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1 – 10 of 102
Open Access
Article
Publication date: 7 July 2020

Juho Valtiala

This study analyses agricultural land price dynamics in order to better understand price development and to improve forecast accuracy. Understanding the evolution of agricultural…

Abstract

Purpose

This study analyses agricultural land price dynamics in order to better understand price development and to improve forecast accuracy. Understanding the evolution of agricultural land prices is important when considering sound investment decisions.

Design/methodology/approach

This study applies threshold autoregression to model agricultural land prices. The data includes quarterly observations on Finnish agricultural land prices.

Findings

The study shows that Finnish agricultural land prices exhibit regime-switching behaviour when using past changes in prices as a threshold variable. The threshold autoregressive model not only fits the data better but also improves the accuracy of price forecasts compared to the linear autoregressive model.

Originality/value

The results show that a sharp fall in agricultural land prices temporarily changes the regular development of prices. This information significantly improves the accuracy of price predictions.

Details

Agricultural Finance Review, vol. 81 no. 2
Type: Research Article
ISSN: 0002-1466

Keywords

Open Access
Article
Publication date: 4 June 2021

Hyo-Chan Lee, Seyoung Park and Jong Mun Yoon

This study aims to generalize the following result of McDonald and Siegel (1986) on optimal investment: it is optimal for an investor to invest when project cash flows exceed a…

Abstract

This study aims to generalize the following result of McDonald and Siegel (1986) on optimal investment: it is optimal for an investor to invest when project cash flows exceed a certain threshold. This study presents other results that refine or extend this one by integrating timing flexibility and changes in cash flows with time-varying transition probabilities for regime switching. This study emphasizes that optimal thresholds are either overvalued or undervalued in the absence of time-varying transition probabilities. Accordingly, the stochastic nature of transition probabilities has important implications to the search for optimal timing of investment.

Details

Journal of Derivatives and Quantitative Studies: 선물연구, vol. 29 no. 2
Type: Research Article
ISSN: 1229-988X

Keywords

Open Access
Article
Publication date: 16 June 2022

Fatma Mathlouthi and Slah Bahloul

This paper aims at examining the co-movement dependent regime and causality relationships between conventional and Islamic returns for emerging, frontier and developed markets…

Abstract

Purpose

This paper aims at examining the co-movement dependent regime and causality relationships between conventional and Islamic returns for emerging, frontier and developed markets from November 2008 to August 2020.

Design/methodology/approach

First, the authors used the Markov-switching autoregression (MS–AR) model to capture the regime-switching behavior in the stock market returns. Second, the authors applied the Markov-switching regression and vector autoregression (MS-VAR) models in order to study, respectively, the co-movement and causality relationship between returns of conventional and Islamic indexes across market states.

Findings

Results show the presence of two different regimes for the three studied markets, namely, stability and crisis periods. Also, the authors found evidence of a co-movement relationship between the conventional and Islamic indexes for the three studied markets whatever the regime. For the Granger causality, it is proved only for emerging and developed markets and only during the stability regime. Finally, the authors conclude that Islamic indexes can act as diversifiers, or safe-haven assets are not strongly supported.

Originality/value

This paper is the first study that examines the co-movement and the causal relationship between conventional and Islamic indexes not only across different financial markets' regimes but also during the COVID-19 period. The findings may help investors in making educated decisions about whether or not to add Islamic indexes to their portfolios especially during the recent outbreak.

Details

Journal of Capital Markets Studies, vol. 6 no. 2
Type: Research Article
ISSN: 2514-4774

Keywords

Open Access
Article
Publication date: 3 July 2021

Faik Bilgili, Fatma Ünlü, Pelin Gençoğlu and Sevda Kuşkaya

This paper aims to investigate the pass-through (PT) effect in Turkey by using quarterly data for the period 1998: Q1-2019: Q2 to understand the dynamic potential effects of…

2151

Abstract

Purpose

This paper aims to investigate the pass-through (PT) effect in Turkey by using quarterly data for the period 1998: Q1-2019: Q2 to understand the dynamic potential effects of exchange rates on domestic prices.

Design/methodology/approach

The paper launches several nonlinear models in which the basic determinants of domestic prices in Turkey are determined through Markov regime-switching models (MSMs). Hence, this research follows the variables of the consumer price index (CPI), USD exchange rate, gross domestic product (GDP; demand side of the economy), industrial production index (production side of the economy), economic uncertainty and geopolitical risk index for Turkey.

Findings

This work explores that the exchange rate and demand side of the economy (GDP) follow a positive nonlinear relationship with CPI at both regimes. The production side of the economy (IP) affects negatively the CPI during regime 0. Economic uncertainty influences the CPI positively at Regime 1, while geopolitical risk has a negative association with CPI at Regime 0. Eventually, the paper provides some policy proposals associated with the impacts of GDP, IP, economic uncertainty and geopolitical risk on CPI in Turkey.

Originality/value

One may claim that any PT model, which does not observe the possible structural or regime shifts in estimated parameters, might fail to estimate the coefficients unbiasedly and efficiently. Hence, this work differs from available relevant works in the literature since this paper considers linearity or nonlinearity important and reveals that the relevant PT model follows a nonlinear path rather than a linear path, this nonlinear path is converged strongly by MSMs and estimates the significant regime shifts in the constant term and, in parameters of independent variables of PT by MSMs.

Details

Applied Economic Analysis, vol. 30 no. 88
Type: Research Article
ISSN:

Keywords

Open Access
Article
Publication date: 31 May 2003

Geun Gwan Lyu, Gi Beom Bin, Yeong Jo Lee and Seong Jun Jo

Efficient market hypothesis implies that the past price movements do not help forecast future price movements. Thus, it is impossible to consistently benefit by a technical…

17

Abstract

Efficient market hypothesis implies that the past price movements do not help forecast future price movements. Thus, it is impossible to consistently benefit by a technical trading strategy. On the other hand, technical analysts claim that the historical price movements are useful in predicting future price movements. These two lines of arguments are mutually contradictory. This paper reasonably assumes that the more efficient markets are, the worse will be the investment performance of technical analysis, and that as financial market‘s trading volume grows and with the elapse of time, the efficiency of markets should improve. This implies that after the launch of a new financial asset, market efficiency would improve with increased trading and elapsed time. In this paper, the duration analysis technique is used as a forecasting model and applied to measure the efficiency of Korean futures market and the won/dollar exchange rate market.

Open Access
Article
Publication date: 30 November 2004

Shi Yong Yoo

This paper is concerned with the effects of weather uncertainty on the electricity future curve. Following the approach used by Lucia and Schwartz (2002), the behavior of the…

14

Abstract

This paper is concerned with the effects of weather uncertainty on the electricity future curve. Following the approach used by Lucia and Schwartz (2002), the behavior of the underlying spot price is assumed to consist of two components ‘ a totally predictable deterministic component that accounts for regularities in the evolution of prices and a stochastic component that accounts for the behavior of residuals from the deterministic part. The weather uncertainty is modeled consistently with seasonal outlook probabilities from the CPC (Climate Prediction Center) outlook. For a given realization of temperature, the electricity load can be predicted very accurately by a time series model using temperature and other explanatory variables. Furthermore, if temperature and electricity load are known, the spot price can be predicted as well using the regime switching model with time-varying transition probabilities. The electricity future price can be calculated for the given seasonal probabilities from the CPC outlook. Then the electricity future price can be obtained as the arithmetic average of the one-day electricity future price. The future price reflects clearly the response of the spot price to different weather patterns. As the summer gets warmer, the high price regime is more likely to be realized, and as a result, the future price increases.

Content available
Article
Publication date: 28 June 2018

Shun Chen, Shiyuan Zheng and Hilde Meersman

The occurrence and unpredictability of speculative bubbles on financial markets, and their accompanying crashes, have confounded economists and economic historians worldwide. The…

1222

Abstract

Purpose

The occurrence and unpredictability of speculative bubbles on financial markets, and their accompanying crashes, have confounded economists and economic historians worldwide. The purpose of this paper is to diagnose and detect the bursting of shipping bubbles ex ante, and to qualify the patterns of shipping price dynamics and the bubble mechanics, so that appropriate counter measures can be taken in advance to reduce side effects arising from bubbles.

Design/methodology/approach

Log periodic power law (LPPL) model, developed in the past decade, is used to detect large market falls or “crashes” through modeling of the shipping price dynamics on a selection of three historical shipping bubbles over the period of 1985 to 2016. The method is based on a nonlinear least squares estimation that yields predictions of the most probable time of the regime switching.

Findings

It could be concluded that predictions by the LPPL model are quite dependent on the time at which they are conducted. Interestingly, the LPPL model could have predicted the substantial fall in the Baltic Dry Index during the recent global downturn, but not all crashes in the past. It is also found that the key ingredient that sets off an unsustainable growth process for shipping prices is the positive feedback. When the positive feedback starts, the burst of bubbles in shipping would be influenced by both endogenous and exogenous factors, which are crucial for the advanced warning of the market conversion.

Originality/value

The LPPL model has been first applied into the dry bulk shipping market to test a couple of shipping bubbles. The authors not only assess the predictability and robustness of the LPPL model but also expand the understanding of the model and explain patterns of shipping price dynamics and bubble mechanics.

Details

Maritime Business Review, vol. 3 no. 2
Type: Research Article
ISSN: 2397-3757

Keywords

Open Access
Article
Publication date: 31 May 2015

Taewoo Daniel Kim and Kiyool Ohk

The study examines whether the trader’s order imbalance for KOSPI200 futures can explain their informativeness. I use daily positions of various types of futures market…

15

Abstract

The study examines whether the trader’s order imbalance for KOSPI200 futures can explain their informativeness. I use daily positions of various types of futures market participants such as foreign investors, institution investors, and individual investors to identify informed traders. The positions of foreign investors, institution investors and individual investors are correlated with returns in KOSPI200 futures markets, but there is some debate as the interpretation of such a relationship. I find that the foreign investors’ position is informative to investors, supporting the private information view. In terms of trader’s behavior, foreign traders follow contrarian strategies and trade with higher information than individual and institutional traders, who trade as momentum. Also, I considering regime switching effects in this frameworks. In threshold regression models, I found a different behavior during futures return expansions and contractions or volatility expansions and contractions.

Details

Journal of Derivatives and Quantitative Studies, vol. 23 no. 2
Type: Research Article
ISSN: 2713-6647

Keywords

Content available
Article
Publication date: 28 March 2018

Claudio Ferrari, Malvina Marchese and Alessio Tei

Economic studies have always underlined the cyclical trends of many industries and their different relations to the macro-economic cycles. Shipping is one of those industries and…

3054

Abstract

Purpose

Economic studies have always underlined the cyclical trends of many industries and their different relations to the macro-economic cycles. Shipping is one of those industries and it has been often characterised by peaks that have influenced both the trade patterns and industry investment structure (e.g. fleet, shipyard activity, freight rates). One of the main issues related with the cycles is the effect on overcapacity and prices for newbuilding and how the understanding of these patterns can help in preventing short-hand strategies. The purpose of this paper is to evaluate different effects of business elements on shipbuilding activity, in relation to different economic-cycle phases.

Design/methodology/approach

This paper proposes a non-linear econometric model to identify the relations between shipbuilding and economic cycles over the past 30 years. The research focuses on identifying the cycle characteristics and understanding the asymmetrical effect of economic- and business-related variables on its development.

Findings

The study underlines the presence of an asymmetric effect of several business variables on the shipbuilding productions, depending on the cyclical phases (i.e. market expansion or economic slowdown). Moreover, lagged effects seem to be stronger than contemporaneous variables.

Originality/value

The paper is a first attempt of using non-linear modelling to shipbuilding cycles, giving indications that could be included in relevant investment policies.

Details

Maritime Business Review, vol. 3 no. 2
Type: Research Article
ISSN: 2397-3757

Keywords

Open Access
Article
Publication date: 24 November 2022

Slah Bahloul and Fatma Mathlouthi

The objective of this paper is twofold. First, to study the safe-haven characteristic of the Islamic stock indexes and Ṣukūk during the crises time. Second, to evaluate this…

Abstract

Purpose

The objective of this paper is twofold. First, to study the safe-haven characteristic of the Islamic stock indexes and Ṣukūk during the crises time. Second, to evaluate this property in the last pandemic. This study employs the daily dataset from June 15, 2015, to June 15, 2020, for the most affected countries by the earlier disease.

Design/methodology/approach

This study uses the Markov-switching Capital Asset Pricing Model (CAPM) approach and the basic CAPM for the main analysis and the safe haven index (SHI) recently developed by Baur and Dimpfl (2021) for the robustness test.

Findings

Based on Baur and Lucey's (2010) definition, empirical findings indicate that Islamic stock indexes cannot be a refuge throughout the crisis regime for all selected conventional markets. However, Ṣukūk are a strong refuge in Brazilian, Russian and Malaysian markets. For the remainder countries, except Italy, the USA and Spain, the Ṣukūk index offers weak protection against serious conventional market downturns. Similar conclusions are obtained during the COVID-19 global crisis period. Finally, results are confirmed by using the SHI.

Originality/value

To the best of the authors’ knowledge, this paper is the first study that evaluates the safe haven effectiveness of the Islamic index and Ṣukūk using the SHI in the most impacted countries by the COVID-19 outbreak.

Details

Islamic Economic Studies, vol. 30 no. 1
Type: Research Article
ISSN: 1319-1616

Keywords

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