Pub Date : 2024-12-12DOI: 10.1016/j.eneco.2024.108132
Farhad Billimoria, Jacob Mays, Rahmat Poudineh
One of the persistent concerns in scarcity-based electricity market designs is that markets for long-term contracts are highly illiquid or ‘missing’. In the context of decarbonisation, a key question arises as to whether this phenomenon will persist or improve as markets transition to greater proportions of zero-marginal cost renewables and storage. Using a stochastic equilibrium model and insights from insurance theory, we consider long-term hedging in the context of credit and financing constraints. For electricity markets dominated by thermal generation, the deliverability of long-term hedges can be significantly impacted by the volatility of thermal fuels and the co-dependence between them under extreme conditions. Our results demonstrate the importance of fuel hedging as an underlying driver of the cost and deliverability of electricity hedging. Where the underlying fuel exposure cannot be contracted, generators may need to price contracts at multiples of the expected value of spot prices. The results provide guidance for discourse on policy and market design in relation to tail risk. One interpretation of the results in this paper is that the lack of contracting for tail risks given a volatile raw commodity is not a market failure per se, but a rational response of market participants due in part to the expense of hedging generation when fuel exposures are unable to be hedged. Counterintuitively, in the context of the energy transition, our results show that, ceteris paribus, increasing the penetration of low carbon resources like wind, solar, and energy storage can add diversity to the risk exposures of the underlying hedge contract.
{"title":"Hedging and tail risk in electricity markets","authors":"Farhad Billimoria, Jacob Mays, Rahmat Poudineh","doi":"10.1016/j.eneco.2024.108132","DOIUrl":"https://doi.org/10.1016/j.eneco.2024.108132","url":null,"abstract":"One of the persistent concerns in scarcity-based electricity market designs is that markets for long-term contracts are highly illiquid or ‘missing’. In the context of decarbonisation, a key question arises as to whether this phenomenon will persist or improve as markets transition to greater proportions of zero-marginal cost renewables and storage. Using a stochastic equilibrium model and insights from insurance theory, we consider long-term hedging in the context of credit and financing constraints. For electricity markets dominated by thermal generation, the deliverability of long-term hedges can be significantly impacted by the volatility of thermal fuels and the co-dependence between them under extreme conditions. Our results demonstrate the importance of fuel hedging as an underlying driver of the cost and deliverability of electricity hedging. Where the underlying fuel exposure cannot be contracted, generators may need to price contracts at multiples of the expected value of spot prices. The results provide guidance for discourse on policy and market design in relation to tail risk. One interpretation of the results in this paper is that the lack of contracting for tail risks given a volatile raw commodity is not a market failure per se, but a rational response of market participants due in part to the expense of hedging generation when fuel exposures are unable to be hedged. Counterintuitively, in the context of the energy transition, our results show that, ceteris paribus, increasing the penetration of low carbon resources like wind, solar, and energy storage can add diversity to the risk exposures of the underlying hedge contract.","PeriodicalId":11665,"journal":{"name":"Energy Economics","volume":"32 1","pages":""},"PeriodicalIF":12.8,"publicationDate":"2024-12-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142873881","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Sorting with Teams","authors":"Job Boerma, Aleh Tsyvinski, Alexander P. Zimin","doi":"10.1086/732891","DOIUrl":"https://doi.org/10.1086/732891","url":null,"abstract":"Journal of Political Economy, Ahead of Print. <br/>","PeriodicalId":16875,"journal":{"name":"Journal of Political Economy","volume":"29 1","pages":""},"PeriodicalIF":8.2,"publicationDate":"2024-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142810069","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-12-11DOI: 10.1016/j.jhealeco.2024.102955
Gijsbert Zwart
We analyse a model of optimal risk adjustment in competitive health-insurance markets which suffer from both ex-ante adverse selection and ex-post moral hazard. We find, firstly, that, unlike in an adverse-selection-only market, in an environment where also moral hazard is important, removing insurers' selection incentives requires risk-adjustment payments that do not fully equalize costs among consumer types. Current practice of attempting to correct for all predictable cost differences among consumers is then misguided. Secondly, if the sponsor of the risk-adjustment system is not only concerned with eliminating selection distortions, but also wants to redistribute towards high-risk consumers, the required higher risk-adjustment payments will introduce selection distortions in high-risk consumers' contracts. This leads to excessive equilibrium provision of care for those suffering severe health shocks. Finally, insurer market power creates countervailing incentives, helping the risk adjuster to combat selection distortions but working against a risk-adjustment regulation that also cares about redistribution.
{"title":"Moral hazard and risk adjustment.","authors":"Gijsbert Zwart","doi":"10.1016/j.jhealeco.2024.102955","DOIUrl":"https://doi.org/10.1016/j.jhealeco.2024.102955","url":null,"abstract":"<p><p>We analyse a model of optimal risk adjustment in competitive health-insurance markets which suffer from both ex-ante adverse selection and ex-post moral hazard. We find, firstly, that, unlike in an adverse-selection-only market, in an environment where also moral hazard is important, removing insurers' selection incentives requires risk-adjustment payments that do not fully equalize costs among consumer types. Current practice of attempting to correct for all predictable cost differences among consumers is then misguided. Secondly, if the sponsor of the risk-adjustment system is not only concerned with eliminating selection distortions, but also wants to redistribute towards high-risk consumers, the required higher risk-adjustment payments will introduce selection distortions in high-risk consumers' contracts. This leads to excessive equilibrium provision of care for those suffering severe health shocks. Finally, insurer market power creates countervailing incentives, helping the risk adjuster to combat selection distortions but working against a risk-adjustment regulation that also cares about redistribution.</p>","PeriodicalId":50186,"journal":{"name":"Journal of Health Economics","volume":"99 ","pages":"102955"},"PeriodicalIF":3.4,"publicationDate":"2024-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142824669","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-12-11DOI: 10.1016/j.frl.2024.106563
Lorenzo Mercuri, Andrea Perchiazzo, Edit Rroji
In this paper, we employ the CARMA(p,q)-Hawkes model to investigate the intraday jumps observed in the corporate bond prices. We introduce a bivariate extension of the model, which deals with the cross-effect of upward and downward price movements. An empirical analysis is conducted on green and brown bonds with analogous characteristics. The findings indicate that higher-order univariate/bivariate CARMA(p,q)-Hawkes models produce a superior fit in jump activity with respect to Hawkes models with exponential kernels.
{"title":"Modelling jumps with CARMA(p,q)-Hawkes: An application to corporate bond markets","authors":"Lorenzo Mercuri, Andrea Perchiazzo, Edit Rroji","doi":"10.1016/j.frl.2024.106563","DOIUrl":"https://doi.org/10.1016/j.frl.2024.106563","url":null,"abstract":"In this paper, we employ the CARMA(p,q)-Hawkes model to investigate the intraday jumps observed in the corporate bond prices. We introduce a bivariate extension of the model, which deals with the cross-effect of upward and downward price movements. An empirical analysis is conducted on green and brown bonds with analogous characteristics. The findings indicate that higher-order univariate/bivariate CARMA(p,q)-Hawkes models produce a superior fit in jump activity with respect to Hawkes models with exponential kernels.","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"31 1","pages":""},"PeriodicalIF":10.4,"publicationDate":"2024-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142841950","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Index","authors":"","doi":"10.1111/jcms.13712","DOIUrl":"https://doi.org/10.1111/jcms.13712","url":null,"abstract":"","PeriodicalId":51369,"journal":{"name":"Jcms-Journal of Common Market Studies","volume":"62 S1","pages":"251-265"},"PeriodicalIF":3.1,"publicationDate":"2024-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142867745","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-12-11DOI: 10.1016/j.frl.2024.106617
Ghulam Ghouse, Muhammad Ishaq Bhatti, Muhammad Junaid Nasrullah
This paper explores the complex relationships between financial inclusion, fintech adoption, the Human Development Index (HDI), and green finance in promoting environmental sustainability within E-7 economies. Using structural equation model, our analysis reveals a significant direct impact of HDI on environmental sustainability, with green innovation serving as a crucial mediator. These findings highlight the essential role of green innovation in enhancing sustainability in emerging economies, offering new insights into the synergy between financial practices, human development, and environmental conservation.
{"title":"The impact of financial inclusion, Fintech, HDI, and green finance on environmental sustainability in E-7 countries","authors":"Ghulam Ghouse, Muhammad Ishaq Bhatti, Muhammad Junaid Nasrullah","doi":"10.1016/j.frl.2024.106617","DOIUrl":"https://doi.org/10.1016/j.frl.2024.106617","url":null,"abstract":"This paper explores the complex relationships between financial inclusion, fintech adoption, the Human Development Index (HDI), and green finance in promoting environmental sustainability within E-7 economies. Using structural equation model, our analysis reveals a significant direct impact of HDI on environmental sustainability, with green innovation serving as a crucial mediator. These findings highlight the essential role of green innovation in enhancing sustainability in emerging economies, offering new insights into the synergy between financial practices, human development, and environmental conservation.","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"257 1","pages":""},"PeriodicalIF":10.4,"publicationDate":"2024-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142841958","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-12-11DOI: 10.1016/j.eneco.2024.108114
Mariya Gubareva, Muhammad Shafiullah, Tamara Teplova
{"title":"Corrigendum to “Cross-quantile risk assessment: The interplay of crude oil, artificial intelligence, clean tech, and other markets” [Energy Economics Volume 141, January 2025, 108085]","authors":"Mariya Gubareva, Muhammad Shafiullah, Tamara Teplova","doi":"10.1016/j.eneco.2024.108114","DOIUrl":"https://doi.org/10.1016/j.eneco.2024.108114","url":null,"abstract":"","PeriodicalId":11665,"journal":{"name":"Energy Economics","volume":"38 1","pages":""},"PeriodicalIF":12.8,"publicationDate":"2024-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142825373","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Journal of Futures Markets: Volume 45, Number 1, January 2025","authors":"","doi":"10.1002/fut.22517","DOIUrl":"https://doi.org/10.1002/fut.22517","url":null,"abstract":"","PeriodicalId":15863,"journal":{"name":"Journal of Futures Markets","volume":"45 1","pages":"1"},"PeriodicalIF":1.8,"publicationDate":"2024-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1002/fut.22517","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142851414","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-12-11DOI: 10.1016/j.frl.2024.106589
Wenyu Xie, Weijun Yin, Dorothy Tu
This paper investigates how nepotism culture affects SMEs’ innovation behavior. Using a large international datasets of small and medium enterprises, we establish the negative effect of nepotism culture on SMEs’ innovation, and observe the heterogeneous impact based on the presence of informal payments, financial constraints, and female ownership. Our results suggest that nepotism culture hinders highly skilled human capital and formal training, both of which are paramount for technological advancement and economic development. The policy implication is that promoting merit-based recruitment and reducing nepotistic practices could enhance innovation capacity, especially by fostering a more competitive environment.
{"title":"Invisible handcuffs: Nepotism culture and SMEs’ innovation","authors":"Wenyu Xie, Weijun Yin, Dorothy Tu","doi":"10.1016/j.frl.2024.106589","DOIUrl":"https://doi.org/10.1016/j.frl.2024.106589","url":null,"abstract":"This paper investigates how nepotism culture affects SMEs’ innovation behavior. Using a large international datasets of small and medium enterprises, we establish the negative effect of nepotism culture on SMEs’ innovation, and observe the heterogeneous impact based on the presence of informal payments, financial constraints, and female ownership. Our results suggest that nepotism culture hinders highly skilled human capital and formal training, both of which are paramount for technological advancement and economic development. The policy implication is that promoting merit-based recruitment and reducing nepotistic practices could enhance innovation capacity, especially by fostering a more competitive environment.","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"78 1","pages":""},"PeriodicalIF":10.4,"publicationDate":"2024-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142841959","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-12-11DOI: 10.1016/j.frl.2024.106645
M A Aneesha, P J Jijo Lukose
This study investigates the effects of a regulatory change that enabled a new category of Foreign Portfolio Investors (FPIs) to participate in the Indian IPO market. We find a significant increase in FPI demand and their share in the total institutional holdings post-regulation. Further, we observe a significant rise in flipping activity accompanied by a decline in FPI holdings during the two quarters after an IPO. Despite these changes, the level of information uncertainty remains largely unchanged. These findings underscore regulatory interventions' complex and multifaceted consequences on FPI behavior and its broader implications for IPO market dynamics.
{"title":"From frenzy to flip: Unpacking foreign investor behavior in the wake of regulatory change","authors":"M A Aneesha, P J Jijo Lukose","doi":"10.1016/j.frl.2024.106645","DOIUrl":"https://doi.org/10.1016/j.frl.2024.106645","url":null,"abstract":"This study investigates the effects of a regulatory change that enabled a new category of Foreign Portfolio Investors (FPIs) to participate in the Indian IPO market. We find a significant increase in FPI demand and their share in the total institutional holdings post-regulation. Further, we observe a significant rise in flipping activity accompanied by a decline in FPI holdings during the two quarters after an IPO. Despite these changes, the level of information uncertainty remains largely unchanged. These findings underscore regulatory interventions' complex and multifaceted consequences on FPI behavior and its broader implications for IPO market dynamics.","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"1 1","pages":""},"PeriodicalIF":10.4,"publicationDate":"2024-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142884064","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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