Economics - Research Publications
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ItemEquity return and short-term interest rate volatility: level effects and asymmetric dynamics( 2005-07)Evidence suggests that short-term interest rate volatility peakswith the level of short rates, while equity volatility responds asymmetricallyto positive and negative shocks. We present an LM basedtest that distinguishes between level effects and asymmetry in volatilitywhich is robust to the presence of unidentified nuisance parametersunder the null. There is strong evidence of a level effect and asymmetricresponse in the relationship between S&P 500 Index returns and3-month US Treasury Bills. The conditional covariance depends onthe level of the short rate which has implications for hedging equityreturns against short term interest rate movements.
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ItemTesting for rate-dependence and asymmetry in inflation uncertainty: evidence from the G7 economies( 2006-02)The Friedman-Ball hypothesis implies a link between the inflation rate and inflationuncertainty. In this paper we employ a new test for the joint null hypothesis of no dependenceeffects and no asymmetry in the G7 inflation volatility. The results show that higher inflationrates operate additively via the conditional variance of inflation to induce greater inflationuncertainty in the U.S., U.K. and Canada. In addition, positive inflationary shocks are found togenerate greater inflation uncertainty than negative shocks of a similar magnitude in the U.K. andCanada.
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ItemTime Variation and Asymmetry in the World Price of Covariance Risk: The Implications for International Diversification( 2004-06)The International Capital Asset Pricing Model measures countryrisk in terms of the conditional covariance of national returns withthe world return. Using impulse responses from a multivariate nonlinearmodel we provide evidence of time variation and asymmetry inthe measure of country risk. and the implied benefit to internationaldiversification. The evidence implies that the price of risk and the benefitsfrom diversification may differ in a statistically and economicallymeaningful fashion across bull and bear markets.
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ItemMeasuring the response of macroeconomic uncertainty to shocks(M I T PRESS, 2005-05)
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ItemThe asymmetric effects of uncertainty on inflation and output growth(WILEY, 2004-09-01)