In this article we examine the theory of Purchasing Power Parity (PPP) on a sample of Central and Eastern European economies. The article makes two main advances with respect to previous PPP studies. First, it employs a monthly database on real exchange rates for a panel of 12 Central and Eastern European economies by testing the theory separately with respect to the US dollar and to the euro for the period January 1994 to December 2008. Second, we utilize, among other panel unit root tests, the panel Seemingly Unrelated Regressions Augmented Dickey-Fuller (SURADF) test proposed by Breuer et al. (2002), which allows us to identify how many and which members of the panel contain a unit root. As our study found support for the validity of PPP in some reforming European economies, special attention should be devoted to individual country-specific factors that cause PPP deviations.
COBISS.SI-ID: 10656028
In this article, we investigate the Purchasing Power Parity (PPP) concept by utilizing a database of monthly real exchange rates from 12 Central and Eastern European economies with respect to different numeraire currencies. Owing to the elaborated limitations of linear specifications by verifying this exchange rate theory, we apply a nonlinear unit root test based on the Exponential Smooth Transition Autoregressive (ESTAR) model proposed by Kapetanios et al. (KSS; 2003). Our analysis shows that after taking into account the nonlinear reversion of real exchange rates of European transition economies with respectto the euro, the validity of PPP is confirmed for the majority of countries in the sample.
COBISS.SI-ID: 10988316
This paper examines the volatility of the stock indices of two world powers - USA and China, before and during the global financial crisis. Generally, it is believed that markets of developing countries are riskier than the developed capital markets. The purpose of this study was to confirm or reject this common belief, to determine whether the characteristics of American stock market fluctuation changed during the crisis, and to compare its volatility to China. We used three different GARCH models to examine the volatility. The study confirmed that during the global financial crisis volatility significantly increased on both stock markets. The results of this study thus do not support the common belief that the developed capital market is subject to relatively lower volatility than the developing market. During the current global financial crisis, the developed American market has actually been more volatile than the Chinese one.
COBISS.SI-ID: 11307548
Our well-being depends on both our personal success and the success of our society. The realization of this fact makes cooperation an essential trait. Experiments have shown that rewards can elevate our readiness to cooperate, but since giving a reward inevitably entails paying a cost for it, the emergence and stability of such behavior remains elusive. Here we show that allowing for the act of rewarding to self-organize in dependence on the success of cooperation creates several evolutionary advantages that instill new ways through which collaborative efforts are promoted. Ranging from indirect territorial battle to the spontaneous emergence and destruction of coexistence, phase diagrams and the underlying spatial patterns reveal fascinatingly rich social dynamics that explain why this costly behavior has evolved and persevered. Comparisons with adaptive punishment, however, uncover an Achilles heel of adaptive rewarding, coming from over-aggression, which in turn hinders optimal utilization of network reciprocity. This may explain why, despite its success, rewarding is not as firmly embedded into our societal organization as punishment.
COBISS.SI-ID: 19323144
The foundations of the efficient market hypothesis (EMH) are being tested in this article. We propose that using public information (consensus target price), one can develop a s strategy that will outperform the benchmark. The average of the target prices is compared to the security's current price in order to calculate the target-to-real-price (TRP) ratio. As the ratio is observed to be stationary, we build upon the feature and propose various ways to implement it into the trading strategy. We create clear and simple-to-implement rules which indicate whether the stock is over/undervalued. We simulate the value of the protfolio based on the buy/sellsignals. Backtesting is used in order to compare the return of the model to the benchmark. Results of the trading strategy are positive, as the model outperforms the passive portfolio by more that 50 %. The strategy is implemented on the emerging market securities, but we note that stationarity of the ratio has already been observed in the developed market, which indicates consistency of the results.
COBISS.SI-ID: 10971420