Risk aversion is a key element of utility maximizing hedge strategies; however, it has typically been assigned an arbitrary value in the literature. This paper instead applies a GARCH-in-Mean (GARCH-M) model to estimate a time-varying measure of risk aversion that is based on the observed risk...

In this paper, differences in return autocorrelation across weekdays have been investigated. Our research provides strong evidence of the importance on non-trading periods, not only weekends and holidays but also overnight closings, to explain return autocorrelation anomalies. While stock...

This paper addresses the issue of the optimal behaviour of the Lender of Last Resort (LOLR) in its microeconomic role regarding individual financial institutions in distress. It has been argued that the LOLR should not intervene at the microeconomic level and let any defaulting institution face...

This paper investigates the relative strengths of complementary and substitution effects between earnings and dividend announcements on a sequential sample of announcements of earnings and dividends from U.S. firms. The empirical results support the complementary hypothesis for earnings...

This paper aims to develop new methods for statistical inference in a class of stochastic volatility models for financial data based on non-Gaussian Ornstein-Uhlenbeck (OU) processes. Our approach uses indirect inference methods: First, a quasi-likelihood for the actual data is estimated. This...

The paper deals with the issue of stock market informational inefficiency differentiating between the main signals which indicate inefficiency manifestation within these markets. We discuss two main sources of inefficiency, price momentum and the mean reverting process, insisting on the causes...

Taking into account the actual economic situation of the world with numerous financial crisis, the insurance companies should control their financial stability in order to avoid the insolvency or even bankruptcy state. Thus, the insurers should find the adequate methods of substantiating the...

The project aims to create an econometric model which allows the forecasting of the evolution of Romania’s real economy, as well as the evolution of the system of Romanian financial markets. The study basis is represented by the assimilation of real economies with physics systems which are...

The size premium, defined as the return differential between shares of small and large companies, is subject to cyclical fluctuations. This study examines the predictability of this premium for the Swiss stock market applying a new and flexible forecasting approach. Our strategies provide...

This paper addresses the question of the selection of multivariate GARCH models in terms of variance matrix forecasting accuracy with a particular focus on relatively large scale problems. We consider 10 assets from NYSE and NASDAQ and compare 125 model based one-step-ahead conditional variance...