A new method for estimating liquidity risk: Insights from a liquidity-adjusted CAPM framework

This paper proposes a new non-parametric method for estimating model-free, time-varying liquidity betas which builds on realized covariance and volatility theory. Working under a liquidity-adjusted CAPM framework we provide evidence that liquidity risk is a factor priced in the Greek stock market, mainly arising from the covariation of individual liquidity with local market liquidity, however, the level of liquidity seems to be an irrelevant variable in asset pricing. Our findings provide support to the notion that liquidity shocks transmitted across securities can cause market-wide effects and can have important implications for portfolio diversification strategies. ©2012 Elsevier B.V. All rights reserved.

Modified Information Criteria and Selection of Long Memory Time Series Models

The problem of model selection of a univariate long memory time series is investigated once a semi parametric estimator for the long memory parameter has been used. Standard information criteria are not consistent in this case. A Modified Information Criterion (MIC) that overcomes these difficulties is introduced and proofs that show its asymptotic validity are provided. The results are general and cover a wide range of short memory processes. Simulation evidence compares the new and existing methodologies and empirical applications in monthly inflation and daily realized volatility are presented.

The Greek Debt Crisis and Southern Europe: Majoritarian Pitfalls?

Although widely debated in broader socioeconomic terms, the Eurozone crisis has not received adequate scholarly attention with regards to the impact of alternative political systems. This article revisits the debate on majoritarian and consensus democracies drawing on recent evidence from the Eurozone debacle. Greece is particularly interesting both with regards to its potential ‘global spillover effects’ and choice of political system. Despite facing comparable challenges as Portugal and Spain, the country has become polarized socially and politically, seeing a record number of MP defections, electoral volatility and the rise of the militant extreme right. The article explains why Greece, the country that relied most extensively on majoritarian institutions, entered the global financial crisis in the most vulnerable position while subsequently faced insurmountable political and institutional obstacles in its management. The article points to the paradox of majoritarianism: in times of economic stress, the first ‘casualties’ are its strongest elements – centrist parties (bi-partisanship) and cabinet stability.

Testing the Prebisch–Singer hypothesis since 1650: Evidence from panel techniques that allow for multiple breaks

In this paper, we re-examine two important aspects of the dynamics of relative primary commodity prices, namely the secular trend and the short run volatility. To do so, we employ 25 series, some of them starting as far back as 1650 and powerful panel data stationarity tests that allow for endogenous multiple structural breaks. Results show that all the series are stationary after allowing for endogenous multiple breaks. Test results on the Prebisch–Singer hypothesis, which states that relative commodity prices follow a downward secular trend, are mixed but with a majority of series showing negative trends. We also make a first attempt at identifying the potential drivers of the structural breaks. We end by investigating the dynamics of the volatility of the 25 relative primary commodity prices also allowing for endogenous multiple breaks. We describe the often time-varying volatility in commodity prices and show that it has increased in recent years.

Optimal Time Series Momentum

We develop a continuous-time asset price model to capture the timeseries momentum documented recently. The underlying stochastic delay differentialsystem facilitates the analysis of effects of different time horizons used bymomentum trading. By studying an optimal asset allocation problem, we find thatthe performance of time series momentum strategy can be significantly improvedby combining with market fundamentals and timing opportunity with respect tomarket trend and volatility. Furthermore, the results also hold for different timehorizons, the out-of-sample tests and with short-sale constraints. The outperformanceof the optimal strategy is immune to market states, investor sentiment andmarket volatility.

Ionic liquids for efficient hydrogen sulfide and thiol scavenging

Functionalised pyridinium and ammonium ionic liquids bearing a Michael acceptor are shown to scavenge H₂S gas and various thiols, in most cases, without the aid of any added bases. Utilising the effective non-volatility of ionic liquids and ‘tagging’ malodourous substances to an ionic matrix renders them odourless.

Time-Varying Liquidity and Momentum Profits

A basic intuition is that arbitrage is easier when markets are most liquid. Surprisingly, we find that momentum profits are markedly larger in liquid market states. This finding is not explained by variation in liquidity risk, time-varying exposure to risk factors, or changes in macroeconomic condition, cross-sectional return dispersion, and investor sentiment. The predictive performance of aggregate market illiquidity for momentum profits uniformly exceed that of market return and market volatility states. While momentum strategies are unconditionally unprofitable in US, Japan, and Eurozone countries in the last decade, they are substantial following liquid market states.

Gas generation in interconnected power systems with high wind power penetration

Increasing installed capacities of wind power in an effort to achieve sustainable power systems for future generations pose problems for system operators. Volatility in generation volumes due to the adoption of stochastic wind power is increasing. Storage has been shown to act as a buffer for these stochastic energy sources, facilitating the integration of renewable energy into a historically inflexible power system. This paper examines peak and off peak benefits realised by installing a short term discharge storage unit in a system with a high penetration of wind power in 2020. A fully representative unit commitment and economic dispatch model is used to analyse two scenarios, one ‘with storage’ and one ‘without storage’. Key findings of this preliminary study show that wind curtailment can be reduced in the storage scenario, with a larger reduction in peak time ramping of gas generators is realised.

Understanding Risk: Recent Contributions from the Journal of Risk and Governance

Following on from the format of the previous Book Understanding Risk: Contributions from the Journal of Risk and Governance, this collection of recent contributions (including work by the editor) this book is divided in three sections .  The first section examines issues relating to corporate governance in the private sector, with emphasis being placed on issues of 'Board Decision Making,' Earnings Management and Audit Committee Effectiveness'  and ' Corporate Governance Failures.'  These contributions are complemented by the second sections which looks at governance and risk issues affecting the public sector, with a focus being places on 'Public Private Partnerships' and regulation of activities in the Life Sciences.'  Section three focuses on societal risk management in relation to health, safety and the environment.  In this context, contributions are presented in relation to major debates surrounding 'Rising Trends in Cancer Cases,' dilemmas surrounding 'Medical Self Help,' 'Mental Health Policy' and the use of 'Information Technology in Health Care.'

Combining Bio- and Chemo-catalysis for the Conversion of Bio-Renewable Alcohols

The use of biomass as a source of fuel is on the sharp increase. In parallel with this expansion, new chemical processes and technologies are required to improve efficiency, sustainability, and profitability.
Biocatalytic and chemocatalytic methods can be combined to affect the conversion of bio-alcohols, and convert them to valuable chemical targets in an atom efficient and environmentally benign manor. Fermentation offers a useful first step in biomass conversion, as whole cell biocatalysts can provide sustained activity when fed with crude biomass. Coupling this with homogeneous and/or heterogeneous catalysis enables the preparation of a diverse product range. The transition between biocatalytic and chemocatalytic steps can be assisted by utilising ionic liquids.
Ionic liquids have potential roles in biorefineries that generate alcohols; as an extractant, reaction medium, and catalytic reagent. Underpinning the potential of ionic liquids in this area is: 1. the ability of ionic liquids to solubilize polyols and alcohols; 2. the facility to functionalise ionic liquids and tune properties; 3. the low volatility of ionic liquids.
The FP7 project GRAIL will be highlighted; this project focusses on the utilisation of glycerol formed as a by-product in biodiesel synthesis.

Identifying the relative importance of stock characteristics

There is no consensus in the literature as to which stock characteristic best explains returns. In this study, we employ a novel econometric approach better suited than the traditional characteristic sorting method to answer this question for the UK market. We evaluate the relative explanatory power of market, size, momentum, volatility, liquidity and book-to-market factors in a semiparametric characteristic-based factor model which does not require constructing characteristic portfolios. We find that momentum is the most important factor and liquidity is the least important based on their relative contribution to the fit of the model and the proportion of sample months for which factor returns are significant. Overall, this study provides strong evidence to support that the momentum characteristic can best explain stock returns in the UK market. The econometric approach employed in this study is a novel way to assess relevant investment risk in international financial markets outside U.S. Moreover, multinational institutions and investors can use this approach to identify regional factors in order to diversify their portfolios.