Pub Date : 2024-11-07DOI: 10.1016/j.qref.2024.101937
Bin Zhou, Huai-Long Shi
Against the backdrop of increasing interest in factor investing, this paper explores volatility connectedness among theme factors and sector indices in the Chinese stock market using the Diebold-Yilmaz approach with quantile factor VAR. Our static analysis reveals significant similarities at extreme quantiles, contrasting with the conditional median. We find that higher connectedness measures at extreme quantiles correspond to improved performance of portfolios based on sectors and themes. Additionally, dynamic analysis indicates a strong link between total connectedness and major risk events in China. Moreover, variations in connectedness between the right and left tails serve as a market-level risk proxy, significantly influencing the performance of both themes and sectors. These findings underscore the importance of understanding volatility connectedness for devising effective investment strategies and enhancing risk management practices in the Chinese stock market.
{"title":"Quantile volatility connectedness among themes and sectors: Novel evidence from China","authors":"Bin Zhou, Huai-Long Shi","doi":"10.1016/j.qref.2024.101937","DOIUrl":"10.1016/j.qref.2024.101937","url":null,"abstract":"<div><div>Against the backdrop of increasing interest in factor investing, this paper explores volatility connectedness among theme factors and sector indices in the Chinese stock market using the Diebold-Yilmaz approach with quantile factor VAR. Our static analysis reveals significant similarities at extreme quantiles, contrasting with the conditional median. We find that higher connectedness measures at extreme quantiles correspond to improved performance of portfolios based on sectors and themes. Additionally, dynamic analysis indicates a strong link between total connectedness and major risk events in China. Moreover, variations in connectedness between the right and left tails serve as a market-level risk proxy, significantly influencing the performance of both themes and sectors. These findings underscore the importance of understanding volatility connectedness for devising effective investment strategies and enhancing risk management practices in the Chinese stock market.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"98 ","pages":"Article 101937"},"PeriodicalIF":2.9,"publicationDate":"2024-11-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142651684","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-11-01DOI: 10.1016/j.qref.2024.101938
Junyong Lee , Kyounghun Lee , Frederick Dongchuhl Oh
This study examines the effect of credit rating concerns on corporate environmental, social, and governance (ESG) behavior. We use the plus or minus test on a large sample of ESG scores and S&P credit ratings of U.S. publicly traded firms from 2003 to 2017. We find that firms with credit rating concerns often increase their ESG activities. This finding holds even after we control for various factors affecting ESG practices. Moreover, firms on the boundary between investment- and speculative-grade ratings significantly improve their ESG performance compared to other cases. Finally, we find evidence that the positive effect of credit rating concerns on ESG activities is pronounced during the global financial crisis and then strengthens further. Overall, our study highlights the impact of credit ratings on corporate ESG behavior. (JEL G24, G32, M14)
{"title":"Credit ratings and corporate ESG behavior","authors":"Junyong Lee , Kyounghun Lee , Frederick Dongchuhl Oh","doi":"10.1016/j.qref.2024.101938","DOIUrl":"10.1016/j.qref.2024.101938","url":null,"abstract":"<div><div>This study examines the effect of credit rating concerns on corporate environmental, social, and governance (ESG) behavior. We use the plus or minus test on a large sample of ESG scores and S&P credit ratings of U.S. publicly traded firms from 2003 to 2017. We find that firms with credit rating concerns often increase their ESG activities. This finding holds even after we control for various factors affecting ESG practices. Moreover, firms on the boundary between investment- and speculative-grade ratings significantly improve their ESG performance compared to other cases. Finally, we find evidence that the positive effect of credit rating concerns on ESG activities is pronounced during the global financial crisis and then strengthens further. Overall, our study highlights the impact of credit ratings on corporate ESG behavior. (JEL G24, G32, M14)</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"98 ","pages":"Article 101938"},"PeriodicalIF":2.9,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142586770","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-11-01DOI: 10.1016/j.qref.2024.101935
Ezekiel Kofi Opoku , Edward Marfo-Yiadom , Mariya Gubareva , José Zorro Mendes
This pioneering study unravels the financial performance dynamics of Ghanaian insurance firms, leveraging proprietary data from the National Insurance Company (NIC), Ghana. Utilizing a system GMM technique on a comprehensive panel dataset of 40 firms from 2012 to 2017, it uncovers cost efficiency, claims ratio, retention ratio, audit fees, firm age and size, and board composition as crucial performance drivers. In what concerns the implications for the emerging economies, we show that the inclusion of the variable “risk retention and claims” helps insurance companies to better ascertain the right level of risks associated with the businesses they underwrite, so that the claims ratio will be minimized, and the appropriate premium ensured. Moreover, for the insurance sector in the frontier markets, with characteristics like Ghana´s economy, the study advocates for strategic cost control measures and emphasizes the need for proactive regulatory approaches aiming to enhance policy actions and to provide supplementary funds for firms demonstrating growth potential. These empirical evidence-based insights help design a roadmap for developing the insurance sector in the economies belonging to frontier and emerging markets.
{"title":"Unveiling dynamics: Financial performance determinants in the Ghanaian insurance industry","authors":"Ezekiel Kofi Opoku , Edward Marfo-Yiadom , Mariya Gubareva , José Zorro Mendes","doi":"10.1016/j.qref.2024.101935","DOIUrl":"10.1016/j.qref.2024.101935","url":null,"abstract":"<div><div>This pioneering study unravels the financial performance dynamics of Ghanaian insurance firms, leveraging proprietary data from the National Insurance Company (NIC), Ghana. Utilizing a system GMM technique on a comprehensive panel dataset of 40 firms from 2012 to 2017, it uncovers cost efficiency, claims ratio, retention ratio, audit fees, firm age and size, and board composition as crucial performance drivers. In what concerns the implications for the emerging economies, we show that the inclusion of the variable “risk retention and claims” helps insurance companies to better ascertain the right level of risks associated with the businesses they underwrite, so that the claims ratio will be minimized, and the appropriate premium ensured. Moreover, for the insurance sector in the frontier markets, with characteristics like Ghana´s economy, the study advocates for strategic cost control measures and emphasizes the need for proactive regulatory approaches aiming to enhance policy actions and to provide supplementary funds for firms demonstrating growth potential. These empirical evidence-based insights help design a roadmap for developing the insurance sector in the economies belonging to frontier and emerging markets.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"98 ","pages":"Article 101935"},"PeriodicalIF":2.9,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142651683","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"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 : 2024-10-23DOI: 10.1016/j.qref.2024.101933
Chune Young Chung , Pham Thi Ngoc Dung , Chang Liu
We examine whether institutional investors can reduce the risk of stock price crashes caused by managers’ intentional withholding of bad news. Specifically, we focus on the effect of institutional blockholder monitoring on stock price crash risk. The empirical results show negative relationships between institutional blockholdings and various crash risk variables, which suggests that institutional blockholder monitoring of nontransparent managerial behaviors can decrease crash risk. Furthermore, we find that the influence of monitors is more pronounced in firms with high information asymmetry, thereby corroborating the institutional blockholder monitoring role. This study validates the monitoring role of dedicated institutional investors in agency-motivated managerial behaviors.
{"title":"Institutional blockholder monitoring and stock price crash risk","authors":"Chune Young Chung , Pham Thi Ngoc Dung , Chang Liu","doi":"10.1016/j.qref.2024.101933","DOIUrl":"10.1016/j.qref.2024.101933","url":null,"abstract":"<div><div>We examine whether institutional investors can reduce the risk of stock price crashes caused by managers’ intentional withholding of bad news. Specifically, we focus on the effect of institutional blockholder monitoring on stock price crash risk. The empirical results show negative relationships between institutional blockholdings and various crash risk variables, which suggests that institutional blockholder monitoring of nontransparent managerial behaviors can decrease crash risk. Furthermore, we find that the influence of monitors is more pronounced in firms with high information asymmetry, thereby corroborating the institutional blockholder monitoring role. This study validates the monitoring role of dedicated institutional investors in agency-motivated managerial behaviors.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"98 ","pages":"Article 101933"},"PeriodicalIF":2.9,"publicationDate":"2024-10-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142530117","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-10-22DOI: 10.1016/j.qref.2024.101934
Ben Ma , Yong Qiu
Although companies typically claim to implement an employee stock ownership plan (ESOP) for the purpose of incentivizing employees to enhance corporate performance, many non-incentive motives may be hidden behind this move. Using data on China’s stock market from 2014 to 2022, this paper demonstrates that due to optimistic market reactions, employee stock ownership plans may be related to covering up corporate fraud. Companies that have already committed fraud but have yet to have this fraud detected have a higher propensity for declaring an ESOP. In further research, we found this effect is more pronounced for companies with underperforming stock prices.
{"title":"Employee stock ownership plan as a measure of covering up corporate fraud: Evidence from China","authors":"Ben Ma , Yong Qiu","doi":"10.1016/j.qref.2024.101934","DOIUrl":"10.1016/j.qref.2024.101934","url":null,"abstract":"<div><div>Although companies typically claim to implement an employee stock ownership plan (ESOP) for the purpose of incentivizing employees to enhance corporate performance, many non-incentive motives may be hidden behind this move. Using data on China’s stock market from 2014 to 2022, this paper demonstrates that due to optimistic market reactions, employee stock ownership plans may be related to covering up corporate fraud. Companies that have already committed fraud but have yet to have this fraud detected have a higher propensity for declaring an ESOP. In further research, we found this effect is more pronounced for companies with underperforming stock prices.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"98 ","pages":"Article 101934"},"PeriodicalIF":2.9,"publicationDate":"2024-10-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142553621","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-10-22DOI: 10.1016/j.qref.2024.101932
Faisal Faisal , Suresh Ramakrishnan , Sami Ur Rahman , Adnan Ali , Hamid Ghazi H Sulimany
Policymakers worldwide, especially central banks, are concerned about the causes and remedies of financial instability. This study examines the asymmetric influence of the shadow economy on financial instability. Moreover, the study analyzes the moderating role of institutional quality (IQ) in the shadow economy and financial instability nexus. This study used novel econometric techniques, including RALS-ADF and RALS-LM unit root tests, RALS-Fourier ARDL, NARDL, and single Fourier-Toda and Yamamoto causality tests, using yearly data from 1984 to 2020 for Turkey. Specifically, a positive shock to IQ declines financial instability, while a negative shock to IQ promotes it. Further, the negative shock to SE lessens the financial instability. Moreover, the negative shock to the interaction term implies that the shadow economy outweighs the IQ (depending on the level of IQ) in its effect in the case of Turkey, i.e., even if IQ increases (which usually decreases financial instability), the increasing SE has a dominant effect, and eventually upsurges financial instability. Additionally, in line with the institutional failure hypothesis, the negative shock to interaction term leads to a substantial increase in financial instability. Finally, the findings showed a one-way causality that runs from economic growth to financial instability and bidirectional causality between SE and GDP. The government should reduce shadow economic activities in the economy by enhancing IQ, which can increase government revenue and reduce financial instability.
{"title":"Asymmetric nexus between shadow economy and financial instability: Does institutional quality matter?","authors":"Faisal Faisal , Suresh Ramakrishnan , Sami Ur Rahman , Adnan Ali , Hamid Ghazi H Sulimany","doi":"10.1016/j.qref.2024.101932","DOIUrl":"10.1016/j.qref.2024.101932","url":null,"abstract":"<div><div>Policymakers worldwide, especially central banks, are concerned about the causes and remedies of financial instability. This study examines the asymmetric influence of the shadow economy on financial instability. Moreover, the study analyzes the moderating role of institutional quality (IQ) in the shadow economy and financial instability nexus. This study used novel econometric techniques, including RALS-ADF and RALS-LM unit root tests, RALS-Fourier ARDL, NARDL, and single Fourier-Toda and Yamamoto causality tests, using yearly data from 1984 to 2020 for Turkey. Specifically, a positive shock to IQ declines financial instability, while a negative shock to IQ promotes it. Further, the negative shock to SE lessens the financial instability. Moreover, the negative shock to the interaction term implies that the shadow economy outweighs the IQ (depending on the level of IQ) in its effect in the case of Turkey, i.e., even if IQ increases (which usually decreases financial instability), the increasing SE has a dominant effect, and eventually upsurges financial instability. Additionally, in line with the institutional failure hypothesis, the negative shock to interaction term leads to a substantial increase in financial instability. Finally, the findings showed a one-way causality that runs from economic growth to financial instability and bidirectional causality between SE and GDP. The government should reduce shadow economic activities in the economy by enhancing IQ, which can increase government revenue and reduce financial instability.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"98 ","pages":"Article 101932"},"PeriodicalIF":2.9,"publicationDate":"2024-10-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142651682","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-10-18DOI: 10.1016/j.qref.2024.101930
Xin-Jiang He , Puneet Pasricha , Tuantuan Lu , Sha Lin
Investigating default risk in pricing options holds significant practical importance, as nearly all market participants and institutions face credit risk. Additionally, economic cycles and asset liquidity are crucial factors that should be incorporated. This paper considers these factors and derives an analytical pricing formula. Specifically, we model the economic cycles through switching volatility driven by a continuous-time Markov chain, while we adopt a discounting factor based on market liquidity levels to model the asset liquidity. We establish a risk-neutral measure after embracing a regime-switching Esscher transform, and formulate a price representation to value vulnerable options analytically despite the complexity of the developed model. We conduct several numerical experiments to validate the model’s efficacy and flexibility.
{"title":"Vulnerable options with regime switching and stochastic liquidity","authors":"Xin-Jiang He , Puneet Pasricha , Tuantuan Lu , Sha Lin","doi":"10.1016/j.qref.2024.101930","DOIUrl":"10.1016/j.qref.2024.101930","url":null,"abstract":"<div><div>Investigating default risk in pricing options holds significant practical importance, as nearly all market participants and institutions face credit risk. Additionally, economic cycles and asset liquidity are crucial factors that should be incorporated. This paper considers these factors and derives an analytical pricing formula. Specifically, we model the economic cycles through switching volatility driven by a continuous-time Markov chain, while we adopt a discounting factor based on market liquidity levels to model the asset liquidity. We establish a risk-neutral measure after embracing a regime-switching Esscher transform, and formulate a price representation to value vulnerable options analytically despite the complexity of the developed model. We conduct several numerical experiments to validate the model’s efficacy and flexibility.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"98 ","pages":"Article 101930"},"PeriodicalIF":2.9,"publicationDate":"2024-10-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142530116","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-10-02DOI: 10.1016/j.qref.2024.101926
Shu-Ching Chou, Yen-Hui Kuo, Yu-Hsiu Cheng
Globally, economic growth is promoted through regional economic integration, and governments actively try to improve the security and efficiency of international trade and border management by optimizing the conditions for international trade. The World Trade Organization (WTO) introduced the Authorized Economic Operator (AEO) certification system to improve the efficiency of customs clearance and to ensure the security of the global supply chain. Using a sample of Taiwanese-listed firms that attained AEO certification from 2009 to 2018, this study investigates the influence of AEO certification on their export sales and corporate performance. The empirical results show that AEO-certified firms increase their ratio of export sales and the scope of export destination regions. However, AEO-certified firms can not improve their operating and market performance significantly, except for low-performance firms in the accreditation year. This study also uses the two-stage least square regressions (2SLS) method and the propensity score matching method to conduct the regression analysis. The regression results are consistent with the main findings. The findings can be used for reference by firms seeking to expand international trade and by governments to promote the country’s international trading.
{"title":"The value of international standards certification: Evidence on export and firm performance from a security enforcement on borders","authors":"Shu-Ching Chou, Yen-Hui Kuo, Yu-Hsiu Cheng","doi":"10.1016/j.qref.2024.101926","DOIUrl":"10.1016/j.qref.2024.101926","url":null,"abstract":"<div><div>Globally, economic growth is promoted through regional economic integration, and governments actively try to improve the security and efficiency of international trade and border management by optimizing the conditions for international trade. The World Trade Organization (WTO) introduced the Authorized Economic Operator (AEO) certification system to improve the efficiency of customs clearance and to ensure the security of the global supply chain. Using a sample of Taiwanese-listed firms that attained AEO certification from 2009 to 2018, this study investigates the influence of AEO certification on their export sales and corporate performance. The empirical results show that AEO-certified firms increase their ratio of export sales and the scope of export destination regions. However, AEO-certified firms can not improve their operating and market performance significantly, except for low-performance firms in the accreditation year. This study also uses the two-stage least square regressions (2SLS) method and the propensity score matching method to conduct the regression analysis. The regression results are consistent with the main findings. The findings can be used for reference by firms seeking to expand international trade and by governments to promote the country’s international trading.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"98 ","pages":"Article 101926"},"PeriodicalIF":2.9,"publicationDate":"2024-10-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142425577","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"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 : 2024-10-01DOI: 10.1016/j.qref.2024.101929
Sangik Seok , Hoon Cho , Doojin Ryu
We examine the intraday relationship between weather conditions and investor sentiment in the Korean equity market. By uncovering the intermediary role of weather-induced sentiment in affecting market variables, we suggest a potential link between weather conditions, sentiment, and market dynamics. High temperatures, humidity, and cloud coverage negatively affect investors’ moods, while strong winds and long sunshine durations have a positive impact. Although only cloud coverage marginally impacts stock returns, weather factors significantly affect market turnover, volatility, and illiquidity, especially when they alter sentiment dynamics.
{"title":"Intraday analyses on weather-induced sentiment and stock market behavior","authors":"Sangik Seok , Hoon Cho , Doojin Ryu","doi":"10.1016/j.qref.2024.101929","DOIUrl":"10.1016/j.qref.2024.101929","url":null,"abstract":"<div><div>We examine the intraday relationship between weather conditions and investor sentiment in the Korean equity market. By uncovering the intermediary role of weather-induced sentiment in affecting market variables, we suggest a potential link between weather conditions, sentiment, and market dynamics. High temperatures, humidity, and cloud coverage negatively affect investors’ moods, while strong winds and long sunshine durations have a positive impact. Although only cloud coverage marginally impacts stock returns, weather factors significantly affect market turnover, volatility, and illiquidity, especially when they alter sentiment dynamics.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"98 ","pages":"Article 101929"},"PeriodicalIF":2.9,"publicationDate":"2024-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142553620","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-09-29DOI: 10.1016/j.qref.2024.101927
Lu Wang , Xing Wang , Chao Liang
Research has focused on whether information spillovers from external influences play a role in clean energy–natural gas volatility forecasts. However, the climate and energy crises caused by the intensification of extreme events, such as recent extreme weather and geopolitical risks, have led the public to turn their attention to research in the field of clean energy. Therefore, this paper uses one-class SVM (support vector machine) techniques to identify extreme volatility in natural gas prices induced by significant occurrences (e.g., wars, financial crises, and COVID-19) and then investigates whether considering extreme volatility in natural gas over different volatile periods (short- and long-term periods) improves volatility forecasting accuracy within the context of a GARCH-MIDAS framework. The in-sample analyses demonstrate that extreme shocks increase natural gas price volatility and that the asymmetric effects are more influential than the short- and long-term extreme volatility effects. The out-of-sample results indicate that the GJR-GARCH-MIDAS-one-class-SVM-SLES model outperforms the other models and achieves the best forecasting performance of the remaining extended models. In addition, robustness tests confirm these findings.
{"title":"Natural gas volatility prediction via a novel combination of GARCH-MIDAS and one-class SVM","authors":"Lu Wang , Xing Wang , Chao Liang","doi":"10.1016/j.qref.2024.101927","DOIUrl":"10.1016/j.qref.2024.101927","url":null,"abstract":"<div><div>Research has focused on whether information spillovers from external influences play a role in clean energy–natural gas volatility forecasts. However, the climate and energy crises caused by the intensification of extreme events, such as recent extreme weather and geopolitical risks, have led the public to turn their attention to research in the field of clean energy. Therefore, this paper uses one-class SVM (support vector machine) techniques to identify extreme volatility in natural gas prices induced by significant occurrences (e.g., wars, financial crises, and COVID-19) and then investigates whether considering extreme volatility in natural gas over different volatile periods (short- and long-term periods) improves volatility forecasting accuracy within the context of a GARCH-MIDAS framework. The in-sample analyses demonstrate that extreme shocks increase natural gas price volatility and that the asymmetric effects are more influential than the short- and long-term extreme volatility effects. The out-of-sample results indicate that the GJR-GARCH-MIDAS-one-class-SVM-SLES model outperforms the other models and achieves the best forecasting performance of the remaining extended models. In addition, robustness tests confirm these findings.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"98 ","pages":"Article 101927"},"PeriodicalIF":2.9,"publicationDate":"2024-09-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142425576","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"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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