Browsing by Subject "Econometrics"

Now showing 1 - 3 of 3
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    On the implications of recent advancements in information technologies and high-dimensional modeling for financial markets and econometric frameworks
    (2019) Schmidt, Alexander; Jung, Robert
    Around the turn of the millennium, the Organization for Economic Co-operation and Development (OECD) published an article, which summarizes the organizations expectations towards technological developments of the 21st century. Of particular interest to the authors are innovations in the area of information technology, highlighting their far-reaching impact on, amongst others, the financial sector. According to the article, the expected increasing interconnectedness of individuals, markets, and economies holds the potential to fundamentally change not only the flow of information in financial markets but also the way in which people interact with each other and with financial institutions. Looking back at the first two decades of the 21st century, these predictions appear to have been quite accurate: The rise of the internet to a platform of utmost relevance to industries and the economy as a whole profoundly impacts how people nowadays receive and process information and subsequently form, share, and discuss their opinions amongst each other. At the financial markets around the globe trading has become more and more accessible to individuals. Less financial and technical knowledge is required of retail investors to engage in trading, resulting in increased market participation and more heterogeneous trader profiles. This, in turn, influences the dynamics in the financial markets and challenges some of the conventional wisdom concerning market structures. In this context, the interdependencies between the media, retail investors, and the stock market are of particular interest for practitioners. However, the changed dynamics in the flow and exchange of data and information are also highly interesting from a researchers perspective, resulting in entire branches of the academic literature devoted to the topic. While these branches have grown in many different directions, this doctoral thesis explores two specific aspects of this field of research: First, it investigates the consequences of the increased interconnectedness of individuals and markets for the dynamics between the new information technologies and the financial markets. This entails gaining new insights about these dynamics and assessing how investors process certain company-related information for their investment decisions by means of sentiment analysis of large, publicly available data sets. Secondly, it illustrates how an advanced understanding of high-dimensional models, resulting from such analyses of large data sets, can be beneficial in re-thinking and improving existing econometric frameworks. Three independent but related research projects are presented in this thesis that address both of the aforementioned aspects to give a more holistic picture of the implications that the profoundly changed flow and exchange of data and information of the last decades hold for finance and econometrics. As such, the projects (i) highlight the importance of carefully assessing the dynamics between investor sentiment and stock market volatility in an intraday context, (ii) analyze how investors process newly available, rich sources of information on a firms environmental, social, and governance (ESG) practices for their investment decisions, and (iii) propose a new approach to detecting multiple structural breaks in a cointegrated framework enabled by new insights about high-dimensional models. The first original work of this doctoral thesis aims at closing an existing gap in the behavioral finance literature by taking an intraday perspective in assessing the relationship between investor sentiment and stock market volatility. More precisely, the paper titled "The Twitter myth revisited: Intraday investor sentiment, Twitter activity and individual-level stock return volatility", which is joint work with Simon Behrendt, takes a closer look at the dynamics of individual-level stock return volatility, measured by absolute 5-minute returns, and Twitter sentiment and activity in an intraday context. After accounting for the intraday periodicity in absolute returns, we discover some statistically significant co-movements of intraday volatility and information from stock-related Tweets for all constituents of the Dow Jones Industrial Average (DJIA). However, economically, the effects are of negligible magnitude, and out-of-sample forecast performance is not improved when including Twitter sentiment and activity as exogenous variables. From a practical point of view, this chapter finds that high-frequency Twitter information is not particularly useful for highly active investors with access to such data for intraday volatility assessment and forecasting when considering individual-level stocks. Inspired by this first research project, the second original work presented in this thesis keeps its focus on sentiment analysis in the context of the financial markets. Titled "Sustainable news - A sentiment analysis of the effect of ESG information on stock prices", it investigates the effect of ESG-related news sentiment on the stock market performance of the DJIA constituents. Relying on a large data set of news articles that were published online or in print media between the years of 2010 and 2018, each articles sentiment with respect to ESG-related topics is extracted using a dictionary approach from which a polarity-based sentiment index is calculated. Estimating autoregressive distributed lag models reveals significant effects of both temporary and permanent changes in ESG-related news sentiment on idiosyncratic returns for the vast majority of the DJIA constituents. According to the models results, one can assign the stocks to different groups depending on their investors apparent predisposition towards ESG news, which in turn seems to be linked with a stocks financial performance. The last original work presented is then concerned with the second aspect of this doctoral thesis - the question of how our enhanced understanding of the increasingly high dimensional datasets that occur in practice can produce new solutions to familiar problems in econometrics. The paper "Multiple structural breaks in cointegrating regressions: A model selection approach", which is joint work with Karsten Schweikert, introduces the least absolute shrinkage and selection operator (lasso) as a tool for consistent breakpoint estimation. In this paper, we propose a new approach to model structural change in cointegrating regressions using penalized regression techniques. First, we consider a setting with fixed breakpoint candidates and show that a modified adaptive lasso estimator can consistently estimate structural breaks in the intercept and slope coefficient of a cointegrating regression. In such a scenario, one could also perceive our method as performing an efficient subsample selection. Second, we extend our approach to a diverging number of breakpoint candidates and provide simulation evidence that timing and magnitude of structural breaks are consistently estimated. Third, we use the adaptive lasso estimation to design new tests for cointegration in the presence of multiple structural breaks, derive the asymptotic distribution of our test statistics and show that the proposed tests have power against the null of no cointegration. Finally, we use our new methodology to study the effects of structural breaks on the long-run PPP relationship.
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    Quantifying pond and labor productivity of small-holder aquaculture farmers in the central dry-zone of Myanmar
    (2019) Chertkov, Georgi
    To date, aquaculture in developing countries is still largely based on unimproved fish species. As a result, indigenous fish species often show poor growth rate, high fish mortality, and may have high labor production costs. By introducing Genetic Improvement of Farmed Tilapia (GIFT) in Myanmar, WorldFish aims to increase pond and labor productivity such that smallholder farmers earn more from aquaculture from their scarce land, capital and labor resources. The case study presented below purposely selected fish farmers for a micro-economic and partially technical study on labor and pond productivity in aquaculture. Quantitative and qualitative research methods were used to obtain very detailed data allowing me to estimate pond and labor productivity under existing smallholder farmers conditions in Myanmar. The research region was the Central Dry Zone of Myanmar, an area close to those hatcheries which have been identified by World Fish and national research partners. The case study assesses the current productivity and income from pond aquaculture derived by smallholders and provides crucial baseline information for the planned study during 2020/21 to assess the food security, productivity, and income effects of introducing improved tilapia to these smallholder farmers. Information collected during the study regarding problems faced by smallholder aquaculture farmers in the Central Dry Zone will be useful to ensure better delivery of future projects and objectives. Investment scenarios included in the case study aim to provide a demonstration of how future changes to the practices of smallholder aquaculture farmers could impact their profitability. A more productive smallholder aquaculture sector in Myanmar could help to reduce the availability and prices for fish which is a major source of protein and micronutrients for the people of Myanmar.
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    The impacts of conflict and climate change on food security and nutrition in Chad
    (2023) Bachofer, Robert Paul; Sousa-Poza, Alfonso
    This dissertation aims at providing an overview of how armed conflict and climate impact food security and nutrition in the African country of Chad. It analyzes the impacts of the Boko Haram insurgency on food security and nutrition, and those of annually recurrent droughts on households’ coping strategies. Placing the Republic of Chad in the context of the administrative regions of surrounding countries, where Boko Haram and its splinter groups operated at the time of their greatest territorial expansion (Extreme Nord in Cameroon, Lac in Chad, and Diffa in Niger, as well as the Nigerian states of Borno, Yobe, and Adamawa), it covers the timeframe from late 2009 to 2016. On the qualitative side, a systematic literature review on the impacts of Boko Haram on food security and related concepts in the study area, a review of conflict databases and press coverage of Boko Haram’s activities, and semi-structured interviews of Chadian security experts help to locate where and when the insurgency was active, the violence it perpetrated, and the impacts it had. On the quantitative side, the thesis leverages DHS data of 1997 and 2010, MICS data of 2000 and 2015 for childhood malnutrition indicators. The 2011, 2013, 2014, 2015 and 2016 ENSA waves are used for household food security indicators. Across the broader Lake Chad region, Boko Haram activity led to the displacement of food producers, interruption of migration routes of pastoralists, increased exposure to cattle rustling, and transport restrictions affecting food markets. It is also associated with changes in trade routes and border closures leading to price fluctuations, market closure and decrease in market activity, reduction in smallholder farmers’ income, and curbing physical access of consumers to food markets due to the destruction of infrastructure and security concerns. These factors contributed to increases in wasting, stunting, and child mortality rates, decreases in school enrolment and years of schooling, and limitations in access to health care. On the macroeconomic level, agricultural output, GDP, and other development indicators have been affected negatively. However, on the micro level, many studies focus on the insurgency’s impacts on displacement, in the form of refugees and IDPs within specific camps. These populations struggle with their loss of agro-pastoralist livelihoods, and with limited access to land and water to sustain them. Coupled with low employment rates, this results in low income across camps. However, whether this results in lack of food availability and diversity differs significantly from camp to camp, and access to health, education, and other basic service is highly unequally distributed as well. Concerningly, trading food for sex is a practice in at least some camps. Centering in on Chad itself, the thesis exploits the fact that Boko Haram perpetrated only criminal but not political violence between 2010 and 2014. During this period, insurgents plundered and pillaged Chadian villages in the seasonal wetlands of Lake Chad, and committed other criminal acts, but did not engage Chadian security forces for political gains; hence, this setup allows to isolate the impacts that terrorist organizations can achieve through purely criminal violence. Applying a DID approach, the dissertation finds that such criminal violence causes deteriorations in the z-scores of underweight and wasting of children under the age of five years by -0.085 points and -0.305 points, respectively. It finds that the insurgency’s criminal violence causes a decrease of 31.7 percentage points in the participation of households in agricultural activities and a decrease of their dietary diversity by 53.7 points. These impacts are large, especially considering that criminal violence perpetrated by Boko Haram in Chad received little to no international attention. The impacts of seasonal drought on food security, however, are much more measured. Out of five coping strategies assessed, seasonal drought has impacts to a statistically significant degree on only two: The prevalence of households selling non-productive assets and the prevalence of using their savings increases by 7.1 percentage points and 7.6 percentage points, respectively, when drought exposure increases by 1 percentage point on a low administrative level. Estimates of heterogeneous treatment effects and other robustness tests support a causal interpretation of these coefficients, which are obtained through two-way fixed effect estimations. These findings do not mean that drought-affected households do not enact other coping strategies, too. It merely means that seasonal drought likely causes them to use only two very specific coping strategies, but it does not cause the use of others.