Contemporary Trends and Challenges in Finance (eBook)

Krzysztof Jajuga is a professor of finance at Wrocław University of Economics, Poland. He  holds master, doctoral and habilitation degree from Wrocław University of Economics, Poland, titular professor given by President of Poland, honorary doctorate from Cracow University of Economics and honorary professorship from Warsaw University of Technology. He carries out research within the area of financial markets, risk management, household finance and multivariate statistics. He published numerous papers and monographs in the area of finance and quantitative methods in economic sciences. He is editor in chief of Argumenta Oeconomica as well as sits on the scientific board of several other scientific journals.Lucjan T. Orlowski is professor of economics and finance at Sacred Heart University in Fairfield, Connecticut. He also serves as Director of the Doctor of Business Administration (DBA) in Finance Program. He was a visiting professor at New York University, University of Bonn, University of Rome III, Shanghai University of Finance and Economics, University of Warsaw and others. He served as an advisor to Poland’s Minister of Finance and the National Bank of Poland. His research interests include monetary economics and stability of financial markets and institutions.  He has published over 80 papers, completed work on 3 books and written chapters for 12 edited volumes.  He serves on editorial boards of 8 scientific journals.  He has been awarded Doctor Honoris Causa by Wrocław University of Economics.Karsten Staehr is a professor of international and public finance at the Department of Economics and Finance at Tallinn University of Technology, Estonia, and a part-time research supervisor at Eesti Pank, the central bank of Estonia. He holds a master’s degree from the Massachusetts Institute of Technology and master’s and Ph.D. degrees from the University of Copenhagen. He carries out research and policy analysis within international finance, monetary economics, public economics, European integration and comparative economics. Karsten Staehr has published in numerous journals, including European Economic Review, Journal of Common Market Studies, Journal of Comparative Economics, Review of International Economics and Economics Letters. He is an associate editor of the Baltic Journal of Economics and is on the editorial board of several other journals. 

Preface 6
Contents 9
About the Editors 12
Part I: Econometrics of Financial Markets 13
Chosen Measures for Pricing of Liquidity 14
1 Introduction 14
2 Liquidity and Liquidity Risk 15
3 Liquidity Measures 16
4 Chosen Liquidity Measures and Application into Polish Market 17
5 Summary 19
References 20
Not as Black as Is Painted? Influence of sCDS Market on Domestic Financial Markets Before and After the Ban on Naked sCDS Trade 21
1 Introduction 21
2 The Data 22
2.1 Bond Market 23
2.2 Exchange Rate 24
2.3 Stock Exchange 26
3 Causality in Mean and Variance 27
4 Robustness Check: Volatility Impulse Response 29
5 Conclusions 31
References 32
Determinants of the Spread Between POLONIA Rate and the Reference Rate: Dynamic Model Averaging Approach 34
1 Introduction 34
2 Dynamic Model Averaging 36
3 Variables and Models 37
4 Empirical Results 39
5 Conclusions 40
References 41
World Natural Gas Markets: Characteristics, Basic Properties and Linkages of Natural Gas Prices 43
1 Introduction 43
2 Constant Conditional Correlation Model 45
3 Basic Properties of Returns and the Estimation Results 46
4 Conclusions 49
References 50
Are Major Currencies Hedges or Safe Havens for Polish Stocks and Bonds? 52
1 Introduction 52
2 Econometric Model 57
3 Empirical Results 58
4 Conclusion 61
References 62
Copper Price Discovery on COMEX, 2006-2015 63
1 Introduction 63
2 Model 65
3 Empirical Results 67
4 Conclusion 71
References 72
A Copula Approach to Backward-Looking Factors in Market Based Inflation Expectations 74
1 Introduction 74
2 Methodology 76
3 Data 78
4 Results 79
5 Interpretation and Conclusion 80
References 81
Part II: Stock Market Investments 83
Risk Parity Portfolios for the Grouped Stocks 84
1 Introduction 84
2 Risk Parity Portfolios for Individual Stocks 85
3 Risk Parity Portfolios for Grouped Stocks 87
4 Risk Parity Portfolios for Warsaw Stock Exchange 88
5 Summary 91
References 91
Order Imbalance Indicators in Asset Pricing: Evidence from the Warsaw Stock Exchange 93
1 Introduction 93
2 Brief Literature Review 94
3 Definition of Order Imbalance 95
4 The Three-Factor Asset Pricing Model with Imbalance Indicator 96
5 Research Methodology and Procedure 98
6 Empirical Results 100
Appendix 102
References 104
Interaction Between Market Depth and Market Tightness on the Warsaw Stock Exchange: A Preliminary Study 105
1 Introduction 105
2 Dimensions of Market Liquidity 107
2.1 Measuring of Market Depth 107
2.2 Measuring of Market Tightness 108
3 Data Description and Empirical Results on the WSE 109
3.1 Summarized Results of Daily Market Depth and Daily Market Tightness Estimates 109
3.2 Correlation Analysis Between Market Depth and Market Tightness for Selected Big Companies 110
4 Conclusion 112
References 112
Investment Opportunities in the WSE: Bull Versus Bear Markets 114
1 Introduction 114
2 Study Background 115
3 Identification Strategy 116
3.1 Asset Pricing Models 116
3.2 LHS Portfolios 116
3.3 Testing for Model´s Robustness 117
4 Findings 117
4.1 Excess Returns for the Set of Univariate LHS Portfolios 117
4.2 Abnormal Returns in the WSE 119
4.3 Abnormal Returns in the WSE 121
5 Conclusions 122
References 123
Part III: Macrofinance 124
Development of Financial Systems in 1995-2014: A Factor Analysis 125
1 Introduction 126
2 Review of Literature 126
3 Methodology and Data 127
4 Discussion of Empirical Results 130
5 Conclusions 133
References 133
Measuring Systemic Risk with CoVaR Using a Stock Market Data Based Approach 135
1 Introduction 135
2 Alternative Approach to Calculating VaR and CoVaR 136
2.1 Quantile Regression and Estimation of CoVaR 137
2.2 Stock Market Data 138
3 CoVaR Based on the Stock Market Data: Empirical Results for Poland 139
4 Conclusions 141
References 143
The Quality of Financial Information and Stock Market Development: A Panel Data Study for the European Economies 144
1 Introduction 144
2 Literature Review 146
3 Empirical Work 147
3.1 Research Methodology Framework 147
3.2 Sample and Data Description 148
3.3 Estimated Results and Discussion 149
4 Conclusions 151
References 151
Impacts of Urban Environmental Attributes on Residential Housing Prices in Warsaw (Poland): Spatial Hedonic Analysis of City D... 153
1 Introduction 153
2 Literature Review 154
3 Methodology and Data 155
3.1 Study Area and Data Collection 155
3.2 Hedonic Pricing Method and Regression Model 156
4 Results 158
5 Conclusions 161
References 162
Macro- and Microprudential Regulations and Their Effects on Procyclicality of Solvency and Liquidity Risk 163
1 Introduction 163
2 Related Literature 164
3 Research Design and Data 166
4 Results 168
4.1 Macroprudential Policy and Microprudential Regulations and Their Effect on Procyclicality of Leverage 174
4.2 Macroprudential Policy and Microprudential Regulations and Their Effect on Procyclicality of Liquidity Risk 175
4.3 Interactions Between Macroprudential Policy and Microprudential Regulations and Their Effect on Procyclicality of Leverage... 176
5 Conclusions 177
References 177
Part IV: Banks and Other Financial Institutions 179
Balance Sheet Shaping Through Decision Model and the Role of the Funds Transfer Pricing Process 180
1 Introduction 180
2 Decision Model: Maximization of the Assets Income and Minimization of the Funding Costs 181
3 Funds Transfer Pricing Process (FTP): General Concepts 185
4 Conclusions 189
References 189
Testing VaR Under Basel III with Application to No-Failure Setting 191
1 Introduction 191
2 Testing VaR Failure Rate 192
3 Simulation Study of Test Properties 195
4 Summary and Conclusions 196
References 197
Factors of Influence on Relationship Banking of Polish Firms 199
1 Introduction 199
2 Literature Review 201
3 Hypotheses 202
4 Data and Descriptive Analysis 202
5 Econometric Model 203
6 Empirical Results, Conclusions and Limitations 204
References 206
Bootstrap Mean Squared Error of Prediction in Loss Reserving 208
1 Introduction 208
2 The Model and the Predicted Total Loss Reserve 209
3 The Bootstrap MSEP 211
4 Numerical Example 212
5 Conclusions 214
References 214
Mixture Cure Models in Prediction of Time to Default: Comparison with Logit and Cox Models 216
1 Introduction 216
2 The Formula of Mixture Cure Models 218
3 Data 221
4 Results 222
5 Conclusions and Further Research 224
References 225
Part V: Public Finance 227
A New Business Model in Health Care Between Public and Private: Low Cost High Value Healthcare 228
1 Introduction 228
2 Organization and Research Method 229
3 Financing Health Care System: The Cut 230
4 Low Cost High Value Health Care 234
5 Case Study 235
6 Conclusions 237
References 238
The Heterogeneous Diversity of the Real Estate Transfer Tax in the EU 240
1 Introduction 240
2 EU and (Dis)Harmonized Real Estate Transfer Taxation 241
3 Diverse Real Estate Transfer Taxation in EU Member States 243
4 Case Study: Czech Real Estate Transfer Taxation 245
5 Conclusion 247
References 247
Impact of Financial Policies of Local Authorities on Entrepreneurship: Comprehensiveness of Policy Matters 249
1 Introduction 250
2 Data, Methods, and Model Specification 252
3 Results 256
4 Discussion and Conclusions 258
References 259
Part VI: Corporate Finance 262
Are Capital Structure Determinants Different Depending on Firm Size and Debt Maturity? Evidence from European Panel Data 263
1 Introduction 263
2 Literature Review on Capital Structure Determinants 264
3 Dataset Characteristics 266
4 Methodology Description 266
5 Empirical Results 271
6 Conclusions 272
References 273
Value Creation in a Firm Through Coopetition: Real Options Games Approach 274
1 Introduction 274
2 The Model of Interaction Between Firms: Option Game 275
2.1 Pure Competition 275
2.2 Coopetition 279
3 Benefits of Coopetition 280
3.1 Coopetition vs. Competition 280
3.2 Coopetition: Loyalty vs. Disloyalty 281
4 Conclusion 283
References 284
Part VII: Household Finance 285
Does a Household´s Wealth Determine the Risk Profile of Its Financial Asset Portfolio? 286
1 Introduction 286
2 Related Literature 287
3 Data and Methodology 288
4 Results: Portfolios´ Description 291
5 Results: Fractional Multinomial Logit Regression 292
6 Conclusions 296
References 296
Supporting Family to Their Utmost-People´s over the Age of 50 Attitudes to Borrowing 298
1 Introduction 298
2 Methods and Data 300
3 Results 303
4 Discussion 305
5 Final Thoughts 306
References 306