The aim of this article is to present some non-classical risk measures which are commonly used in financial investments, including investments in assets from the market of precious non-ferrous metals. The time series of log-returns of gold, silver, platinum and palladium prices are considered. To properly asses the investment risk the measures based on Value-at-Risk methodology have been used (the VaR estimation approach based on values from the tail of the distribution). Additionally, the measure comparing expected profits to expected losses from the opposite tails distribution has been shown – the Rachev ratio. It was assumed that the log-returns of presented assets belong to the family of stable distributions. The results confirm the validity of the use of stable distributions to asses the risk on the precious non-ferrous metals market.
{"title":"Non-Classical Measures of Investment Risk on the Market of Precious Non-Ferrous Metals Using the Methodology of Stable Distributions","authors":"Dominik Krężołek","doi":"10.12775/DEM.2012.006","DOIUrl":"https://doi.org/10.12775/DEM.2012.006","url":null,"abstract":"The aim of this article is to present some non-classical risk measures which are commonly used in financial investments, including investments in assets from the market of precious non-ferrous metals. The time series of log-returns of gold, silver, platinum and palladium prices are considered. To properly asses the investment risk the measures based on Value-at-Risk methodology have been used (the VaR estimation approach based on values from the tail of the distribution). Additionally, the measure comparing expected profits to expected losses from the opposite tails distribution has been shown – the Rachev ratio. It was assumed that the log-returns of presented assets belong to the family of stable distributions. The results confirm the validity of the use of stable distributions to asses the risk on the precious non-ferrous metals market.","PeriodicalId":31914,"journal":{"name":"Dynamic Econometric Models","volume":"12 1","pages":"89-103"},"PeriodicalIF":0.0,"publicationDate":"2012-12-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66547961","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In the paper we argue that a general formula for the unconditional kurtosis of sign-switching GARCH(p,q,k) processes proposed by Thavaneswaran and Appadoo (2006) does not give correct results. To show that we revised the original theorem given by Thavaneswaran and Appadoo (2006) for the special case of the GARCH(p,q,k) process, i.e. GARCH(p,q,1). We show that the formula for the unconditional kurtosis basing on the original theorem and the revised version is different.
{"title":"The Formula of Unconditional Kurtosis of Sign-Switching GARCH(p,q,1) Processes","authors":"Joanna Górka","doi":"10.12775/DEM.2012.007","DOIUrl":"https://doi.org/10.12775/DEM.2012.007","url":null,"abstract":"In the paper we argue that a general formula for the unconditional kurtosis of sign-switching GARCH(p,q,k) processes proposed by Thavaneswaran and Appadoo (2006) does not give correct results. To show that we revised the original theorem given by Thavaneswaran and Appadoo (2006) for the special case of the GARCH(p,q,k) process, i.e. GARCH(p,q,1). We show that the formula for the unconditional kurtosis basing on the original theorem and the revised version is different.","PeriodicalId":31914,"journal":{"name":"Dynamic Econometric Models","volume":"12 1","pages":"105-110"},"PeriodicalIF":0.0,"publicationDate":"2012-12-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66547965","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
W wielu krajach brakuje wypracowanego systemu oznaczania początku i konca kryzysu. W proponowanej metodzie periodyzacji kazda z czterech faz aktywności gospodarczej opisywana jest przez koniunkcje wartości rocznych i miesiecznych indeksow produkcji przemyslowej. Analitycy rynku zwracają szczegolną uwage na zroznicowanie zachowania sie wiekszości wskaźnikow makroekonomicznych w czasie spadkow i dlugookresowego wzrostu. W związku z tym uzasadnione jest zalozenie o zmieniających sie parametrach modeli opisujących ksztaltowanie sie tych wielkości. Realizacje takiego zalozenia umozliwiają zarowno modele przelącznikowe, jak i modele logitowe. W badaniach empirycznych przeprowadzono porownanie prawdopodobienstwa wystąpienia kryzysu z obu modeli Analiza wynikow pokazuje duze podobienstwo wskazan z zaproponowanej metody periodyzacji i modelu Hamiltona. Model Hamiltona w prezentowanej wersji dobrze opisuje prawdopodobienstwo wystąpienia dwoch faz spadkowych. Model logitowy pozwala na uzyskanie zadawalających rezultatow dla podzialu bardziej szczegolowego. Na gruncie gospodarki polskiej nalezy jednak w dalszym ciągu prowadzic badania nad rozpoznaniem wlasności symptomatycznych roznych wskaźnikow makroekonomicznych.
{"title":"The Probability of Recession in Poland Based on the Hamilton Switching Model and the Logit Model","authors":"Milda Maria Burzała","doi":"10.12775/DEM.2012.005","DOIUrl":"https://doi.org/10.12775/DEM.2012.005","url":null,"abstract":"W wielu krajach brakuje wypracowanego systemu oznaczania początku i konca kryzysu. W proponowanej metodzie periodyzacji kazda z czterech faz aktywności gospodarczej opisywana jest przez koniunkcje wartości rocznych i miesiecznych indeksow produkcji przemyslowej. Analitycy rynku zwracają szczegolną uwage na zroznicowanie zachowania sie wiekszości wskaźnikow makroekonomicznych w czasie spadkow i dlugookresowego wzrostu. W związku z tym uzasadnione jest zalozenie o zmieniających sie parametrach modeli opisujących ksztaltowanie sie tych wielkości. Realizacje takiego zalozenia umozliwiają zarowno modele przelącznikowe, jak i modele logitowe. W badaniach empirycznych przeprowadzono porownanie prawdopodobienstwa wystąpienia kryzysu z obu modeli Analiza wynikow pokazuje duze podobienstwo wskazan z zaproponowanej metody periodyzacji i modelu Hamiltona. Model Hamiltona w prezentowanej wersji dobrze opisuje prawdopodobienstwo wystąpienia dwoch faz spadkowych. Model logitowy pozwala na uzyskanie zadawalających rezultatow dla podzialu bardziej szczegolowego. Na gruncie gospodarki polskiej nalezy jednak w dalszym ciągu prowadzic badania nad rozpoznaniem wlasności symptomatycznych roznych wskaźnikow makroekonomicznych.","PeriodicalId":31914,"journal":{"name":"Dynamic Econometric Models","volume":"12 1","pages":"73-87"},"PeriodicalIF":0.0,"publicationDate":"2012-12-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66547956","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study investigates the impact of trading volume on selected quantiles of the EUR/PLN return distribution. Empirical results obtained with the quantile regression approach confirm that an increase in the turnover is associated with a significant increase in the dispersion of the corresponding return distribution. We divided the trading volume into its expected (antici-pated) and unexpected (unanticipated) component and found that the unexpected volume shocks have a significantly larger impact on the dispersion of the return distribution. We also observed that the volume-return relationship is nonlinear; the dependence is stronger with more extreme quantiles. Moreover, after accounting for a conditional volatility measure as a controlling explan-atory factor for the quantile dynamics, the impact of the expected volume declines yet remains significant especially for the most extreme quantiles.
{"title":"“Does It Take Volume to Move the EUR/PLN FX Rates?” Evidence from Quantile Regressions","authors":"K. Bień-Barkowska","doi":"10.12775/DEM.2012.003","DOIUrl":"https://doi.org/10.12775/DEM.2012.003","url":null,"abstract":"This study investigates the impact of trading volume on selected quantiles of the EUR/PLN return distribution. Empirical results obtained with the quantile regression approach confirm that an increase in the turnover is associated with a significant increase in the dispersion of the corresponding return distribution. We divided the trading volume into its expected (antici-pated) and unexpected (unanticipated) component and found that the unexpected volume shocks have a significantly larger impact on the dispersion of the return distribution. We also observed that the volume-return relationship is nonlinear; the dependence is stronger with more extreme quantiles. Moreover, after accounting for a conditional volatility measure as a controlling explan-atory factor for the quantile dynamics, the impact of the expected volume declines yet remains significant especially for the most extreme quantiles.","PeriodicalId":31914,"journal":{"name":"Dynamic Econometric Models","volume":"12 1","pages":"35-52"},"PeriodicalIF":0.0,"publicationDate":"2012-12-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66548309","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The paper concerns the measurement of the dependence between economic spatial and also spatiotemporal processes at various levels of data aggregation. The considerations refer to the investigations confirming efficiency of the so-called quasi-congruent spatial model as a tool of the measurement of the dependence between economic processes. The main problem of the paper is to discuss such a description of the spatial and spatio-temporal connections, which would be adequate to express the autodependence of the investigated processes. The application of the economic distance, which characterizes the similarity of the regions on the ground of the values of the analyzed processes, is proposed.
{"title":"Identification of the Structures of Spatial and Spatio- Temporal Processes and a Problem of Data Aggregation","authors":"E. Szulc","doi":"10.12775/DEM.2011.001","DOIUrl":"https://doi.org/10.12775/DEM.2011.001","url":null,"abstract":"The paper concerns the measurement of the dependence between economic spatial and also spatiotemporal processes at various levels of data aggregation. The considerations refer to the investigations confirming efficiency of the so-called quasi-congruent spatial model as a tool of the measurement of the dependence between economic processes. The main problem of the paper is to discuss such a description of the spatial and spatio-temporal connections, which would be adequate to express the autodependence of the investigated processes. The application of the economic distance, which characterizes the similarity of the regions on the ground of the values of the analyzed processes, is proposed.","PeriodicalId":31914,"journal":{"name":"Dynamic Econometric Models","volume":"11 1","pages":"5-20"},"PeriodicalIF":0.0,"publicationDate":"2011-12-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66547615","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The purpose of the paper it to compare the performance of both information and prediction criteria in selecting the forecasting model on empirical data for Poland when the data generating model is unknown. The attention will especially focus on the evolution of information criteria (AIC, BIC) and accumulated prediction error (APE) for increasing sample sizes and rolling windows of different size, and also the impact of initial sample and rolling window sizes on the selection of forecasting model. The best forecasting model will be chosen from the set including three models: autoregressive model, AR (with or without a deterministic trend), ARIMA model and random walk (RW) model.
{"title":"Information and Prediction Criteria in Selecting the Forecasting Model","authors":"M. Piłatowska","doi":"10.12775/DEM.2011.002","DOIUrl":"https://doi.org/10.12775/DEM.2011.002","url":null,"abstract":"The purpose of the paper it to compare the performance of both information and prediction criteria in selecting the forecasting model on empirical data for Poland when the data generating model is unknown. The attention will especially focus on the evolution of information criteria (AIC, BIC) and accumulated prediction error (APE) for increasing sample sizes and rolling windows of different size, and also the impact of initial sample and rolling window sizes on the selection of forecasting model. The best forecasting model will be chosen from the set including three models: autoregressive model, AR (with or without a deterministic trend), ARIMA model and random walk (RW) model.","PeriodicalId":31914,"journal":{"name":"Dynamic Econometric Models","volume":"11 1","pages":"21-40"},"PeriodicalIF":0.0,"publicationDate":"2011-12-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66547676","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The paper addresses the question of how the exchange rate dynamics affects the analysis of linkages between national stock markets. We consider two ways of tackling the problem. The first one consists in denominating the analyzed quotations in the same currency. The second deals with a direct introducing the exchange rate into a model. Our analysis is based on the daily return series on selected stock indices from the period 1995-2010. We model the dependence structure using dynamic copulas. This allows us to separate the dynamics of dependence from the volatility dynamics.
{"title":"The Impact of the Exchange Rate Dynamics on the Dependencies in Global Stock Market","authors":"Małgorzata Doman, R. Doman","doi":"10.12775/DEM.2011.005","DOIUrl":"https://doi.org/10.12775/DEM.2011.005","url":null,"abstract":"The paper addresses the question of how the exchange rate dynamics affects the analysis of linkages between national stock markets. We consider two ways of tackling the problem. The first one consists in denominating the analyzed quotations in the same currency. The second deals with a direct introducing the exchange rate into a model. Our analysis is based on the daily return series on selected stock indices from the period 1995-2010. We model the dependence structure using dynamic copulas. This allows us to separate the dynamics of dependence from the volatility dynamics.","PeriodicalId":31914,"journal":{"name":"Dynamic Econometric Models","volume":"6 1","pages":"73-86"},"PeriodicalIF":0.0,"publicationDate":"2011-12-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66547471","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In the paper, I generalize the Asymmetric Autoregressive Conditional Duration (AACD) model proposed by Bauwens and Giot (2003) with respect to the generalized gamma and the Burr distribution for an error term. I derive the log likelihood functions for the augmented models and show how to check the goodness-of-fit of the distributional assumptions with the application of the probability integral transforms proposed by Diebold, Gunther and Tay (1998). Moreover, I present an exemplary empirical application of the Asymmetric ACD model for the durations between submissions of market or best limit orders on the interbank trading platform for the Polish zloty. I test the impact of selected market microstructure factors (i.e. the bid-ask spread, volatility) on the time of order submissions.
{"title":"Distribution Choice for the Asymmetric ACD Models","authors":"K. Bień-Barkowska","doi":"10.12775/DEM.2011.004","DOIUrl":"https://doi.org/10.12775/DEM.2011.004","url":null,"abstract":"In the paper, I generalize the Asymmetric Autoregressive Conditional Duration (AACD) model proposed by Bauwens and Giot (2003) with respect to the generalized gamma and the Burr distribution for an error term. I derive the log likelihood functions for the augmented models and show how to check the goodness-of-fit of the distributional assumptions with the application of the probability integral transforms proposed by Diebold, Gunther and Tay (1998). Moreover, I present an exemplary empirical application of the Asymmetric ACD model for the durations between submissions of market or best limit orders on the interbank trading platform for the Polish zloty. I test the impact of selected market microstructure factors (i.e. the bid-ask spread, volatility) on the time of order submissions.","PeriodicalId":31914,"journal":{"name":"Dynamic Econometric Models","volume":"11 1","pages":"55-72"},"PeriodicalIF":0.0,"publicationDate":"2011-12-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66547874","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
An evaluation of the efficiency of different methods of the minimum variance portfolio selection was performed for seventy stocks from the Warsaw Stock Exchange. Eight specifications of multivariate GARCH models and six other methods were used. The application of all considered GARCH-class models was more efficient in stocks allocation than the implementation of the other analyzed methods. The simple specifications of multivariate GARCH models, whose parameters were estimated in two stages, like the DCC and CCC models were the best performing models.
{"title":"Minimum Variance Portfolio Selection for Large Number of Stocks - Application of Time-Varying Covariance Matrices","authors":"P. Fiszeder","doi":"10.12775/DEM.2011.006","DOIUrl":"https://doi.org/10.12775/DEM.2011.006","url":null,"abstract":"An evaluation of the efficiency of different methods of the minimum variance portfolio selection was performed for seventy stocks from the Warsaw Stock Exchange. Eight specifications of multivariate GARCH models and six other methods were used. The application of all considered GARCH-class models was more efficient in stocks allocation than the implementation of the other analyzed methods. The simple specifications of multivariate GARCH models, whose parameters were estimated in two stages, like the DCC and CCC models were the best performing models.","PeriodicalId":31914,"journal":{"name":"Dynamic Econometric Models","volume":"11 1","pages":"87-98"},"PeriodicalIF":0.0,"publicationDate":"2011-12-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66547548","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The aim of this paper is to investigate the predictive properties of the MSF-Scalar BEKK(1,1) model in context of portfolio optimization. The MSF-SBEKK model has been proposed as a feasible tool for analyzing multidimensional financial data (large n), but this research examines forecasting abilities of this model for n = 2, since for bivariate data we can obtain and compare predictive distributions of the portfolio in many other multivariate SV specifications. Also, approximate posterior results in the MSF-SBEKK model (based on preliminary estimates of nuisance matrix parameters) are compared with the exact ones.
{"title":"Bayesian Optimal Portfolio Selection in the MSF-SBEKK Model","authors":"Anna Pajor","doi":"10.12775/DEM.2011.003","DOIUrl":"https://doi.org/10.12775/DEM.2011.003","url":null,"abstract":"The aim of this paper is to investigate the predictive properties of the MSF-Scalar BEKK(1,1) model in context of portfolio optimization. The MSF-SBEKK model has been proposed as a feasible tool for analyzing multidimensional financial data (large n), but this research examines forecasting abilities of this model for n = 2, since for bivariate data we can obtain and compare predictive distributions of the portfolio in many other multivariate SV specifications. Also, approximate posterior results in the MSF-SBEKK model (based on preliminary estimates of nuisance matrix parameters) are compared with the exact ones.","PeriodicalId":31914,"journal":{"name":"Dynamic Econometric Models","volume":"11 1","pages":"41-54"},"PeriodicalIF":0.0,"publicationDate":"2011-12-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66547844","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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