Sonderforschungsbereich 649: Ökonomisches Risiko

Permanent URI for this collectionhttp://edoc.hu-berlin.de/18452/87

About the CRC 649
We live in a world full of uncertainty. Uncertainty about the future influence present decisions. Financial market fluctuations threaten household wealth, real estate, or the value of bonds and shares. Unforeseen technical innovations destroy the market position of well-established firms. Cyclical fluctuations endanger employment. Economic policy is constantly challenged by growth risks. The pivotal meaning of economic risk has not until now be given sufficient consideration.

Please note: the Collaborative Research Center 649 and its publication series was successfully concluded at the end of 2017.

Humboldt-Universität zu Berlin
School of Business and Economics
Coordinator: Prof. Dr. Wolfgang Härdle
Deputy Coordinator: Prof. Michael C. Burda, Ph.D.

http://sfb649.wiwi.hu-berlin.de
ISSN 1860-5664

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Now showing 1 - 20 of 832

2017-11-06Diskussionspapier
Is Scientific Performance a Function of Funds?
(Wirtschaftswissenschaftliche Fakultät) Zharova, Alona; Härdle, Wolfgang Karl; Lessmann, Stefan
The management of universities demands data on teaching and research performance. While teaching parameters can be measured via student performance and teacher evaluation programs, the connection of research outputs and their grant antecedents is much harder to check, test and understand. This paper elicits the interdependence structure between third-party expenses (TPE), publications, citations and academic age. To describe the relationship, we analyze individual level data from a sample of professorships from a leading research university and a Scopus database for the period 2001 to 2015. Using estimates from a PVARX model, impulse response functions and a forecast error variance decomposition, we show that analyzing on the high aggregation level of universities does not reflect the behavior of its faculties. We explain the differences in relationship structure between indicators for social sciences and humanities, life sciences and mathematical and natural sciences. For instance, for mathematics and some fields of social sciences and humanities the relationship between the TPE and the number of publications is insignificant, however, the influence of the TPE on the number of citation is significant and positive that indicates the difference between quality and quantity of research outputs. The paper also proposes a visualization of the cooperation between faculties and research interdisciplinarity via the co-authorship structure among publications. We discuss the implications for policy and decision making and suggest recommendations for research management of universities.
2017-11-06Diskussionspapier
Dynamic semi-parametric factor model for functional expectiles
(Wirtschaftswissenschaftliche Fakultät) Burdejová, Petra; Härdle, Wolfgang Karl
High-frequency data can provide us with a quantity of informa- tion for forecasting, help to calculate and prevent the future risk based on extremes. This tail behaviour is very often driven by ex- ogenous components and may be modelled conditional on other vari- ables. However, many of these phenomena are observed over time, exhibiting non-trivial dynamics and dependencies. We propose a func- tional dynamic factor model to study the dynamics of expectile curves. The complexity of the model and the number of dependent variables are reduced by lasso penalization. The functional factors serve as a low-dimensional representation of the conditional tail event, while the time-variation is captured by factor loadings. We illustrate the model with an application to climatology, where daily data over years on temperature, rainfalls or strength of wind are available.
2017-11-06Diskussionspapier
Dynamic Semiparametric Factor Model with a Common Break
(Wirtschaftswissenschaftliche Fakultät) Chen, Likai; Wang, Weining; Wu, Wei Biao
For change-point analysis of high dimensional time series, we consider a semiparametric model with dynamic structural break factors. The observations are described by a few low dimensional factors with time-invariate loading functions of covariates. The unknown structural break in time models the regime switching e ects introduced by exogenous shocks. In particular, the factors are assumed to be nonstationary and follow a Vector Autoregression (VAR) process with a structural break. In addition, to account for the known spatial discrepancies, we introduce discrete loading functions. We study the theoretical properties of the estimates of the loading functions and the factors. Moreover, we provide both the consistency and the asymptotic convergence results for making inference on the common breakpoint in time. The estimation precision is evaluated via a simulation study. Finally we present two empirical illustrations on modeling the dynamics of the minimum wage policy in China and analyzing a limit order book dataset.
2017-11-06Diskussionspapier
Realized volatility of CO2 futures
(Wirtschaftswissenschaftliche Fakultät) Benschop, Thijs; López-Cabrera, Brenda
The EU Emission Trading System (EU ETS) was created to reduce the CO2 and other greenhouse gas emissions at the lowest economic cost. In reality market participants are faced with considerable uncertainty due to price changes and require price and volatility estimates and forecasts for appropriate risk management, asset allocation and volatility trading. Although the simplest approach to estimate volatility is to use the historical standard deviation, realized volatility is a more accurate measure for volatility, since it is based on intraday data. Besides the stylized facts commonly observed in financial time series, we observe long-memory properties in the realized volatility series, which motivates the use of Heterogeneous Autoregressive (HAR) class models. Therefore, we propose to model and forecast the realized volatility of the EU ETS futures with HAR class models. The HAR models outperform benchmark models such as the standard long-memory ARFIMA model in terms of model fit, in-sample and out-of-sample forecasting. The analysis is based on intraday data (May 2007-April 2012) for futures on CO2 certificates for the second EU-ETS trading period (expiry December 2008-2012). The estimation results of the models allow to explain the volatility drivers in the market and volatility structure, according to the Heterogeneous Market Hypothesis as well as the observed asymmetries. We see that both speculators with short investment horizons as well as traders taking long-term hedging positions are active in the market. In a simulation study we test the suitability of the HAR model for option pricing and conclude that the HAR model is capable of mimicking the long-term volatility structure in the futures market and can be used for short-term and long-term option pricing.
2017-09-12Diskussionspapier
Spatial Functional Principal Component Analysis with Applications to Brain Image Data
(Wirtschaftswissenschaftliche Fakultät) Li, Yingxing; Huang, Chen; Härdle, Wolfgang Karl
This paper considers a fast and effective algorithm for conducting functional principle component analysis with multivariate factors. Compared with the univariate case, our approach could be more powerful in revealing spatial connections or extracting important features in images. To facilitate fast computation, we connect Singular Value Decomposition with penalized smoothing and avoid estimating a huge dimensional covariance operator. Under regularity assumptions, the results indicate that we may enjoy the optimal convergence rate by employing the smoothness assumption inherent to functional objects. We apply our method on the analysis of brain image data. Our extracted factors provide excellent recovery of the risk related regions of interests in human brain and the estimated loadings are very informative in revealing the individual risk attitude.
2017-09-12Diskussionspapier
Penalized Adaptive Method in Forecasting with Large Information Set and Structure Change
(Wirtschaftswissenschaftliche Fakultät) Li, Xinjue; Zbonakova, Lenka; Härdle, Wolfgang Karl
In the present paper we propose a new method, the Penalized Adaptive Method (PAM), for a data driven detection of structure changes in sparse linear models. The method is able to allocate the longest homogeneous intervals over the data sample and simultaneously choose the most proper variables with help of penalized regression models. The method is simple yet exible and can be safely applied in high-dimensional cases with different sources of parameter changes. Comparing with the adaptive method in linear models, its combination with dimension reduction yields a method which selects proper signi cant variables and detects structure breaks while steadily reduces the forecast error in high-dimensional data. When applying PAM to bond risk premia modelling, the locally selected variables and their estimated coeffcient loadings identified in the longest stable subsamples over time align with the true structure changes observed throughout the market.
2017-08-28Diskussionspapier
Das deutsche Arbeitsmarktwunder: Eine Bilanz
(Wirtschaftswissenschaftliche Fakultät) Burda, Michael C.; Seele, Stefanie
Dem deutschen Arbeitsmarkt ging es noch nie seit der Wiedervereinigung so gut wie heute. Die nachhaltige Entwicklung seit 2005 ist auf zwei entscheidende Treiber zurückzuführen: die Umverteilung eines beinahe gleichbleibenden Arbeitsstundenvolumens auf mehr Beschäftigte und die massive Ausweitung der Teilzeitarbeit. Die Lohnzurückhaltung der Tarifparteien war dabei eine notwendige, jedoch nicht hinreichende Bedingung für diesen Erfolg. Die Kovarianz von Lohn und Erwerbsindikatoren deutet darauf hin, dass die Arbeitsmarktreformen der sogenannten Agenda 2010 die erwerbsfähige Bevölkerung ab 2005 zur Teilnahme am Arbeitsmarkt aktiviert haben. Insbesondere die Reform der Arbeitslosenunterstützung hat die Ausweitung des Arbeitsangebots im unteren Lohnsegment ermöglicht und bewerkstelligt, dass die sozialversicherungspflichtige Teil- und Vollzeitarbeit zunahm. Ein Rückbau der Reformen könnte diesen Erfolg gefährden.
2017-08-23Diskussionspapier
The systemic risk of central SIFIs
(Wirtschaftswissenschaftliche Fakultät) Chen, Cathy Yi-Hsuan; Nasekin, Sergey
Systemic risk quantification in the current literature is concentrated on market-based methods such as CoVaR(Adrian and Brunnermeier (2016)). Although it is easily implemented, the interactions among the variables of interest and their joint distribution are less addressed. To quantify systemic risk in a system-wide perspective, we propose a network-based factor copula approach to study systemic risk in a network of systemically important financial institutions (SIFIs). The factor copula model offers a variety of dependencies/tail dependencies conditional on the chosen factor; thus constructing conditional network. Given the network, we identify the most “connected” SIFI as the central SIFI, and demonstrate that its systemic risk exceeds that of non-central SIFIs. Our identification of central SIFIs shows a coincidence with the bucket approach proposed by the Basel Committee on Banking Supervision, but places more emphasis on modeling the interplay among SIFIs in order to generate systemwide quantifications. The network defined by the tail dependence matrix is preferable to that defined by the Pearson correlation matrix since it confirms that the identified central SIFI through it severely impacts the system. This study contributes to quantifying and ranking the systemic importance of SIFIs.
2017-08-23Diskussionspapier
Pricing Green Financial Products
(Wirtschaftswissenschaftliche Fakultät) Melzer, Awdesch; Härdle, Wolfgang Karl; López-Cabrera, Brenda
With increasing wind power penetration more and more volatile and weather dependent energy is fed into the German electricity system. To manage the risk of windless days and transfer revenue risk from wind turbine owners to investors wind power derivatives were introduced. These insurance-like securities (ILS) allow to hedge the risk of unstable wind power production on exchanges like Nasdaq and European Energy Exchange. These products have been priced before using risk neutral pricing techniques. We present a modern and powerful methodology to model weather derivatives with very skewed underlyings incorporating techniques from extreme event modelling to tune seasonal volatility and compare transformed Gaussian and non-Gaussian CARMA(p; q) models. Our results indicate that the transformed Gaussian CARMA(p; q) model is preferred over the non-Gaussian alternative with Lévy increments. Out-of-sample backtesting results show good performance wrt burn analysis employing smooth Market Price of Risk (MPR) estimates based on NASDAQ weekly and monthly German wind power futures prices and German wind power utilisation as underlying. A seasonal MPR of a smile-shape is observed, with positive values in times of high volatility, e.g. winter months, and negative values, in times of low volatility and production, e.g. in summer months. We conclude that producers pay premiums to insure stable revenue steams, while investors pay premiums when weather risk is high.
2017-08-11Diskussionspapier
Racial/Ethnic Differences In Non-Work At Wor
(Wirtschaftswissenschaftliche Fakultät) Hamermesh, Daniel S.; Genadek, Katie R.; Burda, Michael C.
2017-08-09Diskussionspapier
Social Security Contributions and the Business Cycle
(Wirtschaftswissenschaftliche Fakultät) Almosova, Anna; Burda, Michael C.; Voigts, Michael
This paper examines magnitudes and business cycle dynamics of social security contributions (SSC). In most OECD countries studied, we document a negative covariation of payroll tax burdens with GDP and GDP growth at business cycle and lower frequencies. We assess the overall magnitude of the distortion following Barro and Redlick (2011). For most countries, average marginal SSC tax rates exceed average rates, but the latter tracks the former tightly. Changes in average payroll tax burdens are mostly accounted for by changes in tax schedules rather than shifts in the earnings distribution over time. For many countries, SSC rates behave like estimated values of the “labor wedge” (Chari et al. 2007, Brinca et al., 2016).
2017-08-09Diskussionspapier
Generalized Entropy and Model Uncertainty
(Wirtschaftswissenschaftliche Fakultät) Meyer-Gohde, Alexander
I entertain a generalization of the standard Bolzmann-Gibbs-Shannon measure of entropy in multiplier preferences of model uncertainty. Using this measure, I derive a generalized exponential certainty equivalent, which nests the exponential certainty equivalent of the standard Hansen-Sargent model uncertainty formulation and the power certainty equivalent of the popular Epstein-Zin-Weil recursive preferences as special cases. Besides providing a model uncertainty rationale to these risk-sensitive preferences, the generalized exponential equivalent provides additional flexibility in modeling uncertainty through its introduction of pessimism into agents, causing them to overweight events made more likely in the worst case model when forming expectations. In a standard neoclassical growth model, I close the gap to the Hansen-Jagannathan bounds with plausible detection error probabilities using the generalized exponential equivalent and show that Hansen-Sargent and Epstein-Zin-Weil preferences yield comparable market prices of risk for given detection error probabilities.
2017-07-21Diskussionspapier
Conditional moment restrictions and the role of density information in estimated structural models
(Wirtschaftswissenschaftliche Fakultät) Tryphonides, Andreas
While incomplete models are desirable due to their robustness to misspecification, they cannot be used to conduct full information exercises i.e. counterfactual experiments and predictions. Moreover, the performance of the corresponding GMM estimators is fragile in small samples. To deal with both issues, we propose the use of an auxiliary conditional model for the observables f(X|Z, '), where the equilibrium conditions E(m(X, #)|Z) = 0 are imposed on f(X|Z, ') using information projections, and (#, ') are estimated jointly. We provide the asymptotic theory for parameter estimates for a general set of conditional projection densities, under correct and local misspecification of f(X|Z, '). In either cases, efficiency gains are significant. We provide simulation evidence for the Mean Squared Error (MSE) both under the case of local and fixed density misspecification and apply the method to the prototypical stochastic growth model. Moreover, we illustrate that given (#ˆ, 'ˆ) it is now feasible to do counterfactual experiments without explicitly solving for the equilibrium law of motion.
2017-07-17Diskussionspapier
(Un)expected Monetary Policy Shocks and Term Premia
(Wirtschaftswissenschaftliche Fakultät) Kliem, Martin; Meyer-Gohde, Alexander
We analyze an estimated stochastic general equilibrium model that replicates key macroeconomic and financial stylized facts during the Great Moderation of 1983-2007. Our model predicts a sizeable and volatile nominal term premium - comparable to recent reduced-form empirical estimates - with real risk two times more important than inflation risk for the average nominal term premia. The model enables us to address salient questions about the effects of monetary policy on the term structure of interest rates. We fi nd that monetary policy shocks can have differing effects on risk premia. Actions by the monetary authority with a persistent effect on households' expectations have substantial effects on nominal and real risk premia. Our model rationalizes many of the opposing findings on the effects of monetary policy on term premia in the empirical literature.
2017-07-10Diskussionspapier
Investing with cryptocurrencies
(Wirtschaftswissenschaftliche Fakultät) Trimborn, Simon; Mingyang, Li; Härdle, Wolfgang Karl
Cryptocurrencies have left the dark side of the finance universe and become an object of study for asset and portfolio management. Since they have a low liquidity compared to traditional assets, one needs to take into account liquidity issues when one puts them into the same portfolio. We propose use a LIquidity Bounded Risk-return Optimization (LIBRO) approach, which is a combination of the Markowitz framework under the liquidity constraints. The results show that cryptocurrencies add value to a portfolio and the optimization approach is even able to increase the return of a portfolio and lower the volatility risk. The codes used to obtain the results in this paper are available via www.quantlet.de
2017-07-04Diskussionspapier
Adaptive weights clustering of research papers
(Wirtschaftswissenschaftliche Fakultät) Adamyan, Larisa; Efimov, Kirill; Chen, Cathy Yi-Hsuan; Härdle, Wolfgang Karl
The JEL classification system is a standard way of assigning key topics to economic articles in order to make them more easily retrievable in the bulk of nowadays massive literature. Usually the JEL (Journal of Economic Literature) is picked by the author(s) bearing the risk of suboptimal assignment. Using the database of a Collaborative Research Center from Humboldt-Universit¨at zu Berlin and Xiamen University, China we employ a new adaptive clustering technique to identify interpretable JEL (sub)clusters. The proposed Adaptive Weights Clustering (AWC) is available on www.quantlet.de and is based on the idea of locally weighting each point (document, abstract) in terms of cluster membership. Comparison with k-means or CLUTO reveals excellent performance of AWC.
2017-05-29Diskussionspapier
Industry Interdependency Dynamics in a Network Context
(Wirtschaftswissenschaftliche Fakultät) Qian, Ya; Härdle, Wolfgang Karl; Chen, Cathy Yi-Hsuan
This paper contributes to model the industry interconnecting structure in a network context. General predictive model (Rapach et al. 2016) is extended to quantile LASSO regression so as to incorporate tail risks in the construction of industry interdependency networks. Empirical results show a denser network with heterogeneous central industries in tail cases. Network dynamics demonstrate the variety of interdependency across time. Lower tail interdependency structure gives the most accurate out-of-sample forecast of portfolio returns and network centrality-based trading strategies seem to outperform market portfolios, leading to the possible ’too central to fail’ argument.
2017-05-29Diskussionspapier
The impact of news on US household inflation expectations
(Wirtschaftswissenschaftliche Fakultät) Chao, Shih-Kang; Härdle, Wolfgang Karl; Sheen, Jeffrey; Trück, Stefan; Wang, Ben Zhe
Analysis of monthly disaggregated data from 1978 to 2016 on US household in ation expectations reveals that exposure to news on in ation and monetary policy helps to explain in ation expectations. This remains true when controlling for household personal characteristics, their perceptions of the effectiveness of government policies, their expectations of future interest rates and unemployment, and their sentiment levels. We find evidence of an asymmetric impact of news on in ation expectations particularly after 1983, with news on rising in ation and easier monetary policy having a stronger effect in comparison to news on lowering in ation and tightening monetary policy.
2017-05-29Diskussionspapier
Data science & digital society
(Wirtschaftswissenschaftliche Fakultät) Chen, Cathy Yi-Hsuan; Härdle, Wolfgang Karl
Data Science looks at raw numbers and informational objects created by different disciplines. The Digital Society creates information and numbers from many scientiHic disciplines. The amassment of data though makes is hard to Hind structures and requires a skill full analysis of this massive raw material. The thoughts presented here on DS2 - Data Science & Digital Society analyze these challenges and offers ways to handle the questions arising in this evolving context. We propose three levels of analysis and lay out how one can react to the challenges that come about. Concrete examples concern Credit default swaps, Dynamic Topic modeling, Crypto currencies and above all the quantitative analysis of real data in a DS2 context.
2017-05-29Diskussionspapier
The Economics of German Unification after Twenty-five Years: Lessons for Korea
(Wirtschaftswissenschaftliche Fakultät) Burda, Michael C.; Weder, Mark
This paper reviews the performance of the East German economy in the turbulent quarter-century following reunification and draws some conclusions for the reunification of North and South Korea. In this period, the gap in output per capita between East and West Germany declined at a speed not far from empirical estimates of the neoclassical growth model, yet systematic total factor productivity di¤eren- tials persist despite identical institutional frameworks and significant investment in the eastern regions. At the same time, regional disparities in income, well-being, and health are little different from those found within West Germany, and net migration has ceased. On this human metric, German unification has been an unqualified success. For Korea, an e¤ort of this dimension will be costly. A back-of-the- envelope calculation suggests that Korean uni?cation will cost roughly twice as much as its German counterpart.

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