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Permanent URI for this collectionhttps://hdl.handle.net/20.500.14288/3

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Department: search.filters.department.Department of EconomicsSubject: search.filters.subject.Finance

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Now showing 1 - 10 of 30
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    Macro-financial spillovers
    (Elsevier Sci Ltd, 2023) Cotter, John; Hallam, Mark; Department of Economics; Department of Economics; Yılmaz, Kamil; College of Administrative Sciences and Economics
    We analyse spillovers between the real and financial sides of the US economy, and between those in the US and other advanced economies. The approach developed allows for differ-ences in sampling frequency between financial and macroeconomic data. We find that financial markets are typically net transmitters of shocks to the real side of the economy, particularly during turbulent market conditions. This result holds both for domestic US macro-financial spillovers, and also those between the US and other advanced economies. Our macro-financial spillover measures are found to have significant predictive ability for future macroeconomic conditions in both in-sample and out-of-sample forecasting envi-ronments. Furthermore, the predictive ability frequently of our macro-financial measures frequently exceeds that of purely financial systemic risk measures previously employed in the literature for the same task.
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    Trans-Atlantic equity volatility connectedness: U.S. and European financial institutions, 2004-2014
    (Oxford Univ Press, 2016) Diebold, Francis X.; Department of Economics; Department of Economics; Yılmaz, Kamil; Faculty Member; College of Administrative Sciences and Economics; 6111
    We characterize equity return volatility connectedness in the network of major American and European financial institutions, 2004-2014. Our methods enable precise characterization of the timing and evolution of key aspects of the financial crisis. First, we find that during 2007-2008 the direction of connectedness was clearly from the United States to Europe, but that connectedness became bidirectional starting in late 2008. Second, we find an unprecedented surge in directional connectedness from European to U.S. financial institutions in June 2011, consistent with massive deterioration in the health of EU financial institutions. Third, we identify particular institutions that played disproportionately important roles in generating connectedness during the U.S. and the European crises.
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    Testing for linear and nonlinear predictability of stock returns
    (Oxford University Press (OUP), 2013) Lanne, Markku; Saikkonen, Pentti; Department of Economics; Department of Economics; Meitz, Mika; Faculty Member; College of Administrative Sciences and Economics; N/A
    We develop tests for predictability in a first-order ARMA model oftensuggested for stock returns. Instead of the conventional ARMA model,we consider its non-Gaussian and noninvertible counterpart that has identical autocorrelation properties but allows for conditionalheteroskedasticity prevalent in stock returns. In addition to autocorrelation,the tests can also be used to test for nonlinear predictability, incontrast to previously proposed predictability tests based on invertible ARMA models. Simulation results attest to improved power. We apply our tests to postwar U.S. stock returns. All return series considered are found serially uncorrelated but dependent and, hence, nonlinearly predictable.
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    Measuring real-financial connectedness in the us economy
    (Elsevier Science Inc, 2021) Uluceviz, Erhan; Department of Economics; Department of Economics; Yılmaz, Kamil; Faculty Member; College of Administrative Sciences and Economics; 6111
    We analyze the connectedness between the real and the financial sectors of the U.S. economy. Using the weekly ADS index of the Philadelphia Fed (the widely used business conditions indicator) to represent the real side, we find that during times of financial distress and business cycle turning points, the direction of connectedness runs from the real sector to financial markets. The ADS index is derived from a model containing a measure of term structure along with real variables. Therefore, it might not be the best representative of the real activity used in the connectedness analysis. As an alternative, we derive a real activity index (RAI) from a dynamic factor model of the real sector variables only. The behavior of RAI over time is quite similar to that of the ADS index. When we include RAI to represent the real side, connectedness from the real side to financial markets weakens substantially, while the connectedness from financial markets to the real side becomes more pronounced.
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    Observations on recent monetary policy measures
    (Bilgesel Yayincilik San & Tic Ltd, 2011) Department of Economics; Department of Economics; Üçer, Murat; Faculty Member; College of Administrative Sciences and Economics; N/A
    Last December, the Central Bank embarked on a new monetary policy experiment, which signaled a paradigm shift of sorts in monetary policy practice in Turkey. On the one hand, what the Bank did was very courageous and timely: it saw the unsustainability of the current account deficit and made an attempt to “remove the punch bowl, as the party was still going”. But the preferred policy mix created a number of question marks in analysts’ minds. We also think a different and a somewhat more comprehensive and simpler route could have been taken in the management of capital inflows, or in the conduct of monetary policy, in particular. In this article, we tried to explain why we thought so, from three perspectives: the context from which the new policy mix has originated; the internal consistency of and the risks associated with the Bank’s approach, and whether it had been successful (as of late March/early April) in achieving the targeted objectives. / Geçen Aralık ayında uygulamaya sokulan para politikası karışımı, yeni bir dönemin başlangıcı oldu, Merkez Bankası para politikası uygulamasında bir nevi paradigma değişikliğine gitti. Merkez Bankası bir yandan bu çıkışıyla çok takdir edilecek bir şey yaptı: önemli bir irade göstererek, tüm hızıyla parti devam ederken, ortalığı biraz sakinleştirmeye karar verdi; cari açık tarafında sürdürülemezliği gördü. Ancak tercih edilen bileşim bir takım soruları da beraberinde getirdi. Kanımızca daha kapsamlı, daha farklı ve aynı zamanda daha anlaşılır bir yöntem izlenebilirdi. Bu makalede neden böyle düşündüğümüzü 3 farklı açıdan – politika bileşiminin çıkış noktası; kendi içsel tutarlılığı ile riskleri, ve şimdiye kadar (Mart sonu/Nisan başı itibariyle) alınan sonuçlar açısından -- değerlendirmeye çalıştık.
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    Investment intensity of currencies and the random walk hypothesis: cross-currency evidence
    (2011) Chuluun, Tuugi; Eun, Cheol S.; Department of Economics; Department of Economics; Kılıç, Rehim; Faculty Member; College of Administrative Sciences and Economics; N/A
    This paper studies the cross-currency and temporal variations in the random walk behavior in exchange rates. We characterize currencies with relatively large investment flows as investment intensive and conjecture that the more investment intensive a currency is, the closer its exchange rate adheres to random walk. Using 29 floating bilateral USD exchange rates, we find that the higher the investment intensity, the less likely it is to reject random walk and the smaller the deviation from random walk is. However, the effect of investment intensity is non-monotonic. Application of threshold models shows that after investment intensity reaches the estimated thresholds, the level of investment intensity has no further effect on the deviation from random walk. These findings help reconcile the previous conflicting results on the random walk in exchange rates by focusing on the effect of cross-currency and temporal variations in investment intensity. 
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    A dynamic asset pricing model with time-varying factor and idiosyncratic risk
    (Oxford University Press (OUP), 2009) Department of Economics; Department of Economics; Glabadanidis, Paskalis; Faculty Member; College of Administrative Sciences and Economics; N/A
    This paper uses a multivariate GaRCH model to account for time variation in factor loadings and idiosyncratic risk in improving the performance of the CaPM and the three-factor Fama-French model. I show how to incorporate time variation in betas and the second moments of the residuals in a very general way. Both the static and conditional CaPM substantially outperform the three-factor model in pricing industry portfolios. Using a dynamic CaPM model results in a 30% reduction in the average absolute pricing error of size/book-to-market portfolios. ad hoc analysis shows that the market beta of a value-minus-growth portfolio decreases whenever the default premium increases as well as during economic recessions.
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    Discount window borrowing after 2003: the explicit reduction in implicit costs
    (Elsevier Science Bv, 2010) Department of Economics; Department of Economics; Department of Economics; Artuç, Erhan; Demiralp, Selva; Faculty Member; Faculty Member; College of Administrative Sciences and Economics; College of Administrative Sciences and Economics; N/A; 42533
    In 2003, the Federal Reserve introduced primary credit as its main discount window lending program. This program replaced the adjustment credit program, which, subject to a number of restrictions, had generated a stigma associated with borrowing from the Federal Reserve. Lessening the stigma of borrowing was viewed as essential for reducing the reluctance to borrow from the Federal Reserve. We develop a structural model of daily borrowing. Using this model, we estimate the implicit cost associated with borrowing. Our results suggest that the stigma of borrowing is significantly reduced. (C) 2009 Elsevier B.V. All rights reserved.
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    Imported machinery for export competitiveness
    (Oxford University Press (OUP), 2002) Mody, Ashoka; Department of Economics; Department of Economics; Yılmaz, Kamil; Faculty Member; College of Administrative Sciences and Economics; 6111
    This article analyzes the relationship between export competitiveness and investment in machinery, allowing for imperfect substitution between domestically produced and imported machinery. A translog export price function is estimated for developed, exportoriented developing, and import-substituting developing economies in a panel data setting. Between 1967 and 1990 imported machinery helped lower export prices for export-oriented developing economies. Moreover, throughout the period imported machinery was not a substitute for domestic machinery. Import-substituting developing economies were unable to harness imported machinery to reduce costs early in the period, but from about the early 1980s, with the opening of their trade regimes, they were able to benefit from the cost-reducing effect. The results imply that innovative effort based on imported technologies can be a precursor to the development of domestic innovation capabilities.
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    More on properness: the case of mean-variance preferences
    (Springer, 2002) N/A; Department of Economics; Department of Economics; Lajeri-Chaherli, Fatma; Faculty Member; College of Administrative Sciences and Economics; N/A
    This paper focuses on the situations where individuals with mean-variance preferences add independent risks to an already risky situation. Pratt and Zeckhauser (Econometrica, 55, 143-154, 1987) define a concept called proper risk aversion in the expected utility framework to describe the situation where an undesirable risk can never be made desirable by the presence of an independent undesirable risk. The assumption of mean-variance preferences allows us to study proper risk aversion in an intuitive manner. The paper presents an economic interpretation for the quasi-concavity of a utility function derived over mean and variance. The main result of the paper says that quasi-concavity plus decreasing risk aversion is equivalent to proper risk aversion.