Cross-sectional dependence in idiosyncratic volatility

This paper introduces a framework for analysis of cross-sectional dependence in the idiosyncratic volatilities of assets using high frequency data. We first consider the estimation of standard measures of dependence in the idiosyncratic volatilities such as covariances and correlations. Next, we study an idiosyncratic volatility factor model, in which we decompose the co-movements in idiosyncratic volatilities into two parts: those related to factors such as the market volatility, and the residual co-movements. When using high frequency data, naive estimators of all of the above measures are biased due to the estimation errors in idiosyncratic volatility. We provide bias-corrected estimators and establish their asymptotic properties. We apply our estimators to high-frequency data on 27 individual stocks from nine different sectors, and document strong cross-sectional dependence in their idiosyncratic volatilities. We also find that on average 74% of this dependence can be explained by the market volatility.

Return and Volatility performance comparison of Ethical and Non-ethical publicly-listed financial services companies

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Gamma stochastic volatility models

This paper presents gamma stochastic volatility models and investigates its distributional and time series properties. The parameter estimators obtained by the method of moments are shown analytically to be consistent and asymptotically normal. The simulation results indicate that the estimators behave well. The insample analysis shows that return models with gamma autoregressive stochastic volatility processes capture the leptokurtic nature of return distributions and the slowly decaying autocorrelation functions of squared stock index returns for the USA and UK. In comparison with GARCH and EGARCH models, the gamma autoregressive model picks up the persistence in volatility for the US and UK index returns but not the volatility persistence for the Canadian and Japanese index returns. The out-of-sample analysis indicates that the gamma autoregressive model has a superior volatility forecasting performance compared to GARCH and EGARCH models.

Analysis of Stochastic Volatility Sequences Generated by Product Autoregressive Models

The classical methods of analysing time series by Box-Jenkins approach assume that the observed series uctuates around changing levels with constant variance. That is, the time series is assumed to be of homoscedastic nature. However, the nancial time series exhibits the presence of heteroscedasticity in the sense that, it possesses non-constant conditional variance given the past observations. So, the analysis of nancial time series, requires the modelling of such variances, which may depend on some time dependent factors or its own past values. This lead to introduction of several classes of models to study the behaviour of nancial time series. See Taylor (1986), Tsay (2005), Rachev et al. (2007). The class of models, used to describe the evolution of conditional variances is referred to as stochastic volatility modelsThe stochastic models available to analyse the conditional variances, are based on either normal or log-normal distributions. One of the objectives of the present study is to explore the possibility of employing some non-Gaussian distributions to model the volatility sequences and then study the behaviour of the resulting return series. This lead us to work on the related problem of statistical inference, which is the main contribution of the thesis

CO spillover and oxidation on Pt/TiO2

The adsorption of CO has been measured on a 2.5 wt% Pt/TiO2 catalyst using TPD. A somewhat surprising observation is that (i) CO2 is produced, even though oxygen is not dosed into the system, (ii) repeated experiments result in the same amount of CO2 desorption. The results appear to be due to a combination of factors-(i) is due to spillover of CO from the Pt to the TiO2 support, while (ii) is due to the diffusion of Ti3+ into the bulk of the TiO2 crystallite, which effectively removes the surface non-stoichiometry which might otherwise be expected.

Hydrogen spillover on carbon-supported metal catalysts studied by inelastic neutron scattering. Surface vibrational states and hydrogen riding modes

Hydrogen spillover on carbon-supported precious metal catalysts has been investigated with inelastic neutron scattering (INS) spectroscopy. The aim, which was fully realized, was to identify spillover hydrogen on the carbon support. The inelastic neutron scattering spectra of Pt/C, Ru/C, and PtRu/C fuel cell catalysts dosed with hydrogen were determined in two sets of experiments: with the catalyst in the neutron beam and, using an annular cell, with carbon in the beam and catalyst pellets at the edge of the cell excluded from the beam. The vibrational modes observed in the INS spectra were assigned with reference to the INS of a polycyclic aromatic hydrocarbon, coronene, taken as a molecular model of a graphite layer, and with the aid of computational modeling. Two forms of spillover hydrogen were identified: H at edge sites of a graphite layer (formed after ambient dissociative chemisorption of H-2), and a weakly bound layer of mobile H atoms (formed by surface diffusion of H atoms after dissociative chernisorption of H-2 at 500 K). The INS spectra exhibited characteristic riding modes of H on carbon and on Pt or Ru. In these riding modes H atoms move in phase with vibrations of the carbon and metal lattices. The lattice modes are amplified by neutron scattering from the H atoms attached to lattice atoms. Uptake of hydrogen, and spillover, was greater for the Ru containing catalysts than for the Pt/C catalyst. The INS experiments have thus directly demonstrated H spillover to the carbon support of these metal catalysts.

The value premium and time-varying volatility

Numerous studies have documented the failure of the static and conditional capital asset pricing models to explain the difference in returns between value and growth stocks. This paper examines the post-1963 value premium by employing a model that captures the time-varying total risk of the value-minus-growth portfolios. Our results show that the time-series of value premia is strongly and positively correlated with its volatility. This conclusion is robust to the criterion used to sort stocks into value and growth portfolios and to the country under review (the US and the UK). Our paper is consistent with evidence on the possible role of idiosyncratic risk in explaining equity returns, and also with a separate strand of literature concerning the relative lack of reversibility of value firms' investment decisions.

International financial centres, office market rents and volatility

Despite continuing developments in information technology and the growing economic significance of the emerging Eastern European, South American and Asian economies, international financial activity remains strongly concentrated in a relatively small number of international financial centres. That concentration of financial activity requires a critical mass of office occupation and creates demand for high specification, high cost space. The demand for that space is increasingly linked to the fortunes of global capital markets. That linkage has been emphasised by developments in real estate markets, notably the development of global real estate investment, innovation in property investment vehicles and the growth of debt securitisation. The resultant interlinking of occupier, asset, debt and development markets within and across global financial centres is a source of potential volatility and risk. The paper sets out a broad conceptual model of the linkages and their implications for systemic market risk and presents preliminary empirical results that provide support for the model proposed.

Measuring the response of macroeconomic uncertainty to shocks

Recent research documents the importance of uncertainty in determining macroeconomic outcomes, but little is known about the transmission of uncertainty across such outcomes. This paper examines the response of uncertainty about inflation and output growth to shocks documenting statistically significant size and sign bias and spillover effects. Uncertainty about inflation is a determinant of output uncertainty, whereas higher growth volatility tends to raise inflation volatility. Both inflation and growth volatility respond asymmetrically to positive and negative shocks. Negative growth and inflation shocks lead to higher and more persistent uncertainty than shocks of equal magnitude but opposite sign.

Stochastic volatility jump-diffusions for European equity index dynamics

Major research on equity index dynamics has investigated only US indices (usually the S&P 500) and has provided contradictory results. In this paper a clarification and extension of that previous research is given. We find that European equity indices have quite different dynamics from the S&P 500. Each of the European indices considered may be satisfactorily modelled using either an affine model with price and volatility jumps or a GARCH volatility process without jumps. The S&P 500 dynamics are much more difficult to capture in a jump-diffusion framework.