Studies in Nonlinear Dynamics & Econometrics

Published by De Gruyter

Volume 23 Issue 1

February 2019

Issue of Studies in Nonlinear Dynamics & Econometrics

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Journal Overview

Research Articles

Publicly Available April 30, 2018

Think again: volatility asymmetry and volatility persistence

Dirk G. Baur, Thomas Dimpfl

Article number: 20170020

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Abstract

We use a leveraged quantile heterogeneous autoregressive model of realized volatility to illustrate that volatility persistence and the asymmetric “leverage” effect are high volatility phenomena. More specifically, we find that (i) low volatility is not persistent, but high volatility all the more, even featuring properties of explosive processes; and (ii) asymmetry of volatility is only a high volatility phenomenon and there is no asymmetry in low volatility regimes. Our results turn out to be robust to the choice of the realized variance estimator, in particular with respect to jumps. The analysis illustrates that quantile regression can provide information that is hidden in commonly used GARCH or realized volatility models. The quantile regression results can also be linked to the weak empirical evidence of the leverage effect and the volatility feedback effect.

July 12, 2018

A nonlinear model of asset returns with multiple shocks

Hannu Kahra, Vance L. Martin, Saikat Sarkar

Article number: 20170064

Abstract

A nonlinear model of asset returns allowing for multiple shocks is specified. The nonlinear features of the model are demonstrated graphically using a 3-dimensional diagram referred to as the mean impact surface. A new class of nonlinearity tests is also developed which is compared with existing testing methodologies. Applying the framework using excess returns on US and world equities the empirical results provide strong statistical evidence that domestic and foreign shocks have nonlinear effects on expected returns in the US with the effects being determined by the sign and the size of shocks. In contrast, the effects on world expected returns from shocks in the US and the world are found to react more smoothly. The empirical nonlinearities identified are also shown to be robust to alternative choices of risk factors and distributional assumptions.

August 11, 2018

A regime switching skew-normal model of contagion

Joshua C.C. Chan, Renée A. Fry-McKibbin, Cody Yu-Ling Hsiao

Article number: 20170001

Abstract

A flexible multivariate model of a time-varying joint distribution of asset returns is developed which allows for regime switching and a joint skew-normal distribution. A suite of tests for linear and nonlinear financial market contagion is developed within the framework. The model is illustrated through an application to contagion between US and European equity markets during the Global Financial Crisis. The results show that correlation contagion dominates coskewness contagion, but that coskewness contagion is significant for Greece. A flight to safety to the US is also evident in the significance of breaks in the skewness parameter in the crisis regime. Comparison to the Asian crisis shows that similar patterns emerge, with a flight to safety to Japan, and Malaysia affected by coskewnes contagion with Hong Kong.

July 5, 2018

Methods for strengthening a weak instrument in the case of a persistent treatment

Michel Berthélemy, Petyo Bonev, Damien Dussaux, Magnus Söderberg

Article number: 20150094

Abstract

When evaluating policy treatments that are persistent and endogenous, available instrumental variables often exhibit more variation over time than the treatment variable. This leads to a weak instrumental variable problem, resulting in high bias or uninformative confidence intervals. We evaluate two new estimation approaches that strengthen the instrument. We derive their theoretical properties and show in Monte Carlo simulations that they outperform standard IV-estimators. We use our procedures to estimate the effect of public utility divestiture in the US nuclear energy sector. Our results show that divestiture significantly increases production efficiency.

July 3, 2018

A non-linear Keynesian Goodwin-type endogenous model of the cycle: Bayesian evidence for the USA

Theodore Mariolis, Konstantinos N. Konstantakis, Panayotis G. Michaelides, Efthymios G. Tsionas

Article number: 20160137

Abstract

This paper incorporates the so-called Bhaduri-Marglin accumulation function in Goodwin’s original growth cycle model and econometrically estimates the proposed model for the case of the US economy in the time period 1960–2012, using a modern Bayesian sequential Monte Carlo method. Based on our findings, the US economy follows an exhilarationist regime throughout our investigation period with the sole exception of an underconsumption regime for the time period 1974–1978. In general, the results suggest that the proposed approach is an appropriate vehicle for expanding and improving traditional Goodwin-type models.

July 20, 2018

Investment on human capital in a dynamic contest model

Kerim Keskin, Çağrı Sağlam

Article number: 20170095

Abstract

Although most contest games are modeled in such a way that the outcome depends only on the efforts exerted by the contestants, what is arguably more important is the contestants’ effective efforts which may be influenced also by their ability, human capital, strength, etc. In this paper, we investigate an extensive model including such an effectiveness parameter and analyze the optimal investment behavior in a dynamic conflict framework. At each period, two contestants compete for a common prize by choosing contest efforts and investment levels. Each contestant’s investment accumulates as his/her human capital which depreciates through time. Who wins the component contest at a particular period is determined by the contestants’ effective efforts, defined as increasing functions of their efforts and human capitals. Following the analysis of subgame perfect Nash equilibrium in a two-period model and of open-loop equilibrium in an infinite-horizon model, we provide intuitive comparative static results.

About this journal

Objective
A peer-reviewed journal since 1996, Studies in Nonlinear Dynamics & Econometrics (SNDE) is at the forefront of statistical and theoretical approaches to economics. The journal studies ways in which econometrics and dynamical systems theory increase our understanding of economic and financial markets. The journal disseminates authors' algorithms, programs, and data sets, allowing other scholars to replicate empirical results. Authors include econometricians such as Clive Granger, James Hamilton, and Halbert White, and theorists Jess Benhabib, Alan Kirman, and Kazuo Nishimura.

Best Paper Award
Since 2015, the Society has awarded $500 each year to the best paper published in the Society’s journal: Studies in Nonlinear Dynamics and Econometrics.

The Best Paper in 2023 for Studies in Nonlinear Dynamics and Econometrics, has been awarded to Thomas Lux for his paper: "Approximate Bayesian Inference for Agent-Based Models in Economics: A Case Study." Studies in Nonlinear Dynamics & Econometrics, vol. 27, no. 4, 2023, pp. 423-447.

The Best Paper in 2022 for Studies in Nonlinear Dynamics and Econometrics, has been awarded to Szabolcs Blazsek, Alvaro Escribano and Adrian Licht. for their paper: "Multivariate Markov-switching score-driven models: an application to the global crude oil market" Studies in Nonlinear Dynamics & Econometrics, vol. 26, no. 3, 2022, pp. 313-335.

The Best Paper in 2021 for Studies in Nonlinear Dynamics and Econometrics, has been awarded to Eric Mark Aldrich and Howard Kung for their paper: “Computational Methods for Production-Based Asset Pricing Models with Recursive Utility”, published in Volume 25, Issue 1.

The Best Paper in 2020 for Studies in Nonlinear Dynamics and Econometrics, has been awarded to Gregor Bäurle, Daniel Kaufmann, Sylvia Kaufmann and Rodney Strachan for their paper: “Constrained interest rates and changing dynamics at the zero lower bound”, published in Volume 24, Issue 2.

The Best Paper in 2019 for Studies in Nonlinear Dynamics and Econometrics, has been awarded to Chang-Jin Kim and Yunmi Kim for their paper: “A unified framework jointly explaining business conditions, stock returns, volatility and “volatility feedback news” effects”, published in Volume 23, Issue 2.

The Best Paper in 2018 for Studies in Nonlinear Dynamics and Econometrics, has been awarded to Luiggi Donayre, Yunjong Eo and James Morley for their paper: “Improving likelihood-ratio-based confidence intervals for threshold parameters in finite samples”,published in Volume 22, Issue 1 (Feb 2018)

The Best Paper in 2017 for Studies in Nonlinear Dynamics and Econometrics has been awarded to Julien Chevallier and Stephane Goutte for their paper: “On the estimation of regime-switching Levy models”, published in Volume 21, Issue 1 (Feb 2017).

The Best Paper in 2016 for Studies in Nonlinear Dynamics and Econometrics has been awarded to Mark J. Jensen for his paper: “Robust estimation of nonstationary, fractionally integrated, autoregressive, stochastic volatility?”, published in Volume 20, Issue 4 (Sept. 2016).

The Best Paper in 2015 for Studies in Nonlinear Dynamics and Econometrics has been awarded to Markus Jochmann and Gary Koop for their paper: “Regime-switching cointegration?”, published in Volume 19, Issue 1 (Feb 2015).

Topics

Probability
Statistics
Macroeconomics
Finance
Forecasting
Econometrics

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