Downside risk
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Carbon Tail Risk Open
Strong regulatory actions are needed to combat climate change, but climate policy uncertainty makes it difficult for investors to quantify the impact of future climate regulation. We show that such uncertainty is priced in the option marke…
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Are cryptocurrencies a safe haven for equity markets? An international perspective from the COVID-19 pandemic Open
The COVID-19 pandemic provided the first widespread bear market conditions since the inception of cryptocurrencies. We test the widely mooted safe haven properties of Bitcoin, Ethereum and Tether from the perspective of international equit…
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ESG shareholder engagement and downside risk Open
We show that engagement on environmental, social, and governance issues can benefit shareholders by reducing firms’ downside risks. We find that the risk reductions (measured using value at risk [VaR] and lower partial moments) vary across…
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Delayed Expected Loss Recognition and the Risk Profile of Banks Open
This paper investigates the extent to which delayed expected loan loss recognition ( DELR ) is associated with greater vulnerability of banks to three distinct dimensions of risk: (1) stock market liquidity risk, (2) downside tail risk of …
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Soil Water Holding Capacity Mitigates Downside Risk and Volatility in US Rainfed Maize: Time to Invest in Soil Organic Matter? Open
Yield stability is fundamental to global food security in the face of climate change, and better strategies are needed for buffering crop yields against increased weather variability. Regional- scale analyses of yield stability can support…
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Multinationality, portfolio diversification, and asymmetric MNE performance: The moderating role of real options awareness Open
The field of international business is fundamentally concerned with the implications of managerial actions that affect multinational risk and performance outcomes. While portfolio diversification and real options theory are often used to d…
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Volatility Forecasting: Downside Risk, Jumps and Leverage Effect Open
We provide empirical evidence of volatility forecasting in relation to asymmetries present in the dynamics of both return and volatility processes. Using recently-developed methodologies to detect jumps from high frequency price data, we e…
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The Axiomatic Approach to Risk Measures for Capital Determination Open
The quantification of downside risk in terms of capital requirements is a key issue for both regulators and the financial industry. This review presents the axiomatic approach, which is based on monetary risk measures. These provide a unif…
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Good Volatility, Bad Volatility, and Option Pricing Open
Advances in variance analysis permit the splitting of the total quadratic variation of a jump-diffusion process into upside and downside components. Recent studies establish that this decomposition enhances volatility predictions and highl…
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Comparing gold’s and Bitcoin’s safe-haven roles against energy commodities during the COVID-19 outbreak: A vine copula approach Open
This paper aims to compare the safe-haven roles of gold and Bitcoin for energy commodities, including oils and petroleum, during COVID-19. Specifically, we examine the presence of reduction in downside risk after mixing gold/Bitcoin with s…
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Cryptocurrency Trading Using Machine Learning Open
We present a model for active trading based on reinforcement machine learning and apply this to five major cryptocurrencies in circulation. In relation to a buy-and-hold approach, we demonstrate how this model yields enhanced risk-adjusted…
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Capturing Macroeconomic Tail Risks with Bayesian Vector Autoregressions Open
A rapidly growing body of research has examined tail risks in macroeconomic outcomes. Most of this work has focused on the risks of significant declines in GDP, and has relied on quantile regression methods to estimate tail risks. In this …
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Stablecoins as a tool to mitigate the downside risk of cryptocurrency portfolios Open
This paper empirically assesses the ability of three putative stablecoins (two dollar-backed, Tether and USD Coin; and one gold-backed, Digix Gold) to mitigate the risk of facing severe losses (downside risk) of a traditional cryptocurrenc…
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Diversified crop-livestock farms are risk-efficient in the face of price and production variability Open
Mixed crop-livestock farms are important production systems worldwide and dominate Australia's broadacre agricultural regions. While integration of crops and livestock can offer many benefits, these are often intertwined and are hard to qu…
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Downside Variance Risk Premium Open
We propose a new decomposition of the variance risk premium in terms of upside and downside variance risk premia. The difference between upside and downside variance risk premia is a measure of skewness risk premium. We establish that the …
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COVID‐19 crisis and risk spillovers to developing economies: Evidence from Africa Open
This study provides new evidence on how risk spillovers occur from the United States to developing economies in Africa during the COVID‐19 pandemic. The results show that downside risk exposures of African markets, financial firms and bank…
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Decoupling hypothesis of Islamic stocks: Evidence from copula CoVaR approach Open
This paper studies the dependence structure between Islamic and conventional stocks in five countries (USA, UK, Japan, Malaysia and Pakistan) using the copula CoVaR approach for the period 2004–2016. Results from the copula models show tha…
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Freight Rates in Downside and Upside Markets: Pricing of Own and Spillover Risks from Other Shipping Segments Open
Summary Shipping freight rates are notoriously volatile and shipping investors are perceived to be risk loving. The paper explores the stochastic properties of freight rates in the shipping industry and derives the analytical equations for…
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Determinants of downside risk exposure of dairy farms Open
We investigate determinants of dairy producers’ risk exposure using a unique combination of foci on (i) downside risks, (ii) a holistic representation of revenues from milk and animal sales, (iii) climatic extremes and (iv) the role of ani…
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Typology for flight-to-quality episodes and downside risk measurement Open
We propose a total return-based framework to measure downside risk associated with phenomenon of capital outflows from riskier to safer financial markets. The proposed method consists of three elements: (i) the general definition of the fl…
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Does corporate governance have a differential effect on downside and upside risk? Open
We investigate whether corporate governance has differential effects on downside and upside risk. Intuitively, strong corporate governance should decrease the downside risk but increase the upside risk. However, using a large panel of 1164…
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The Role of Production Risk in Sustainable Land-Management Technology Adoption in the Ethiopian Highlands Open
Working papers in Economics, No 407, School of Business, Economics and Law at University of Gothenburg.
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Growth at Risk From Climate Change Open
How will climate change affect risks to economic activity? Research on climate impacts has tended to focus on effects on the average level of economic growth. I examine whether climate change may make severe contractions in economic activi…
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Real Options and Environmental Policies: The Good, the Bad, and the Ugly Open
The literature on real options shows that irreversibilities, uncertainties about future benefits and costs, and the flexibility in decision making generate benefits and costs of delaying immediate action. When applied to government policy …
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Symmetric and Asymmetric Market Betas and Downside Risk Open
Our paper explores whether a symmetric plain or an asymmetric down-beta is a better hedging measure (Roy 1952; Markowitz 1959). Unlike Ang, Chen, and Xing (2006) and Lettau, Maggiori, and Weber (2014), we find that the prevailing plain mar…
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Beyond Mean-Variance: Risk and Performance Measurement in a Nonsymmetrical World Open
Most practitioners use the capital asset pricing model (CAPM) to measure risk and investment performance. The CAPM, however, assumes either that all asset returns are normally distributed (and thus symmetrical) or that investors have mean-…
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Elicitation of irrigators' risk preferences from observed behaviour Open
Water trading in the M urray– D arling B asin of A ustralia has developed to the point where it is a common adaptation tool used by irrigators, making it an apt case study to elicit the marginal value of irrigation water and irrigators' ri…
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Multiobjective stochastic programming with recourses for real-time flood water conservation of a multireservoir system under uncertain forecasts Open
Flood water conservation realized through real-time multireservoir operations is effective in mitigating water scarcity. Owing to the influence of real-time inflow forecast uncertainty, determining an informed operation plan necessitates r…
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Valuing portfolios of interdependent real options under exogenous and endogenous uncertainties Open
Although the value of portfolios of real options is often affected by both exogenous and endogenous sources of uncertainty, most existing valuation approaches consider only the former and neglect the latter. In this paper, we introduce an …
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Downside Risk-Based Six-Factor Capital Asset Pricing Model (CAPM): A New Paradigm in Asset Pricing Open
The importance of downside risk cannot be denied. In this study, we have replaced beta in the five-factor model of using downside beta and have added a momentum factor to suggest a new six-factor downside beta capital asset pricing model (…