C58 - Financial EconometricsReturn

The main purpose of this study is to examine the impacts of GDP, trade openness, the freedom index and the internet on FDI in 54 countries, including developing, transition and developed countries, over the period 1995-2021. First, the variables affecting FDI are determined. Then, first- and second-generation unit root tests are conducted for panel data to investigate stationarity. Finally, long- and short-run relationships between variables that have an effect on FDI are exhibited with panel cointegration tests and panel ARDL analysis. Among 17 candidate variables, internet, GDP, the freedom index and trade openness are determined to affect FDI. GDP, the internet and the freedom index have a significant positive and trade openness has a significant negative relationship with FDI in the short run. Finally, there is a long-term equilibrium between FDI and all the variables. Trade openness also has negative coefficient in developing countries such as China, Brazil and Turkey. This is a unique study in which empirical findings are given for each country with the PMG model, which would aid the policy implications identified for the 54 countries, including developing, transition and developed countries.

Decentralized finance (DeFi) is a brand-new disruptive procedure that encourages the use of blockchain technology for developing and distributing a variety of financial goods and services. This study investigates the time-varying and asymmetric interplay between DeFi and CEE stock returns, concentrated around the COVID-19 outbreak and the Russo-Ukrainian conflict. While the associations between other cryptocurrencies and conventional assets have been studied, DeFi assets have not. For this purpose, we employ the multivariate DECO-GARCH model and cross-quantilogram framework. The results reveal a positive equicorrelation between DeFi and CEE stock market returns. Notably, the influence of DeFi on CEE stock markets is greater during the COVID-19 outbreak and the Russo-Ukrainian conflict than in the other periods. Furthermore, the cross-quantilogram estimations uncover that CEE stock markets depend less on the DeFi market at longer lag lengths. This means that the diversification benefits of DeFi against CEE stock market returns are more important for long-run investment horizons. In general, our research offers a new understanding of dependence structures, which might help investors make better investment decisions and direct their trading strategies.

This study aims to investigate whether clean energy exchange traded funds (ETFs) exhibit long-term memory properties and whether the efficient market hypothesis is valid for these assets. The results of the model established to test the dual long memory indicate the existence of long memory in both return and volatility of the ICLN, PBD, PBW series, while the long memory feature is found only in the volatility of the other variables. The results reveal that the selected clean energy ETFs do not exhibit weak efficient market characteristics and volatility has a predictable structure. These results mean that by using the past price movements of clean energy ETFs, future price movements can be predicted and thus above-normal returns can be obtained. In addition, it can be said that risks and uncertainties are effective on the price movements of clean energy ETFs. These results are important for portfolio managers, hedgers and individual and institutional investors aiming to direct their investments to the renewable energy market, as well as for policymakers.

Monetary metals have historically been important in providing limits to the quantity of money. The mandatory backing of money with gold or silver was gradually circumvented and abolished. Both precious metals have thus become, among other things, investment assets associated with returns and risks. They may or may not be profitable and safe. The absence of precious metal limits has led to a significantly faster devaluation of money. However, inflation may also be reflected in rising market prices for financial and real assets. This paper analyses the potential interrelationships between inflation, market prices of shares in the S&P 500 index, and market prices of gold over the period 1996-2020 in the United States. The analysis shows a strong impact of inflation on both the stock index and gold. The market price of gold was partly influenced by the development of market stock prices.

This article examines the impact of demographic, economic and institutional determinants on life insurance demand in the Czech Republic between 1993 and 2015. Theoretical part discusses general characteristics of the insurance market, life insurance, its importance in the Czech Republic. It also includes detailed research of historical studies and articles. In empirical part is surveyed an influence of determinants on life insurance demand, using econometric models based on time series and principal component analysis. We used autoregressive distributed lag model, which defines short-term relationships between principal components and an error correction model, which examines long-term relationships between time series. It was found that an increase in average wage and banking sector size had a positive impact on life insurance demand and an increase in young dependency ratio, old dependency ratio, interest rate and net national savings had a negative impact on life insurance demand. Number of tertiary educated people, public sector size, and consumer spending were classified as insignificant variables.

We have tested the stability of parameters loading the asymmetric behaviour of the correlation and the importance of this behavior on the portfolio selection. In this paper, we have analyzed the following time series S&P index, gold and CME 5-Year Treasury Note Futures during the most important crisis from 1992 to 2009. The methodology is based on the dynamic conditional correlation model and its asymmetric volatility and asymmetric correlation extensions. The stability of parameters was tested by t-test applied on the rol ling windows data. The information importance of asymmetric volatility and correlation was tested by global minimum variance portfolio. The results suggest that the parameters loading the asymmetric behavior of the correlation are not stable for the analyzed time series during the financial crisis. With one exception we have found out that global minimum variance portfolio based on the dynamic conditional correlation model with asymmetric volatility is significantly less volatile than the global minimum variance portfolio based on the asymmetric dynamic conditional correlation model.

Corporate innovations are a central part of a country's economic activity. They foster and improve competitiveness, which ultimately leads to economic growth and progress. In this study, we focus on the post-communist European region, where corporations operate under uncertain conditions. Utilizing a sample with almost 100,000 firm level observations over the period from 2001 to 2013, we analyse effects of uncertainty steaming from corruption environment on innovation decisions of the Central European private firms. We find that domestic firms and firms with dispersed ownership innovate less when business and municipal uncertainty conditions increase. When firms are unsure whether they will be blocked by local bureaucrats from capitalizing on their innovation, they scale down their efforts. However, this result disappears for firms with foreign majority ownership. We hypothesize that foreign controlled firms have cleared all uncertainties before they entered the foreign market.

Measuring and managing of financial risks is an essential part of the management of financial institutions. The appropriate risk management should lead to an efficient allocation of available funds. Approaches based on Value at Risk measure have been used as a means for measuring market risk since the late 20th century, although regulators newly suggest to apply more complex method of Expected Shortfall. While evaluating models for market risk estimation based on Value at Risk is relatively simple and involves so-called backtesting procedure, in the case of Expected Shortfall we cannot apply similar procedure. In this article we therefore focus on an alternative method for comprehensive evaluation of VaR models at various significance levels by means of data envelopment analysis (DEA). This approach should lead to the adoption of the model which is also suitable in terms of the Expected Shortfall criterion. Based on the illustrative results from the US stock market we conclude that NIG model and historical simulation should be preferred to normal distribution and GARCH model. We can also recommend to estimate the parameters from the period slightly shorter than two years.

We study the effects of corruption on firm efficiency using a unique comprehensive dataset of private firms from 10 Central and Eastern European countries for the period from 2002 to 2013. We find that an environment characterized by a high level of corruption has an adverse effect on firm efficiency. This effect is amplified for firms with a lower propensity to behave corruptly, i.e. foreign-controlled firms, while domestically-owned firms are not penalized. At the same time, an environment characterized by considerable heterogeneity in perception of corruption is associated with an increase in firm efficiency.

Cluster Analysis of Jumps on Capital Markets We analyze the behavior and performance of multiple price jump indicators across capital markets and over time. By using high-frequency we perform cluster analysis of price jump indicators that share similar properties in terms of their performance in that they minimize Type I and Type II errors. We show that clusters of price jump indicators do not exhibit equal size. Clusters are stable across stock market indices and time. Detected numbers of price jumps are also stable over time. The recent financial crisis does not seem to affect the overall jumpiness of mature or emerging stock markets. Our results support the stress testing approach of the Basel III. Accords in that the jump component of the volatility process does not need to be treated separately for the purpose of stress testing.

This article proposes an approach to an interest rate analysis for purposes of risk management.of fi nancial portfolio consisting of assets or liabilities linked to interest rates and held to maturity in the Czech environment. Czech fi nancial market is characterized by relative underdevelopment and relatively low liquidity, and in an environment of high uncertainty due to interventions and regulations of central banks and other authorities. This article fi rst describes the volatility of the Czech koruna and euro interest rates using the GARCH model. Based on this description, relationships between levels of koruna and euro swaptions volatilities are determined. After obtaining estimates of koruna swaptions implied volatilities, the BGM interest rate model is applied to Czech koruna and euro interest rate simulations. They are then compared with the real development of given interest rates. It turns out that although the BGM model was developed for the purpose fi nancial derivatives valuation in the environment of developed and liquid fi nancial markets without signifi - cant distortions, resulting simulations are relatively good, and their use can improve interest rate risk management even in the Czech environment.

The paper analyzes 10-year government bond and stock index of the Czech Republic and the United States in period from January 2002 to February 2012. Main purpose of the paper is to show connection between bond and stock market and verify whether bonds can be taken as stock indicators. A detailed study of fi nancial time series of both countries is performed. Different stages of each financial time series which is called bear, normal and bull state are presented. The conclusion is that all three stages have different means return and they are in accordance with financial theory. For the division of time series into each state Markov-Switching model is used.