Questions tagged [economics]
The economics tag has no usage guidance.
77
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Performance Swaps
I am trying to find more information regarding performance interest rate swaps. The only source that I have found so far after digging extensively is the following. However, I am not as satisfied as I ...
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Can I extend the private information model of Kyle in in a continuous analogue, e.g. the Ornstein–Uhlenbeck process?
Taking into account an old post of maths.stackexchange, I recall the following:
On the one hand, we know that the Ornstein–Uhlenbeck process can also be considered as the continuous-time analogue of ...
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How does truncating data deal with long right tails of data? Why is a long right tail bad?
For reference, my coworker graphed the unemployment rate with an HP Filter on. He told me he truncated the data to 95% to deal with this issue but I'm not 100% sure what this means and why its ...
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463
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How to compare financial statements of two companies working in two different currencies?
So I am conducting a research on applying Data Envelopment Analysis (DEA) for comparing efficiencies of different companies working in different countries and thereby publishing their financial ...
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3
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database for economic & finance timeseries
I am looking for a technical solution to store economic and financial timeseries (nothing intraday for now, just daily/weekly/yearly)
Most timeseries database I find do not seem to take into account ...
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608
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Inflation effect on FX rates
With UK's inflation surging to 3.2% as per the published figures today reported by the FT, it is interesting to ponder the effect of rising inflation on FX rates.
The article linked above points out ...
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47
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Could you suggest a way to estimate an individual's risk-aversion
Did you see real-world examples of a way to estimate an individual's risk-aversion roughly by making mini-surveys to individuals or making them play mini-games?
Do portfolio management companies do ...
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3
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255
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Tech companies valuation
Usually tech companies/stocks are valued using one of the two methods:
DCF (discounted cash flows) method that is sensitive to interest rates raise (if rates up value down)
EBITDA or revenues ...
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58
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Escape Dynamics in financial economics or time series
These slides describe escape dynamics to be a type of, or having some relation to, rare event(s). Black swan events in business cycles was also included under the definition of rare events. My guess ...
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Equilibrium in the Kyle (1985) model
In his 1985 paper, Kyle presents 3 versions of the same model: a single period model, a multiple period model and the continuous time limit of the multiple period model.
When he formalizes the ...
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399
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Cashflow Risk vs Discount Risk
Studying asset pricing, I often hear the terms cashflow risk and discount risk but I'm not sure what they mean? The Campbell/Shiller (1988) decomposition includes cashflows (future dividends) and ...
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Can we think of Overnight Index Swaps as short-term IRS?
OIS are a series of fixed-rate cashflows discounted at the overnight rate, swapped for overnight (floating) rate.
IRS are similarly discounted fixed-rate cashflows, swapped on an IBOR-floating rate.
...
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Looking for a Book which can summaries last 20 years of economics [closed]
What I would like to read is how the economic spectrum have changed over the period ( Central banks policy decisions , QE 1/2/3 , ECB TLTRO, BOJ unlimited stimulus ). How the central bank dealt with ...
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Effect of lowering benchmark interest rates
On recent days, Yen appreciated 30 bps towards USD "after the Central Bank lowered its interest rates by 50 bps". Can someone explain me the economic rationale of the appreciation after a central bank ...
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Cash flows regression on macroeconomic data
I'm looking into a research project and am struggling to find any existing work on this or whether I'm asking the right question.
My question is to test the relationship between macroeconomic ...
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1
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182
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Question about CAPM Betas - Causes of Beta Movement Query
CAPM betas are measures of systematic risks, which include things like the exchange rate, inflation, interest rates, etc.
What I'm confused about is described below:
E.g. suppose I'm looking at one ...
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How to conduct an event-study for a single index (i.e the DJIA) with multiple events
I am a postgraduate student writing my thesis. I am somewhat a novice in the field I have chosen to study, however this has undoubtedly broadened my horizons. I am attempting to evaluate the impact of ...
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How does the efficient market hypothesis fit with the rapid changes in prices?
The price of IBM changes from second to second, but there's no way that actual news about IBM is coming out that fast. The information available about IBM changes a lot more slowly than its share ...
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Measuring corporate size relative to world GDP
I'm working o a model where corporate revenue / world GDP is a dependent variable of some stuff (based on the model proposed in this paper: http://www.scielo.br/scielo.php?pid=S1807-76922009000200002&...
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251
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Is there such a thing as resonance in economic underliers?
In physics the occurence of resonance is explained and widely understood in its linear form and subject to research in nonlinear resonance.
Example for instance are resonant frequencies of objects.
...
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Autoregressive Distributed Lag Models (ARDL) results analysis
When using autoregressive distributed lag models (ARDL), I usually get a counter-intuitive result for the selected lag.
For example, when examining the relationship between GDP and Foreign Direct ...
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What preprint repositories are available online?
Besides data sources, what preprint archives are available for academics and practitioners in the fields of Quantitative Finance and Economics?
I have subscribed Google Scholar alerts and regularly ...
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3
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If markets are efficient, why are most returns systematically high?
Suppose markets are perfectly efficient and asset prices reflect all available information. Under this assumption one expects current prices to be non-biased estimators of future prices. It seems to ...
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762
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What is the relation between Relative Risk Aversion and Market Price of Risk
If we assume that the preferences of investors in a market aggregate to display the following utility function
$$u(W)=\dfrac{1}{1-\gamma}W^{1-\gamma},\quad \gamma>0,\quad \gamma\neq1$$
then from$...
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Does CRRA-utility imply higher risk-aversion for lower wealth?
Consider the utility function $u(W)=\dfrac{1}{1-\gamma}W^{1-\gamma}$, where $\gamma=0.5$
Since this function will exhibit decreasing marginal utility of wealth, is it correct to say that for any ...
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How to Calculate the Value of a Growing Perpetuity Using a State Price Matrix?
Summary
I wish to value perpetual cash flows through state contingent claims on real consumption, where the state of the economy is assumed to follow a finite markov chain (Similar to Banz and Miller ...
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382
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Comparing two models using Wald Test
I would like to use a Wald test to compare two models.
To give a basic example, let:
$Y_{t}=\alpha+{\phi_1x}_{t-1}+{\beta}_{1}x_{t-1}+{\beta}_{2}x_{t-1}+{\beta}_{3}x_{t-1}+\epsilon_t (A)$
$Y_{t}=\...
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Elobaration on: Discrete returns versus log returns of assets
I read Discrete returns versus log returns of assets and it is very helpful.
However, if log-returns are easier for time-aggregation, then why do economists work with discrete returns e.g. in GDP ...
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Financial economics vs finance [closed]
What is the difference between financial economics and finance?
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What relevance might the Modigliani-Miller theorem have for weight of evidence?
Suppose in computing weight of evidence based on financial ratios of some bank, one finds that their debt ratio and equity ratio have largely (you pick how large I guess) differing weights of evidence....
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When a particular bond is delivered, why there is the need to define a conversion factor? What is its utility?
Where, the conversion factor for a bond (by John C. Hull) is set equal to the quoted price the bond would have per dollar of principal on the first day of the delivery month on the assumption that the ...
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Valuation functional
Consider an economy with $J = 2$ assets and $S = 3$ states. The $J\times S$ payoff matrix for the two assets is $$X = \begin{pmatrix}
0 & 3 & 3\\
1 & 1 & 0\\
\end{pmatrix}$$
and the ...
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Can tobin's Q value for a firm be negative?
Can Tobin's Q value for a firm be negative?
I am calculating Tobin's Q value using Compustat data for firm i and year t. I am using the formula presented in Chung and Pruitt(1994) -
Q = (Market ...
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How do I interpret the credit rating history time series?
This is the best historical time series which I could find from tradingeconomics.com/malaysia/rating. It would be great if someone could answer my question. I am currently researching on the topic of ...
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Simulating Asset Prices by Independently Simulating Supply and Demand
If I have an asset, whose supply is generally mean-reverting and whose demand is generally cyclical, could I somehow simulate / project the supply and demand levels across multiple discrete time ...
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Central Bank intervention in forex market
Sometimes CB intervenes in fx market buy buying or selling currency to make it stay in some band. My question is how does Central Bank determine the size of interventions? I mean how do they know how ...
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In what economic scenario do yield curves bull flatten or bear steepen?
Bull steepening and bear flattening have the common belief that in bad news, treasuries catch a bid and short end rallies more because most bad news are short lived. In good news, treasuries sell off ...
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Brexit implied probability
It is possible to bet on the Brexit e.g. on this page:
https://sports.ladbrokes.com/en-gb/betting/politics/british/eu-referendum/uk-european-referendum/220800266/
The quotes are 8/15 for remain, and ...
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Could we have prevented the World Economic Crisis in 2008?
There is an expression - "Too big to fall." - which means that if a bank or a financial institution manages a sufficient part of the financial assets than the state can't afford that this bank or ...
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How were the probabilities of recession over the next four quarters calculated in this table?
http://www.bloomberg.com/news/articles/2016-02-08/goldman-sachs-says-defy-mr-market-as-recession-risk-still-low
The probability of a slump in the U.S. is just 18 percent and 23
percent over the ...
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Which studies should be replicated?
In psychology voting on which studies should be replicated is established on a website. For economics, including financial economics, the ReplicationWiki (that I founded) offers a voting option but it ...
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Fannie Mae and Freddie Mac as substitute benchmark bonds
"The reduction seen in US government debt in the late 1990s has led to a redution in the supply of intermediate and long-term government bonds, and some concern has arisen over this fact. In the ...
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Why financial instistution for instance banks lowered down their interest rate during QE?
When QE is carried out, the Federal Reserve prints money and buy government bonds in an effort to pour extra money into the economy. This causes financial institutions for instance banks to lowered ...
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Why Central Bank carry out Qe when they can directly force banks to lower down the interest rate?
To boost the economy, the central bank can do it either by lowering down the interest rate nor carry out QE. But QE objective is to lowered the interest rate also so banks can give out more loan. This ...
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Can the money market break in a crisis situation?
I am researching the question, what happens during a crisis situation to the money market. Can it break?
In 2007-08 there is evidence that liquity hoarding from banks became a rather common problem. ...
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Stressing the going up of LIBOR - Which balance sheet variables to stress?
Analysts expect the LIBOR to rise in the next two years. Hence, all companies that have foreign currency loans will face problems. I am preparing a study on this topic, but data is an extreme issue.
...
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249
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does there need to be risk-neutral agents in the market to enforce risk-neutral pricing?
I'm trying to understand a fundamental link between mathematical finance and economics.
I understand that risk-neutral pricing is free of arbitrage with replicating portfolio. Does risk-neutral ...
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664
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Looking for a definition of financial entropy
In Science, Entropy is generally considered to be the irreversibility of stuff.
Google defines entropy as:
lack of order or predictability; gradual decline into disorder
The 'gradual decline in ...
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What is the gross accounting relation of Cobb-Douglas function?
We have Cobb-Douglas function like this $Y=AK^\alpha L^{1-\alpha}$, in one of the book, it deduce like this:
How can we get this formula?
$$\frac{\Delta Y}Y = \frac{\Delta A}A+\alpha\frac{\Delta K}K+(...
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Has automated trading produced profits at IEX?
Is there evidence that automated trading is profitable on the latency-enforced portion of the exchange?
On the one hand, if automated trading was profitable when these limits existed naturally, it ...
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