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2012

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Full-Text Articles in Social and Behavioral Sciences

Time Series, Unit Roots, And Cointegration: An Introduction, Lonnie K. Stevans Dec 2012

Time Series, Unit Roots, And Cointegration: An Introduction, Lonnie K. Stevans

Lonnie K. Stevans

The econometric literature on unit roots took off after the publication of the paper by Nelson and Plosser (1982) that argued that most macroeconomic series have unit roots and that this is important for the analysis of macroeconomic policy. Yule (1926) suggested that regressions based on trending time series data can be spurious. This problem of spurious correlation was further pursued by Granger and Newbold (1974) and this also led to the development of the concept of cointegration (lack of cointegration implies spurious regression). The pathbreaking paper by Granger (1981), first presented at a conference at the University of Florida ...


Economic Analysis Of Working Waterfronts In The United States, Alan W. Hodges, Thomas J. Stevens, Mohammad Rahmani, Robert Swett Dec 2012

Economic Analysis Of Working Waterfronts In The United States, Alan W. Hodges, Thomas J. Stevens, Mohammad Rahmani, Robert Swett

Maine Sea Grant Publications

Waterfront communities in the United States, whether rural or urban, recreational or industrialized, have been subject to economic, technological, ecological, and demographic changes that challenge their continued existence or development. The purpose of this study is to document the current status, contribution to regional economies, and future prospects of U.S. coastal communities in order help promote their long‐term economic prosperity. A review of the relevant literature on economic valuation of waterfront and ocean‐related economic activities found that previous studies usually evaluated only one particular economic sector or specific region. The present study attempts to provide a comprehensive ...


The Smallest Upper Bound For The Pth Absolute Central Moment Of A Class Of Random Variables, Martin Egozcue, Luis Fuentes García, Wing Keung Wong, Ricardas Zitikis Dec 2012

The Smallest Upper Bound For The Pth Absolute Central Moment Of A Class Of Random Variables, Martin Egozcue, Luis Fuentes García, Wing Keung Wong, Ricardas Zitikis

Martin Egozcue

We establish the smallest upper bound for the p absolute central moment over the class of all random variables with values in a compact interval. Numerical values of the bound are calculated for the first ten integer values of p, and its asymptotic behaviour derived when p tends to infinity. In addition, we establish an analogous bound in the case of all symmetric random variables with values in a compact interval. Such results play a role in a number of areas including actuarial science, economics, finance, operations research, and reliability.


The Bank Of Tanzania (Bot) As The Custodian Of The Tanzanian Economy: Opportunities And Challenges, Conrad John Masabo Mr. Dec 2012

The Bank Of Tanzania (Bot) As The Custodian Of The Tanzanian Economy: Opportunities And Challenges, Conrad John Masabo Mr.

Conrad John Masabo Mr.

When Tanzania embarked on fundamental transformation of its economy almost two decades ago one of the top agenda in the economic reforms was the need to overhaul the financial system. And in view of pivotal role it plays in the country’s economy, the banking sector was the first to undergo reforms. Implementation of the reforms followed recommendations of the Presidential Commission on the need to modernize the banking sector dubbed the Nyirabu Commission. The BOT Act of 1995 was a landmark in Tanzania’s monetary history by adopting a single policy objective, i.e. price stability and moving away ...


How You Estimate The Yield Curve Matters!, Luiz Paulo Fichtner, Pedro Santa-Clara Dec 2012

How You Estimate The Yield Curve Matters!, Luiz Paulo Fichtner, Pedro Santa-Clara

Luiz Paulo Fichtner

We evaluate a two-factor Cox et al. (1985a,b) model using Euribor zero-coupon yields. We estimate this model using a state-space framework, where we sum a log-likelihood function of the state vector dynamics to a log-likelihood function of cross-section pricing errors. We introduce a likelihood-scaling weight in the joint log-likelihood function and show that there is a tradeoff in how one estimates a yield curve. Giving more weight to the cross-section of pricing errors improves the fitting and forecasting of Euribor yields, while giving more weight to the log-likelihood function of the state vector dynamics improves interest rate derivative pricing ...


Out-Of-Sample Predictability Of Bond Returns, Luiz Paulo Fichtner, Pedro Santa-Clara Dec 2012

Out-Of-Sample Predictability Of Bond Returns, Luiz Paulo Fichtner, Pedro Santa-Clara

Luiz Paulo Fichtner

We test the out-of-sample predictive power for one-year bond excess returns for a vari- ety of models that have been proposed in the literature. We find that these models perform well in sample, but have worse out-of-sample performance than the historical sample mean. We write the one-year excess return on a n-maturity bond at time t + 1 as the difference between n times the n-maturity bond yield at time t, and the sum of n − 1 times the (n − 1)-maturity bond yield at time t + 1 and the one-year bond yield at time t. Instead of forecasting returns directly ...


An Optimal Strategy For Maximizing The Expected Real- Estate Selling Price: Accept Or Reject An Offer?, Martin Egozcue, Luis Fuentes García, Ricardas Zitikis Dec 2012

An Optimal Strategy For Maximizing The Expected Real- Estate Selling Price: Accept Or Reject An Offer?, Martin Egozcue, Luis Fuentes García, Ricardas Zitikis

Martin Egozcue

Motivated by a real-life situation, we put forward a model and then derive an optimal strategy that maximizes the expected real-estate selling price when one of the only two remaining buyers has already made an offer but the other one is yet to make. Since the seller is not sure whether the other buyer would make a lower or higher offer, and given no recall, the seller needs a strategy to decide whether to accept or reject the first-come offer. The herein derived optimal seller's strategy, which maximizes the expected selling price, is illustrated under several scenarios, such as ...


Optimal Investment Strategies Using Multi-Property Commercial Real Estate Analysis Of Pre/Post Housing Bubble, Kyle Kundiger Dec 2012

Optimal Investment Strategies Using Multi-Property Commercial Real Estate Analysis Of Pre/Post Housing Bubble, Kyle Kundiger

HIM 1990-2015

This paper analyzes theperformance of five commercial real estate property types (office, retail, industrial, apartment, and hotel) between 2000 and 2012 to determine the U.S. housing crisis'simpact on Real Estate investing. Under the concept of Modern Portfolio Theory, the data was analyzed using investment analysis programs to determine correlation, risk/return characteristics, and trade-offs (Sharpe ratio) as well as the optimal allocation among the individual property types. In light of the results, each property type plays a different role in investment strategies in various economic cycles. Some assets are attractive solely based onpotential return, or risk for return ...


Is Economic Value Added (Eva) The Best Way To Assemble A Portfolio?, Tamas Pataky Dec 2012

Is Economic Value Added (Eva) The Best Way To Assemble A Portfolio?, Tamas Pataky

HIM 1990-2015

In search of a better investment metric, researchers began to study Economic Value Added, or EVA, which was introduced in 1991 by Stern Stewart & Co in their book, "The Quest for Value" (Turvey, 2000). Stern Stewart & Co devised EVA as a better alternative to evaluate investment projects within the corporate finance field, later to be considered for use as a performance metric for investor use. A wide array of multinational corporations, such as Coca-Cola, Briggs and Stratton, and AT&T adopted the EVA method, which led to EVA's worldwide acclaim. Several points in the study reveal that EVA does ...


Impact Of The 2003 Illinois Gaming Tax Rate Increase On Marketing Spending And Cross-State Substitution, Mikael Bengt Ahlgren Dec 2012

Impact Of The 2003 Illinois Gaming Tax Rate Increase On Marketing Spending And Cross-State Substitution, Mikael Bengt Ahlgren

UNLV Theses, Dissertations, Professional Papers, and Capstones

The purpose of this research was to investigate three potential consequences related to the 2003 Illinois Gaming Tax rate restructuring. The first section presents the assessment of whether a higher tax rate motivated an Illinois casino operator to reduce of marketing/promotional expenditures in an attempt to negatively influence revenues. The second establishes if the surrounding state gaming operators reacted to the increased Gaming Tax rate in Illinois, by raising their marketing spending. The last section clarifies whether the changes to the Illinois Gaming Tax Schedule impacted gaming volumes in the neighboring/competing states of Indiana, Iowa, and Missouri.

The ...


Money And Asset Prices With Uninsurable Risks, Nicolas L. Jacquet, Serene Tan Dec 2012

Money And Asset Prices With Uninsurable Risks, Nicolas L. Jacquet, Serene Tan

Research Collection School Of Economics

We develop a model where the coexistence of money and a higher yielding asset is endogenously obtained when no restriction is placed on the use of either object as a medium of exchange. Due to the presence of uninsurable risks, agents have, in equilibrium, di⁄erent relative valuations of the asset to money, and hence, the use of money as a means of payment is strictly preferred. This endogenous di⁄erence in the willingness of agents to use money over the asset implies that money carries a greater liquidity premium than the asset. We obtain that the asset strictly dominates ...


Contracting Over Prices, Shurojit Chatterji, Sayantan Ghosal Dec 2012

Contracting Over Prices, Shurojit Chatterji, Sayantan Ghosal

Research Collection School Of Economics

We define a solution concept, perfectly contracted equilibrium, for an intertemporal exchange economy where agents are simultaneously price takers in spot commodity markets while engaging inefficient, non-Walrasian contracting over future prices. Without requiring that agents have perfect foresight, we show that perfectly contracted equilibrium outcomes are a subset of Pareto optimal allocations. It is a robust possibility for perfectly contracted equilibrium outcomes to differ from Arrow-Debreu equilibrium outcomes. We show that both centralized banking and retrading with bilateral contracting can lead to perfectly contracted equilibria.


Essays In Development Economics And Economics Of The Family, Aaron Johnson Dec 2012

Essays In Development Economics And Economics Of The Family, Aaron Johnson

Theses and Dissertations

Chapter 1 explores a potential solution to the continuing disequlibrium in microfinance markets. I design a mechanism to aid in securitization of microloans, using a dynamic investment pool governed by a Central Microcredit Clearinghouse (CMC), that would sell investment units back to MFIs and outside investors simultaneously. The CMC would serve as a catalyst to this other avenue of microcredit financing, securitization of microloans, which could help spawn the type of growth in investor-based funding of MFIs that is so urgently needed. Chapter 2 analyzes Official Development Assistance (ODA) commitment and disbursement activity in terms of motivation, considering that the ...


A Second Look At The 2007-08 Food Price Crisis: Considering The Impact Of Endogenous Dynamics On Food Prices, Luigi Russi Nov 2012

A Second Look At The 2007-08 Food Price Crisis: Considering The Impact Of Endogenous Dynamics On Food Prices, Luigi Russi

Luigi Russi

This paper offers an alternative to the conventional explanation of the 2007-08 food price crisis in terms of escalating demand or dwindling supply. Instead, its focus is on the legal institutional structure of commodity futures markets, which has witnessed a drastic alteration in the role of speculators. These have transformed from “market makers” (that keep commodity futures markets liquid by arbitraging on price fluctuations) to “market breakers”. Index speculation, in particular, has had the effect of muddling information about market “fundamentals” because of the need – brought about by commodity index swaps – for swap dealers to hedge the fluctuations of an ...


The Unbearable Lightness Of The Economics-Made-Fun Genre, Peter Spiegler Nov 2012

The Unbearable Lightness Of The Economics-Made-Fun Genre, Peter Spiegler

Peter Spiegler

Several commentators have argued that the Economics-Made-Fun (“EMF”) genre contains very little actual economics. As such, it would seem that criticisms of EMF do not apply economics more broadly. In this paper I take a contrary view, arguing that, in fact, at a deep conceptual level, the engine of EMF analyses is precisely the engine of mainstream economics. Specifically, I argue that both EMF and mainstream economics rest on a conceptual foundation known as the Principal of the Substitution of Similars (“PSS”). Understanding how PSS leads EMF practitioners to make claims well beyond what is warranted by their analysis also ...


The Relationship Among The Liquidity In Real Economy, Financial Economy And Inflation, Zhaoxuan Sun Nov 2012

The Relationship Among The Liquidity In Real Economy, Financial Economy And Inflation, Zhaoxuan Sun

Lingnan Journal of Banking, Finance and Economics

This paper introduces the principles supporting the fisher transaction equation. Then, it transforms the traditional quantity equation, and adds the financial economic department into the equation to estimate currency liquidity respectively. We show that when liquidity enters into the real economy and the financial economy, the capital price will change earlier than the product price does. We could also interpret that the excess liquidity in the financial economy firstly affects the capital price. Then, the capital price will take positive effects on the product price. This is opposed to the influence mechanism taken by liquidity on the real economy. We ...


Stock Market Efficiency In The S&P 500 With Respect To Day Of The Week, Zachary James Rodenbarger Nov 2012

Stock Market Efficiency In The S&P 500 With Respect To Day Of The Week, Zachary James Rodenbarger

Lingnan Journal of Banking, Finance and Economics

Theoretically speaking, we assume that markets are efficient and that investors should not be able to earn abnormal returns without privately held information. The fact that fund managers beat the market can simply be explained as luck. However, realistically speaking, the markets involve humans that do not always make rational decisions, which can lead to market inefficiencies. This paper looks into one such inefficiency which regards trading day of the week in the S&P 500 through three different forecasting periods coming before, during, and after the financial crisis of 2008. Theoretically we would expect to find no pattern or ...


Link Between S&P 500 And Ftse 100 And The Comparison Of That Link Before And After The S&P 500 Peak In October 2007, Michael Joseph Silk Nov 2012

Link Between S&P 500 And Ftse 100 And The Comparison Of That Link Before And After The S&P 500 Peak In October 2007, Michael Joseph Silk

Lingnan Journal of Banking, Finance and Economics

The paper reviews the correlation between the S&P 500 and the FTSE 100 before and during the 2008 global financial crisis. It found that The S&P 500 has a strong causation effect on the FTSE 100, both before and since the financial crisis. This link seems to have increased after the October 2007 peak in the S&P 500. Since the crisis, the FTSE 100 appears to have a weak causation effect on the S&P 500. Before the crisis there was no apparent impact on the S&P 500’s movements from movements in the FTSE 100.


The Empirical Study Of Earnings Management Based On Chinese Listed Companies, Yang Zhang Nov 2012

The Empirical Study Of Earnings Management Based On Chinese Listed Companies, Yang Zhang

Lingnan Journal of Banking, Finance and Economics

Earnings management that is used to manipulate book earnings to an expected level has been one of the controversial topics in the accounting field. It occurs two ways: one is accrued earnings management and the other is real earnings management. Many studies show that these two methods have a reciprocal relationship based on the costs of using them. The accrued earnings management method is preferred when the accounting standards are flexible and the real earnings management is preferred when the legal systems are good. This paper verifies its findings by drawing a link to the new accounting standard announced by ...


The Global Financial Tsunami : 2008, Juan Manuel Chaves Echeverri Nov 2012

The Global Financial Tsunami : 2008, Juan Manuel Chaves Echeverri

Lingnan Journal of Banking, Finance and Economics

In 2008 a series of bankruptcies of financial institutions led the United States and the principal economies of the world into a recession of great magnitude that required exceptional government intervention.

It started on September 14th when Lehman Brothers announced that it was entering into chapter 11 bankruptcy. After this, there was intervention in recognized multinational corporations like Fannie Mae, Freddie Mac, and American International Group. There were also the bank failures of Washington Mutual and Citigroup.

The main cause of this crisis was the excessive level of leverage of the financial industry, which had its roots in the real ...


Convex Combinations Of Quadrant Dependent Copulas, Martin Egozcue, Luis Fuentes García, Wing Wong, Ricardas Zitikis Nov 2012

Convex Combinations Of Quadrant Dependent Copulas, Martin Egozcue, Luis Fuentes García, Wing Wong, Ricardas Zitikis

Martin Egozcue

It is well known that quadrant dependent (QD) random variables are also quadrant dependent in expectation (QDE). Recent literature has offered examples rigorously establishing the fact that there are QDE random variables which are not QD. The examples are based on convex combinations of specially chosen QD copulas: one negatively QD and another positively QD. In this paper we establish general results that determine when convex combinations of arbitrary QD copulas give rise to negatively or positively QD/QDE copulas. In addition to being an interesting mathematical exercise, the established results are helpful when modeling insurance and financial portfolios.


Information Effect Of Entry Into Credit Ratings Market: The Case Of Insurers' Ratings, Neil A. Doherty, Anastasia V. Kartasheva, Richard D. Phillips Nov 2012

Information Effect Of Entry Into Credit Ratings Market: The Case Of Insurers' Ratings, Neil A. Doherty, Anastasia V. Kartasheva, Richard D. Phillips

Business Economics and Public Policy Papers

The paper analyzes the effect of competition between credit rating agencies (CRAs) on the information content of ratings. We show that a monopolistic CRA pools sellers into multiple rating classes and has partial market coverage. This provides an opportunity for market entry. The entrant designs a rating scale distinct from that of the incumbent. It targets higher-than-average companies in each rating grade of the incumbent's rating scale and employs more stringent rating standards. We use Standard and Poor's (S&P) entry into the market for insurance ratings previously covered by a monopolist, A.M. Best, to empirically test ...


The Term Structure Of Interest Rates In A Dsge Model With Recursive Preferences, Jules Van Binsbergen, Jesús Fernández-Villaverde, Ralph Koijen, Juan Rubio-Ramírez Nov 2012

The Term Structure Of Interest Rates In A Dsge Model With Recursive Preferences, Jules Van Binsbergen, Jesús Fernández-Villaverde, Ralph Koijen, Juan Rubio-Ramírez

Finance Papers

A dynamic stochastic general equilibrium (DSGE) model in which households have Epstein and Zin recursive preferences is solved with perturbation. The parameters governing preferences and technology are estimated by maximum likelihood using macroeconomic data and the term structure of interest rates. The estimates imply a large risk aversion, an elasticity of intertemporal substitution higher than one, and substantial adjustment costs. Furthermore, the paper identifies the tensions within the model by estimating it on subsets of these data. The analysis concludes by pointing out potential extensions that may improve the model's fit.


Basel Iii And Credit Risk Measurement: Variations Among G20 Countries, Matt Schlickenmaier Nov 2012

Basel Iii And Credit Risk Measurement: Variations Among G20 Countries, Matt Schlickenmaier

San Diego International Law Journal

Most countries require banks to hold extra capital to protect against unforeseen financial calamities; banks with riskier loans must hold more capital than those with safer loans. Basel II, a set of international banking standards, allows banks to measure a loan’s risk in different ways: some banks make their own judgments; others use outside agencies. The recent mortgage crisis prompted banks to reevaluate these methods, in part due to banks having failed to perceive the high level of risk inherent in securitized mortgages. The international community’s response was Basel III, an updated version of its previous standards. This ...


Price Discovery In The Stock And Corporate Bond Markets, Yifei Mao Ph.D. Oct 2012

Price Discovery In The Stock And Corporate Bond Markets, Yifei Mao Ph.D.

Working Papers

This paper uses intraday U.S. bond transaction and stock quote data to investigate whether corporate bonds lead stocks in price discovery of underlying firm value. I use Hasbrouck's (1995) “information share" approach to determine the relative contribution of corporate bond to price discovery. Based on a sample of 214 firms, I find that corporate bond markets contribute 12.6% on average to price discovery from 2009 to 2011. Corporate bond market price discovery increases with the riskiness of the under-lying firm value, and is related to contemporaneous market conditions. The findings are consistent with the informed trading theory ...


Reserve Currency And A Lender Of Next-To-Last Resort: A Literature Review, Alida S. Skold Oct 2012

Reserve Currency And A Lender Of Next-To-Last Resort: A Literature Review, Alida S. Skold

Alida S. Skold

The role of the US dollar as the global dominant reserve currency is eroding. Debate is ongoing regarding next steps. Moving the international monetary system to a single global currency is part of the debate. Literature reviews the eroding role of the US dollar and implications the erosion carries for the US. The Special Drawing Rights developed by the IMF could fill the role of Keynes’ recommended global currency known as the “bancor.” Regardless of the nature of the global reserve currency, access to liquidity is required to have an effective international monetary system. Literature defines a missing layer of ...


Return Predictability In International Financial Markets And The Role Of Investor Sentiment, Anjeza Kadilli Oct 2012

Return Predictability In International Financial Markets And The Role Of Investor Sentiment, Anjeza Kadilli

Anjeza Kadilli

We investigate the predictability of stock returns in the financial market for a large panel of developed countries using investor sentiment, business-cycle variables and financial indicators within two panel regime-switching models, with threshold and smooth transition between regimes. We find strong evidence of predictability of long-term returns following the business cycles, but much weaker results for the short-run returns. During crisis times, investor sentiment and inflation become key factors in predicting stock returns. Different tests and goodness of fit measures point out that the use of regime-switching models is more appropriate than linear models. To our knowledge, this study is ...


Beyond Stochastic Volatility And Jumps In Returns And Volatility, Garland Durham, Yang-Ho Park Oct 2012

Beyond Stochastic Volatility And Jumps In Returns And Volatility, Garland Durham, Yang-Ho Park

Finance

While a great deal of attention has been focused on stochastic volatility in stock returns, there is strong evidence suggesting that return distributions have time-varying skewness and kurtosis as well. Under the risk-neutral measure, for example, this can be seen from variation across time in the shape of Black-Scholes implied volatility smiles. This paper investigates model characteristics that are consistent with variation in the shape of return distributions using a stochastic volatility model with a regime-switching feature to allow for random changes in the parameters governing volatility of volatility, leverage effect and jump intensity. The analysis consists of two steps ...


Money Supply Endogeneity And Bank Stock Returns, Z. Badarudin, M. Ariff, A. Khalid Oct 2012

Money Supply Endogeneity And Bank Stock Returns, Z. Badarudin, M. Ariff, A. Khalid

Ahmed Khalid

This article presents results of tests on two related hypotheses on moneysupply. The first relates to an unresolved issue of money endogeneity whilethe second centres on the yet-explored relationship between money supplyand bank stock returns if money is found to be endogenous. Our results,using long-horizon data of Group of Seven (G-7) economies, supports causality in money supply as running from bank lending to bank deposits,a result that is predicted by the post-Keynesian money supply endogeneity(bank-credit-driven) theory. Thus, the result is not consistent withexogeneity proposition. A new evidence of positive relationship betweenendogenous money supply and aggregate bank stock ...


Strategic Planning For Expanding Medicare And Medicaid Populations, Dave Zoeller Oct 2012

Strategic Planning For Expanding Medicare And Medicaid Populations, Dave Zoeller

Accounting and Finance Faculty Publications

No abstract provided.