The Impact of Renewables on Electricity Prices and Congestion in a Regime Switching Model: Evidence from the Italian Grid

This paper investigates the impact of market coupling on (1) electricity prices of Hungarian and Romanian markets and (2) the influence of renewable generation on price regimes by employing the Markov regime-switching model with time-varying transition probabilities. The study provides the evidence of the changes in regimes since market coupling. The results show that the persistence and occurrences of Hungarian price drops are significantly increased. Meanwhile, Romanian prices exhibit less and shorter living price jumps. Considering time-varying transition probabilities as functions of wind power production in Romania, the study also reveals that market coupling changed the influence of wind power production on the regime-switching mechanism of electricity prices.

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Impact of volatility and equity market uncertainty on herd behaviour: evidence from UK REITs

Journal of European Real Estate Research ◽

10.1108/jerer-06-2017-0021 ◽

2018 ◽

Vol 11 (2) ◽

pp. 169-186 ◽

Cited By ~ 5

Author(s):

Omokolade Akinsomi ◽

Yener Coskun ◽

Rangan Gupta ◽

Chi Keung Marco Lau

Keyword(s):

Asset Allocation ◽

Regime Switching ◽

Stock Exchange ◽

Equity Market ◽

Market Uncertainty ◽

Content Type ◽

Regime Switching Model ◽

Switching Model ◽

Market Sentiment ◽

The Impact

PurposeThis paper aims to examine herding behaviour among investors and traders in UK-listed Real Estate Investment Trusts (REITs) within three market regimes (low, high and extreme volatility periods) from the period June 2004 to April 2016.Design/methodology/approachObservations of investors in 36 REITs that trade on the London Stock Exchange as at April 2016 were used to analyse herding behaviour among investors and traders of shares of UK REITs, using a Markov regime-switching model.FindingsAlthough a static herding model rejects the existence of herding in REITs markets, estimates from the regime-switching model reveal substantial evidence of herding behaviour within the low volatility regime. Most interestingly, the authors observed a shift from anti-herding behaviour within the high volatility regime to herding behaviour within the low volatility regime, with this having been caused by the FTSE 100 Volatility Index (UK VIX).Originality/valueThe results have various implications for decisions regarding asset allocation, diversification and value management within UK REITs. Market participants and analysts may consider that collective movements and market sentiment/psychology are determinative factors of risk-return in UK REITs. In addition, general uncertainty in the equity market, proxied by the impact of the UK VIX, may also provide a signal for increasing herding-related risks among UK REITs.

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Asymmetric Labor Market Reforms: Effects on Wage Growth and Conversion Probability of Fixed-Term Contracts

ILR Review ◽

10.1177/0019793917737506 ◽

2017 ◽

Vol 71 (3) ◽

pp. 760-788 ◽

Cited By ~ 1

Author(s):

Marta Silva ◽

Luis Filipe Martins ◽

Helena Lopes

Keyword(s):

Regime Switching ◽

Wage Growth ◽

Employment Protection ◽

Hourly Wage ◽

Regime Switching Model ◽

Switching Model ◽

Term Contract ◽

Labor Market Reforms ◽

The Impact ◽

Employee Data

The authors investigate the impact of a change in employment protection laws in Portugal that increased the maximum legal duration of fixed-term contracts. They find that this reform led to a reduction in the probability that a worker on a fixed-term contract would be converted to a permanent contract. In addition, those workers who had their contracts converted experienced a significantly higher hourly wage growth at the time of conversion and faced a lower reduction in wage growth during the years in which the changed legislation was in force. Consequently, the implementation of this law led to a 27% increase in the wage-growth differential between the two contracts. The findings are based on an endogenous regime-switching model using rich administrative linked employer–employee data.

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The impact of global financial market uncertainty on the risk-return relation in the stock markets of G7 countries

Studies in Economics and Finance ◽

10.1108/sef-05-2013-0069 ◽

2017 ◽

Vol 34 (1) ◽

pp. 2-23 ◽

Cited By ~ 3

Author(s):

Geoffrey Loudon

Keyword(s):

Financial Market ◽

Stock Markets ◽

Regime Switching ◽

Transition Probabilities ◽

Market Uncertainty ◽

Content Type ◽

Regime Switching Model ◽

Switching Model ◽

Risk Return ◽

The Impact

Purpose This paper aims to investigate the effect of global financial market uncertainty on the relation between risk and return in G7 stock markets. Design/methodology/approach Market uncertainty is quantified using a probability-based measure derived from a regime-switching model in which the state transition probabilities are time-varying in response to leading economic indicators. Time variation in the risk return relation is estimated using a GARCH-M model. Findings While the regime-switching model successfully distinguishes between crisis and normal states, there remains substantial variability through time in the level of uncertainty about which state prevails. Results show that a strong negative relation exists between this uncertainty and the reward-to-variability ratio across all G7 stock markets. This finding is qualitatively consistent at both monthly and weekly horizons. Originality/value Extant evidence on the risk-return relation is conflicting. Most papers assume the relation is time constant. Allowing the reward-to-variability ratio to vary through time in response to return regime uncertainty increases the understanding of asset pricing. It also has important implications for asset allocation decisions by investors.

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