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Zeno Adams
Title
Dr.
Last Name
Adams
First name
Zeno
Email
zeno.adams@unisg.ch
Phone
+41 71 224 70 14
Skype
zeno.adams
Now showing
1 - 9 of 9
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PublicationAre Correlations Constant? Empirical and Theoretical Results on Popular Correlation Models in FinanceMultivariate GARCH models have been designed as an extension of their univariate counterparts. Such a view is appealing from a modeling perspective but imposes correlation dynamics that are similar to time-varying volatility. In this paper, we argue that correlations are quite different in nature. We demonstrate that the highly unstable and erratic behavior that is typically observed for the correlation among financial assets is to a large extent a statistical artefact. We provide evidence that spurious correlation dynamics occur in response to financial events that are sufficiently large to cause a structural break in the time-series of correlations. A measure for the autocovariance structure of conditional correlations allows us to formally demonstrate that the volatility and the persistence of daily correlations are not primarily driven by financial news but by the level of the underlying true correlation. Our results indicate that a rolling-window sample correlation is often a better choice for empirical applications in finance.Type: journal articleJournal: Journal of banking and financeVolume: 84
Scopus© Citations 28 -
PublicationThe Sources of Risk Spillovers Among U.S. REITs : Financial Characteristics and Regional ProximityIn this paper, we estimate the risk spillovers among 74 U.S. REITs using the statedependent sensitivity value-at-risk (SDSVaR) approach. This methodology allows for the quantification of the spillover size as a function of a company's financial condition (tranquil, normal, and volatile REIT prices). We show that the size of risk spillovers is more than twice as large when REITs are in financial distress and find evidence for the impact of geographical proximity: REITs that have their properties located in close distance to the properties of other REITs show risk spillovers that are on average 33% higher than REITs that have similar properties but at a larger distance. We estimate the risk gradient to decrease nonlinearly and to have zero slope for property distances of more than 250 miles. Our empirical findings provide first empirical evidence on the transmission of risk spillovers from underlying real positions to the securitized level of a company. Specifically, our results provide new insights concerning the relevance of geographical diversification for REITs and have important implications for the investment and risk management decisions of real estate investors, mortgage lenders, home suppliers, and policy makers.Type: journal articleJournal: Real Estate EconomicsVolume: 43Issue: 1
Scopus© Citations 28 -
PublicationSpillover Effects among Financial Institutions: A State-Dependent Sensitivity Value-at-Risk ApproachIn this paper, we develop a state-dependent sensitivity value-at-risk (SDSVaR) approach that enables us to quantify the direction, size, and duration of risk spillovers among financial institutions as a function of the state of financial markets (tranquil, normal, and volatile). Within a system of quantile regressions for four sets of major financial institutions (commercial banks, investment banks, hedge funds, and insurance companies) we show that while small during normal times, equivalent shocks lead to considerable spillover effects in volatile market periods. Commercial banks and, especially, hedge funds appear to play a major role in the transmission of shocks to other financial institutions. Using daily data, we can trace out the spillover effects over time in a set of impulse response functions and find that they reach their peak after 10 to 15 days.Type: journal articleJournal: Journal of Financial and Quantitative AnalysisVolume: 49Issue: 3
Scopus© Citations 71 -
PublicationDisentangling the Short and Long-Run Effects of Occupied Stock in the Rental Adjustment ProcessIn the current stand of literature on the rental adjustment process starting with Hendershott et al. (Real Estate Economics, 30, 165-183, 2002a, Journal of Real Estate Finance and Economics, 24, 59-87, 2002b) it has become practice to treat the compound variable "occupied stock" as a supply variable. In this study we show that this variable deserves a more critical investigation and that the general view of a supply variable may be misleading. Using panel data covering 30 urban areas for 17 years, we investigate the rental adjustment process in the German office market. The application of recently developed cointegration techniques for non-stationary panel data in conjunction with the corresponding error correction model (ECM) enables us to overcome the data limitations, particularly existent for most European real estate markets. Hence, our primary motivation is (a) to demonstrate how "occupied stock" should be interpreted correctly and (b) to provide useful insights into the long-term relationships and short-run dynamics of real office prime rents. The empirical evidence suggests that a one percent rise in office employment increases real rents on average by 1.64% through higher demand for office space. On the other hand, a one percent increase in the supply of office space decreases real rents in the long run by 2.25%. The results from the error correction model show that deviations from the long-run equilibrium lead to an adjustment process which restores equilibrium within approximately 3 years.Type: journal articleJournal: Journal of Real Estate Finance and EconomicsVolume: 44Issue: 4
Scopus© Citations 12 -
PublicationInvestment choice and performance potential in the mutual fund industryThis article investigates the performance potential of a set of three investment choices: multi-asset, multi-management and multi-instrument. These approaches have been used recently in the asset management industry to give investors access to an extended investment universe, and to provide higher risk-adjusted returns to clients. In this context, we evaluate each investment choice's overall contribution to portfolio performance. Using bootstrapping simulations and a set of performance measures over a 20-year sample, we show that: 1. extending the typical equity- and bond-focused fund to a set of five asset classes increases the Sharpe ratio by 50 per cent on average, 2. allowing for third-party funds in a client's portfolio significantly reduces company-specific risk, and 3. including single assets leads to an increased return potential for skilled portfolio managers. Thus, our empirical results suggest that investments in actively managed mutual funds are likely to benefit significantly from these multi-investment approaches, and that the current practice of providing investors with balanced in-house funds is suboptimal.Type: journal articleJournal: Journal of Asset ManagementVolume: 13Issue: 2DOI: 10.1057/jam.2012.1
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PublicationMacroeconomic Determinants of International Housing MarketsThis paper examines the long-term impact and short-term dynamics of macroeconomic variables on international housing prices. Since adequate housing market data are generally not available and usually of low frequency we apply a panel cointegration analysis consisting of 15 countries over a period of 30 years. Pooling the observations allows us to overcome the data restrictions which researchers face when testing long-term relationships among single real estate time series. This study does not only confirm results from previous studies, but also allows for a comparison of single country estimations in an integrated equilibrium framework. The empirical results indicate house prices to increase in the long-run by 0.6% in response to a 1% increase in economic activity while construction costs and the long-term interest rate show average long-term effects of approximately 0.6% and ?0.3%, respectively. Contrary to current literature our estimates suggest only about 16% adjustment per year. Thus the time to full recovery may be much slower than previously stated, so that deviations from the long-term equilibrium result in a dynamic adjustment process that may take up to 14 years.Type: journal articleJournal: Journal of Housing EconomicsVolume: 19Issue: 1
Scopus© Citations 174 -
PublicationThe Predictive Power of Value-at-Risk Models in Commodity Futures MarketsApplying standard value-at-risk (VaR) models to assets with non-normally distributed returns can lead to an underestimation of the true risk. Commodity futures returns are driven by continuous supply and demand shocks that lead to a distinct pattern of time-varying volatility. As a result of these specific risk characteristics, commodity returns create the ideal environment for testing the accuracy of VaR models. Therefore, this article examines the in- and out-of-sample performance of various VaR approaches for commodity futures investments. Our results suggest that dynamic VaR models such as the CAViaR and the GARCH-type VaR generally outperform traditional VaRs. These models can adequately incorporate the time-varying volatility of commodity returns, and are sensitive to significant changes in the series of commodity returns. This has important implications for the risk management of portfolios involving commodity futures positions. Risk managers willing to familiarize themselves with these complex models are rewarded with a VaR that shows the adequate level of risk even under extreme and rapidly changing market conditions, as well as under calm market periods, during which excessive capital reserves would lead to unnecessary opportunity costs.Type: journal articleJournal: Journal of Asset ManagementVolume: 11Issue: 4DOI: 10.1057/jam.2009.21
Scopus© Citations 24 -
PublicationValue at Risk, GARCH Modelling and the Forecasting of Hedge Fund Return VolatilityThis paper examines the conditional volatility characteristics of daily management style returns and compares the out-of-sample forecasts of different Value at Risk (VaR) approaches, namely, the normal, Cornish-Fisher (CF), and the so-called GARCH-type VaR. The examination of the conditional volatility of hedge fund styles and composite returns shows important differences concerning persistence, mean reversion and asymmetry in the period under consideration. Hedge fund returns exhibit significant negative skewness and excess kurtosis, which cannot be captured in the normal VaR whereas the CF-VaR results in a systematic downward shift of the conventional VaR. The GARCH-type VaR, however, includes the time-varying conditional volatility and is able to trace the actual return process more effectively. Since the forecast performance cannot detect which of the three VaR types can match the time-varying risk adequately, an adjusted hit ratio takes the size of the hits as well as the average VaR into account. According to this, the GARCH-type VaR outperforms the other VaRs for most of the hedge fund style indices.Type: journal articleJournal: Derivatives Use, Ttrading & RegulationVolume: 13Issue: 1
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PublicationCommodities and the Macroeconomy(John Wiley & Sons, 2008-07)