M. R. Henrique, Henrique Formigoni, José Carlos Tiomatsu Oyadomari
Brazil is the country with the highest number of lawsuits per capita, a fact that demonstrates the complexity and size of the challenge that is to set up and maintain an efficient, fair and fast judicial system to meet the demand (CNJ, 2011). The general objective of the research is to demonstrate the Contribution of Judicial Accounting Expertise to the Theory of the Fundamental Law Suit Efficiency. The research methodology is a literature review to know the state of the art of the subject following by a critical analysis on the Contribution of Judicial Accounting Expertise to the Theory of the Fundamental Law Suit Efficiency. Accounting expert reports must contain consistent conclusions, based on documentary evidence. The accounting professional must be able to justify any conclusions presented throughout of the report. Addionaly, the accounting expert reports must be written in a clear, objective, and accessible way, in order to avoid mistatements regarding the possible statements presented in the report. The expert accountant’s work being prepared with quality will contribute to the theory of the fundamental law suit efficiency as it will avoid questioning by the parties and possible elaboration of complementary reports.
{"title":"Essay on the Contribution of Judicial Accounting Expertise to the Theory of the Fundamental Law Suit Efficiency in Brazil","authors":"M. R. Henrique, Henrique Formigoni, José Carlos Tiomatsu Oyadomari","doi":"10.5539/ijef.v15n8p96","DOIUrl":"https://doi.org/10.5539/ijef.v15n8p96","url":null,"abstract":"Brazil is the country with the highest number of lawsuits per capita, a fact that demonstrates the complexity and size of the challenge that is to set up and maintain an efficient, fair and fast judicial system to meet the demand (CNJ, 2011). The general objective of the research is to demonstrate the Contribution of Judicial Accounting Expertise to the Theory of the Fundamental Law Suit Efficiency. The research methodology is a literature review to know the state of the art of the subject following by a critical analysis on the Contribution of Judicial Accounting Expertise to the Theory of the Fundamental Law Suit Efficiency. Accounting expert reports must contain consistent conclusions, based on documentary evidence. The accounting professional must be able to justify any conclusions presented throughout of the report. Addionaly, the accounting expert reports must be written in a clear, objective, and accessible way, in order to avoid mistatements regarding the possible statements presented in the report. The expert accountant’s work being prepared with quality will contribute to the theory of the fundamental law suit efficiency as it will avoid questioning by the parties and possible elaboration of complementary reports.","PeriodicalId":37166,"journal":{"name":"International Journal of Economics and Finance Studies","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-07-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78464387","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 objective of this article is to analyze, in the Dominican Republic, the impact of monetary policy on labor market variables disaggregated by gender. The results indicate that the expansion of credit and money favor the growth of female employment and female participation to a greater degree than male, which leads to an increase in the ratio of female to male employment and leads to an increase in domestic savings. and economic growth. It is shown that the female-to-male employment ratio reduces external vulnerability and inflation, homicide and suicide rates, and is a mechanism for the transmission of monetary policies.
{"title":"The Channel of Female Employment in the Transmission of Monetary Policy in the Dominican Republic","authors":"L. Cáceres","doi":"10.5539/ijef.v15n8p80","DOIUrl":"https://doi.org/10.5539/ijef.v15n8p80","url":null,"abstract":"The objective of this article is to analyze, in the Dominican Republic, the impact of monetary policy on labor market variables disaggregated by gender. The results indicate that the expansion of credit and money favor the growth of female employment and female participation to a greater degree than male, which leads to an increase in the ratio of female to male employment and leads to an increase in domestic savings. and economic growth. It is shown that the female-to-male employment ratio reduces external vulnerability and inflation, homicide and suicide rates, and is a mechanism for the transmission of monetary policies.","PeriodicalId":37166,"journal":{"name":"International Journal of Economics and Finance Studies","volume":"9 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-07-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78465185","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}
Yuan Chang, MazurinaMohd Ali, Qing Wang, Shu-hui Lin
Based on a total of 1,590 listed non-financial firms on the Taiwan Stock Exchange and the Taipei Exchanges covering the period of 2007~2020, this study examines whether a firm’s financing decision, namely, capital structure policy is affected by corporate board gender diversity. While existing research has explored the effects of a firm’s board diversity on various financial and non-financial consequences, this study argues that board gender diversity contributes to better financial performance and higher social reputation, on the one hand, it allows the firm to borrow more funds or enjoy better loan conditions, and on the other hand, it also leads to a higher level of trust in the firm’s ability to repay debts from its funders. All of these factors make the firm more likely to have a higher level of debt utilization. Through correlation analysis and multiple regression estimation, principal outcome shows that firm with greater degree of board gender diversity tends to use more debt financing in the capital structure decision.
{"title":"Corporate Board Gender Diversity and Financing Decision","authors":"Yuan Chang, MazurinaMohd Ali, Qing Wang, Shu-hui Lin","doi":"10.5539/ijef.v15n8p43","DOIUrl":"https://doi.org/10.5539/ijef.v15n8p43","url":null,"abstract":"Based on a total of 1,590 listed non-financial firms on the Taiwan Stock Exchange and the Taipei Exchanges covering the period of 2007~2020, this study examines whether a firm’s financing decision, namely, capital structure policy is affected by corporate board gender diversity. While existing research has explored the effects of a firm’s board diversity on various financial and non-financial consequences, this study argues that board gender diversity contributes to better financial performance and higher social reputation, on the one hand, it allows the firm to borrow more funds or enjoy better loan conditions, and on the other hand, it also leads to a higher level of trust in the firm’s ability to repay debts from its funders. All of these factors make the firm more likely to have a higher level of debt utilization. Through correlation analysis and multiple regression estimation, principal outcome shows that firm with greater degree of board gender diversity tends to use more debt financing in the capital structure decision.","PeriodicalId":37166,"journal":{"name":"International Journal of Economics and Finance Studies","volume":"78 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-07-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88341970","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}
Based on U.S. macroeconomic data from the past 30 years, it appears that the loose monetary policy of maintaining low interest rates did not effectively encourage businesses and consumers to increase their purchases. Despite the intent of the policy to stimulate demand for goods and services, it instead had an unexpected effect on the financial sector by driving up demand for assets, which led to inflation in equity and real estate prices. As a result, a loose monetary policy is unlikely to be an effective strategy for countering a recession, which contradicts the working assumption of the central banks around the world.
{"title":"The Inefficacy of Loose Monetary Policy","authors":"K. Choie","doi":"10.5539/ijef.v15n8p73","DOIUrl":"https://doi.org/10.5539/ijef.v15n8p73","url":null,"abstract":"Based on U.S. macroeconomic data from the past 30 years, it appears that the loose monetary policy of maintaining low interest rates did not effectively encourage businesses and consumers to increase their purchases. Despite the intent of the policy to stimulate demand for goods and services, it instead had an unexpected effect on the financial sector by driving up demand for assets, which led to inflation in equity and real estate prices. As a result, a loose monetary policy is unlikely to be an effective strategy for countering a recession, which contradicts the working assumption of the central banks around the world.","PeriodicalId":37166,"journal":{"name":"International Journal of Economics and Finance Studies","volume":"24 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-07-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85694152","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 this paper the relationship between carbon risk and corporate capital structure is examined. Recent literature highlights that heavy carbon-emitting firms need to adjust their level of indebtedness to reach their optimal financial leverage. Specifically, the amount of debt raised by high carbon-emitting businesses is lower than that of their low carbon-emitting counterparts. This can be explained by using the trade-off theory, according to which heavy carbon-emitting firms undergo both increasing financial distress costs and decreasing tax benefits of debt, causing them to employ a lower level of financial leverage relative to light carbon-emitting firms.
{"title":"Carbon Risk and Corporate Capital Structure: The State of the Art","authors":"Oscar Domenichelli","doi":"10.5539/ijef.v15n8p66","DOIUrl":"https://doi.org/10.5539/ijef.v15n8p66","url":null,"abstract":"In this paper the relationship between carbon risk and corporate capital structure is examined. Recent literature highlights that heavy carbon-emitting firms need to adjust their level of indebtedness to reach their optimal financial leverage. Specifically, the amount of debt raised by high carbon-emitting businesses is lower than that of their low carbon-emitting counterparts. This can be explained by using the trade-off theory, according to which heavy carbon-emitting firms undergo both increasing financial distress costs and decreasing tax benefits of debt, causing them to employ a lower level of financial leverage relative to light carbon-emitting firms.","PeriodicalId":37166,"journal":{"name":"International Journal of Economics and Finance Studies","volume":"34 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-07-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89911281","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 literature on asset predictability suggests the usefulness of the variance risk premium (VRP) and its diffusive and jump risk components as predictors that can yield an improved forecast power. This study investigates whether there is a robust and statistically significant relation between the VRP components and the future Japanese composite index of coincident indicators (CI) and credit spreads (CS), including the outbreak of the COVID-19 pandemic which has caused economic conditions and financial markets to become unstable. The main empirical results are as follows: (i) our rolling window predictive regressions indicate the stability of the significantly negative relation between the diffusive risk component of the VRP and the future CI; (ii) the significantly positive relation of the jump risk component of the VRP and the future lower-rated CS is hampered by the inclusion of the COVID-19 period when the Bank of Japan purchased large-scale corporate bonds under the continuing Japanese expansionary monetary policy; and (iii) the diffusive risk component is partly affected by the impact of the COVID-19 pandemic, but remains significantly positive relation with the future higher- and lower-rated CS.
{"title":"Variance Risk Premium Components in Japan for Predictability: Evidence from the COVID-19 Pandemic","authors":"M. Ubukata","doi":"10.5539/ijef.v15n8p27","DOIUrl":"https://doi.org/10.5539/ijef.v15n8p27","url":null,"abstract":"The literature on asset predictability suggests the usefulness of the variance risk premium (VRP) and its diffusive and jump risk components as predictors that can yield an improved forecast power. This study investigates whether there is a robust and statistically significant relation between the VRP components and the future Japanese composite index of coincident indicators (CI) and credit spreads (CS), including the outbreak of the COVID-19 pandemic which has caused economic conditions and financial markets to become unstable. The main empirical results are as follows: (i) our rolling window predictive regressions indicate the stability of the significantly negative relation between the diffusive risk component of the VRP and the future CI; (ii) the significantly positive relation of the jump risk component of the VRP and the future lower-rated CS is hampered by the inclusion of the COVID-19 period when the Bank of Japan purchased large-scale corporate bonds under the continuing Japanese expansionary monetary policy; and (iii) the diffusive risk component is partly affected by the impact of the COVID-19 pandemic, but remains significantly positive relation with the future higher- and lower-rated CS.","PeriodicalId":37166,"journal":{"name":"International Journal of Economics and Finance Studies","volume":"59 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-06-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86876262","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}
Although bracket pools in the NCAA Men’s Basketball Tournament are a game, in practice most players do not compete strategically. Instead, they are more likely to choose brackets as though they are playing a lottery. When faced with such unsophisticated opponents, the game simplifies to a finance problem where you must choose an optimal portfolio of brackets. The brackets that pay the highest return are modal brackets in which higher seeds are always picked to beat lower seeds until the Final Four. When playing multiple brackets, the optimal strategy is to diversify across possible winners in the first round of the Final Four. We have found both theoretically and empirically that enormous returns can be earned with this approach.
{"title":"Smart Money in the NCAA Men’s Basketball Tournament","authors":"George Chang, J. Feigenbaum","doi":"10.5539/ijef.v15n8p14","DOIUrl":"https://doi.org/10.5539/ijef.v15n8p14","url":null,"abstract":"Although bracket pools in the NCAA Men’s Basketball Tournament are a game, in practice most players do not compete strategically. Instead, they are more likely to choose brackets as though they are playing a lottery. When faced with such unsophisticated opponents, the game simplifies to a finance problem where you must choose an optimal portfolio of brackets. The brackets that pay the highest return are modal brackets in which higher seeds are always picked to beat lower seeds until the Final Four. When playing multiple brackets, the optimal strategy is to diversify across possible winners in the first round of the Final Four. We have found both theoretically and empirically that enormous returns can be earned with this approach.","PeriodicalId":37166,"journal":{"name":"International Journal of Economics and Finance Studies","volume":"32 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-06-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76929619","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 examines the influence of imports and exports of beef products on Tajikistan’s domestic market. Data from reputable sources covering the period 1999-2019, including the World Bank, Federal Bureau of Statistics, and International Financial Statistics, are utilized. The Vector Error Correction Model (VECM) and Granger causality methodology are employed to analyze the relationship between beef product imports, exports, their determinants, and the domestic market. The empirical analysis reveals that macroeconomic variables (GDP, foreign direct investment, inflation, and beef production) and the openness of the economy play a crucial role in determining the impact of imports and exports on Tajikistan’s domestic market. E-views and Stata software are used for data analysis. The findings indicate that Tajikistan imports more beef products than it exports, demonstrating a growing reliance on imported beef over the 1999-2019 period, implying a lack of competitive domestic beef production. Additionally, excessive beef exports can negatively affect domestic production and the economy. To ensure stability and sustainable economic growth, policy measures are recommended. These include implementing import tariffs to protect local producers, providing subsidies and support programs to enhance domestic production, and strategic planning to meet domestic beef demand before considering exports. By adopting these measures, Tajikistan can achieve a balanced and prosperous domestic market. These findings underscore the importance of considering the impact of beef imports and exports and implementing appropriate policies and regulations to promote a thriving domestic market.
{"title":"Import and Export of Beef Products in Tajikistan and Its Impact on the Domestic Market","authors":"Rishod Davlatov, Solomon Boamah, Mukut Sikder, Xuecheng Dou","doi":"10.5539/ijef.v15n7p68","DOIUrl":"https://doi.org/10.5539/ijef.v15n7p68","url":null,"abstract":"This study examines the influence of imports and exports of beef products on Tajikistan’s domestic market. Data from reputable sources covering the period 1999-2019, including the World Bank, Federal Bureau of Statistics, and International Financial Statistics, are utilized. The Vector Error Correction Model (VECM) and Granger causality methodology are employed to analyze the relationship between beef product imports, exports, their determinants, and the domestic market. The empirical analysis reveals that macroeconomic variables (GDP, foreign direct investment, inflation, and beef production) and the openness of the economy play a crucial role in determining the impact of imports and exports on Tajikistan’s domestic market. E-views and Stata software are used for data analysis. The findings indicate that Tajikistan imports more beef products than it exports, demonstrating a growing reliance on imported beef over the 1999-2019 period, implying a lack of competitive domestic beef production. Additionally, excessive beef exports can negatively affect domestic production and the economy. To ensure stability and sustainable economic growth, policy measures are recommended. These include implementing import tariffs to protect local producers, providing subsidies and support programs to enhance domestic production, and strategic planning to meet domestic beef demand before considering exports. By adopting these measures, Tajikistan can achieve a balanced and prosperous domestic market. These findings underscore the importance of considering the impact of beef imports and exports and implementing appropriate policies and regulations to promote a thriving domestic market.","PeriodicalId":37166,"journal":{"name":"International Journal of Economics and Finance Studies","volume":"37 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-06-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84350484","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}
We compute the growth of financial intermediary (FI) assets as an indicator of liquidity provided by intermediaries to the economy, as is done in the existing literature, and analyze its impact on the economy. We find that shocks to aggregate FI assets have a significant impact on U.S. real GDP and other macroeconomic indicators. Furthermore, shocks to assets of individual FIs also impact economic growth. However, our sub-sample analysis reveals notable shifts in the nature of financial intermediation: i) an increasing importance of market-based intermediaries, such as securities brokers and dealers, while the relationship between banks and the overall economy has diminished; ii) mutual funds demonstrate a greater impact compared to pension funds, underscoring their relative significance in driving economic outcomes in recent years; iii) insurance companies and shadow banks exhibit consistent significance across the sub-sample periods. These results suggest adopting a holistic approach to policymaking that considers various FIs, enhancing regulation and oversight of systemically important non-bank financial institutions, and monitoring of large insurers to mitigate the risk of financial instability.
{"title":"Evolving Nature of Financial Intermediation and Economic Growth: Insights from a Bayesian Vector-Autoregression Analysis","authors":"Ujjal Chatterjee","doi":"10.5539/ijef.v15n8p1","DOIUrl":"https://doi.org/10.5539/ijef.v15n8p1","url":null,"abstract":"We compute the growth of financial intermediary (FI) assets as an indicator of liquidity provided by intermediaries to the economy, as is done in the existing literature, and analyze its impact on the economy. We find that shocks to aggregate FI assets have a significant impact on U.S. real GDP and other macroeconomic indicators. Furthermore, shocks to assets of individual FIs also impact economic growth. However, our sub-sample analysis reveals notable shifts in the nature of financial intermediation: i) an increasing importance of market-based intermediaries, such as securities brokers and dealers, while the relationship between banks and the overall economy has diminished; ii) mutual funds demonstrate a greater impact compared to pension funds, underscoring their relative significance in driving economic outcomes in recent years; iii) insurance companies and shadow banks exhibit consistent significance across the sub-sample periods. These results suggest adopting a holistic approach to policymaking that considers various FIs, enhancing regulation and oversight of systemically important non-bank financial institutions, and monitoring of large insurers to mitigate the risk of financial instability.","PeriodicalId":37166,"journal":{"name":"International Journal of Economics and Finance Studies","volume":"51 2 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-06-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76588593","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 presents an analysis of the impact of asset price bubbles on the markets for cryptocurrencies and con-siders the standard risk management measure Value-at-Risk (“VaR”). We apply the theory of local martingales, present a styled model of asset price bubbles in continuous time and perform a simulation experiment featuring one- and two-dimensional Stochastic Differential Equation (“SDE”) systems for asset value through a Constant Elasticity of Variance (“CEV”) process that can detect bubble behavior. In an empirical analysis across several widely traded cryptocurrencies, we find that the estimated parameters of one-dimensional SDE systems do not show evidence of bubble behavior. However, if we estimate a two-dimensional system jointly with an equity market index, we do detect a bubble, and comparing bubble to non-bubble economies it is shown that asset price bubbles result in materially inflated VaR measures. The implication of this finding for portfolio and risk management is that rather than acting as a diversifying asset class, cryptocurrencies may not only be highly correlated with other assets but have anti-diversification properties that materially inflate the downside risks in portfolios combining these asset types. We also measure the model risk arising from mispecifying the process driving cryptocurrencies by ignoring the relationship to another representative risk asset through applying the principle of relative entropy, where we find that across all cryptocurrencies studied that the distributions of a distance measure between the simulated distributions of VaR are almost all highly skewed to the right and very heavy-tailed. We find that in the majority of cases that the model risk “multipliers” range in about two to five across cryptocurrencies, estimates which could be applied to establish a model risk reserve as part of an economic capital calculation for risk management of cryptocurrencies.
{"title":"The Detection of Asset Price Bubbles in the Cryptocurrency Markets with an Application to Risk Management and the Measurement of Model Risk","authors":"Michael Jacobs, Jr.","doi":"10.5539/ijef.v15n7p46","DOIUrl":"https://doi.org/10.5539/ijef.v15n7p46","url":null,"abstract":"This study presents an analysis of the impact of asset price bubbles on the markets for cryptocurrencies and con-siders the standard risk management measure Value-at-Risk (“VaR”). We apply the theory of local martingales, present a styled model of asset price bubbles in continuous time and perform a simulation experiment featuring one- and two-dimensional Stochastic Differential Equation (“SDE”) systems for asset value through a Constant Elasticity of Variance (“CEV”) process that can detect bubble behavior. In an empirical analysis across several widely traded cryptocurrencies, we find that the estimated parameters of one-dimensional SDE systems do not show evidence of bubble behavior. However, if we estimate a two-dimensional system jointly with an equity market index, we do detect a bubble, and comparing bubble to non-bubble economies it is shown that asset price bubbles result in materially inflated VaR measures. The implication of this finding for portfolio and risk management is that rather than acting as a diversifying asset class, cryptocurrencies may not only be highly correlated with other assets but have anti-diversification properties that materially inflate the downside risks in portfolios combining these asset types. We also measure the model risk arising from mispecifying the process driving cryptocurrencies by ignoring the relationship to another representative risk asset through applying the principle of relative entropy, where we find that across all cryptocurrencies studied that the distributions of a distance measure between the simulated distributions of VaR are almost all highly skewed to the right and very heavy-tailed. We find that in the majority of cases that the model risk “multipliers” range in about two to five across cryptocurrencies, estimates which could be applied to establish a model risk reserve as part of an economic capital calculation for risk management of cryptocurrencies.","PeriodicalId":37166,"journal":{"name":"International Journal of Economics and Finance Studies","volume":"63 1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-06-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134981716","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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