Topics in financial econometrics

In the first chapter, we consider the joint estimation of objective and risk-neutral parameters for SV option pricing models. We propose a strategy which exploits the information contained in large heterogeneous panels of options, and we apply it to S&P 500 index and index call options data. Our approach breaks the stochastic singularity between contemporaneous option prices by assuming that every observation is affected by measurement error. We evaluate the likelihood function by using a MC-IS strategy combined with a Particle Filter algorithm. The second chapter examines the impact of different categories of traders on market transactions. We estimate a model which takes into account traders’ identities at the transaction level, and we find that the stock prices follow the direction of institutional trading. These results are carried out with data from an anonymous market. To explain our estimates, we examine the informativeness of a wide set of market variables and we find that most of them are unambiguously significant to infer the identity of traders. The third chapter investigates the relationship between the categories of market traders and three definitions of financial durations. We consider trade, price and volume durations, and we adopt a Log-ACD model where we include information on traders at the transaction level. As to trade durations, we observe an increase of the trading frequency when informed traders and the liquidity provider intensify their presence in the market. For price and volume durations, we find the same effect to depend on the state of the market activity. The fourth chapter proposes a strategy to express order aggressiveness in quantitative terms. We consider a simultaneous equation model to examine price and volume aggressiveness at Euronext Paris, and we analyse the impact of a wide set of order book variables on the price-quantity decision.

Micro and Macro essays in Applied Fiscal Policy

This thesis analysis micro and macro aspect of applied fiscal policy issues. The first chapter investigates the extent to which local budget spending composition reacts to fiscal rules variations. I consider the budget of Italian municipalities and exploit specific changes in the Domestic Stability Pact’s rules, to perform a difference-in-discontinuities analysis. The results show that imposing a cap on the total amount of consumption and investment is not as binding as two caps, one for consumption and a different one for investment. More specifically, consumption is triggered by changes in wages and services spending, while investment relies on infrastructure movements. In addition, there is evidence that when an increase in investment is achieved, there is also a higher budget deficit level. The second chapter intends to analyze the extent to which fiscal policy shocks are able to affect macrovariables during business cycle fluctuations, differentiating among three intervention channels: public taxation, consumption and investment. The econometric methodology implemented is a Panel Vector Autoregressive model with a structural characterization. The results show that fiscal shocks have different multipliers in relation to expansion or contraction periods: output does not react during good times while there are significant effects in bad ones. The third chapter evaluates the effects of fiscal policy announcements by the Italian government on the long-term sovereign bond spread of Italy relative to Germany. After collecting data on relevant fiscal policy announcements, we perform an econometric comparative analysis between the three cabinets that followed one another during the period 2009-2013. The results suggest that only fiscal policy announcements made by members of Monti’s cabinet have been effective in influencing significantly the Italian spread in the expected direction, revealing a remarkable credibility gap between Berlusconi’s and Letta’s governments with respect to Monti’s administration.

Topics in Local Economic Development

This thesis contributes to the current debate in literature about local economic development by considering two different topics: quality of institutions, and the role of clusters in innovation and productivity growth. The research is built upon three papers. The first paper deals with the analysis of the effect of administrative continuity on administrative efficiency. The analysis underlines the importance of different typologies of social capital. Findings reveal a positive impact on administrative efficiency (AE) by administrative continuity (AC) when it is coupled by bridging and linking social capital. On the contrary, bonding social capital influences negatively the effect by AC on AE. The second paper investigates the spatial interaction in levels of quality of government (QoG) among European regions. Notwithstanding the largely recognised role by institutions in the design of regional policies, no study has been conducted about the mechanisms of interaction and diffusion of QoG at regional level. This research wants to overcome this knowledge gap in literature. Findings reveal a heterogeneity in spatial interaction among groups of regions, i.e. ‘leader regions’ (Northern regions) and ‘lagging regions’ (Southern regions), when considering different mechanisms of interaction (learning / imitating competition and pure competition). Moreover, the effect of wealth on the levels of QoG is nonlinear. Finally, the third paper analyses the relation among specialization and productivity within the agricultural sector. In literature, the study of clusters dynamics has long neglected agriculture. The analysis describes the changes in sectorial specialization for eight main crop groups in Italian regions (NUTS 3), assessing the existence of spatial autocorrelations by using an exploratory data analysis. Furthermore, the effect of specialization on productivity is analysed within the main crop groups using a spatial panel data model. Findings reveal a marked tendency to specialization in the Italian agriculture, and a heterogeneous effect by specialization on productivity.

Experimental and numerical investigation on short and long term performance of macro-synthetic fibre reinforced concrete materials

Fibre Reinforced Concretes are innovative composite materials whose applications are growing considerably nowadays. Being composite materials, their performance depends on the mechanical properties of both components, fibre and matrix and, above all, on the interface. The variables to account for the mechanical characterization of the material, could be proper of the material itself, i.e. fibre and concrete type, or external factors, i.e. environmental conditions. The first part of the research presented is focused on the experimental and numerical characterization of the interface properties and short term response of fibre reinforced concretes with macro-synthetic fibers. The experimental database produced represents the starting point for numerical models calibration and validation with two principal purposes: the calibration of a local constitutive law and calibration and validation of a model predictive of the whole material response. In the perspective of the design of sustainable admixtures, the optimization of the matrix of cement-based fibre reinforced composites is realized with partial substitution of the cement amount. In the second part of the research, the effect of time dependent phenomena on MSFRCs response is studied. An extended experimental campaign of creep tests is performed analysing the effect of time and temperature variations in different loading conditions. On the results achieved, a numerical model able to account for the viscoelastic nature of both concrete and reinforcement, together with the environmental conditions, is calibrated with the LDPM theory. Different type of regression models are also elaborated correlating the mechanical properties investigated, bond strength and residual flexural behaviour, regarding the short term analysis and creep coefficient on time, for the time dependent behaviour, with the variable investigated. The experimental studies carried out emphasize the several aspects influencing the material mechanical performance allowing also the identification of those properties that the numerical approach should consider in order to be reliable.

Topics in climate change risk

In this Thesis, we analyze how climate risk impacts economic players and its consequences on the financial markets. Essentially, literature unravels two main channels through which climate change poses risks to the status quo, namely physical and transitional risk, that we cover in three works. Firstly, the call for a global shift to a net-zero economy implicitly devalues assets that contribute to global warming that regulators are forcing to dismiss. On the other hand, abnormal changes in the temperatures as well as weather-related events challenge the environmental equilibrium and could directly affect operations as well as profitability. We start the analysis with the physical component, by presenting a statistical measure that generally represents shocks to the distribution of temperature anomalies. We oppose this statistic to classical physical measures and assess that it is the driver of the electricity consumption, in the weather derivatives market, and in the cross-section of equity returns. We find two transmission channels, namely investor attention, and firm operations. We then analyze the transition risk component, by associating a regulatory horizon characterization to fixed income valuation. We disentangle a risk driver for corporate bond overperformance that is tight to change in credit riskiness. After controlling a statistical learning algorithm to forecast excess returns, we include carbon emission metrics without clear evidence. Finally, we analyze the effects of change in carbon emission on a regulated market such as the EU ETS by selecting utility sector corporate bond and, after controlling for the possible risk factor, we document how a firm’s carbon profile differently affects the term structure of credit riskiness.

Governing the water conservation in the Urmia Lake Basin: addressing macro systems’ fit and micro users’ behavior

To change unadapted water governing systems, and water users’ traditional conducts in line with climate change, understanding of systems’ structures and users’ behaviors is necessary. To this aim, comprehensive and pragmatic research was designed and implemented in the Urmia Lake Basin where due to the severe droughts, and human-made influences, especially through the agricultural development, the lake has been shrunken drastically. To analyze the water governance and conservation issues in the basin, an innovative framework was developed based on mathematical physics concepts and pro-environmental behavior theories. Accordingly, in system level (macro/meso), the problem of fit of the early-shaped water governing system associating with the function of “political-security” and “political-economic” factors in the basin was identified through mean-field models. Furthermore, the effect of a “political-environmental” factor, the Urmia Lake Restoration Program (ULRP), on reforming the system structure and hence its fit was assessed. The analysis results revealed that by revising the provincial boundaries (horizontal alternation) for the entity of Kurdistan province to permit that interact with the headquarter of West Azerbaijan province for its water demand-supply initiatives, the system fit can increase. Also, the constitution of the ULRP (vertical arrangement) not only could increase the structural fit of the water governing system to the basin, but also significantly could enhance the system fit through its water-saving policy. Besides, in individual level (micro), the governing factors of water conservation behavior of the major users/farmers were identified through rational and moral socio-psychological models. In rational approach, incorporating PMT and TPB, the SEM results demonstrated that “Perceived Vulnerability”, “Self-Efficacy”, “Response Efficacy”, “Response Cost”, “Subjective Norms” and “Institutional Trust” significantly affect the water-saving intention/behavior. Likewise, NAM based analysis as a moral approach, uncovered the significant effects of “Awareness of Consequences”, “Appraisal of Responsibility”, “Personal Norms” as well as “Place Attachment” and “Emotions” on water-saving intention.