One of the most prominent features of the U.S. stock market is the close connection between aggregate stock market volatility and the development of the business cycle. Figure 1 depicts the statistical relation between stock market volatility and the industrial production growth rate over the last sixty years, which shows that stock volatility is largely countercyclical, being larger in bad tim...

We examine the dynamics of idiosyncratic risk, market risk and return correlations in European equity markets using weekly observations from 3515 stocks listed in the 12 Euro area stock markets over the period 1974-2004. Similarly to Campbell, Lettau, Malkiel and Xu (2001), we find a rise in idiosyncratic volatility, implying that it now takes more stocks to diversify away idiosyncratic risk. C...

TRADING IN FX MARKETS IS DOMINATED BY TWO MICROSTRUCTURES: exchanges with market makers and OTC-markets without market makers. Using laboratory experiments we test whether the impact of a Tobin tax is different in these two market microstructures. We find that (i) in markets without market makers an unilaterally imposed Tobin tax (i.e. a tax haven exists) increases volatility. (ii) In contrast,...

This paper examined the volatility spillover effects between futures market and spot market in China, using both VAR model and TVP-VAR model. This study found strong bi-directional volatility spillovers between CSI futures and spot markets, and the change of futures’ volatility decreased the change of spot market’s volatility. This results support the hypothesis that the risk management functio...

abstract producing of flowers and ornamental plants in iran has some challenges and failure in the market structure and marketing of these products. in this study, we evaluated the different marketing channels of flowers and ornamental plants in the existing market structure according to economic criteria and the characteristics of market structure. cut-rose and esfahan province were selected a...

In this paper, I examine how time-varying discount factors can contribute to labor market volatility in a Diamond-Mortensen-Pissarides matching model. I find that the procyclical discount factor of either entrepreneurs or workers can magnify labor market volatility. Quantitatively, the entrepreneur’s discount factor has a larger effect than the worker’s discount factor. To account for the obser...

This study empirically examines the effect of foreign exchange (FX) market liquidity risk and volatility on the excess returns of currency carry trades. In contrast to the existent literature, we construct an alternative proxy of liquidity risk violations of no arbitrage bounds in the forward and currency swap markets. We also use volatility smile data to capture FX-market specific volatility. ...

We measure dynamic risk exposure of hedge funds to various risk factors during different market volatility conditions using the regime-switching beta model. We find that in the high-volatility regime (when the market is rolling-down) most of the strategies are negatively and significantly exposed to the Large-Small and Credit Spread risk factors. This suggests that liquidity risk and credit ris...

Recent literature shows how the destabilising e¤ect of portfolio insurance activity on the price of the underlying asset depends on the liquidity of the asset market. We build a simple model where market timers shift capital around asset markets in order to exploit gains from temporary excess-volatility of asset prices. In this way, market timers increase the liquidity of asset markets reducing...