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Book part
Publication date: 21 November 2014

Yixiao Sun

New asymptotic approximations are established for the Wald and t statistics in the presence of unknown but strong autocorrelation. The asymptotic theory extends the usual…

Abstract

New asymptotic approximations are established for the Wald and t statistics in the presence of unknown but strong autocorrelation. The asymptotic theory extends the usual fixed-smoothing asymptotics under weak dependence to allow for near-unit-root and weak-unit-root processes. As the locality parameter that characterizes the neighborhood of the autoregressive root increases from zero to infinity, the new fixed-smoothing asymptotic distribution changes smoothly from the unit-root fixed-smoothing asymptotics to the usual fixed-smoothing asymptotics under weak dependence. Simulations show that the new approximation is more accurate than the usual fixed-smoothing approximation.

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Book part
Publication date: 15 April 2020

Jianning Kong, Peter C. B. Phillips and Donggyu Sul

Measurement of diminishing or divergent cross section dispersion in a panel plays an important role in the assessment of convergence or divergence over time in key…

Abstract

Measurement of diminishing or divergent cross section dispersion in a panel plays an important role in the assessment of convergence or divergence over time in key economic indicators. Econometric methods, known as weak σ-convergence tests, have recently been developed (Kong, Phillips, & Sul, 2019) to evaluate such trends in dispersion in panel data using simple linear trend regressions. To achieve generality in applications, these tests rely on heteroskedastic and autocorrelation consistent (HAC) variance estimates. The present chapter examines the behavior of these convergence tests when heteroskedastic and autocorrelation robust (HAR) variance estimates using fixed-b methods are employed instead of HAC estimates. Asymptotic theory for both HAC and HAR convergence tests is derived and numerical simulations are used to assess performance in null (no convergence) and alternative (convergence) cases. While the use of HAR statistics tends to reduce size distortion, as has been found in earlier analytic and numerical research, use of HAR estimates in nonparametric standardization leads to significant power differences asymptotically, which are reflected in finite sample performance in numerical exercises. The explanation is that weak σ-convergence tests rely on intentionally misspecified linear trend regression formulations of unknown trend decay functions that model convergence behavior rather than regressions with correctly specified trend decay functions. Some new results on the use of HAR inference with trending regressors are derived and an empirical application to assess diminishing variation in US State unemployment rates is included.

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Book part
Publication date: 12 December 2003

Timothy J. Vogelsang

This paper proposes a new approach to testing in the generalized method of moments (GMM) framework. The new tests are constructed using heteroskedasticity autocorrelation

Abstract

This paper proposes a new approach to testing in the generalized method of moments (GMM) framework. The new tests are constructed using heteroskedasticity autocorrelation (HAC) robust standard errors computed using nonparametric spectral density estimators without truncation. While such standard errors are not consistent, a new asymptotic theory shows that they lead to valid tests nonetheless. In an over-identified linear instrumental variables model, simulations suggest that the new tests and the associated limiting distribution theory provide a more accurate first order asymptotic null approximation than both standard nonparametric HAC robust tests and VAR based parametric HAC robust tests. Finite sample power of the new tests is shown to be comparable to standard tests.

Details

Maximum Likelihood Estimation of Misspecified Models: Twenty Years Later
Type: Book
ISBN: 978-1-84950-253-5

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Article
Publication date: 2 August 2013

Shanaka Herath and Gunther Maier

This study aims to examine the impact of relative importance of local characteristics, distance from the city centre and unobservable spatial relation in explaining values…

Abstract

Purpose

This study aims to examine the impact of relative importance of local characteristics, distance from the city centre and unobservable spatial relation in explaining values of constant‐quality apartment units in Vienna.

Design/methodology/approach

Drawing on recent developments in spatial econometrics and spatial hedonic house price modelling, the rent gradient hypothesis is examined by means of hedonic regression and spatial hedonic regression. Spatial autocorrelation tests are applied in order to assess possible presence of spatial dependence. The authors borrow Florax et al.'s specification search strategy in order to choose the most appropriate spatial model specification.

Findings

This research shows that local characteristics – or particularities – proxied by district and distance from the city centre are important location variables with regard to the Viennese apartment market. The spatial analysis suggests that the apartment prices are spatially autocorrelated and the Viennese apartment market has a distance‐based neighbourhood structure. The main finding is, however, that residents are willing to bid more for constant‐quality apartment units that are close to the centre of the city.

Originality/value

Rent gradient hypothesis is usually tested within non‐spatial hedonic frameworks: this study estimates a spatial hedonic model additionally in order to allow for comparison of results. This is also the first article to apply recent developments in spatial econometrics to examine explicitly rent gradient theory in the context of the Viennese apartment market.

Details

Journal of European Real Estate Research, vol. 6 no. 2
Type: Research Article
ISSN: 1753-9269

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Article
Publication date: 13 April 2010

Alexandre Di Miceli da Silveira, Ricardo Pereira Câmara Leal, André Luiz Carvalhal‐da‐Silva and Lucas Ayres B. de C. Barros

This paper aims to investigate the determinants and the evolution of voluntarily adopted firm‐level corporate governance practices in Brazil from 1998 to 2004 using broad

Abstract

Purpose

This paper aims to investigate the determinants and the evolution of voluntarily adopted firm‐level corporate governance practices in Brazil from 1998 to 2004 using broad corporate governance scores.

Design/methodology/approach

The authors employ a robust panel‐data procedure that accounts for the main sources of endogeneity to a very representative panel of Brazilian firms over a six‐year period. They address the endogeneity that arises from the simultaneous determination of the quality of corporate governance practices, the dependent variable, and possibly several firm attributes that are commonly employed as the determinants of such practices and are supposedly independent. Specifically, theoretical arguments and empirical evidence strongly suggest that the quality of corporate governance practices may influence some of the variables commonly used as its determinants just as much as they may be influenced by them.

Findings

The paper finds that firm‐level corporate governance practices are steadily improving but there is much room for improvement. Heterogeneity has increased. Voluntarily adhering to new stricter listing requirements is associated positively with improvements in firm‐level corporate governance practices. Reducing or not using non‐voting shares improves corporate governance practices.

Research limitation/implications

The authors found no clear evidence of the influence of other potential determinants of the quality of corporate governance, such as growth prospects, firm size, firm value, and ownership structure. Thus, they doubt previous findings that suggest a causal relationship from value and ownership to corporate governance practices because value and ownership seem to be determined endogenously.

Practical implications

Policies directed to reduce the use of non‐voting shares should be implemented. Creating strict listing requirements that may be adopted voluntarily by firms could be a feasible solution to improve the quality of corporate governance practices in emerging market countries. Firms in an emerging market that find that issuance in the USA became too expensive or demanding may offer a substitute listing environment with credible requirements to foreign investors. Premium listings may partially compensate emerging market exchanges for their loss of trading to major markets.

Originality/value

The paper examines the evolution of the voluntary adoption of corporate governance practices in Brazil from 1998 through 2004 while most studies use cross‐section samples over one or a few years. Further, this is one of a few papers to analyze the impact of ownership structure on the quality of corporate governance practices by segregating control and cash flow rights.

Details

Corporate Governance: The international journal of business in society, vol. 10 no. 2
Type: Research Article
ISSN: 1472-0701

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Book part
Publication date: 19 December 2012

Jingjing Yang and Timothy J. Vogelsang

We analyze Lagrange Multiplier (LM) tests for a shift in trend of a univariate time series at an unknown date. We focus on the class of LM statistics based on…

Abstract

We analyze Lagrange Multiplier (LM) tests for a shift in trend of a univariate time series at an unknown date. We focus on the class of LM statistics based on nonparametric kernel estimates of the long run variance. Extending earlier work for models with nontrending data, we develop a fixed-b asymptotic theory for the statistics. The fixed-b theory suggests that, for a given statistic, kernel, and significance level, there usually exists a bandwidth such that the fixed-b asymptotic critical value is the same for both I(0) and I(1) errors. These “robust” bandwidths are calculated using simulation methods for a selection of well-known kernels. We find when the robust bandwidth is used, the supremum statistic configured with either the Bartlett or Daniell kernel gives LM tests with good power. When testing for a slope change, we obtain the surprising finding that less trimming of potential shift dates leads to higher power, which contrasts the usual relationship between trimming and power. Finite sample simulations indicate that the robust LM statistics have stable size with good power.

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Article
Publication date: 1 January 2006

DeQing Diane Li and Kenneth Yung

Though stock portfolio return autocorrelation is well documented in the literature, its cause is still not clearly understood. Presently, evidence of private information…

Abstract

Purpose

Though stock portfolio return autocorrelation is well documented in the literature, its cause is still not clearly understood. Presently, evidence of private information induced stock return autocorrelation is still very limited. The difficulty in obtaining foreign country information by small investors makes the private information of institutional investors in the ADR (American Depository Receipt) market more significant and influential. As such, the ADR market provides a favorable environment for testing the effect of private information on return autocorrelation. The purpose of this paper is to address this issue.

Design/methodology/approach

In this paper, ADRs are sorted annually into three groups based on market equity capitalization. Within each capitalization group, ADRs are further sorted into three groups based on the fraction of shares held by institutional investors. Each ADR is assigned to one of the nine groups and group membership is rebalanced each year. The return autocorrelation of individual ADR securities and ADR portfolios for each group are then calculated.

Findings

The results demonstrate that ADR individual stock and portfolio daily return autocorrelations are positively related to institutional ownership. It is also found that other explanations, such as non‐synchronous trading, bid‐ask spread and volatility of ADR, cannot explain the positive relation between daily return autocorrelations and institutional ownership of ADR.

Originality/value

Since ADR market is more suitable than other markets for testing the role of private information, stronger and clearer results are got accordingly. This paper suggests that trading strategy based on private information of institutional investors can lead to stock return autocorrelation in ADR daily returns.

Details

Review of Accounting and Finance, vol. 5 no. 1
Type: Research Article
ISSN: 1475-7702

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Book part
Publication date: 24 May 2007

Frederic Carluer

“It should also be noted that the objective of convergence and equal distribution, including across under-performing areas, can hinder efforts to generate growth

Abstract

“It should also be noted that the objective of convergence and equal distribution, including across under-performing areas, can hinder efforts to generate growth. Contrariwise, the objective of competitiveness can exacerbate regional and social inequalities, by targeting efforts on zones of excellence where projects achieve greater returns (dynamic major cities, higher levels of general education, the most advanced projects, infrastructures with the heaviest traffic, and so on). If cohesion policy and the Lisbon Strategy come into conflict, it must be borne in mind that the former, for the moment, is founded on a rather more solid legal foundation than the latter” European Commission (2005, p. 9)Adaptation of Cohesion Policy to the Enlarged Europe and the Lisbon and Gothenburg Objectives.

Details

Managing Conflict in Economic Convergence of Regions in Greater Europe
Type: Book
ISBN: 978-1-84950-451-5

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Article
Publication date: 27 November 2018

Said Sami Al Hallaq, Mohamad M. Ajlouni and Ahmed Shakir Al-Douri

With reference to the methodology of Prof Choudhry in his book “Tawhidi Epistemology and its Applications: Economics, Finance, Science, and Society” in 2014, in a…

Abstract

Purpose

With reference to the methodology of Prof Choudhry in his book “Tawhidi Epistemology and its Applications: Economics, Finance, Science, and Society” in 2014, in a different context, this study aims to present the conceptual fundamental of Islamic finance investment, where investment decisions are governed by Divine law and Islamic jurisprudence, followed by the empirical nature of real-world issues where investment decisions are governed by only financial indicators, using the Amman Stock Exchange as a case study.

Design/methodology/approach

As pointed out by Raderbauer (2011), research and industry initiatives mainly focus on environmental measures while ignoring the economic and socio-cultural dimension of sustainability. Recognizing the importance of a holistic understanding to define sustainable business practices for the accommodation industry. Financial markets are no exception; moral and values either coming from secular or religious understanding help to examine relationships between attitudes and actions, as well as differences in attitudes and actions related to the business’ characteristics. In business, ethical considerations apply to a broad list of virtues that companies, their managers and employees customarily seek to adopt. These include, but are not limited to, the encouragement of honesty, integrity and efficiency, as well as diversity and communication skills. One of the most common sources of ethical considerations is religion. In these cases, religious doctrine imparts a sense of applied ethics, where one considers what right conduct is, how to live a life pleasing to the Divine and how one should treat him/herself and others in accordance with those teachings. Again, as ethical considerations is a broad philosophical concept, it can apply to any situation where the person ponders the nature of right and wrong, how to recognize the difference and the meaning those conclusions carry for everyday life.

Findings

It can be concluded that the overall the quantitative and qualitative statistics showed that accommodation business manager’s decision has had a very little positive attitude toward sustainability and the implementation of sustainable business practices in ASE financial transaction, no matter what classification, type of business, ownership or size of business. Only rules and regulations govern the attitude and behavior when making financial transactions with profit is the main target. Moral indicators could not be seen throughout the analysis and test used to achieve objectives of the study at hand. One can imagine that the combined two factors together “Moral-Material” in implementing financial transactions will produce a more beneficial outcome. Achieving a material and holistic objective will produce an optimum situation, which can contribute positively to sustainable development.

Originality/value

Islamic alternatives to traditional investment tools have been driven by the fact that such tools do not conform to the Islamic general principles of the Shari’ah (Usmani, 2002). There has been a growing desire to have funds in which profits are not based on riba or interest, which is prohibited in Islam. Muslims deem that profit should come because of efforts; this is not the case in interest-dominated investments. In addition, there is a desire to have investment portfolios, which are morally purified. Thus, investments in companies that are not in compliance with the Shari’ah are not permitted and are eliminated from the portfolio. To ensure compliance with the forgoing condition, Shari’ah advisory boards whose role is mainly to give assurance that money is managed within the framework of Islamic laws govern Islamic mutual funds (Hassan, 2001; Hassan, 2002). On the other hand, dealing with the applied part, the paper will deal with a case study from Jordan (Amman Stock Exchange), where, code of ethics is issued by virtue of the provisions of Article 26 (e) of the Securities Law No. 23 of 1997. The Amman Stock Exchange operates as an exchange for the trading of securities. The company lists securities such as equities and bonds. Its activities include providing enterprises with a means of raising capital by listing on the exchange; encouraging an active market in listed securities based on the determination of prices and trading; providing facilities and equipment for trading the recoding of trades and publication of prices; monitoring and regulating market trading; and coordinating with the Jordan Securities Commission as necessary. The company’s activities also include ensuring compliance with the law, fair market and investor protection; setting out and enforcing a professional code of ethics.

Details

International Journal of Ethics and Systems, vol. 35 no. 1
Type: Research Article
ISSN: 0828-8666

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Book part
Publication date: 2 March 2011

Galina Smirnova, Olga Saldakeeva and Sergey Gelman

The phenomenon of positive autocorrelation in daily stock index returns is often viewed as a consequence of stable behavioural patterns of certain investor groups (see…

Abstract

The phenomenon of positive autocorrelation in daily stock index returns is often viewed as a consequence of stable behavioural patterns of certain investor groups (see, e.g., Sentana & Wadhwani, 1992; Koutmos, 1997). However, such patterns may change due to extreme events, that is, financial crises, and thus affect the autocorrelation in returns. Emerging markets and especially BRIC countries have experienced severe crises in the last 20 years and are therefore a suitable object for studying this effect.

The focus of this chapter is on identifying substantial changes in the autocorrelation of BRIC markets' index returns after experiencing upheavals of the financial system. For this purpose, we look for structural breaks in the parameters of an ARMA–GARCH model with the standard endogenous search procedure.

Our approach yields no statistically significant evidence of the autocorrelation changes due to the crises. Only in India the decline in autocorrelation in 1998 seems to be economically relevant, but is not significant statistically. Significant shifts that we could identify were rather related to microstructural changes, such as abolishment of price change limits by China and the removal of a leading player in India's market in 1992. All in all our results suggest that even though extreme negative events on financial markets may induce changes in feedback trading strategies, their influence on autocorrelation is not pronounced enough. The impact of other factors, in the first place of regulatory changes, seems to be of larger relevance.

Details

The Impact of the Global Financial Crisis on Emerging Financial Markets
Type: Book
ISBN: 978-0-85724-754-4

Keywords

1 – 10 of over 2000