Journal of Economic Asymmetries最新文献

This study examines which asymmetric variables lead to the better forecast performance of downside and upside risks. The models used in this study measure downside and upside risks using realized semivariance. In addition to their past values, the models utilize return, volume, and jump components as asymmetric variables. We apply these models to major exchange-traded funds (ETFs) and show that asymmetric return variables increase the forecast performance of downside and upside risks for all ETFs. For bond, commodity, and crude oil ETFs, asymmetric trading volume variables are also found to be an important factor in better forecast performance. These results indicate that asymmetric information plays an important role in forecasting downside and upside risks, enabling superior risk management and investment strategy formulation.

This paper develops the asymptotic theory for stable autoregressive models in which the noise variance grows in a polynomial-like fashion. It is shown that the asymptotic distribution of the OLS estimator of the coefficient vector is multivariate normal with a covariance matrix that depends on the order, k, of the variance growth. A consistent estimator of k is proposed, which delivers heteroscedasticity-robust test statistics. The case of “variance decline” is studied as well. It is demonstrated that by means of a simple data transformation producing the time reversed image of the original series, the problem of “variance decrease” can be reformulated in terms of that of polynomial-like variance growth. Simulation evidence suggests that the new procedures work quite well in small samples. Finally, the new methods are used in order to measure potential asymmetries in business cycles dynamics among several OECD countries.

Investment is envisaged as a prerequisite for improving productivity and growth in any economy. In India, investment has decelerated during the global financial crisis (GFC) of 2008, especially after 2011–12, which has spurred a heated discussion regarding causes accountable for elongated slowdown. To this end, we empirically examine the causal nexus between investment and its covariates in an asymmetric framework. The present study finds asymmetric cointegration along with short-run impact asymmetry, long-run reaction asymmetry, and adjustment asymmetry between investment and its covariates. Furthermore, evidence of asymmetric Granger causality is also established. Our study's conclusions have important policy outcomes to combat the economy's downturn in investment.

In this study, we empirically assess both linear and nonlinear relationships between the total tax burden and various tax items with real per capita GDP growth rates for 41 developing countries between 1990 and 2019. We use panel data techniques to evaluate the impact of taxation, as a percentage of GDP, on economic growth in both the short and long run perspectives, and to identify threshold values for different types of taxes. In addition to contributing to previous evidence on the linear effects, our results support the existence of nonlinearities and motivate policies aimed at raising certain tax revenues without hindering economic growth.

This paper examines the asymmetric effects of economic policy uncertainty (EPU) on the demand for money in Canada, Japan, the United Kingdom, and the United States. We use linear and nonlinear ARDL models with monthly data over the period 1985–2022 to conduct the analysis. Results from the linear ARDL model show that changes in EPU have no short-run or long-run effect on money demand in any country, except in the US, where changes in EPU have a positive short-run effect. However, with the nonlinear ARDL model, we find evidence of short-run and long-run effects across all four countries. Both increases and decreases in EPU have negative long-run effects on Canadian and UK money demand, but a positive effect on US money demand. For Japan, rising EPU has a positive effect on money demand, whereas falling EPU is insignificant. The long-run results are consistent in each country over time. The recent COVID-19 period had a short-run impact across countries and a long-run effect on the relationship between EPU and money demand in Canada and the UK. In contrast, the Brexit period had no differential long-run impact on money demand across countries, and a short run impact was only observed in the UK. Our results highlight the importance of adopting nonlinear ARDL models instead of linear models to analyze money demand and the need to examine countries separately since the long-run effects of EPU on money demand vary across countries.

Using daily data for the financial stress index of the US and real estate investment trusts (REITs) returns from February 2, 2020, to January 20, 2022, we investigate the frequency-dependent and asymmetric connectedness between global financial market stress and REIT returns for the top 12 REIT regimes in America, Europe, and Asia. We use a novel asymmetric, noise-reducing-domain EEMD-based quantile connectedness and quantile-on-quantile regression technique and the quantile vector autoregression (QVAR) connectedness approach. The findings divulge that at the upper quantile financial market stress is a major risk transmitter, transmitting risk towards Germany, France, Netherlands, New Zealand, the UK, and Canada. The findings of the study explicate the pivotal role of the financial soundness on the housing market, which is one of the main drivers of the economy. Investors and market participants should observe the conditional state of market dynamics and its associated policies for risk management and diversification strategies in real estate investment.

Oil price instabilities have direct and heterogeneous implications for stock sector markets as a result of portfolio risk management and fund allocations. Previous studies have shown that the oil-stock market nexus is asymmetric and strongly vulnerable to international events. Using daily data of ten Chinese stock sector indices and the West Texas Intermediate crude oil futures over the period from July 2, 2007, to September 3, 2021, we examine the quantile return spillovers and interconnectedness between these markets using the approach of Ando et al. (2022), showing that return spillovers between the markets under investigation are more pronounced under bearish market conditions than during bullish ones. Major financial, political, energy, and COVID-19 pandemic events have magnified spillovers. Irrespective of the state of the market, oil is always a net receiver of return spillovers. Moreover, for all sectors other than materials, the sector that acts as a net receiver during bearish market conditions becomes a net contributor during bullish market conditions, and vice versa. During the COVID-19 period, the hedging technique was the most cost-effective. In the event of a global pandemic, the IT, financial, telecommunication, and energy sectors can benefit from oil's higher hedging effectiveness. Oil was a cheaper hedging asset during the pandemic, and it offered the highest hedging effectiveness to utilities before the outbreak and to the financial sector during the COVID-19 pandemic.

We investigate the impact of an exogenous economic crisis on investors' response to corporate earnings announcements. We use COVID-19 as an exogenous shock as an unanticipated macroeconomic event. Given the general fear and economic uncertainty, the COVID-19 pandemic provides a natural setting to investigate how investors reacted to earnings announcements. Did the investors excessively punish the stock for negative performance (since it confirmed their general fear), or did they reward good performers excessively since beating expectations was especially tough in the crisis? We find that the pandemic exacerbated investors' responses to earnings announcements. We further find that investors' reactions to significant positive earnings surprises were more prominent than to large negative ones. Our results are robust to alternate specifications and parallel trend analysis. We contribute to the literature by providing evidence on how the uncertainty caused by an economic crisis can impact investors’ response to earnings news.