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A system of time-varying models for predictive regressions 用于预测回归的时变模型系统
IF 2.1 2区 经济学
Journal of Empirical Finance Pub Date : 2025-05-13 DOI: 10.1016/j.jempfin.2025.101622
Deshui Yu , Yayi Yan
{"title":"A system of time-varying models for predictive regressions","authors":"Deshui Yu ,&nbsp;Yayi Yan","doi":"10.1016/j.jempfin.2025.101622","DOIUrl":"10.1016/j.jempfin.2025.101622","url":null,"abstract":"<div><div>This paper proposes a system of time-varying models for predictive regressions, where a time-varying autoregressive (TV-AR) process is introduced to model the dynamics of the predictors and a linear control function approach is used to improve the estimation efficiency. We employ a profile likelihood estimation method to estimate both constant and time-varying coefficients and propose a hypothesis test to examine the parameter stability. We establish the asymptotic properties of the proposed estimators and test statistics accordingly. Monte Carlo simulations show that the proposed methods work well in finite samples. Empirically, the TV-AR process effectively approximates the time-series behavior of a broad set of potential predictors. Furthermore, we reject the stability assumption of predictive models for more than half of these predictors. Finally, the linear projection method not only improves estimator efficiency but also enhances out-of-sample forecasting performance, leading to significant utility gains in forecasting experiments.</div></div>","PeriodicalId":15704,"journal":{"name":"Journal of Empirical Finance","volume":"82 ","pages":"Article 101622"},"PeriodicalIF":2.1,"publicationDate":"2025-05-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143937810","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Portfolio optimization with estimation errors—A robust linear regression approach 具有估计误差的投资组合优化——一种鲁棒线性回归方法
IF 2.1 2区 经济学
Journal of Empirical Finance Pub Date : 2025-05-08 DOI: 10.1016/j.jempfin.2025.101619
Yilin Du , Wenfeng He , Xiaoling Mei
{"title":"Portfolio optimization with estimation errors—A robust linear regression approach","authors":"Yilin Du ,&nbsp;Wenfeng He ,&nbsp;Xiaoling Mei","doi":"10.1016/j.jempfin.2025.101619","DOIUrl":"10.1016/j.jempfin.2025.101619","url":null,"abstract":"<div><div>Covariance and precision matrices of asset returns are unknown in practice and must be estimated in minimum variance portfolio optimizations. Although a variety of estimators have been proposed that give better out-of-sample performance than the sample covariance matrix, they nevertheless contain estimation error of the type that is most likely to disrupt the optimizer. In this study, we propose a robust optimization framework to tackle the estimation error issue. Rather than the sample covariance matrix, as is the case with the existing approaches, our framework focuses on the row sums of estimates of the precision matrix, which can greatly minimize the number of unknown parameters. A robust linear regression framework is developed to tackle the estimate error by first rewriting the portfolio optimization as a least-squares regression model. Furthermore, our results on both simulated and empirical data reveal that the suggested robust portfolios are more stable and perform better out-of-sample than existing estimators in general.</div></div>","PeriodicalId":15704,"journal":{"name":"Journal of Empirical Finance","volume":"82 ","pages":"Article 101619"},"PeriodicalIF":2.1,"publicationDate":"2025-05-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143942185","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
The role of macro-finance factors in predicting stock market volatility: A latent threshold dynamic model 宏观金融因素在股票市场波动预测中的作用：一个潜在阈值动态模型
IF 2.1 2区 经济学
Journal of Empirical Finance Pub Date : 2025-05-07 DOI: 10.1016/j.jempfin.2025.101620
John M. Maheu , Azam Shamsi Zamenjani
{"title":"The role of macro-finance factors in predicting stock market volatility: A latent threshold dynamic model","authors":"John M. Maheu ,&nbsp;Azam Shamsi Zamenjani","doi":"10.1016/j.jempfin.2025.101620","DOIUrl":"10.1016/j.jempfin.2025.101620","url":null,"abstract":"<div><div>Measuring, modeling, and forecasting volatility are of great importance in financial applications such as asset pricing, portfolio management, and risk management. In this paper, we investigate predictability of stock market volatility by macro-finance variables in a dynamic regression framework using latent thresholding. The latent threshold models allow data-driven shrinkage of regression coefficients by collapsing them to zero for irrelevant predictor variables and allowing for time-varying nonzero coefficients when supported by the data. This is a parsimonious framework which selects what potential predictor variables should be included in the regressions and when. We extend this model to allow for stochastic volatility for realized volatility innovations and discuss Bayesian estimation methods. We apply the models to monthly S&amp;P 500 and NASDAQ 100 volatility and find that using macro-finance variables in volatility forecasts enhances model performance statistically and economically, particularly when we allow for dynamic inclusion/exclusion of these variables.</div></div>","PeriodicalId":15704,"journal":{"name":"Journal of Empirical Finance","volume":"82 ","pages":"Article 101620"},"PeriodicalIF":2.1,"publicationDate":"2025-05-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144072372","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
The economic value of equity implied volatility forecasting with machine learning 用机器学习预测股票隐含波动率的经济价值
IF 2.1 2区 经济学
Journal of Empirical Finance Pub Date : 2025-05-06 DOI: 10.1016/j.jempfin.2025.101618
Paul Borochin , Yanhui Zhao
{"title":"The economic value of equity implied volatility forecasting with machine learning","authors":"Paul Borochin ,&nbsp;Yanhui Zhao","doi":"10.1016/j.jempfin.2025.101618","DOIUrl":"10.1016/j.jempfin.2025.101618","url":null,"abstract":"<div><div>We evaluate the importance of nonlinear and interactive effects in implied volatility innovation forecasting by comparing the performance of machine learning models that can search for interactive effects relative to classical ones that cannot, measuring the economic significance of these predictions in cross-sectional and time series pricing tests of delta-hedged option returns. Machine learning models offer superior out of sample performance. Since the predictive variables are the same across all models, these performance differences likely capture the value of nonlinear and interactive effects in implied volatility forecasts. Our results are robust to look-ahead bias and model overfitting.</div></div>","PeriodicalId":15704,"journal":{"name":"Journal of Empirical Finance","volume":"82 ","pages":"Article 101618"},"PeriodicalIF":2.1,"publicationDate":"2025-05-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143923621","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Forecasting financial volatility: An approach based on Parkinson volatility measure with long memory stochastic range model 金融波动预测：基于长记忆随机区间模型的帕金森波动测度方法
IF 2.1 2区 经济学
Journal of Empirical Finance Pub Date : 2025-05-05 DOI: 10.1016/j.jempfin.2025.101617
Zhi De Khoo , Kok Haur Ng , You Beng Koh , Kooi Huat Ng
{"title":"Forecasting financial volatility: An approach based on Parkinson volatility measure with long memory stochastic range model","authors":"Zhi De Khoo ,&nbsp;Kok Haur Ng ,&nbsp;You Beng Koh ,&nbsp;Kooi Huat Ng","doi":"10.1016/j.jempfin.2025.101617","DOIUrl":"10.1016/j.jempfin.2025.101617","url":null,"abstract":"<div><div>This paper proposes a long memory stochastic range (LMSR) model to investigate the persistence of range-based volatility series. The latent variable in the LMSR model is derived from the established autoregressive fractionally integrated moving average process. To estimate the model parameters, there is no closed-form solution for the latent process. Hence, the parameters of the stochastic model are estimated by applying the quasi-maximum likelihood method via the Whittle approximation. A comprehensive simulation study assesses the method’s performance, with results showing that estimated parameters are close to true values and precision improves with longer simulated time series lengths. To demonstrate the applicability of the model, we conducted empirical studies based on four financial assets, and their volatilities are estimated directly using the range-based Parkinson (PK) volatility measure. The results show evidence of long memory in these volatility series using the rescaled range and Geweke-Porter-Hudak methods. We fit the resulting PK volatility estimates to the LMSR model and other competing volatility models, and their modelling performances are compared. Results indicate that all LMSR models outperform competitors according to the log-likelihood and Akaike information criterion as well as out-of-sample loss functions. Additionally, the estimated parameters of these LMSR models confirm the presence of long memory, while competing short memory models struggle to capture the persistent nature of volatility in financial markets.</div></div>","PeriodicalId":15704,"journal":{"name":"Journal of Empirical Finance","volume":"82 ","pages":"Article 101617"},"PeriodicalIF":2.1,"publicationDate":"2025-05-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143917903","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Creating value through corporate social responsibility: The role of foreign institutional investors in Chinese listed firms 通过企业社会责任创造价值：境外机构投资者在中国上市公司中的作用
IF 2.1 2区 经济学
Journal of Empirical Finance Pub Date : 2025-04-26 DOI: 10.1016/j.jempfin.2025.101621
Yunhe Li , Yu Liu , Mihail Miletkov , Tina Yang
{"title":"Creating value through corporate social responsibility: The role of foreign institutional investors in Chinese listed firms","authors":"Yunhe Li ,&nbsp;Yu Liu ,&nbsp;Mihail Miletkov ,&nbsp;Tina Yang","doi":"10.1016/j.jempfin.2025.101621","DOIUrl":"10.1016/j.jempfin.2025.101621","url":null,"abstract":"<div><div>This study examines the interplay between two major global trends—the growing role of foreign institutional ownership (FIO) due to financial liberalization and the rise of corporate social responsibility (CSR) as an investment ethos. We choose the setting of China, the world’s second-largest economy that has recently experienced substantial growth in foreign portfolio investment and increased its commitment to CSR. We document that CSR performance significantly influences the portfolio allocation decisions of certain types of FIO. Crucially, our analysis reveals that firms with a higher level of ownership by foreign institutional investors are associated with a more positive relation between CSR performance and firm value. This finding is robust to endogeneity examinations, including quasi-natural experiments and instrumental variable estimations. The finding is stronger for non-state-owned enterprises, firms with higher customer awareness, firms with more foreign directors, and firms with more frequent corporate site visits from FIO. Monitoring and advising are two likely channels through which FIO enhance the CSR-value relation. Finally, we demonstrate that FIO enhance firms’ ability to harness the power of CSR as a driver of innovation.</div></div>","PeriodicalId":15704,"journal":{"name":"Journal of Empirical Finance","volume":"82 ","pages":"Article 101621"},"PeriodicalIF":2.1,"publicationDate":"2025-04-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143927581","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Climate change risk and green bond pricing 气候变化风险与绿色债券定价
IF 2.1 2区 经济学
Journal of Empirical Finance Pub Date : 2025-04-23 DOI: 10.1016/j.jempfin.2025.101616
Alfonso Del Giudice, Silvia Rigamonti, Andrea Signori
{"title":"Climate change risk and green bond pricing","authors":"Alfonso Del Giudice,&nbsp;Silvia Rigamonti,&nbsp;Andrea Signori","doi":"10.1016/j.jempfin.2025.101616","DOIUrl":"10.1016/j.jempfin.2025.101616","url":null,"abstract":"<div><div>We investigate whether climate change risk is accurately priced in the bond market. Green bonds outperform brown bonds after a climate-related disaster, consistent with investors adjusting their preference towards green assets. We then examine whether the post-disaster reaction is rational or affected by a behavioral bias. Our findings reveal two key patterns supporting the behavioral explanation: first, the impact of disasters on green bond prices is temporary as it fully reabsorbs by the fifth month after the event; second, the effect weakens as disasters become more repetitive. Overall, the evidence indicates that investors overreact in the immediate aftermath of a disaster and this overreaction fades as the event becomes less salient.</div></div>","PeriodicalId":15704,"journal":{"name":"Journal of Empirical Finance","volume":"82 ","pages":"Article 101616"},"PeriodicalIF":2.1,"publicationDate":"2025-04-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143903884","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Regulatory fragmentation and corporate innovation 监管碎片化和企业创新
IF 2.1 2区 经济学
Journal of Empirical Finance Pub Date : 2025-04-17 DOI: 10.1016/j.jempfin.2025.101614
Hongkang Xu
{"title":"Regulatory fragmentation and corporate innovation","authors":"Hongkang Xu","doi":"10.1016/j.jempfin.2025.101614","DOIUrl":"10.1016/j.jempfin.2025.101614","url":null,"abstract":"<div><div>Using a distinctive measure derived from the Federal Register, this study examines the relation between regulatory fragmentation and corporate innovation. While regulatory fragmentation is commonly perceived as a barrier due to increased compliance costs and operational complexities, I find a significant positive association between regulatory fragmentation and innovation outputs, a result that remains consistent across various robustness tests. This effect is particularly pronounced in older firms, those with considerable regulatory influence, large market shares, and firms operating in similar regulatory environments. The results challenge the predominantly negative perceptions surrounding regulatory fragmentation in policy discussions, highlighting its potential to significantly enhance a firm’s innovative capabilities.</div></div>","PeriodicalId":15704,"journal":{"name":"Journal of Empirical Finance","volume":"82 ","pages":"Article 101614"},"PeriodicalIF":2.1,"publicationDate":"2025-04-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143860531","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
The rise of venture capital and IPO quality 风险投资的兴起与IPO质量
IF 2.1 2区 经济学
Journal of Empirical Finance Pub Date : 2025-04-02 DOI: 10.1016/j.jempfin.2025.101613
Amrita Nain , Jie Ying , Joseph Arthur
{"title":"The rise of venture capital and IPO quality","authors":"Amrita Nain ,&nbsp;Jie Ying ,&nbsp;Joseph Arthur","doi":"10.1016/j.jempfin.2025.101613","DOIUrl":"10.1016/j.jempfin.2025.101613","url":null,"abstract":"<div><div>We show that an increase in the supply of venture capital (VC) leads to a decline in the quality of firms going public. We argue that due to VC selectivity, private capital flows disproportionately to the most promising firms causing them to hold back from public issuance. Post-IPO abnormal returns indicate that the stock market does not fully incorporate this decline in quality at the time of the IPO. Our research adds to recent evidence on the negative impact of fast-growing private markets on Main Street investors.</div></div>","PeriodicalId":15704,"journal":{"name":"Journal of Empirical Finance","volume":"82 ","pages":"Article 101613"},"PeriodicalIF":2.1,"publicationDate":"2025-04-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143881783","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
The influence of long-term managerial orientation on pay inequality 长期管理导向对薪酬不平等的影响
IF 2.1 2区 经济学
Journal of Empirical Finance Pub Date : 2025-03-24 DOI: 10.1016/j.jempfin.2025.101612
Chen-Chieh Liao , Yin-Hua Yeh
{"title":"The influence of long-term managerial orientation on pay inequality","authors":"Chen-Chieh Liao ,&nbsp;Yin-Hua Yeh","doi":"10.1016/j.jempfin.2025.101612","DOIUrl":"10.1016/j.jempfin.2025.101612","url":null,"abstract":"<div><div>This paper examines the relationship between a firm's long-term managerial orientation and in-firm pay inequality. We exploit two exogenous shocks to firms’ long-term orientation, in the form of inheritance and estate tax changes in Taiwan in 2008 and 2017. Using over a decade's worth of pay inequality data, we demonstrate that a more (less) long-term managerial orientation in a firm, driven by decreases (increases) in estate tax, leads to an increase (decrease) of in-firm pay inequality. Further analysis suggests that changes in-firm pay inequality are associated with changes in executive compensation, rather than with changes in ordinary employee compensation. Furthermore, our results are more pronounced in firms with higher degrees of family ownership and firms in more competitive industries. This paper suggests policy implications for amendments to estate tax since in-firm pay inequality will increase as a result of decreases in estate tax, via effects on firms’ long-term managerial orientation.</div></div>","PeriodicalId":15704,"journal":{"name":"Journal of Empirical Finance","volume":"82 ","pages":"Article 101612"},"PeriodicalIF":2.1,"publicationDate":"2025-03-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143739839","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
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