Measuring, Modeling, and Forecasting Volatility and Correlations from High-Frequency Data

This dissertation contains four essays that all share a common purpose: developing new methodologies to exploit the potential of high-frequency data for the measurement, modeling and forecasting of financial assets volatility and correlations. The first two chapters provide useful tools for univariate applications while the last two chapters develop multivariate methodologies. In chapter 1, we introduce a new class of univariate volatility models named FloGARCH models. FloGARCH models provide a parsimonious joint model for low frequency returns and realized measures, and are sufficiently flexible to capture long memory as well as asymmetries related to leverage effects. We analyze the performances of the models in a realistic numerical study and on the basis of a data set composed of 65 equities. Using more than 10 years of high-frequency transactions, we document significant statistical gains related to the FloGARCH models in terms of in-sample fit, out-of-sample fit and forecasting accuracy compared to classical and Realized GARCH models. In chapter 2, using 12 years of high-frequency transactions for 55 U.S. stocks, we argue that combining low-frequency exogenous economic indicators with high-frequency financial data improves the ability of conditionally heteroskedastic models to forecast the volatility of returns, their full multi-step ahead conditional distribution and the multi-period Value-at-Risk. Using a refined version of the Realized LGARCH model allowing for time-varying intercept and implemented with realized kernels, we document that nominal corporate profits and term spreads have strong long-run predictive ability and generate accurate risk measures forecasts over long-horizon. The results are based on several loss functions and tests, including the Model Confidence Set. Chapter 3 is a joint work with David Veredas. We study the class of disentangled realized estimators for the integrated covariance matrix of Brownian semimartingales with finite activity jumps. These estimators separate correlations and volatilities. We analyze different combinations of quantile- and median-based realized volatilities, and four estimators of realized correlations with three synchronization schemes. Their finite sample properties are studied under four data generating processes, in presence, or not, of microstructure noise, and under synchronous and asynchronous trading. The main finding is that the pre-averaged version of disentangled estimators based on Gaussian ranks (for the correlations) and median deviations (for the volatilities) provide a precise, computationally efficient, and easy alternative to measure integrated covariances on the basis of noisy and asynchronous prices. Along these lines, a minimum variance portfolio application shows the superiority of this disentangled realized estimator in terms of numerous performance metrics. Chapter 4 is co-authored with Niels S. Hansen, Asger Lunde and Kasper V. Olesen, all affiliated with CREATES at Aarhus University. We propose to use the Realized Beta GARCH model to exploit the potential of high-frequency data in commodity markets. The model produces high quality forecasts of pairwise correlations between commodities which can be used to construct a composite covariance matrix. We evaluate the quality of this matrix in a portfolio context and compare it to models used in the industry. We demonstrate significant economic gains in a realistic setting including short selling constraints and transaction costs.

Suomalaisten julkisesti listattujen senttiosakkeiden suoriutuminen verrattuna OMX Helsinki Small Cap -indeksin muihin osakkeisiin

Senttiosakkeista tehtyjä tutkimuksia on olemassa hyvin rajoitetusti, ja ne ovat keskittyneet lähinnä senttiosakelistautumisiin. Tässä tutkielmassa tarkastellaan suomalaisia julkisesti noteerattuja senttiosakkeita ja niiden suoriutumista kymmenen vuoden ajanjaksolla vuosina 2006–2015. Tavoitteena oli selvittää, onko suomalaisiin julkisesti noteerattuihin senttiosakkeisiin sijoittaminen kannattavaa toimintaa ja minkälaisia tuottoja on odotettavissa senttiosakkeisiin sijoittamalla. Tutkimusaineisto koostui tutkielmassa tehdyn määritelmän mukaisista senttiosakkeista ja muista Small Cap -indeksin osakkeista, joita kutsuttiin puolestaan ei-senttiosakkeiksi. Tuotot laskettiin osakkeiden päivittäisistä tuottoindekseistä. Tuottoja verrattiin lyhyellä, keskipitkällä ja pitkällä aikavälillä. Tuottojen tarkastelun tueksi senttiosakkeille ja ei-senttiosakkeille laskettiin seuraavat menestysmittarit: Sharpen luku, Treynorin indeksi ja Jensenin alfa. Lopuksi verrattiin vielä seuraavia tunnuslukuja: ROE (%), E/P-luku, P/B-luku, osinkotuotto-% ja velan suhde omaan pääomaan (%). Saatujen tulosten perusteella suomalaiset julkisesti noteeratut senttiosakkeet ovat lyhyellä aikavälillä kannattavia sijoituskohteita, mutta mitä pidemmäksi tarkasteluperiodi kasvoi, sitä huonommin ne suoriutuivat. Lisäksi senttiosakkeet hävisivät kaikilla tarkasteluperiodeilla ei-senttiosakkeille. Suurimmat positiiviset tuotot olivat kuitenkin yksittäisillä senttiosakkeilla. Senttiosakkeisiin havaittiin liittyvän paljon riskejä, kuten suuri volatiliteetti, suuret negatiiviset tuotot ja konkurssin mahdollisuus. Myös kaikki menestysmittarit ja tunnusluvut indikoivat senttiosakkeiden olevan ei-senttiosakkeita huonompia sijoituskohteita. Sijoittajien on oltava erityisen tarkkoja senttiosakkeiden kanssa, sillä niihin sijoittaminen on pitkälti verrattavissa uhkapelaamiseen.

Interpretación metodológica de los precios de transferencia en Colombia

El concepto de precios de transferencia es un referente universal donde los países se han visto afectados por las malas prácticas comerciales que tiene las diferentes organizaciones en concentrar sus utilidades en aquellos lugares donde las cargas impositivas sean menores o tiendan a cero. Lo anterior implica que lo que dejo de pagar en una región por las bases tributarias determinadas lo estoy recibiendo como utilidad en otro país, generando índices de pobreza y de inequidad tributaria en los países de origen y riqueza a los países destino. Dentro de las directrices que tiene el Gobierno para evitar que se trasladen cargas tributarias entre países es definir unos criterios normativos vinculantes u obligatorios, que eviten que se tipifiquen estos focos de evasión y por el contrario generar una cultura empresarial donde se respete el principio de la plena competencia. Dentro de los criterios normativos están los criterios de vinculación, la información que se debe evidenciar como la comprobatoria y la informativa y las sanciones por incumplir los requisitos vinculantes antes mencionados lo cual nos obliga a profundizar en el mecanismo de control que ejerce el gobierno. De igual forma se establecieron destinos donde se tipifican los precios de transferencia como son los paraísos fiscales, las zonas francas y los vinculados del exterior, donde el destino más relevante donde el Gobierno ejerce control son los paraísos fiscales por sus características que las identifican como son las mínimas cargas tributarias y de igual forma la ausencia de información. Los contribuyentes del impuesto sobre la renta y complementarios que celebren operaciones con vinculados y/o estén obligados a la aplicación de las normas que regulen el régimen de precios de transferencia, deberán llevar acabo tales operaciones en cumplimiento del Principio de Plena Competencia, entendido como aquel en el cual las operaciones entre vinculados cumplen con las condiciones que se hubiesen observado en operaciones comparables con o entre partes independientes, lo anterior, a efectos de determinar sus ingresos ordinarios y extraordinarios, costos, deducciones, activos y pasivos para los fines del impuesto sobre la renta y complementarios. En el siguiente contenido el lector encontrara una metodología ilustrativa que le permita interpretar la normatividad contenida en el Estatuto Tributario (Ley 1607 de 2012 y Decreto 3030 de 2013 el cual reglamenta la norma la ley 1607) y su respectiva aplicación para dar cumplimiento a los requerimientos de la Administración de Impuestos y Aduanas Nacionales. Lo anterior significa que el contenido del texto es el contenido normativo el cual es detallado en su contenido en algunos aspectos gráfico, en otros casos numéricos y en los demás casos narrativos.

L'économie du pluriel : la force naît du nombre et l'énergie naît du mouvement du nombre

Avec la régression de l'État dans les services publics, la globalisation, la déréglementation et l'accélération du commerce et des échanges, il se produit aujourd'hui un tournant de grande portée qui déstabilise et met en jeu le bien commun, notre patrimoine collectif. En effet, il ne faut pas oublier que « les services publics font partie du patrimoine collectif non seulement parce qu'ils ont été financé (sic) collectivement, mais aussi parce que la mise en commun dont ils sont l'objet correspond à une certaine conception de ce qui devrait relever du public afin d'assurer une juste distribution des biens de société essentiels » (Beauchemin, 1999, p. 93). Partant de ce fait, une réflexion doit s'engager quant à la redéfinition de nouvelles bases sociales et, de surcroît, quant à la responsabilité de la construction d'une nouvelle structure économique. Dans cette approche, il est indispensable que notre génération prenne à nouveau position sur le rôle et le devenir du mouvement coopératif, acteur de l'économie sociale. L'un des points influents pour une société du mieux-être réside, sans doute, dans la construction de liens sociaux signifiants et forts. Cependant, si l'économie sociale touche l'ensemble de la population à un niveau ou à un autre, et qu'elle revêt l'espoir d'une vie à essence plus humaniste pour beaucoup d'entre nous et ce, dans le présent contexte de mondialisation, de mégalopoles et de profits, il n'en demeure pas moins qu'il reste encore beaucoup de formation et d'information à faire afin qu'elle puisse revendiquer une participation reconnue et émérite dans la vie économique…

Socioeconomics of fishing communities on Uganda water bodies

Control and management of Uganda fishery resources has been hindered by among other factors the multispecies nature of the resource and the characteristic behaviour of the fishing communities. Fishermen have both genuine and uncompromising attitudes as to why they carry out certain fishing technologies. All fishing activities aim at maximizing the catches or profits while others may fish on a small scale for subsistence. Sensitizing the" fisherfolk on the appropriate fishing technologies, importance of awell regulated fishery exploitation and their participation in control and management of the resource would enhance or lead to increased and sustainable fish production. Socio-economics of fishing technologies were therefore examined using prepared questionnaires and reasons why the fishing communities behave the way they do established.

Entre o cartão-postal e a cidade real: um estudo sobre paisagem e produção imobiliária em Natal/RN

Recent studies concerning the landscape have investigated the most important activities that contribute for its modification and have tried to better understand the society through the marks left by its quotidian. It is understood that singular landscapes constitute the cultural patrimonies of the cities, once they are part of the daily life of the citizens and are present in their social representations. Some contemporary authors defend the preservation of the natural and urban landscape trying, specially, to keep its importance for the local population. Natal is a city where the ambient qualities are well defined and known by the beauty of the area where it is located. Situated just between a river and the sea, the city grew following its geographic characteristics. The Potengi River, the Atlantic Ocean and the vast dunes ecosystem represented natural limits to the urban expansion; at the same time they have favored the development of a landscape pattern marked by the dialectic between the natural elements and the human interventions. However, this relationship changed after the intensification of the high rising development process that took place since the 1960s. The urban legislation tried to preserve the features of the local landscape delimiting Areas for Controlling Building High , destined to protect the scenic value of some parts of the city. On the other hand, the civil construction sector has made constant pressure in sense to abolish or to modify this legal instrument, aiming profits that have increased, in the 1990s, because of the consumption and the qualification of the urban space for tourist activities. It is necessary the raising of new elements to stimulate the quarrel about the landscape preservation, the process of the urban space production and the best way for the legislation implementation. This work tries to raise elements about the subject at local level, in sense to use Natal City experience to contribute for the formulation of indicators to raise the question about the lack of measure for subjective values, for example the cultural and affective value of the landscape. The natural elements inserted in the urban profile, represent strong visual references and supply identity to the town; they are part of the collective imaginary and are detached in the social context of the city. Then, why the preservation of the landscape, that estimates the improvement in the quality of life, is not enough to justify the controlling building high already previewed as part of Natal City Legislation? These questions send us to the approach of the landscape, as a community patrimony, alerting that some of its significant esthetics attributes must be preserved as a legacy for the future generations

Socio economics of fishing communities on Uganda water bodies

Control and management of Uganda fishery resources has been hindered by among other factors the multispecies nature of the resource and the characteristic behaviour of the fishing communities. Fishermen have both genuine and uncompromising attitudes as to why they carry out certain fishing technologies. All fishing activities aim at maximizing the catches or profits while others may fish on a small scale for subsistence. Sensitizing the" fisherfolk on the appropriate fishing technologies. importance of awell regulated fishery exploitation and their participation in control and management of the resource would enhance or lead to increased and sustainable fish production. Socio-economics of fishing technologies were therefore examined using prepared questionnaires and reasons why the fishing communities behave the way they do established.

ENGINEERING DIGITAL SHARING PLATFORM TO CREATE SOCIAL CONTAGION: EVIDENCE FROM LARGE SCALE RANDOMIZED FIELD EXPERIMENTS

Peer-to-peer information sharing has fundamentally changed customer decision-making process. Recent developments in information technologies have enabled digital sharing platforms to influence various granular aspects of the information sharing process. Despite the growing importance of digital information sharing, little research has examined the optimal design choices for a platform seeking to maximize returns from information sharing. My dissertation seeks to fill this gap. Specifically, I study novel interventions that can be implemented by the platform at different stages of the information sharing. In collaboration with a leading for-profit platform and a non-profit platform, I conduct three large-scale field experiments to causally identify the impact of these interventions on customers’ sharing behaviors as well as the sharing outcomes. The first essay examines whether and how a firm can enhance social contagion by simply varying the message shared by customers with their friends. Using a large randomized field experiment, I find that i) adding only information about the sender’s purchase status increases the likelihood of recipients’ purchase; ii) adding only information about referral reward increases recipients’ follow-up referrals; and iii) adding information about both the sender’s purchase as well as the referral rewards increases neither the likelihood of purchase nor follow-up referrals. I then discuss the underlying mechanisms. The second essay studies whether and how a firm can design unconditional incentive to engage customers who already reveal willingness to share. I conduct a field experiment to examine the impact of incentive design on sender’s purchase as well as further referral behavior. I find evidence that incentive structure has a significant, but interestingly opposing, impact on both outcomes. The results also provide insights about senders’ motives in sharing. The third essay examines whether and how a non-profit platform can use mobile messaging to leverage recipients’ social ties to encourage blood donation. I design a large field experiment to causally identify the impact of different types of information and incentives on donor’s self-donation and group donation behavior. My results show that non-profits can stimulate group effect and increase blood donation, but only with group reward. Such group reward works by motivating a different donor population. In summary, the findings from the three studies will offer valuable insights for platforms and social enterprises on how to engineer digital platforms to create social contagion. The rich data from randomized experiments and complementary sources (archive and survey) also allows me to test the underlying mechanism at work. In this way, my dissertation provides both managerial implication and theoretical contribution to the phenomenon of peer-to-peer information sharing.

Marketing relacional: satisfação na formação da lealdade do cliente

A revisão de literatura tem revelado grande interesse na lealdade do cliente e enfatizado cada vez mais a sua importância no sucesso de uma empresa. Simultaneamente, durante décadas, a satisfação tem sido mencionada como um importante determinante da lealdade. Paralelamente, o conceito marketing relacional tem assumido grande relevância ao nível da prestação de serviços, sustentando a ideia de que as empresas podem maximizar os seus ganhos com relações duradouras com os seus clientes, passando a gestão dessas relações a estar associada à satisfação e à consequente lealdade. Neste contexto, o presente estudo examina o efeito do grau de satisfação na formação do grau de lealdade do cliente, através de um estudo de caso de uma loja de desporto da região da Aveiro. Os dados recolhidos, a uma amostra de 220 inquiridos, por meio de um questionário, suportam a teoria de que estes dois constructos estão relacionados entre si. Desta forma, esta investigação permitiu aferir o grau de satisfação geral e de lealdade geral dos clientes para com a loja, fornecendo evidência empírica da existência de uma relação positiva (moderada) entre os mesmos. Foi, ainda, possível afirmar que o grau de lealdade não varia significativamente consoante determinadas características do perfil dos clientes inquiridos, contudo constituem características importantes para a tomada de decisão neste contexto específico.

Essays on Information Frictions, Prices and Unemployment

I investigate the effects of information frictions in price setting decisions. I show that firms' output prices and wages are less sensitive to aggregate economic conditions when firms and workers cannot perfectly understand (or know) the aggregate state of the economy. Prices and wages respond with a lag to aggregate innovations because agents learn slowly about those changes, and this delayed adjustment in prices makes output and unemployment more sensitive to aggregate shocks. In the first chapter of this dissertation, I show that workers' noisy information about the state of the economy help us to explain why real wages are sluggish. In the context of a search and matching model, wages do not immediately respond to a positive aggregate shock because workers do not (yet) have enough information to demand higher wages. This increases firms' incentives to post more vacancies, and it makes unemployment volatile and sensitive to aggregate shocks. This mechanism is robust to two major criticisms of existing theories of sluggish wages and volatile unemployment: the flexibility of wages for new hires and the cyclicality of the opportunity cost of employment. Calibrated to U.S. data, the model explains 60% of the overall unemployment volatility. Consistent with empirical evidence, the response of unemployment to TFP shocks predicted by my model is large, hump-shaped, and peaks one year after the TFP shock, while the response of the aggregate wage is weak and delayed, peaking after two years. In the second chapter of this dissertation, I study the role of information frictions and inventories in firms' price setting decisions in the context of a monetary model. In this model, intermediate goods firms accumulate output inventories, observe aggregate variables with one period lag, and observe their nominal input prices and demand at all times. Firms face idiosyncratic shocks and cannot perfectly infer the state of nature. After a contractionary nominal shock, nominal input prices go down, and firms accumulate inventories because they perceive some positive probability that the nominal price decline is due to a good productivity shock. This prevents firms' prices from decreasing and makes current profits, households' income, and aggregate demand go down. According to my model simulations, a 1% decrease in the money growth rate causes output to decline 0.17% in the first quarter and 0.38% in the second followed by a slow recovery to the steady state. Contractionary nominal shocks also have significant effects on total investment, which remains 1% below the steady state for the first 6 quarters.

Team characteristics beneficial for Open Innovation projects

This study discusses the importance of creating Open Innovation (OI) teams for optimizing costs of Research and Development (R&D), dividing risks and maximizing profits. The purpose of this study is to determine team characteristics beneficial for successful OI project, with the emphasis on the fact that such teams are formed of professionals belonging to different organizations, both private and state-owned, with different educational and professional backgrounds and personal qualities. This purpose is supported by three sub-objectives: to observe the phenomenon of OI and its implementation in emerging economies, particularly in Russia; to specify professional and personal competencies of OI team members essential for the successful collaboration; and to identify the role of the leader in OI teams. The theoretical part of this study consists of knowledge from academic literature related to OI, cross-functional and innovation teams and leadership in innovation. The practical part of the study is presented in the form of multiple case study, and the empirical research is based on six semistructured interviews collected in October 2014 from the CEOs, Innovation Managers and Technical Directors of innovation companies participating actively in OI projects. The findings of the study demonstrate that many of the necessary competencies are equal for innovation or cross-functional teams and OI teams, such as professionalism and communication skills. However, due to the specific nature of OI, additional personal characteristics were recognized as beneficial for OI teams, such as flexibility, empathy and success-orientation. The role of the leader is also considered as a critical success factor for OI teams, with the emphasis on flexibility and autonomy. The findings of the study contribute to understanding the connection between notions of team member, team climate and team leader, and its influence on OI project success. Thus, the main purpose of the study is providing support for existing knowledge on OI teams and developing new insights into this newly emerged topic.

WorldFish Center report on the opportunities and constraints to improved fisheries exploitation and management in the Maringa – Lopori – Wamba landscape

The WorldFish Center was contracted by Africa Wildlife Foundation to conduct a preliminary survey of the role of fisheries in livelihoods, and opportunities and constraints to improved fisheries exploitation and management, in the Maringa-Lopori-Wamba Landscape. In May 2007, a three person WorldFish Center team, supported by AWF staff, visited the landscape to explore how the fishery operates to meet local needs and identify scope for interventions that might improve fisheries livelihood opportunities without undermining its sustainability. It is clear that although fishing is important for both income and subsistence in the areas visited, profits are nonetheless modest and somewhat unpredictable. Moreover, fisherfolk should not be considered a homogeneous group: there are different sub-groups, using different gears and skills, involving women and men in both fishing and post-harvest activities, groups who are more or less dependent on farming, and who fish, on balance, more either for cash or subsistence needs. Thus the findings here need to be set within this context of different sub-groups, fishing for generally very modest remuneration, with the latter subject to considerable variability and uncertainty.

Etude de la chaine de commercialisation du poisson: Lac Ntomba, section du fleuve Congo (Ngombe) et marchés de Mbandaka et Kinshasa

Cette étude a été réalisée par le WorldFish Center dans le cadre de sa collaboration avec le WWF et le projet CARPE de l’USAID. La chaîne de commercialisation du poisson a été suivie des zones de production jusqu’au principal marché final. La région au centre de cette étude est le lac Ntomba ainsi qu’une partie du fleuve Congo. Ceci correspond à la partie nord de la section du Paysage Lac Télé - Lac Tumba de la République Démocratique du Congo. Toutes les étapes de la chaîne de commercialisation du poisson ont été prises en compte dans cette étude. Les stratégies des acteurs présents à chaque étape ainsi que les dynamiques les associant à la chaîne ont été utilisées pour refléter le fonctionnement de la chaîne de commercialisation du poisson et identifier ses spécificités. La pêche est une activité saisonnière de grande importance dans la région du lac Ntomba et la partie proche du fleuve Congo. La majorité des habitants de la région constituent leurs moyens d’existence d’un panachage d’activités, dont la séquence semble être rythmée essentiellement par l’opportunité et le climat. Presque aucun service n’est offert dans cette région où les activités économiques sont réduites et n’ont le plus souvent qu’une faible productivité. Cependant, la chaîne de commercialisation du poisson supporte un large éventail d’acteurs différents et représente un secteur d’une grande importance pour la région. Cette région périphérique est reliée au reste de l’économie nationale par une série de marchés et de nombreux différents types d’acteurs. Assurer ce lien représente de sérieuses difficultés et comporte des risques importants tandis que les marges de profits sont le plus souvent minces. Cependant, il semblerait que, de manière générale, le marché se développe et les liens se renforcent, même si cette évolution est plus discrète dans les lieux les plus isolés.

Coordinated pricing and inventory management

This dissertation mainly focuses on coordinated pricing and inventory management problems, where the related background is provided in Chapter 1. Several periodic-review models are then discussed in Chapters 2,3,4 and 5, respectively. Chapter 2 analyzes a deterministic single-product model, where a price adjustment cost incurs if the current selling price is changed from the previous period. We develop exact algorithms for the problem under different conditions and find out that computation complexity varies significantly associated with the cost structure. %Moreover, our numerical study indicates that dynamic pricing strategies may outperform static pricing strategies even when price adjustment cost accounts for a significant portion of the total profit. Chapter 3 develops a single-product model in which demand of a period depends not only on the current selling price but also on past prices through the so-called reference price. Strongly polynomial time algorithms are designed for the case without no fixed ordering cost, and a heuristic is proposed for the general case together with an error bound estimation. Moreover, our illustrates through numerical studies that incorporating reference price effect into coordinated pricing and inventory models can have a significant impact on firms' profits. Chapter 4 discusses the stochastic version of the model in Chapter 3 when customers are loss averse. It extends the associated results developed in literature and proves that the reference price dependent base-stock policy is proved to be optimal under a certain conditions. Instead of dealing with specific problems, Chapter 5 establishes the preservation of supermodularity in a class of optimization problems. This property and its extensions include several existing results in the literature as special cases, and provide powerful tools as we illustrate their applications to several operations problems: the stochastic two-product model with cross-price effects, the two-stage inventory control model, and the self-financing model.