Download or read book Effects of Macroeconomic News Announcements on Risk Neutral Distribution written by Sol Kim and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the effects of scheduled macroeconomic news announcements on the implied risk-neutral distribution (RND) from option prices. Using the KOSPI200 index options market as the sample market, this study investigates whether the implied RND responds to scheduled macroeconomic news announcements from South Korea and the US. We select six important macroeconomic news announcements each for South Korea and the US and classify them as good news and bad news according to the KOSPI200 index return on the day of the announcement. We use two parametric methods to recover the RND and conduct regression analyses at daily, hourly, and 5-min intervals. The analysis provided several noteworthy results. First, the RND responds to most of the macroeconomic news announcements, but its response disappears within a day in many cases. Second, the longevity of the response depends on the type of news. Third, the implied volatility tends to increase, and the RND tends to become less leptokurtic after news announcements. Fourth, the RND tends to become less (more) negatively skewed after a good (bad) news announcement. Finally, there is no clear evidence of the information contents regarding the effect of news announcements in the RND.

Download or read book The Effect of Macroeconomic News on Beliefs and Preferences written by Alessandro Beber and published by . This book was released on 2003 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the effect of regularly scheduled macroeconomic announcements on the beliefs and preferences of participants in the U.S. Treasury market by comparing the option-implied state-price density (SPD) of bond prices shortly before and after the announcements. We find that the announcements reduce the uncertainty implicit in the second moment of the SPD regardless of the content of the news. The changes in the higher-order moments, in contrast, depend on whether the news is good or bad for economic prospects. Using a standard model for interest rates to disentangle changes in beliefs and changes in preferences, we demonstrate that our results are consistent with time-varying risk aversion in the spirit of habit formation.

Download or read book Stock Market Returns and Volatility written by Mansour Alharaib and published by . This book was released on 2018 with total page 340 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines how stock market returns and volatility responses to macroeconomic news announcements in US and Europe, and oil prices. Moreover, the market risk associated with these stock markets based on selected countries and regions is also analyzed here. In all chapters, the data is in a weekly time horizon and it covers 21 countries from different contents. In particular, Data covers three different time periods, i.e. full sample from 1/1/2000 to 12/31/2015, before the financial crisis, i.e. from 1/1/2000 to 9/27/2008 and after the financial crisis, i.e. from 10/11/2008 to 12/31/2015. Chapter 2 studies the impact of macroeconomic news announcements on stock markets in 21 countries using US and European countries macroeconomic news announcements. The first part investigates the impact of macroeconomic news announcements surprises in US and European Countries on stock markets returns in these countries. The second part analyzes the impact of macroeconomic news announcements in US and European Countries on stock markets volatility in these countries. Our results show that stock markets in selected countries react differently to macroeconomic news announcement in US and Europe. Chapter 3 study the interaction and volatility spillover between oil prices and stock markets returns and volatility in selected countries and regions. Oil prices are based on West Texas Intermediate (WTI). The analysis use VAR(1)-GARCH(1,1) model to capture the interdependence between stocks market and oil prices. The findings show that there is interdependence between stock markets and oil price changes in most selected countries and regions. Chapter 4 study the market risk in stock markets returns in selected countries and regions using IGARCH(1,1) and GARCH(1,1) to obtain the value at risk (VaR) and the expected shortfall (ES). The findings of chapter 4 show that market risk was high for most selected countries before the financial crisis and low after the financial crisis.

Download or read book Option Implied Risk Neutral Distributions and Risk Aversion written by Jens Carsten Jackwerth and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Monetary Policy and Financial Markets written by Fatma S. Tepe and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation examines the interaction between macroeconomic aggregates and financial markets in two different essays. The expansion of derivatives markets has prompted interest in estimating options-implied measures to analyze market participants’ beliefs about future movements in the prices of these derivatives’ underlying assets and the probability these participants assign to unlikely events (see Datta et al., 2014). In this spirit, analyzing oil market is important for two main reasons. First, among all commodities, crude oil futures and derivatives are the most traded and liquid asset in the whole commodity market. Second, the informational content of oil derivatives can be indicative of shifts in global economic expectations which may be of interests to producers, investors and policy makers. Because the risk neutral density (RND, hereafter) consists of information from various option series that have a wide range of strike prices and maturities, we can conjecture more detailed effects of news announcements on market sentiment by investigating the changes in the RND. Chapter 1 links the crude oil market to macroeconomic risk by studying the RND around the U.S. macroeconomic news announcements. I use a non-parametric method to recover the RND and conduct regression analysis using daily data. The analysis provides several noteworthy results. First, I find that the RND is systematically affected by certain macroeconomic news announcements. Second, after controlling for the content of the news, my results indicate that good news tend to make the distribution less negatively skewed, whereas bad news have an opposite effect. However, I do not find any systematic pattern between the content (bad/good) of the news and the implied volatility or kurtosis. Hence, my results show that better/worse-than-expected news in macroeconomic announcements may both increase and decrease implied volatility and kurtosis of the option implied distribution. Finally my estimates obtained from nonlinear regressions display that the magnitude of the surprise may play into this effect; for example worse-than-expected news in Housing Starts announcement decrease the implied volatility and increase the implied kurtosis only when the size of surprise is not too large. How should a central bank conduct monetary policy in the presence of financial shocks? In Chapter 2, I use different nonlinear policy rules and address this question. Most empirical work on monetary policy relies on simple linear policy rules, however it is not clear whether such a rule can be an adequate representation of a process as complex as that of monetary policy. I first estimate Markov Switching Taylor rules with constant transition probabilities to allow for state-contingent policy making during 1987.3-2008.4. As a proxy for financial stress, I use the Adjusted National Financial Conditions Index constructed by the Chicago Fed. Then, I allow transition probabilities driving the monetary policy stance to vary over time and be a function of economic and financial indicators. The paper provides clear-cut evidence that, during the Greenspan-Bernanke tenure, the U.S. monetary policy can be characterized falling into two distinct regimes; a conventional regime where the Fed puts a greater emphasis on targeting inflation while stabilizing the economic outlook and a distressed regime where the Fed responds aggressively to output gaps and is less concerned with inflation. The distressed regime is closely correlated with times of financial imbalances. The empirical results show that nonlinear models outperform the simple linear specification in terms of model fit and the ability to track the actual interest rate. Also, the economic and financial indicators are found to be informative in dating the evolution of the state of the monetary policy stance. The results have implications for nonlinear rules to be a useful guideline for forecasting and policy analysis.

Download or read book Advances in Applied Economic Research written by Nicholas Tsounis and published by Springer. This book was released on 2017-06-07 with total page 869 pages. Available in PDF, EPUB and Kindle. Book excerpt: This proceedings volume aims to provide new research methods, theories and applications from various areas of applied economic research. Featuring papers from the 2016 International Conference on Applied Economics (ICOAE) organized by the University of Nicosia and the Western Macedonia University of Applied Sciences, this volume presents cutting edge research from all areas of economic science that use applied econometrics as the method of analysis. It also features country specific studies with specific economic policy analyses and proposals. Applied economics is a rapidly growing field of economics that combines economic theory with econometrics to analyse economic problems of the real world usually with economic policy interest. ICOAE is an annual conference started in 2008 with the aim to bring together economists from different fields of applied economic research in order to share methods and ideas. The goal of the conference and the enclosed papers is to allow for an exchange of experiences with different applied econometric methods and to promote joint initiatives among well-established fields likemacro- and microeconomics, international economics, finance, agricultural economics, health economics, education economics, international trade theory and management and marketing strategies. Featuring global contributions, this book will be of interest to researchers, academics, professionals and policy makers in the field of applied economics and econometrics.

Download or read book The Oxford Handbook of the Economics of Central Banking written by David G. Mayes and published by Oxford University Press. This book was released on 2019-02-15 with total page 656 pages. Available in PDF, EPUB and Kindle. Book excerpt: The economic influence of central banks has received ever more attention given their centrality during the financial crises that led to the Great Recession, strains in the European Union, and the challenges to the Euro. The Oxford Handbook of the Economics of Central Banking reflects the state of the art in the theory and practice and covers a wide range of topics that will provide insight to students, scholars, and practitioners. As an up to date reference of the current and potential challenges faced by central banks in the conduct of monetary policy and in the search for the maintenance of financial system stability, this Oxford Handbook covers a wide range of essential issues. The first section provides insights into central bank governance, the differing degrees of central bank independence, and the internal dynamics of their decision making. The next section focuses on questions of whether central banks can ameliorate fiscal burdens, various strategies to affect monetary policy, and how the global financial crisis affected the relationship between the traditional focus on inflation targeting and unconventional policy instruments such as quantitative easing (QE), foreign exchange market interventions, negative interest rates, and forward guidance. The next two sections turn to central bank communications and management of expectations and then mechanisms of policy transmission. The fifth part explores the challenges of recent developments in the economy and debates about the roles central banks should play, focusing on micro- and macro-prudential arguments. The implications of recent developments for policy modeling are covered in the last section. The breadth and depth enhances understanding of the challenges and opportunities facing central banks.

Download or read book Handbook of Volatility Models and Their Applications written by Luc Bauwens and published by John Wiley & Sons. This book was released on 2012-04-17 with total page 566 pages. Available in PDF, EPUB and Kindle. Book excerpt: A complete guide to the theory and practice of volatility models in financial engineering Volatility has become a hot topic in this era of instant communications, spawning a great deal of research in empirical finance and time series econometrics. Providing an overview of the most recent advances, Handbook of Volatility Models and Their Applications explores key concepts and topics essential for modeling the volatility of financial time series, both univariate and multivariate, parametric and non-parametric, high-frequency and low-frequency. Featuring contributions from international experts in the field, the book features numerous examples and applications from real-world projects and cutting-edge research, showing step by step how to use various methods accurately and efficiently when assessing volatility rates. Following a comprehensive introduction to the topic, readers are provided with three distinct sections that unify the statistical and practical aspects of volatility: Autoregressive Conditional Heteroskedasticity and Stochastic Volatility presents ARCH and stochastic volatility models, with a focus on recent research topics including mean, volatility, and skewness spillovers in equity markets Other Models and Methods presents alternative approaches, such as multiplicative error models, nonparametric and semi-parametric models, and copula-based models of (co)volatilities Realized Volatility explores issues of the measurement of volatility by realized variances and covariances, guiding readers on how to successfully model and forecast these measures Handbook of Volatility Models and Their Applications is an essential reference for academics and practitioners in finance, business, and econometrics who work with volatility models in their everyday work. The book also serves as a supplement for courses on risk management and volatility at the upper-undergraduate and graduate levels.

Download or read book Financial Markets and the Real Economy written by John H. Cochrane and published by Now Publishers Inc. This book was released on 2005 with total page 117 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial Markets and the Real Economy reviews the current academic literature on the macroeconomics of finance.

Download or read book International Macroeconomics in the Wake of the Global Financial Crisis written by Laurent Ferrara and published by Springer. This book was released on 2018-06-13 with total page 300 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book collects selected articles addressing several currently debated issues in the field of international macroeconomics. They focus on the role of the central banks in the debate on how to come to terms with the long-term decline in productivity growth, insufficient aggregate demand, high economic uncertainty and growing inequalities following the global financial crisis. Central banks are of considerable importance in this debate since understanding the sluggishness of the recovery process as well as its implications for the natural interest rate are key to assessing output gaps and the monetary policy stance. The authors argue that a more dynamic domestic and external aggregate demand helps to raise the inflation rate, easing the constraint deriving from the zero lower bound and allowing monetary policy to depart from its current ultra-accommodative position. Beyond macroeconomic factors, the book also discusses a supportive financial environment as a precondition for the rebound of global economic activity, stressing that understanding capital flows is a prerequisite for economic-policy decisions.

Download or read book Quantifying Systemic Risk written by Joseph G. Haubrich and published by University of Chicago Press. This book was released on 2013-01-24 with total page 286 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the aftermath of the recent financial crisis, the federal government has pursued significant regulatory reforms, including proposals to measure and monitor systemic risk. However, there is much debate about how this might be accomplished quantitatively and objectively—or whether this is even possible. A key issue is determining the appropriate trade-offs between risk and reward from a policy and social welfare perspective given the potential negative impact of crises. One of the first books to address the challenges of measuring statistical risk from a system-wide persepective, Quantifying Systemic Risk looks at the means of measuring systemic risk and explores alternative approaches. Among the topics discussed are the challenges of tying regulations to specific quantitative measures, the effects of learning and adaptation on the evolution of the market, and the distinction between the shocks that start a crisis and the mechanisms that enable it to grow.

Download or read book Inflation Expectations written by Peter J. N. Sinclair and published by Routledge. This book was released on 2009-12-16 with total page 402 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.

Download or read book Financial Modeling Under Non Gaussian Distributions written by Eric Jondeau and published by Springer Science & Business Media. This book was released on 2007-04-05 with total page 541 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book examines non-Gaussian distributions. It addresses the causes and consequences of non-normality and time dependency in both asset returns and option prices. The book is written for non-mathematicians who want to model financial market prices so the emphasis throughout is on practice. There are abundant empirical illustrations of the models and techniques described, many of which could be equally applied to other financial time series.

Download or read book NBER International Seminar on Macroeconomics 2005 written by Jeffrey A. Frankel and published by MIT Press. This book was released on 2007 with total page 421 pages. Available in PDF, EPUB and Kindle. Book excerpt: The NBER International Seminar on Macroeconomics brings together leading American and European economists to discuss a broad range of current issues in global macroeconomics. An international companion to the more American-focused NBER Macroeconomics Annual, the 2005 volume first explores macroeconomic issues of interest to all advanced economies, then analyzes topical questions concerning the eastward expansion of the European Monetary Union.Jeffrey A. Frankel is James W. Harpel Professor of Capital Formation and Economic Growth at Harvard University's John F. Kennedy School of Government. Christopher A. Pissarides is Professor of Economics at the London School of Economics. Both are Research Associates at the National Bureau of Economic Research.

Download or read book Liquidity Markets and Trading in Action written by Deniz Ozenbas and published by Springer Nature. This book was released on 2022 with total page 111 pages. Available in PDF, EPUB and Kindle. Book excerpt: This open access book addresses four standard business school subjects: microeconomics, macroeconomics, finance and information systems as they relate to trading, liquidity, and market structure. It provides a detailed examination of the impact of trading costs and other impediments of trading that the authors call rictions It also presents an interactive simulation model of equity market trading, TraderEx, that enables students to implement trading decisions in different market scenarios and structures. Addressing these topics shines a bright light on how a real-world financial market operates, and the simulation provides students with an experiential learning opportunity that is informative and fun. Each of the chapters is designed so that it can be used as a stand-alone module in an existing economics, finance, or information science course. Instructor resources such as discussion questions, Powerpoint slides and TraderEx exercises are available online.

Download or read book Inflation News and Euro Area Inflation Expectations written by Juan Angel Garcia and published by International Monetary Fund. This book was released on 2018-07-19 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: Do euro area inflation expectations remain well-anchored? This paper finds that the protracted period of low (and below-target) inflation in the euro area since 2013 has weakened their anchoring. Testing their sensitivity to inflation and macroeconomic news, this paper expands existing results in two key dimensions. First, by analyzing all available (advanced) inflation releases. Second, the reactions of expectations are investigated at daily, time-varying and intraday frequency regressions to add robustness to our conclusions. Results point to a significant impact of inflation news over recent years that had not been observed before in the euro area.

Download or read book The Macroeconomic Effects of Public Investment written by Mr.Abdul Abiad and published by International Monetary Fund. This book was released on 2015-05-04 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides new evidence of the macroeconomic effects of public investment in advanced economies. Using public investment forecast errors to identify the causal effect of government investment in a sample of 17 OECD economies since 1985 and model simulations, the paper finds that increased public investment raises output, both in the short term and in the long term, crowds in private investment, and reduces unemployment. Several factors shape the macroeconomic effects of public investment. When there is economic slack and monetary accommodation, demand effects are stronger, and the public-debt-to-GDP ratio may actually decline. Public investment is also more effective in boosting output in countries with higher public investment efficiency and when it is financed by issuing debt.