking secrecy, banking system, internal audit, bank act, banking supervisors, consolidated supervision, capital requirement, holding company, deposit guarantee, banking industry, national bank, banking business, banking laws, mortgage bank, banking license, banking activities, banking regulations, liability management, banking supervisory agency, bank capital, banking union, banking authority, savings bank, capital adequacy, interbank market, banking sectors, banking legislation, bank bonds, banking [ … ] supervision, bank recapitalization, bank inspections, current liability, clearing bank, banking risk, bank crisis, external auditor, bank funding, bank profits, bank assets, banking transactions, retained earnings |
| Date: | 2014–01–21 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:14/13&r=cfn |
| By: | International Monetary Fund. Monetary and Capital Markets Department |
| Keywords: | Banking sector;Basel Core Principles;Bank supervision;Bank resolution;Reports on the Observance of Standards and Codes;Ireland; |
| Date: | 2014–05–27 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:14/135&r=cfn |