Introduction (Władysław Milo, Grzegorz Szafrański and Piotr
Wdowiński) ...................................................... 7
Part One: International Economics and Financial Markets Issues
1 Asset Prices, Asymmetries and Aggregation in the Euro Area
(David Mayes and Matti Virén) ............................... 11
1.1 Introduction ........................................... 11
1.2 Modelling the Impact of Asset Prices on Aggregate
Demand ................................................. 12
1.3 Assessing the Empirical Results ........................ 18
1.3.1 Total Output .................................... 18
1.3.2 Consumption ..................................... 22
1.3.3 Asymmetry ....................................... 23
1.4 Concluding Remarks ..................................... 27
Appendix: The Data .......................................... 30
Reference ................................................... 31
2 Role of Corporate Taxation and Bilateral Tax Treaties in
Investments into Estonian Manufacturing Companies?
Empirical Evidence (Svetlana Raudonen) ...................... 35
2.1 Introduction ........................................... 35
2.2 A Brief Literature Review .............................. 38
2.3 Description of Data and Estimation ..................... 42
2.4 Conclusions ............................................ 45
Appendix .................................................... 46
References .................................................. 49
3 What Drives Chinese Financial Markets? (Magdalena Osińska
and Tomasz Zdanowicz) ....................................... 51
3.1 Introduction ........................................... 51
3.2 Economic Growth in China after Reform in 1978 .......... 52
3.3 Testing for Causality in Conditional Variance .......... 54
3.3.1 Cheung and Ng Test for Causality in Variance .... 54
3.3.2 Caporale, Pittis and Spagnolo Test for
Causality in Variance ........................... 56
3.4 Causality in Variance between Chinese and the World's
Financial Markets-Empirical Analysis ................... 57
3.4.1 Testing for Causality between Currencies ............. 60
3.4.2 Mutual Impact of the World Stock Markets ............. 61
3.4.3 The MGARCH Model for CNY/USD and INR/USD ............. 65
3.5 Conclusions ............................................ 67
References .................................................. 68
Part Two: New Concepts and Methods for Financial Market Analysis
4 On the Empirical Importance of the Spectral Risk Measure
with Extreme Value Theory Approach (Martin Fałdziński) ...... 73
4.1 Introduction ........................................... 73
4.2 Measures of Risk ....................................... 74
4.3 Extreme Value Theory Approach .......................... 78
4.4 Financial Risk Model Evaluation ........................ 80
4.5 Empirical Analysis ..................................... 81
4.6 Conclusion ............................................. 85
References .................................................. 86
5 Regression Models of Macroeconomic Indicators with
Explanatory Variables Observed at a Higher Frequency
(Virmantas Kvedaras, Alfredas Račkauskas and Danas
Zuokas) ..................................................... 87
5.1 Introduction ........................................... 87
5.2 An Aggregation-Based-Estimation of the Period and
Scale Effects .......................................... 89
5.3 An Aggregation Function of Period and Scale Effects .... 92
5.4 Scale and Period Effects of Interest Rates in the
Intertemporal Substitution in Consumption .............. 93
5.5 Final Remarks .......................................... 98
Appendix .................................................... 98
References .................................................. 99
6 Relevance of Accounting Standards for Stock Markets:
Evidence from Poland (Karol Marek Klimczak) ................ 101
6.1 Introduction .......................................... 101
6.2 Accounting Earning and Stock Prices ................... 102
6.3 Methodology ........................................... 103
6.4 Results ............................................... 105
6.5 Conclusions ........................................... 108
References ................................................. 108
7 Parameter Estimation for Nonlinear State-Space Models
Using Particle Methods Combined with the EM Algorithm
(Katarzyna Brzozowska-Rup, Antoni Leon Dawidowicz) ......... 111
7.1 Introduction .......................................... 1ll
7.2 State-Space Models and Particle Filter Estimation ..... 113
7.3 Parameter Estimation in General State-Space Models .... 117
7.3.1 Expectation Maximization Algorithm ............. 117
7.4 Simulation Experiments - Stochastic Volatility
Models ................................................ 118
7.5 Conclusion ............................................ 122
References ................................................. 122
Part Three: Measuring Financial Risk
8 Modelling the Time-Varying Risk Premium by Using the
Kalman Filter: The Euro Money Market Case (Fabio
Filipozzi) ................................................. 127
8.1. Introduction .......................................... 127
8.2 Theoretical Framework ................................. 128
8.3 Data .................................................. 130
8.4 Empirical Results ..................................... 130
8.4.1 Classic Approach ............................... 130
8.4.2 Business Cycle ................................. 132
8.4.3 Kalman Filter .................................. 133
8.5 Conclusion ............................................ 134
Appendix ................................................... 135
References ................................................. 139
9 Comparative Analysis of Polish Equity Open-end Mutual
Funds' Portfolios Using Estimators of Risk Measures and
Risk-Tolerance Coefficient (Joanna Olbryś) ................. 141
9.1 Introduction .......................................... 141
9.2 A Brief Literature Review ............................. 142
9.3 Value-at-Risk and Expected Shortfall: Some
Definitions ........................................... 142
9.4 Value-at-Risk and Expected Shortfall Estimators ....... 144
9.5 The Risk-Tolerance Coefficient ........................ 144
9.6 The Dataset ........................................... 146
9.7 Empirical Results During the Period from January
2003 to January 2009 .................................. 146
9.8 Empirical Results During the Period from January
2008 to January 2009 .................................. 151
9.9 Conclusion ............................................ 153
References ................................................. 153
10 Asymmetry in Volatility: A Comparison of Developed and
Transition Stock Markets (Piotr Wdowiński and Marta
Malecka) ................................................... 155
10.1 Introduction .......................................... 155
10.2 The Methodology ....................................... 157
10.3 The Data and Preliminary Testing ...................... 159
10.4 Testing for Asymmetry in Stock Returns Volatility ..... 162
10.5 Conclusion ............................................ 171
References ................................................. 172
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