Nektarios Aslanidis - Academia.edu (original) (raw)

Papers by Nektarios Aslanidis

Journal of Economic Behavior & Organization, 2022

ABSTRACT The aim of this paper is to study economic activity in CEECs and to look at the transmis... more ABSTRACT The aim of this paper is to study economic activity in CEECs and to look at the transmission of economic activity between the euro area and CEECs. Econometric techniques appropriate for a threshold seemingly unrelated regressions specification are developed to take account of factors that are common to all CEECs. This methodology also allows for asymmetries in the activity of the CEECs governed by the overall euro area activity. The results show slow growth for most CEECs when the euro area economy decelerates, but high growth when the euro area economy grows.

Finance Research Letters, 2022

“Stock market integration between new EU member

Economic Modelling, 2021

Abstract The assumption of constant loadings when estimating factor models is implicit in all emp... more Abstract The assumption of constant loadings when estimating factor models is implicit in all empirical applications used in macroeconomics. We test this assumption explicitly in a general smooth transition loadings setting using a well-studied macroeconomic dataset on the U.S. economy. Our proposed testing approach has reasonable finite sample properties relative to alternatives that allow for an abrupt change in the factor loadings. In an empirical application, we find evidence in support of non-constancy in factor loadings and show that it is mainly concentrated in certain sections of the economy (such as financial variables). Overall, our findings provide additional support toward developing factor models, which explicitly account for non-constant factor loadings.

In this paper we propose a parsimonious regime-switching approach to model the correlations betwe... more In this paper we propose a parsimonious regime-switching approach to model the correlations between assets, the threshold conditional correlation (TCC) model. This method allows the dynamics of the correlations to change from one state (or regime) to another as a function of observable transition variables. Our model is similar in spirit to Silvennoinen and Terasvirta (2009) and Pelletier (2006) but with the appealing feature that it does not suffer from the course of dimensionality. In particular, estimation of the parameters of the TCC involves a simple grid search procedure. In addition, it is easy to guarantee a positive definite correlation matrix because the TCC estimator is given by the sample correlation matrix, which is positive definite by construction. The methodology is illustrated by evaluating the behaviour of international equities, govenrment bonds and major exchange rates, first separately and then jointly. We also test and allow for different parts in the correlati...

SSRN Electronic Journal, 2021

This paper shows that Bitcoin is not correlated to a general uncertainty index as measured by the... more This paper shows that Bitcoin is not correlated to a general uncertainty index as measured by the Google Trends data of Castelnuovo and Tran (2017). Instead, Bitcoin is linked to a Google Trends attention measure specific for the cryptocurrency market. First, we find a bidirectional relationship between Google Trends attention and Bitcoin returns up to six days. Second, information flows from Bitcoin volatility to Google Trends attention seem to be larger than information flows in the other direction. These relations hold across different sub-periods and different compositions of the proposed Google Trends Cryptocurrency index.

Journal of Risk and Financial Management, 2021

We investigate the risk–return trade-off on the US and European stock markets. We investigate the... more We investigate the risk–return trade-off on the US and European stock markets. We investigate the non-linear risk–return trade-off with a special eye to the tails of the stock returns using quantile regressions. We first consider the US stock market portfolio. We find that the risk–return trade-off is significantly positive at the upper tail (0.9 quantile), where the upper tail is large positive excess returns. The positive trade-off is as expected from asset pricing models. For the lower tail (0.1 quantile), that is for large negative stock returns, the trade-off is significantly negative. Additionally, for the median (0.5 quantile), the risk–return trade-off is insignificant. These results are recovered for the US industry portfolios and for Eurozone stock market portfolios.

SSRN Electronic Journal, 2020

This paper studies the dynamic market linkages among cryptocurrencies during August 2015-July 202... more This paper studies the dynamic market linkages among cryptocurrencies during August 2015-July 2020 and finds a substantial increase in market linkages for both returns and volatilities. We use different methodologies to check the different aspects of market linkages. Financial and regulatory implications are discussed.

SSRN Electronic Journal, 2020

Despite the essential role that international trade has historically played for resource-rich Afr... more Despite the essential role that international trade has historically played for resource-rich African economies, growth possibilities have been hindered by considerable trade barriers. Yet, in the large literature on commodity market integration, Africa is a blank spot and little is known about the origins of high trade costs in the African export markets. In this article, we contribute to fill this gap by analyzing West African trade costs from the mid-nineteenth century to the eve of World War II. We construct estimates of international trade costs by applying a flexible threshold model to a representative sample of West African export prices and European import prices. Our results show that trade costs for West Africa experienced a substantial reduction from the 1840s to 1880, similar to the one we observe in other areas of the world. After the 1880s, however, they declined in the rest of the world, but not in West Africa. Consequently, since the late nineteenthcentury, trade for West Africa became relatively more expensive than for other world regions and Africa became relatively less integrated into the global economy. Our findings shed new light on the debate about the origins of African underdevelopment by emphasizing the role of increased trade costs and limited access to global markets.

SSRN Electronic Journal, 2020

This paper adopts a versatile multivariate conditional correlation model to estimate daily season... more This paper adopts a versatile multivariate conditional correlation model to estimate daily seasonality in the returns, the volatility, and the correlations between stocks, bonds, gold and Bitcoin. Besides the well known seasonality in stocks and bonds, the day-of-the-week effect is also present in Bitcoin. Mondays are associated with higher Bitcoin returns, while Wednesdays with higher Bitcoin volatility. As opposed to previous literature, our results indicate strong evidence of Bitcoin's leverage effect. Moreover, we show that daily correlations between Bitcoin and traditional assets are higher at the beginning of the week, while the volatility of these correlations decreases over the week. Our results offer interesting insights in terms of investment and portfolio diversification, that can be applied to the analysis of systematic risk asset allocation and hedging.

SSRN Electronic Journal, 2020

We conduct an international analysis of the cross-sectional risk premiums of uncertainty risk fac... more We conduct an international analysis of the cross-sectional risk premiums of uncertainty risk factors in addition to traditional risk factors. We consider the stock markets in …ve regions separately. Internationally, uncertainty has negative risk premiums which is similar to previous …ndings for the US. This implies that investors get lower returns for assets with high uncertainty betas. We further contribute with an analysis of downside uncertainty risk. Here, the downside uncertainty risk factor is high uncertainty which has additional risk premiums. We measure uncertainty by the logs of the local and US economic policy uncertainty indices.

The Journal of Economic History, 2019

This article analyzes the integration of the Spanish money market in the nineteenth century. We u... more This article analyzes the integration of the Spanish money market in the nineteenth century. We use a Band-Threshold Autoregression model of prices of bills-of-exchange in ten cities to measure market convergence and efficiency in 1825–1875. While price gaps generally decreased during the period, progress in efficiency was limited to a small group of cities. We suggest that convergence was associated to the reduction in transaction costs, which started well before the railways through improvements in roads and postal services. By contrast, the heterogeneous behavior of efficiency might be associated to economic geography changes and their effects on monetary leadership.

SSRN Electronic Journal, 2017

This paper investigates ‡ight-to-safety from stocks to bonds in seven European markets. We use qu... more This paper investigates ‡ight-to-safety from stocks to bonds in seven European markets. We use quantile regressions to identify ‡ightto-safety episodes. The simple risk-return trade-o¤ on the stock markets is negative which is caused by ‡ight-to-safety episodes: During normal periods, the risk-return trade-o¤ is positive and during ‡ight-to-safety episodes it is negative. The e¤ects of ‡ight-to-safety episodes on the risk-return trade-o¤ are qualitatively similar for own country ‡ight-to-safety episodes, for ‡ight from own country stock market to the US bond market, and for US ‡ightto-safety. The strength of the trade-o¤ is strongest for own country ‡ightto-safety episodes. The risk-return trade-o¤ is not signi…cantly in ‡uenced by recession periods or the recent sovereign debt crisis. The main results hold for ‡ight to gold instead of to bonds.

SSRN Electronic Journal, 2017

We predict bond betas conditioning on various macro-…nance variables. We explore di¤erences acros... more We predict bond betas conditioning on various macro-…nance variables. We explore di¤erences across long-term government bonds, investment grade corporate bonds, and high yield corporate bonds. We conduct out-of-sample forecasting using the new approach of combining explanatory variables through complete subset regressions (CSR). We consider the robustness of CSR forecasts across the 1-month, 3-month, and 12-month forecasting horizon. The CSR method performs well in predicting bond betas.

SSRN Electronic Journal, 2018

This letter explores the behavior of conditional correlations among main cryptocurrencies, stock ... more This letter explores the behavior of conditional correlations among main cryptocurrencies, stock and bond indices, and gold, using a generalized DCC class model. From a portfolio management point of view, asset correlation is a key metric in order to construct efficient portfolios. We find that: (i) correlations among cryptocurrencies are positive, albeit varying across time; (ii) correlations with Monero are more stable across time; (iii) correlations between cryptocurrencies and traditional financial assets are negligible.

SSRN Electronic Journal, 2017

A number of commentators and policy makers have argued that inflation targeting central banks are... more A number of commentators and policy makers have argued that inflation targeting central banks are less aggressive in responding to shocks that push inflation below target than to shocks that push inflation above target (Thoma, 2012; Beckworth, 2016; Kashkar, 2017). Support for this claim is usually based on the observation that in a number of inflation targeting countries, recent inflation outcomes have been persistently below target, despite that fact that these countries have been experiencing growth rates below historical norms. For either a strict or flexible inflation targeting central bank, there is no trade-off in terms of real activity to prevent it from doing what is necessary to increase the rate of inflation. In this paper we provide evidence of asymmetry in the time series process for inflation rates in five inflation targeting countries (Australia, New Zealand, Sweden, United States and the Euro-Area). Of the countries we examine, only Canadian inflation shows no evidence of asymmetry. Since it is relatively standard to model inflation as an autoregressive process, we use a threshold autoregressive (TAR) model to test for asymmetry in inflation persistence; above and below some estimated threshold. We find the threshold estimates are reasonable in light of a central bank's announced inflation target.

SSRN Electronic Journal, 2016

The assumption of linearity of factor models is implicit in all empirical applications used in ma... more The assumption of linearity of factor models is implicit in all empirical applications used in macroeconomic analysis. We test this assumption in a more general setting than previously considered using a well-studied macroeconomic dataset on the U.S. economy, and find strong evidence in support for regime-switching type non-linearity. Furthermore, we show non-linearity is strongly concentrated in certain groups (such as financial variables). Our results, which are robust to serial dependence, suggest the assumption of linearity underpinning factor models might be too strong and gives further support towards developing models which explicitly account for non-linearity.

Working Papers, Mar 2, 2004

This paper explores the methodology of regime-switching in the analysis of the income inequality-... more This paper explores the methodology of regime-switching in the analysis of the income inequality-economic growth relationship. The underlying idea is that when some income determinant passes a certain threshold introduces a new relationship between inequality and income and/or income determinants. There are three implications of the estimated models. First, inequality decreases with economic growth when government consumption as share of GDP is 'low'. Second, in a 'low' inflation environment government consumption increases inequality. Third, in countries with 'strict' rule of law openness to international trade and government consumption are associated with lower inequality, while financial development implies higher inequality.

SSRN Electronic Journal, 2016

We propose the threshold conditional correlation (TCC) model that allows for regime changes in th... more We propose the threshold conditional correlation (TCC) model that allows for regime changes in the correlations between financial assets. According to this methodolody the dynamics of the correlations change from one state (or regime) to another as a function of observable transition variable(s). The TCC is similar in spirit to a smooth transition conditional correlation but with the appealing feature that it is easier to estimate, even in a high dimensional setting. In particular, estimation of the parameters of the TCC involves a grid search-QMLE method in which the correlation matrix is positive definite by construction. Furthermore, Monte Carlo experiments show the proposed model generally does not suffer from a serious bias even for very large cross-sections (N=100). The methodology is illustrated by evaluating the behaviour of international equities and government bonds, first separately and then jointly. We further generalize our approach by allowing for different parts in the correlation matrix to have their own transition mechanism, while at the same time guaranteeing that the resulting correlation matrix is positive definite. Finally, we evaluate the out-of-sample economic performance of the TCC model against the popular dynamic conditional correlation (DCC) model by using the Engle-Colacito (2006) test and in terms of density forecasts. The results show that threshold model with four regimes outperforms the DCC, mainly in the recent global financial crisis a period with significant shifts in the level of correlations.

Journal of Economic Behavior & Organization, 2022

ABSTRACT The aim of this paper is to study economic activity in CEECs and to look at the transmis... more ABSTRACT The aim of this paper is to study economic activity in CEECs and to look at the transmission of economic activity between the euro area and CEECs. Econometric techniques appropriate for a threshold seemingly unrelated regressions specification are developed to take account of factors that are common to all CEECs. This methodology also allows for asymmetries in the activity of the CEECs governed by the overall euro area activity. The results show slow growth for most CEECs when the euro area economy decelerates, but high growth when the euro area economy grows.

Finance Research Letters, 2022

“Stock market integration between new EU member

Economic Modelling, 2021

Abstract The assumption of constant loadings when estimating factor models is implicit in all emp... more Abstract The assumption of constant loadings when estimating factor models is implicit in all empirical applications used in macroeconomics. We test this assumption explicitly in a general smooth transition loadings setting using a well-studied macroeconomic dataset on the U.S. economy. Our proposed testing approach has reasonable finite sample properties relative to alternatives that allow for an abrupt change in the factor loadings. In an empirical application, we find evidence in support of non-constancy in factor loadings and show that it is mainly concentrated in certain sections of the economy (such as financial variables). Overall, our findings provide additional support toward developing factor models, which explicitly account for non-constant factor loadings.

In this paper we propose a parsimonious regime-switching approach to model the correlations betwe... more In this paper we propose a parsimonious regime-switching approach to model the correlations between assets, the threshold conditional correlation (TCC) model. This method allows the dynamics of the correlations to change from one state (or regime) to another as a function of observable transition variables. Our model is similar in spirit to Silvennoinen and Terasvirta (2009) and Pelletier (2006) but with the appealing feature that it does not suffer from the course of dimensionality. In particular, estimation of the parameters of the TCC involves a simple grid search procedure. In addition, it is easy to guarantee a positive definite correlation matrix because the TCC estimator is given by the sample correlation matrix, which is positive definite by construction. The methodology is illustrated by evaluating the behaviour of international equities, govenrment bonds and major exchange rates, first separately and then jointly. We also test and allow for different parts in the correlati...

SSRN Electronic Journal, 2021

This paper shows that Bitcoin is not correlated to a general uncertainty index as measured by the... more This paper shows that Bitcoin is not correlated to a general uncertainty index as measured by the Google Trends data of Castelnuovo and Tran (2017). Instead, Bitcoin is linked to a Google Trends attention measure specific for the cryptocurrency market. First, we find a bidirectional relationship between Google Trends attention and Bitcoin returns up to six days. Second, information flows from Bitcoin volatility to Google Trends attention seem to be larger than information flows in the other direction. These relations hold across different sub-periods and different compositions of the proposed Google Trends Cryptocurrency index.

Journal of Risk and Financial Management, 2021

We investigate the risk–return trade-off on the US and European stock markets. We investigate the... more We investigate the risk–return trade-off on the US and European stock markets. We investigate the non-linear risk–return trade-off with a special eye to the tails of the stock returns using quantile regressions. We first consider the US stock market portfolio. We find that the risk–return trade-off is significantly positive at the upper tail (0.9 quantile), where the upper tail is large positive excess returns. The positive trade-off is as expected from asset pricing models. For the lower tail (0.1 quantile), that is for large negative stock returns, the trade-off is significantly negative. Additionally, for the median (0.5 quantile), the risk–return trade-off is insignificant. These results are recovered for the US industry portfolios and for Eurozone stock market portfolios.

SSRN Electronic Journal, 2020

This paper studies the dynamic market linkages among cryptocurrencies during August 2015-July 202... more This paper studies the dynamic market linkages among cryptocurrencies during August 2015-July 2020 and finds a substantial increase in market linkages for both returns and volatilities. We use different methodologies to check the different aspects of market linkages. Financial and regulatory implications are discussed.

SSRN Electronic Journal, 2020

Despite the essential role that international trade has historically played for resource-rich Afr... more Despite the essential role that international trade has historically played for resource-rich African economies, growth possibilities have been hindered by considerable trade barriers. Yet, in the large literature on commodity market integration, Africa is a blank spot and little is known about the origins of high trade costs in the African export markets. In this article, we contribute to fill this gap by analyzing West African trade costs from the mid-nineteenth century to the eve of World War II. We construct estimates of international trade costs by applying a flexible threshold model to a representative sample of West African export prices and European import prices. Our results show that trade costs for West Africa experienced a substantial reduction from the 1840s to 1880, similar to the one we observe in other areas of the world. After the 1880s, however, they declined in the rest of the world, but not in West Africa. Consequently, since the late nineteenthcentury, trade for West Africa became relatively more expensive than for other world regions and Africa became relatively less integrated into the global economy. Our findings shed new light on the debate about the origins of African underdevelopment by emphasizing the role of increased trade costs and limited access to global markets.

SSRN Electronic Journal, 2020

This paper adopts a versatile multivariate conditional correlation model to estimate daily season... more This paper adopts a versatile multivariate conditional correlation model to estimate daily seasonality in the returns, the volatility, and the correlations between stocks, bonds, gold and Bitcoin. Besides the well known seasonality in stocks and bonds, the day-of-the-week effect is also present in Bitcoin. Mondays are associated with higher Bitcoin returns, while Wednesdays with higher Bitcoin volatility. As opposed to previous literature, our results indicate strong evidence of Bitcoin's leverage effect. Moreover, we show that daily correlations between Bitcoin and traditional assets are higher at the beginning of the week, while the volatility of these correlations decreases over the week. Our results offer interesting insights in terms of investment and portfolio diversification, that can be applied to the analysis of systematic risk asset allocation and hedging.

SSRN Electronic Journal, 2020

We conduct an international analysis of the cross-sectional risk premiums of uncertainty risk fac... more We conduct an international analysis of the cross-sectional risk premiums of uncertainty risk factors in addition to traditional risk factors. We consider the stock markets in …ve regions separately. Internationally, uncertainty has negative risk premiums which is similar to previous …ndings for the US. This implies that investors get lower returns for assets with high uncertainty betas. We further contribute with an analysis of downside uncertainty risk. Here, the downside uncertainty risk factor is high uncertainty which has additional risk premiums. We measure uncertainty by the logs of the local and US economic policy uncertainty indices.

The Journal of Economic History, 2019

This article analyzes the integration of the Spanish money market in the nineteenth century. We u... more This article analyzes the integration of the Spanish money market in the nineteenth century. We use a Band-Threshold Autoregression model of prices of bills-of-exchange in ten cities to measure market convergence and efficiency in 1825–1875. While price gaps generally decreased during the period, progress in efficiency was limited to a small group of cities. We suggest that convergence was associated to the reduction in transaction costs, which started well before the railways through improvements in roads and postal services. By contrast, the heterogeneous behavior of efficiency might be associated to economic geography changes and their effects on monetary leadership.

SSRN Electronic Journal, 2017

This paper investigates ‡ight-to-safety from stocks to bonds in seven European markets. We use qu... more This paper investigates ‡ight-to-safety from stocks to bonds in seven European markets. We use quantile regressions to identify ‡ightto-safety episodes. The simple risk-return trade-o¤ on the stock markets is negative which is caused by ‡ight-to-safety episodes: During normal periods, the risk-return trade-o¤ is positive and during ‡ight-to-safety episodes it is negative. The e¤ects of ‡ight-to-safety episodes on the risk-return trade-o¤ are qualitatively similar for own country ‡ight-to-safety episodes, for ‡ight from own country stock market to the US bond market, and for US ‡ightto-safety. The strength of the trade-o¤ is strongest for own country ‡ightto-safety episodes. The risk-return trade-o¤ is not signi…cantly in ‡uenced by recession periods or the recent sovereign debt crisis. The main results hold for ‡ight to gold instead of to bonds.

SSRN Electronic Journal, 2017

We predict bond betas conditioning on various macro-…nance variables. We explore di¤erences acros... more We predict bond betas conditioning on various macro-…nance variables. We explore di¤erences across long-term government bonds, investment grade corporate bonds, and high yield corporate bonds. We conduct out-of-sample forecasting using the new approach of combining explanatory variables through complete subset regressions (CSR). We consider the robustness of CSR forecasts across the 1-month, 3-month, and 12-month forecasting horizon. The CSR method performs well in predicting bond betas.

SSRN Electronic Journal, 2018

This letter explores the behavior of conditional correlations among main cryptocurrencies, stock ... more This letter explores the behavior of conditional correlations among main cryptocurrencies, stock and bond indices, and gold, using a generalized DCC class model. From a portfolio management point of view, asset correlation is a key metric in order to construct efficient portfolios. We find that: (i) correlations among cryptocurrencies are positive, albeit varying across time; (ii) correlations with Monero are more stable across time; (iii) correlations between cryptocurrencies and traditional financial assets are negligible.

SSRN Electronic Journal, 2017

A number of commentators and policy makers have argued that inflation targeting central banks are... more A number of commentators and policy makers have argued that inflation targeting central banks are less aggressive in responding to shocks that push inflation below target than to shocks that push inflation above target (Thoma, 2012; Beckworth, 2016; Kashkar, 2017). Support for this claim is usually based on the observation that in a number of inflation targeting countries, recent inflation outcomes have been persistently below target, despite that fact that these countries have been experiencing growth rates below historical norms. For either a strict or flexible inflation targeting central bank, there is no trade-off in terms of real activity to prevent it from doing what is necessary to increase the rate of inflation. In this paper we provide evidence of asymmetry in the time series process for inflation rates in five inflation targeting countries (Australia, New Zealand, Sweden, United States and the Euro-Area). Of the countries we examine, only Canadian inflation shows no evidence of asymmetry. Since it is relatively standard to model inflation as an autoregressive process, we use a threshold autoregressive (TAR) model to test for asymmetry in inflation persistence; above and below some estimated threshold. We find the threshold estimates are reasonable in light of a central bank's announced inflation target.

SSRN Electronic Journal, 2016

The assumption of linearity of factor models is implicit in all empirical applications used in ma... more The assumption of linearity of factor models is implicit in all empirical applications used in macroeconomic analysis. We test this assumption in a more general setting than previously considered using a well-studied macroeconomic dataset on the U.S. economy, and find strong evidence in support for regime-switching type non-linearity. Furthermore, we show non-linearity is strongly concentrated in certain groups (such as financial variables). Our results, which are robust to serial dependence, suggest the assumption of linearity underpinning factor models might be too strong and gives further support towards developing models which explicitly account for non-linearity.

Working Papers, Mar 2, 2004

This paper explores the methodology of regime-switching in the analysis of the income inequality-... more This paper explores the methodology of regime-switching in the analysis of the income inequality-economic growth relationship. The underlying idea is that when some income determinant passes a certain threshold introduces a new relationship between inequality and income and/or income determinants. There are three implications of the estimated models. First, inequality decreases with economic growth when government consumption as share of GDP is 'low'. Second, in a 'low' inflation environment government consumption increases inequality. Third, in countries with 'strict' rule of law openness to international trade and government consumption are associated with lower inequality, while financial development implies higher inequality.

SSRN Electronic Journal, 2016

We propose the threshold conditional correlation (TCC) model that allows for regime changes in th... more We propose the threshold conditional correlation (TCC) model that allows for regime changes in the correlations between financial assets. According to this methodolody the dynamics of the correlations change from one state (or regime) to another as a function of observable transition variable(s). The TCC is similar in spirit to a smooth transition conditional correlation but with the appealing feature that it is easier to estimate, even in a high dimensional setting. In particular, estimation of the parameters of the TCC involves a grid search-QMLE method in which the correlation matrix is positive definite by construction. Furthermore, Monte Carlo experiments show the proposed model generally does not suffer from a serious bias even for very large cross-sections (N=100). The methodology is illustrated by evaluating the behaviour of international equities and government bonds, first separately and then jointly. We further generalize our approach by allowing for different parts in the correlation matrix to have their own transition mechanism, while at the same time guaranteeing that the resulting correlation matrix is positive definite. Finally, we evaluate the out-of-sample economic performance of the TCC model against the popular dynamic conditional correlation (DCC) model by using the Engle-Colacito (2006) test and in terms of density forecasts. The results show that threshold model with four regimes outperforms the DCC, mainly in the recent global financial crisis a period with significant shifts in the level of correlations.