Economics - Research Publications
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ItemOnce in a Lifetime? The Effects of the Global Financial Crisis on Household Willingness to Take Financial Risk(Wiley, 2019-11-06)We investigate the effect of the global financial crisis (GFC) on household willingness to take risk. A model incorporating experienced returns as a determinant of risk tolerance is specified, with time‐varying weights on past stock returns capturing changes during the crisis. Results show that households became more myopic during the GFC, placing greater weight on more recent stock returns when evaluating financial risk attitudes. Households have been more sensitive to financial shocks during the GFC and post‐GFC periods, with the change in sensitivity found to be uniform over the life cycle and other household characteristics, but differing by income.
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ItemEfficient method of moments estimators for integer time series models(John Wiley & Sons, 2014-11)The parameters of integer autoregressive models with Poisson, or negative binomial innovations can be estimated by maximum likelihood where the prediction error decomposition, together with convolution methods, is used to write down the likelihood function. When a moving average component is introduced this is not the case. To address this problem an efficient method of moment estimator is proposed where the estimated standard errors for the parameters are obtained using subsampling methods. The small sample properties of the estimator are investigated using Monte Carlo methods, while the approach is demonstrated using two well-known examples from the time series literature.
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ItemFinancial contagion and asset pricing(ELSEVIER, 2014-10)
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ItemHedging Supply Risks: An Optimal Water Portfolio(Oxford University Press, 2016)Although water supply diversification has been proposed as a solution to dwindling water reserves, the optimal mix of natural and manufactured sources of water remains largely unexplored. We develop a dynamic portfolio model of water supply that hedges against the supply risks from all potential water sources, by taking into account the size of water reserves, uncertainties of water flows as well as differences in supply costs. The optimal portfolio shares for an existing water supply system are derived and compared with the observed contributions to total water stock, revealing unexploited hedging opportunities between various naturally occurring water sources as well as a general over-reliance on manufactured water. The optimal solution implies that future supply augmentations should target natural sources of water ahead of manufactured water. It is estimated that the optimization of the water supply portfolio for a medium-sized city results in annual cost-savings of up to $463 million.
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ItemThe role of portfolio shocks in a structural vector autoregressive model of the Australian economy(BLACKWELL PUBLISHING, 2008-03)Domestic and foreign equity shocks on the Australian economy are analysed within a five‐variate structural vector autoregressive model, with identification achieved through long‐run restrictions based on the natural rate hypothesis, monetary neutrality, long‐run portfolio balance and purchasing power parity. The results show that real equity values were undervalued by 19 per cent by June 2005, with the gap narrowing thereafter. Foreign crises are important factors explaining this deterioration. The real wealth effects of equity market shocks impact significantly upon financial and goods market prices, whereas output tends to be immune. The model is also able to address puzzles that exist in the vector autoregression literature.
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ItemImplicit Bayesian inference using option prices(BLACKWELL PUBL LTD, 2005-05)Abstract. A Bayesian approach to option pricing is presented in which posterior inference about the underlying returns process is conducted implicitly via observed option prices. A range of models allowing for conditional leptokurtosis, skewness and time‐varying volatility in returns are considered, with posterior parameter distributions and model probabilities backed out from the option prices. Models are ranked according to several criteria, including out‐of‐sample predictive and hedging performance. The methodology accommodates heteroscedasticity and autocorrelation in the option pricing errors, as well as regime shifts across contract groups. The method is applied to intraday option price data on the S&P500 stock index for 1995. While the results provide support for models that accommodate leptokurtosis and skewness, no one model dominates when all criteria are considered.
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ItemA New Class of Tests of Contagion With Applications(AMER STATISTICAL ASSOC, 2010-07)
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ItemComputing the Distributions of Economic Models via Simulation(Econometric Society, 2008-03-18)We study a Monte Carlo algorithm for computing marginal and stationary densities of stochastic models with the Markov property, establishing global asymptotic normality and OP(n–1/2) convergence. Asymptotic normality is used to derive error bounds in terms of the distribution of the norm deviation.
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ItemUnravelling financial market linkages during crises(JOHN WILEY & SONS LTD, 2007-01-01)
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