Template-Type: ReDIF-Article 1.0 Author-Name: Juan Carlos Escanciano Author-X-Name-First: Juan Carlos Author-X-Name-Last: Escanciano Author-Name: Silvia Mayoral Author-X-Name-First: Silvia Author-X-Name-Last: Mayoral Title: Semiparametric estimation of dynamic conditional expected shortfall models Abstract: The paper proposes a simple estimator for a class of Conditional Expected Shortfall risk measures. The estimator is semiparametric, in the sense that it does not require a full specification of the conditional distribution of the data, and it is very simple to compute, being a least squares estimator with a closed form expression. We establish its consistency and asymptotic normality under mild regularity conditions. A simulation study provides evidence of the excellent finite-sample properties of the estimator and an application to some exchange rates highlights the semiparametric aspect of the new estimator. Journal: Int. J. of Monetary Economics and Finance Pages: 106-120 Issue: 2 Volume: 1 Year: 2008 Keywords: conditional value at risk; CVaR; Tail VaR; coherent risk measures; tail risk; market risk; conditional distribution; semiparametric estimation; conditional expected shortfall models. File-URL: http://www.inderscience.com/link.php?id=19217 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:1:y:2008:i:2:p:106-120 Template-Type: ReDIF-Article 1.0 Author-Name: Ahmed Ghorbel Author-X-Name-First: Ahmed Author-X-Name-Last: Ghorbel Author-Name: Abdelwahed Trabelsi Author-X-Name-First: Abdelwahed Author-X-Name-Last: Trabelsi Title: Predictive performance of conditional Extreme Value Theory in Value-at-Risk estimation Abstract: This paper conducts a comparative evaluation of the predictive performance of various Value-at-Risk (VaR) models. Special emphasis is paid to two methodologies related to the Extreme Value Theory (EVT): The Peaks Over Threshold (POT) and the Block Maxima (BM). We apply both unconditional and conditional EVT models to management of extreme market risks in stock markets. They are applied on daily returns of the BVMT and CAC 40 indices with the intention to compare the performance of various estimation methods on markets with different capitalisation and trading practices. The results we report demonstrate that conditional POT EVT method produces the most accurate forecasts of extreme losses both for standard and more extreme VaR quantiles. The conditional block maxima EVT method is less accurate. Journal: Int. J. of Monetary Economics and Finance Pages: 121-148 Issue: 2 Volume: 1 Year: 2008 Keywords: financial risk management; value-at-risk; VaR estimation; extreme value theory; EVT; conditional EVT; backtesting; peaks over threshold; block maxima; market risks; stock markets; extreme losses; forecasting. File-URL: http://www.inderscience.com/link.php?id=19218 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:1:y:2008:i:2:p:121-148 Template-Type: ReDIF-Article 1.0 Author-Name: Keith Pilbeam Author-X-Name-First: Keith Author-X-Name-Last: Pilbeam Author-Name: Rehan Noronha Author-X-Name-First: Rehan Author-X-Name-Last: Noronha Title: Risk budgeting and Value-at-Risk Abstract: Value-at-Risk (VaR) is a popular risk-metric for reporting financial exposure, for evaluating fund/manager performance and for regulatory disclosures. Yet, VaR is not a coherent risk measure because it is not sub-additive. This paper applies the methodology of risk budgeting to determine if VaR qualifies as a coherent risk measure. We show that the tools of risk budgeting allow VaR to be treated as a coherent risk measure, even though it does not restore sub-additivity. The main finding is that the additional analysis provided by risk budgeting means that VaR is a useful tool even if it is not sub-additive. Journal: Int. J. of Monetary Economics and Finance Pages: 149-161 Issue: 2 Volume: 1 Year: 2008 Keywords: value-at-risk; VaR; risk budgeting; risk management; risk attribution; risk decomposition; risk measures. File-URL: http://www.inderscience.com/link.php?id=19219 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:1:y:2008:i:2:p:149-161 Template-Type: ReDIF-Article 1.0 Author-Name: Dimitrios Asteriou Author-X-Name-First: Dimitrios Author-X-Name-Last: Asteriou Title: Country financial and political risk: the case of Indonesia, Malaysia and Philippines Abstract: The following research uses the Clark (2002) and Clark and Kassimatis (2004) methodology to calculate the market value of three Asian Countries (Indonesia, Malaysia and Philippines) for each year over the period 1990–2004 and to estimate the macroeconomic financial risk premium from 1990 to 2004. It also examines whether and to what extent their stock market's performance is affected by the financial risk premium. The results show that before the Asian crisis, the East Asian Countries had strong economic growth and low levels of debt when compared with the size of their economies. Journal: Int. J. of Monetary Economics and Finance Pages: 162-176 Issue: 2 Volume: 1 Year: 2008 Keywords: financial risk premium; political risk; Asian crisis; Indonesia; Malaysia; Philippines; market value; stock market performance; East Asia. File-URL: http://www.inderscience.com/link.php?id=19220 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:1:y:2008:i:2:p:162-176 Template-Type: ReDIF-Article 1.0 Author-Name: Carla Ysusi Author-X-Name-First: Carla Author-X-Name-Last: Ysusi Title: Estimating integrated volatility using absolute high-frequency returns Abstract: When high-frequency data is available, in the context of a stochastic volatility model, realised absolute variation can estimate integrated spot volatility. A central limit theory enables us to do filtering and smoothing using model-based and model-free approaches in order to improve the precision of these estimators. Although the absolute values are empirically attractive as they are less sensitive to possible large movements in high-frequency data, realised absolute variation does not estimate integrated variance. Some problems arise when using a finite number of intra-day observations, as explained here. Journal: Int. J. of Monetary Economics and Finance Pages: 177-200 Issue: 2 Volume: 1 Year: 2008 Keywords: quadratic variation; absolute variation; stochastic volatility models; semimartingale; high-frequency data; state-space representation; Kalman filter; spot volatility; central limit theory. File-URL: http://www.inderscience.com/link.php?id=19221 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:1:y:2008:i:2:p:177-200 Template-Type: ReDIF-Article 1.0 Author-Name: Everton Dockery Author-X-Name-First: Everton Author-X-Name-Last: Dockery Author-Name: Miltos Efentakis Author-X-Name-First: Miltos Author-X-Name-Last: Efentakis Title: An empirical comparison of alternative models in estimating Value-at-Risk: evidence and application from the LSE Abstract: This paper compares a select number of Value-at-Risk (VaR) models using daily data from the London stock exchange for estimating the model-based VaR. The period covers volatile market conditions triggered by a host of events that induced market uncertainty. Our results provide an indication of the degree of accuracy of the various methods and discuss issues of model selection. The empirical findings suggest that the Equally Weighted Moving Average (EWMA) model can furnish more accurate estimated VaR than the GARCH methods, including the popular Historical Simulation (HS) approach, by altering the estimation horizon. Journal: Int. J. of Monetary Economics and Finance Pages: 201-218 Issue: 2 Volume: 1 Year: 2008 Keywords: risk measurement; risk management; value-at-risk; VaR models; London stock exchange; market uncertainty; volatile markets. File-URL: http://www.inderscience.com/link.php?id=19222 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:1:y:2008:i:2:p:201-218 Template-Type: ReDIF-Article 1.0 Author-Name: Jose Olmo Author-X-Name-First: Jose Author-X-Name-Last: Olmo Title: On the role of volatility for modelling risk exposure Abstract: We show in this paper that volatility measures can be misleading indicators of risk if returns do not follow a Gaussian distribution. A more reliable measure of risk is the probability distribution of the return on an asset. Estimators for these measures are usually challenging and need of nonparametric and semi-parametric techniques. The aim of this paper is twofold. First, it proposes the use of semi-parametric estimators of the distribution function of the return on an asset based on extreme value theory for computing Value-at-Risk; and second, it discusses the validity of different volatility models in this semi-parametric framework. The conclusion is that different volatility models can yield different valid risk measures if coupled with the appropriate distribution function. Hence the puzzle in the choice of volatility measures. This is shown in an empirical exercise for data of financial indexes from USA, UK, Germany, Japan and Spain. Journal: Int. J. of Monetary Economics and Finance Pages: 219-234 Issue: 2 Volume: 1 Year: 2008 Keywords: backtesting; conditional heteroscedasticity; GARCH; risk measures; value-at-risk; VaR; volatility models; risk exposure; semiparametric estimators; probability distribution; extreme value theory; USA; United States; United Kingdom; UK; Germany; Japan; Spain. File-URL: http://www.inderscience.com/link.php?id=19223 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:1:y:2008:i:2:p:219-234 Template-Type: ReDIF-Article 1.0 Author-Name: Roman Matousek Author-X-Name-First: Roman Author-X-Name-Last: Matousek Title: Efficiency and scale economies in banking in new EU countries Abstract: In this paper, we provide empirical evidence on bank cost-efficiency in transition countries. Our estimates of the cost-efficiency using a distribution-free approach suggests that among the countries analysed, Estonia, Latvia and Slovenia display the highest X-efficiency while the Czech Republic and Poland show the lowest X-efficiency. Reported X-inefficiency is found to be lowest in the segment of foreign banks that were on average more efficient than other banks. The efficiency of small and foreign banks was also higher when compared with large state-owned banks. Results also indicate that economies of scale decrease with bank size. Journal: Int. J. of Monetary Economics and Finance Pages: 235-249 Issue: 3 Volume: 1 Year: 2008 Keywords: cost efficiency; transition economies; EU banking; European Union; Estonia; Latvia; Slovenia; Czech Republic; Poland; small banks; foreign banks; state-owned banks. File-URL: http://www.inderscience.com/link.php?id=20633 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:1:y:2008:i:3:p:235-249 Template-Type: ReDIF-Article 1.0 Author-Name: Omar Masood Author-X-Name-First: Omar Author-X-Name-Last: Masood Title: Key drivers investment decision-making process for fund managers of a large bank Abstract: How important are the experience, the education and the incentives to fund managers? Do they rely more on financial information from the markets and financial statements or do they take a more personal subjective approach. Is the number of clients correlated with the satisfaction of incentives provided to fund managers? We develop a new methodology to analyse data from direct interviews with fund managers of a large bank. This is an exploratory analysis of some of the main variables underpinning the investment decision process as observed on the action of the actors, the fund managers, and not on the performance results in money terms. Journal: Int. J. of Monetary Economics and Finance Pages: 250-262 Issue: 3 Volume: 1 Year: 2008 Keywords: fund managers; investment decisions; decision making; contingency tables; graphical association models; collapsibility; large banks; experience; education; incentives; financial information; subjective decisions. File-URL: http://www.inderscience.com/link.php?id=20634 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:1:y:2008:i:3:p:250-262 Template-Type: ReDIF-Article 1.0 Author-Name: Musa Essayyad Author-X-Name-First: Musa Author-X-Name-Last: Essayyad Author-Name: Khalid Desai Author-X-Name-First: Khalid Author-X-Name-Last: Desai Title: Behavioural portfolio formation using mental accounting in emerging markets: the case of Saudi Arabia Abstract: This paper aims to test whether investors in Saudi Arabia build their portfolios in a layer-by-layer form, considering them as a pyramid of assets as described by Shefrin and Statman (2000), and to investigate whether investors diversify their investments based on their aspirations. We use t-test and regression analysis to test the nine hypotheses related to investors' portfolio-building behaviour. The results show that Saudi investors are influenced by the mental accounting bias and build their portfolios as a pyramid of assets. The results also show that Saudi investors diversify their portfolio investments based on their aspirations and not efficiency. Journal: Int. J. of Monetary Economics and Finance Pages: 263-283 Issue: 3 Volume: 1 Year: 2008 Keywords: assets pyramiding; behavioural finance; behavioural portfolio formation; emerging markets; portfolio investment; mental accounting; modern portfolio theory; portfolio diversification; Saudi Arabia investments; Saudi mutual funds. File-URL: http://www.inderscience.com/link.php?id=20635 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:1:y:2008:i:3:p:263-283 Template-Type: ReDIF-Article 1.0 Author-Name: Stephanos T. Papadamou Author-X-Name-First: Stephanos T. Author-X-Name-Last: Papadamou Title: The effect of diversification across businesses and within lending activities on risks of commercial banks' portfolios: evidence from South Korea Abstract: This paper investigates the effects of diversification across interest and non-interest activities, as well as, the effects of diversification within lending activities on banks' risk and return measures. Aggregate and panel data from the restructured (after 1997 crisis) banking industry of South Korea for the period 2002-2006 are used. Our results indicate that high level of diversification across interest and non-interest activities, as well as, across broad type of loans (i.e., corporate, household and other loans) is negatively significantly correlated with insolvency risk and positively significantly correlated with risk-adjusted returns, providing evidence for the market-discipline hypothesis. Concerning bank loan portfolio risks, less diversified across industries, loan portfolios are correlated with higher non-performing loan ratio. A shift from manufacture lending towards real estate and lease business lending can reduce the risk of bank loan portfolio. Therefore, bank regulations that focus on stable profitability and bank soundness should provide incentives for diversification. Journal: Int. J. of Monetary Economics and Finance Pages: 284-301 Issue: 3 Volume: 1 Year: 2008 Keywords: diversifiable risks; commercial banks; loan portfolios; risk measures; South Korea; diversification; lending activities; banking industry; insolvency risk; risk-adjusted returns. File-URL: http://www.inderscience.com/link.php?id=20636 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:1:y:2008:i:3:p:284-301 Template-Type: ReDIF-Article 1.0 Author-Name: Sandra Dvorsky Author-X-Name-First: Sandra Author-X-Name-Last: Dvorsky Title: Central Bank Independence in Southeastern Europe with a view to EU integration Abstract: The paper provides an analysis of central bank legislation in eight Southeastern European (SEE) countries. For this purpose, the paper uses the ECB classification and examines functional, institutional, personal and financial independence. Moreover, the paper sheds some light on the practical implementation of CBI in these countries. The study finds that the degree of CBI corresponds largely to the respective country's level of integration with the European Union. The paper concludes that legal arrangements to protect the status of the central bank are a necessary, though not sufficient, prerequisite for CBI. In fact, the importance of practical implementation cannot be overestimated. Journal: Int. J. of Monetary Economics and Finance Pages: 302-328 Issue: 3 Volume: 1 Year: 2008 Keywords: central banks; central bank independence; transition economies; EU integration; European Union; Bulgaria; Romania; Croatia; former Yugoslav Republic of Macedonia; Albania; Bosnia and Herzegovina; Montenegro; Serbia. File-URL: http://www.inderscience.com/link.php?id=20637 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:1:y:2008:i:3:p:302-328 Template-Type: ReDIF-Article 1.0 Author-Name: Panayotis Alexakis Author-X-Name-First: Panayotis Author-X-Name-Last: Alexakis Title: 'Altman Ζ-score model' and prediction of business failures Abstract: This paper analyses whether Z-score, as examined by Altman and other researchers, can predict correctly company failures. The empirical analysis concentrates on the construction companies listed in Athens Exchange, for the period 1995-2006, which coincides with significant construction activity in Greece. It is investigated whether Z-score models can predict bankruptcies for a period up to eight years earlier. It is derived that a particular Altman model performs well in predicting failures for a period up to five years earlier. This is in line with other findings. The empirical results are interesting as they can be used by portfolio managers in stock selection and by company management for merger decisions or other corporate strategic moves. Journal: Int. J. of Monetary Economics and Finance Pages: 329-337 Issue: 4 Volume: 1 Year: 2008 Keywords: risk assessment; bankruptcy prediction; valuation; Altman Z-analysis; mergers; acquisitions; portfolio selection; corporate strategy; company failures; failure prediction; Greece; Z-score models; stock selection. File-URL: http://www.inderscience.com/link.php?id=21143 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:1:y:2008:i:4:p:329-337 Template-Type: ReDIF-Article 1.0 Author-Name: Anis Jarboui Author-X-Name-First: Anis Author-X-Name-Last: Jarboui Author-Name: Hamadi Fakhfakh Author-X-Name-First: Hamadi Author-X-Name-Last: Fakhfakh Title: French banks, governance, and specific investments Abstract: This paper analyses the impact of French banks on the adoption of specific investment in French companies through board representation and ownership stakes. The theoretical principles suggest that the banks refuse the financing of this type of investment. Therefore, the level of banking debt has a negative effect on the specific investment. Our hypotheses suggest that this effect changes according to the contribution of bankers in the corporate governance system. The results carried out on a sample including 176 French listed firms show a change in the behaviour of banks following a real implication in the corporate governance system. Journal: Int. J. of Monetary Economics and Finance Pages: 338-354 Issue: 4 Volume: 1 Year: 2008 Keywords: debt; French banks; corporate governance; specific investment; high technology; low technology; France; board representation; ownership stakes. File-URL: http://www.inderscience.com/link.php?id=21144 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:1:y:2008:i:4:p:338-354 Template-Type: ReDIF-Article 1.0 Author-Name: Ludwig F.M. Reinhard Author-X-Name-First: Ludwig F.M. Author-X-Name-Last: Reinhard Author-Name: Steven Li Author-X-Name-First: Steven Author-X-Name-Last: Li Title: Financing decisions during different economic periods: evidence from Indonesia and Malaysia Abstract: This paper analyses the influence of economic fluctuations on the financing decisions of companies from Indonesia and Malaysia from 1996 to 2005. Our results show that companies with better access to external capital and those that adjust their financial structures faster outperform other companies. In both countries, monetary policy measures appear to be hampered by domestic bank lending practices, capital control measures and the underdevelopment of capital markets. The future development of capital markets and the abolishment of capital control measures, thus, appear to be important issues to increase the efficiency of monetary policy measures in Indonesia and Malaysia. Journal: Int. J. of Monetary Economics and Finance Pages: 355-379 Issue: 4 Volume: 1 Year: 2008 Keywords: corporate finance; economic changes; business cycle; transmission channels; Indonesia; Malaysia; economic fluctuations; financing decisions; monetary policy; capital markets; capital control. File-URL: http://www.inderscience.com/link.php?id=21145 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:1:y:2008:i:4:p:355-379 Template-Type: ReDIF-Article 1.0 Author-Name: T.K. Jayaraman Author-X-Name-First: T.K. Author-X-Name-Last: Jayaraman Author-Name: Jauhari Dahalan Author-X-Name-First: Jauhari Author-X-Name-Last: Dahalan Title: Monetary policy transmission in an undeveloped South Pacific Island country: a case study of Samoa Abstract: Amongst the South Pacific's least developed small island countries, Samoa has emerged as a successful economy. Its achievements of low inflation and high growth rates have been due to sustained fiscal adjustment programmes and appropriate monetary policy measures. This paper undertakes an empirical study of transmission mechanism of monetary policy by adopting a VAR approach and using quarterly data over a 17-year period (1990-2006). The study findings are that money and exchange rate channels are important channels in transmitting monetary impulses to Samoa's output. Journal: Int. J. of Monetary Economics and Finance Pages: 380-398 Issue: 4 Volume: 1 Year: 2008 Keywords: monetary policy; transmission mechanisms; monetary aggregate; econometric modelling; cointegration; error-correction model; Granger causality; variance decomposition; impulse response functions; South Pacific; least developed countries; Samoa; small islands; economic development. File-URL: http://www.inderscience.com/link.php?id=21146 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:1:y:2008:i:4:p:380-398 Template-Type: ReDIF-Article 1.0 Author-Name: Shahdad Naghshpour Author-X-Name-First: Shahdad Author-X-Name-Last: Naghshpour Author-Name: Joseph J. St. Marie Author-X-Name-First: Joseph J. St. Author-X-Name-Last: Marie Title: Monetary reality and economic adaptability of new entrants to the EU Abstract: The New EU entrants have face obstacles such as adjusting to a market economy, integration into The EU, and a single currency, to name a few. One major obstacle is the fact that the voting members consist of the six Executive Board members, and the 12 chairmen of the central banks of the original countries. In any given period this gives two votes to six of the original 12 countries. However, new members have no voting rights. This paper uses the Taylor Rule to determine if the monetary policies of the ECB match the economic realities of the EU new members. Journal: Int. J. of Monetary Economics and Finance Pages: 399-411 Issue: 4 Volume: 1 Year: 2008 Keywords: Taylor Rule; reaction function; monetary policy instruments; interest rates; economic adaptability; new EU entrants; European Union; market economy; voting rights. File-URL: http://www.inderscience.com/link.php?id=21147 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:1:y:2008:i:4:p:399-411 Template-Type: ReDIF-Article 1.0 Author-Name: Konstantinos Drakos Author-X-Name-First: Konstantinos Author-X-Name-Last: Drakos Author-Name: Eleftherios Goulas Author-X-Name-First: Eleftherios Author-X-Name-Last: Goulas Title: Irreversible investment under uncertainty: the message in Leasing Expenditures Abstract: In the present study we initially take stock of the dispersed definitions and measurement methods of irreversibility by offering a bird's eye view of the existing literature. Then we construct a closed-form model to investigate the impact of conditional uncertainty on investment spending under irreversibility by employing leasing penetration rates as an indirect indicator for the degree of irreversibility. Our results support the concept that the investment-uncertainty elasticity varies across leasing rates, and that the overall negative effect of uncertainty on investment decreases monotonically with the degree of reversibility. Journal: Int. J. of Monetary Economics and Finance Pages: 412-426 Issue: 4 Volume: 1 Year: 2008 Keywords: irreversible investment; irreversibility; leasing rates; investment uncertainty. File-URL: http://www.inderscience.com/link.php?id=21148 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:1:y:2008:i:4:p:412-426