Book of Abstracts International Conference FINANCIAL INVESTMENTS AND INSURANCE INVEST 2014 Wrocław, September 17-19, 2014
2 Book of Abstracts
XVIIth Conference Financial Investments and Insurance International Conference: FINANCIAL INVESTMENTS AND INSURANCE HONORARY PATRONAGE OF THE CONFERENCE Rector of Wrocław University of Economics Prof. dr hab. Andrzej Gospodarowicz PATRONAGE OF CONTENT The project is realized with the support of Narodowy Bank Polski 3
Book of Abstracts Official Sponsor of the International Conference Financial Investments and Insurance 4
XVIIth Conference Financial Investments and Insurance Scientific Committee Prof. Diarmuid Bradley School of Professional Finance at Institute of Bankers Prof. dr hab. Jan Czekaj Cracow University of Economics Prof. dr hab. Krzysztof Jajuga - Head of the Scientific Committee Wrocław University of Economics Prof. Dr. Hermann Locarek-Junge Technische Universität Dresden Dr hab. Paweł Miłobędzki, prof. UG University of Gdańsk Prof. dr hab. Jan Monkiewicz Warsaw University of Technology Prof. Lucjan T. Orlowski, Ph.D. Sacred Heart University, Fairfield, Connecticut Prof. dr hab. Wanda Ronka-Chmielowiec Wrocław University of Economics Prof. dr hab. Andrzej Sławiński Warsaw School of Economics Conference Organisers Department of Financial Investments and Risk Management and Department of Insurance Wrocław University of Economics The Organizing Committee dr hab. Katarzyna Kuziak, prof. UE dr inż. Krzysztof Piontek dr Radosław Pietrzyk 5
11:00 13:00 Workshop (room 3 building Z1) 13:00 14:15 Registration (building CKU) 13:15 14:15 Lunch (building CKU) 14:15 14:20 Opening of the Conference Chair: Krzysztof Jajuga Book of Abstracts Conference Programme Wednesday, 17 September 2014 Plenary Session I 14:20 14:50 Holger Fahrinkrug - guest speaker from Bank New York Mellon Stagnation, Lowflation and NIRP - Can EMU return to growth? 14:50 16:10 Leszek Czarnecki Strategy: to win or not to lose? 16:10 16:40 Adam Maciejewski Short-termism myths and facts 16:40 17:15 Coffee Break Parallel Sessions A1 Risk Management I 17:15 17:45 Agnieszka Wojtasiak-Terech Risk identification and assessment guidelines for public sector in Poland Discussant: Krzysztof Kluza 17:45 18:15 Dominik Krężołek Volatility and risk models on the metal market Discussant: Witold Szczepaniak 18:15 18:45 Krzysztof Piontek Power analysis of some chosen tests of independence of Value-at-Risk violations Discussant: Dominik Krężołek 18:45 19:15 Marta Małecka Spectral density tests in VaR failure independence analysis Discussant: Krzysztof Piontek B1 Financial Econometrics 17:15 17:45 Stanisław Wanat, Monika Papież, Sławomir Śmiech Causality in distribution between European stock markets and commodity prices: u sing independence test based on the empirical copula Discussant: Daniel Papla 17:45 18:15 Dorota Szczygieł Application of three dimensional copula functions in the analysis of currency market Discussant: Sławomir Śmiech 18:15 18:45 Joanna Olbryś, Elżbieta Majewska Increasing cross-market correlations during the 2007-2009 financial crisis: Contagion or integration effects? 6
XVIIth Conference Financial Investments and Insurance Discussant: Daniel Papla 18:45 19:15 Jakub Koziński Does investment in fixed assets determine the company value increase? Discussant: Joanna Olbryś C1 Financial Market I 17:15 17:45 Janusz Brzeszczyński, Jerzy Gajdka, Ali M. Kutan Central bank communication and the impact of public announcements of new monetary policy data on the reaction of foreign exchange and stock markets: evidence from Poland Discussant: Ewa Dziwok 17:45 18:15 Ewa Dziwok Value of skills in fixed income investments Discussant: Jerzy Gajdka 18:15 18:45 Agnieszka Przybylska-Mazur Selected methods of the determination of core inflation Discussant: Janusz Brzeszczynski D1 Personal Finance 17:15 17:45 Anna Jędrzychowska, Ewa Poprawska Strength the current minimal amounts of coverage in MTPL insurance in EU countries on personal injured Discussant: Magdalena Homa 17:45 18:15 Łukasz Feldman Household risk management techniques in an intertemporal consumption model Discussant: Paweł Rokita 18:15 18:45 Radosław Pietrzyk, Paweł Rokita On a concept of a household financial plan optimization model Discussant: Krzysztof Piasecki 19:15 Dinner (building CKU) 20:15 Welcome Reception (Il Gusto Club & Restaurant ul. Św. Mikołaja 8-11) Thursday, 18 September 2014 Parallel Sessions A2 Derivatives and speeches by representatives of student scientific associations 08:30 09:00 Agnieszka Majewska The formula of exercise price in employee stock options the verification of the proposed approach Discussant: Ewa Dziawgo 09:00 09:30 Ewa Dziawgo Influence of the volatility price of the underlying instrument on the risk of the option strategy collar (in Polish) Discussant: Paweł Rokita 09:30 10:00 Oskar Paolini Ethereum the future of the financial system? A case of financial derivatives B2 Financial Market II 7
Book of Abstracts 08:30 09:00 Ewa Widz Single stock futures quotation as a forecasting tool for stock prices Discussant: Adam Zaremba 09:00 09:30 Aleksandra Pieloch-Babiarz Dividend initiations as a signal of subsequent earnings performance Warsaw trading floor evidence Discussant: Ewa Widz 09:30 10:00 Jakub Keller Day of the week effect among the smallest companies listed on WSE Discussant: Aleksandra Pieloch-Babiarz C2 Financial Market III 08:30 09:00 Martin T. Bohl, Janusz Brzeszczyński, Dobromił Serwa Large capital inflows and stock returns in a thin market Discussant: Paweł Miłobędzki 09:00 09:30 Tadeusz Winkler-Drews Contrarian strategy risks in Warsaw Stock Exchange Discussant: Sebastian Majewski 09:30 10:00 Lucia Staszkiewicz, Piotr Staszkiewicz HFT's potential of investment companies Discussant: Winkler-Drews 10:00 10:30 Marta Wiśniewska EURUSD high frequency trading: investment performance Discussant: Katarzyna Łęczycka D2 Insurance 08:30 09:00 Volodymyr Veretnov Possibilities and contradictions of nanotechnology applications in preventive activities insurer Discussant: Krzysztof Łyskawa 09:00 09:30 Teresa Bednarczyk, Anna Jańska Innovation in selected insurance products in Poland Discussant: Krzysztof Jajuga 09:30 10:00 Monika Kaczała, Dorota Wiśniewska Risks in the farms in Poland and their financing research findings (in Polish) Discussant: Anna Jędrzychowska 10:00 10:30 Łukasz Jasiński Product innovations in health insurances in Poland (in Polish) Discussant: Monika Kaczała 10:30 11:30 Coffee Break and Poster Session Plenary Session II 11:30 12:00 Richard van Horne Some thoughts on efficiency, behavior, and value 12:00 12:30 Radosław Stefurak Employee stock options in big Polish banks in the context of 2008 financial crisis and subsequent regulatory changes 12:30 13:00 Wojciech Nagel Management risk of lack of compliance with the legal environment, practical aspect 8
XVIIth Conference Financial Investments and Insurance 13:30 14:30 Lunch (building CKU) 15:30 19:00 Guided tour 20:00 Gala Dinner (Hotel Campanile Wrocław Centrum, ul. Ślężna 26) Friday, 19 September 2014 Parallel Sessions A3 Risk Management II 09:00 09:30 Yury Y. Karaleu Slice-Of-Life customization of bankruptcy models Discussant: Aleksander Mercik 09:30 10:00 Krzysztof Kluza Changes in credit risk profile of Polish local governments. Assessment of unsystematic risk Discussant: Yury Y. Karaleu 10:00 10:30 Jarosław Pawłowski Weather risk management example of using weather derivative by producer of beer in Poland (in Polish) Discussant: Agnieszka Majewska 10:30 11:00 Aleksander Mercik Counterparty credit risk in derivatives Discussant: Jarosław Pawłowski B3 Financial Market IV 09:00 09:30 Krzysztof Piasecki Discounting under impact of temporal risk aversion - a case of discrete time Discussant: Krzysztof Jajuga 09:30 10:00 Josef Novotný Possibilities for stock market investment using psychological analysis Discussant: Paweł Porcenaluk 10:00 10:30 Sabina Nowak Order imbalance on the Warsaw Stock Exchange, 2000-2013 Discussant: Piotr Staszkiewicz C3 Corporate Finance 09:00 09:30 Katarzyna Byrka Kita, Mateusz Czerwiński Large block trades and private benefits of control on Polish capital market Discussant: Andrzej Rutkowski 09:30 10:00 Andrzej Rutkowski The profitability of acquiring companies on the Polish public capital market Discussant: Katarzyna Byrka-Kita 10:00 10:30 Aleksandra Szpulak An Integrative Working Capital Management in line with shareholder s wealth maximization Discussant: Małgorzata Tarczyńska-Łuniewska 10:30 11:00 Szymon Kwiatkowski Venture Debt financial instruments and investment risk of an early stage fund Discussant: Jakub Koziński 9
Book of Abstracts D3 Banking System 09:00 09:30 Bogdan Włodarczyk PKO Bank Polski as an institution of systemically importance for the development of the Polish economy Discussant: Dorota Skała 09:30 10:00 Ewa Wycinka Time to default analysis in personal credit scoring Discussant: Bogdan Włodarczyk 10:00 10:30 Dorota Skała Striving toward the mean? Income smoothing dynamics in small Polish banks Discussant: Ewa Wycinka 10:30 11:00 Michał Well The importance of credit risk for the financial stability of the banking sector in Poland Discussant: Jakub Keller 11:00 11:30 Coffee Break Plenary Session III 11:30 12:00 Paweł Miłobędzki How do term premia change over time? The evidence from US dollar LIBOR data using a Fourier approximation 12:00 12:30 Stanisław Wieteska The concept of liability insurance of entities carried out carbon dioxide-emitting installations in the case of their failure in Poland (in Polish) 12:30 13:00 Closing of the Conference 13:00 14:00 Lunch (building CKU) 10
XVIIth Conference Financial Investments and Insurance Plenary Session I Holger Fahrinkrug - guest speaker from Bank New York Mellon Stagna-tion, Lowflation and NIRP - Can EMU return to growth?... Leszek Czarnecki Strategy: to win or not to lose?... 11 Adam Maciejewski Short-termism myths and facts... 13 Leszek Czarnecki Getin Holding SA Strategy: to win or not to lose? The paper presents new challenges facing modern leaders and managers. One of the key challenges is to choose a business development strategy: whether it will be a strategy based on profit maximization at all times and at any cost (play to win) or a strategy based on error and loss risk minimization (play not to lose). Eventually, it is always those leaders and those firms that are willing to take risk and try to win at all costs that are winners. Unfortunately, the likelihood of a win is small; hence, most firms choosing this strategy are sooner or later wound up or taken over. The tendency to take risk and show market aggressiveness decreases with increasing operating scales. Large corporations prefer the not to lose strategy. It is consistent with the observations of nature, where it is the most common one. It is also confirmed by game theory, which assigns the best chances of a win to the tit-for-tat (TFT) strategy developed by Robert Axelrod, which calls for cooperation first, but if the other party defects, the same kind of move (defection) is prescribed. However, a not to lose strategy causes the firm to be stagnant and not to develop, as a result of which it loses market share. This results in a paradox: a to win strategy increases the risk of collapse of the firm, whereas a not to lose strategy brings about stagnation and slow degradation. The solution is to use two strategies at the same time. Risk taking is necessary to increase market advantages, whereas at the same time it is necessary to protect the firm from making errors and increase its resistance to changing environmental conditions. This may be achieved by increasing the emotional intelligence of the team and a new style of management by modern leaders. Today's leaders do not make plans, do not solve problems, and do not organize people, but in reality they should prepare the organization for change and help it to negotiate that change. On the other hand, any adopted strategy should take into account not only the financial results of the company itself, but also the interests of its employees, customers, local communities, etc. Eventually, this provides the greatest chance of value being created in the firm, the firm becoming more competitive and growing in a sustainable way. Keywords: Strategy, TFT, Leadership, Emotional Intelligence, Creating Value, Evolution Vanessa Urch Druskat and Steven B. Wolff, Building the Emotional Intelligence of Groups, Harvard Business Review, March 2001, Reprint R0103E. 11
Book of Abstracts Plenary Session I John P. Kotter, What Leaders Really Do, Harvard Business Review, December 2001, Reprint R0111F. Ranjay Gulati, How CEOs Manage Growth Agendas, Harvard Business Review, July August 2004, Reprint R0407K. Jim Collins, Level 5 Leadership, Harvard Business Review, July August 2005, Reprint R0507M. Boris Groysberg, L. Kevin Kelly, and Bryan MacDonald, The New Path to the C- Suite, Harvard Business Review, March 2011, Reprint R1103C. Gary Hamel and Lisa Valikangas, The Quest for Resilience, Harvard Business Review, September 2003, Reprint R0309C. Cynthia A. Montgomery, Putting Leadership Back into Strategy, Harvard Business Review, January 2008, Reprint R0801C. Jeff Dyer, Hal Gregersen, and Clayton M. Christensen, The Innovator s DNA, HBS Publishing 2011. Rosabeth Moss Kanter, Leadership and the Psychology of Turnarounds, Harvard Business Review, June 2003, Reprint R0306C. Laurie Bassi and Daniel McMurrer, Maximizing Your Return on People, Harvard Business Review, March 2007, Reprint R0703H. Heidi Grant and E. Tory Higgins, Do You Play to Win or to Not Lose?, Harvard Business Review, March 2013, Reprint R1303L. Michael E. Porter, Mark R. Kramer, Creating Shared Value, Harvard Business Review, January February 2011, Reprint R1101C. Robert Axelord, The Evolution of Cooperation, Basic Books 1984. 12
XVIIth Conference Financial Investments and Insurance Adam Maciejewski ex Chief Executive Officer of Warsaw Stock Exchange adam.maciejewski.pl@gmail.com Short-termism myths and facts Short termism refers to an excessive focus on short-term activities and results, driven by a desire of quick wins, at the expense of long-term goals. The key point of this definition is at the expense of. However, it should also be stressed that the natural focus on short term actions aimed at effective adaptation of the organization to constantly changing environment is definitely positive and should not be considered as short termism. Negative results of short termism are most commonly related to public companies. This approach affects company s long-term investments negatively and finally results in lower than possible long-term valuation of the company, as well as under-investment in the whole economy. Short term focus on financial results may also have positive impact on a current market value of a public company. But it should be kept in mind that such valuation has often speculative nature, and has nothing to do with stable value creation. Keywords: short-termism, valuation of the company, reporting standards, management remuneration, stability of management, investments Investor Short-Termism and Firm Value, Øyvind Bøhren (Norwegian School of Management), Richard Priestley (Norwegian School of Management), Bernt Arne Ødegaard University of Stavanger), Norges Bank, 2009 Corporate Investment and Stock Market Listing: A Puzzle?, John Asker (New York University), Joan Farre-Mensa (Harvard Business School), Alexander Ljungqvist (New York University, National Bureau of Economic Research; Centre for Economic Policy Research; European Corporate Governance Institute; Research Institute of Industrial Economics), 2014 Short-termism, Investor Clientele, and Corporate Performance, Francois Brochet (Harvard Business School), Maria Loumioti (University of Southern California), George Serafeim (Harvard University - Harvard Business School), 2013 Investment Chains. Addressing corporate and investor short-termism, Trade Union Congress, London, 2005 EU Market Transparency Directive, 2003 Reports of McKinsey & Company 13
Book of Abstracts Session A1 Parallel Session A1 Risk Management I Agnieszka Wojtasiak-Terech Risk identification and assessment guidelines for public sector in Poland... 14 Dominik Krężołek Volatility and risk models on the metal market... 16 Krzysztof Piontek Power analysis of some chosen tests of independence of Value-at- Risk violations... 17 Marta Małecka Spectral density tests in VaR failure independence analysis... 18 Agnieszka Wojtasiak-Terech Wrocław University of Economics agnieszka.wojtasiak@ue.wroc.pl Risk identification and assessment guidelines for public sector in Poland Risk management should become a very important part of the responsibilities of management and an integral part of the normal organizational processes in all public sector entities, in a way that provides timely and relevant risk information to management. In the last decade there are significant changes occurring in the practice of risk management, changes which, taken as a whole, are tending to redefine risk management of all organization risks on an integrated basis. Enterprise-wide risk management approach has become preferred approach the risk management. The objective of the research will be analysis of two important components of risk management process: risk identification and risk assessment. The study will determine recommendations for the public sector in Poland in terms of structured and comprehensive approach to risk identification and assessment. Author will describe important issues, which must be taken into the consideration to carry out proper risk identification. They are: defining goals and objectives for which risk will be identified, defining focal points of risk identification, selecting risk identification techniques (brain storm, Delphi method, existing data analysis, process analysis) and establishing risk categories. Based on the risk identification practice and theory author will work out risk typology best suited for the public sector risk management process and will recommend some risk identification methods. Risk assessment will be presented as a two-stage process. It includes risk analysis, which precedes risk evaluation. Risk analysis involves consideration of the causes of risk, their impact and the likelihood. It let to determine level of risks and prioritize them. Author will suggest qualitative methods for measurement risk likelihood and impact as best suited for the Polish public sector. Second stage of risk assessment is risk evaluation, which involves comparing the level of risk found during the analysis process with risk criteria established in the beginning of the risk management process. Keywords: risk management, risk identification, risk assessment, municipality risk, public sector risk 14
XVIIth Conference Financial Investments and Insurance Australian Institute of Company Directors, Institute of Internal Auditors Australia, Risk and Risk Management in the Public Sector, Public Sector Governance and Risk Forum, Australian National Audit Office, 2005, pp. 2-21 Cameron, J.W., Managing Risk Across The Public Sector: Good Practice Guide. Auditor General Victoria, Melbourne 2004, pp. 2-8 Carey M., Curtis P. (The contributing authors from Deloitte & Touche LLP), Risk assessment in practice, COSO 2012, pp. 1-18 Cooper T., Strategic Risk Management in the Municipal and Public Sector, An Exploration of Critical Success Factors and Barriers to Strategic Risk Management within the Province of Newfoundland and Labrador, The Harris Centre, Memorial University, Newfoundland 2010, pp. 29-59 COSO II Enterprise Risk Management Integrated Framework, COSO 2004 Dobre praktyki doskonalenia zarządzania zarządzanie ryzykiem, Materiały konferencyjne, Sekretariat Polskiej Nagrody Jakości, Warszawa 2012 Hill S., A Primer on Risk Management in the Public Service. University of Calgary, http://publications.gc.ca/collections/collection/sc94-118-2001e.pdf, access on June 6th, 2014 ISO 9001:2008 Quality management systems Requirements; ISO 2008 ISO 31000:2009 Risk management Principles and guidelines; ISO 2009 ISO/IEC 31010:2009 Risk management Risk assessment techniques; ISO 2009 ISO Guide 73:2009 Risk management- Vocabulary Guidelines for use in standards, ISO 2009 Komunikat nr 6 Ministra Finansów z dnia 6 grudnia 2012 roku w sprawie szczegółowych wytycznych dla sektora finansów publicznych w zakresie planowania i zarządzania ryzykiem. Kontrola zarządcza w sektorze finansów publicznych. Istota, unormowania prawne i otoczenie. Kompendium wiedzy, Ministerstwo Finansów, Warszawa 2012, pp. 52-56 Kumpiałowska A., Skuteczne zarządzanie ryzykiem a kontrola zarządcza w sektorze publicznym, Beck, Warszawa 2011 Peter C., Young P., Private sector and public sector risk Management, is there a difference?, http://www.eirm.com, access on June 6, 2014 PricewaterhouseCoopers, Risk Perspectives, London 2005, pp. 6-33 Queensland Government, A guide to risk management, 2011, pp.7-31 15
Dominik Krężołek University of Economics in Katowice dominik.krezolek@ue.katowice.pl Book of Abstracts Session A1 Volatility and risk models on the metal market Steel industry is currently one of the most important part in the structure of economy sectors both in developed and emerging countries. Therefore it may be identified as a determinant of economic development of the country. Economic and financial crises have a significant influence on the economic activity of the emerging markets. Moreover, instability and fluctuations of GDP and other economic indicators have a significant impact on the demand of commodities, including ones related to the steel market. The aim of this article is to present some volatility models and risk analysis on the example of investments realized on the non-ferrous metal market. The motivation to run this research is low popularity of empirical analysis in this field. Considering volatility analysis the GARCH models are presented (based on non-classical probability distributions). Within risk measures the value-at-risk approach is conducted. Initial results indicate that due to some features of time series of the metal market returns the use of classical models of volatility and risk measure is not very effective. Keywords: volatility, GARCH models, risk analysis, Value-at-Risk, metal market : Bollerslev T., Generalised autoregressive conditional heteroskedasticity, Journal of Econometrics, 1986,No. 31, pp. 307-327. Panas E., Ninni V., The distribution of London Metal Exchange prices: a test of the fractal market hypothesis, European Research Studies, 2010, Vol. XIII, Issue 2, pp. 193-210. Orhan M., Koksal B., A comparison of GARCH models for VaR, Expert Systems with application, 2012, Nol. 39, pp. 3582-3592. Polański A., Stoja E., Incorporating higher moments into Value-at-Risk forecasting, Journal of Forecasting 2010, No. 29, pp. 523-535 Tsay R., Analysis of financial time series, Chicago, Wiley & Sons., 2005. 16
Krzysztof Piontek Wrocław University of Economics krzysztof.piontek@ue.wroc.pl XVIIth Conference Financial Investments and Insurance Power analysis of some chosen tests of independence of Value-at-Risk violations Backtesting is the necessary statistical procedure to evaluate performance of Value-at- Risk models. A satisfactory test should be able to detect both deviations from the correct probability of violations, as well as their clustering. Many researchers and practitioners underline the importance of the lack of any dependence in the hit series over time. If the independence condition is not met, it may be a signal that the respective VaR model reacts too slowly to changes in the market. If the violation sequence exhibits a dependence other than first order Markov dependence, the classical test of Christoffersen would fail to detect it. This article compares the power of the classical Christoffersen test and the Haas test having power against more general forms of dependence. Both of them are, however, based on the same set of information, i.e. hit series. The Hass approach is based on durations and hazard functions. The aim of this article is to analyze presented backtesting methodologies, focusing on the aspect of limited data sets and the power of tests. Simulated data representing asset returns are used here. The power analysis is based on the Dufour Monte Carlo technique. Presented results indicate that some tests are not adequate for small samples, even 1000 observations. Finally, obtained results are summarized and some hints for the optimal backtesting are given. This paper is a continuation of earlier research done by the author. Keywords: risk measurement, VaR, backtesting, power of tests Campbell S (2005): A Review of Backtesting and Backtesting, Procedures. Federal Reserve Board. Washington Haas M (2005): Improved duration-based backtesting of value-at-risk, Journal of Risk, Vol. 8, No. 2, pp. 17-38 Christoffersen P, Pelletier D (2004): Backtesting Value-at-Risk: A Duration-Based Approach, Journal of Financial Econometrics, 2, pp. 84-108 17
Book of Abstracts Session A1 Marta Małecka University of Lodz marta.malecka@uni.lodz.pl Spectral density tests in VaR failure independence analysis Analysis of periodicity and correlation in economical stochastic processes can be done by the means of the spectral analysis developed in physics, whose aim is to detect signals having a given frequency in the joined signal. The method is based on the Fourier theorem, stating that each periodical process can be expressed as a linear combination of elementary processes, which are sinus and cosinus functions. Using the spectrum theory, it was proposed to construct a spectral density-based VaR in-dependence test, where the spectral density is the Fourier transform of the autocovariance function of the VaR failure process [1]. The test idea is to measure the distance between the empirical spectral density and its theoretical form for a martingale difference process. The comparison of the density functions can be based on various goodness-of-fit test statistics, like Anderson-Darling, Cramer von Mises, Kołmogorov- Smirnov or Kuiper statistics [2]. The aim of the paper was to evaluate statistical properties of spectral densitybased VaR tests based on different test statistics. Test assessment included their size and power. The analysis of the test properties was preceded by the overview of spectral theory methods pro-posed in the literature for testing VaR failure independence. The statistical properties of the considered tests were evaluated through the Monte Carlo method. Keywords: spectral density test, VaR independence test Berkowitz J., Christoffersen P., Pelletier D., Evaluating Value-at-Risk Models with Desk-Level Data, Management Science 2011 No. 12(57), pp. 2213 2227. Durlauf S.N., Spectral Based Testing of the Martingale Hypothesis, Journal of Econometrics 1991 No. 50(3), pp. 355 376. 18
XVIIth Conference Financial Investments and Insurance Parallel Session B1 Financial Econometrics Stanisław Wanat, Monika Papież, Sławomir Śmiech Causality in distribution between European stock markets and commodity prices: using independence test based on the empirical copula... 19 Dorota Szczygieł - Application of three dimensional copula functions in the analysis of currency market... 20 Joanna Olbryś, Elżbieta Majewska - Increasing cross-market correlations during the 2007-2009 financial crisis: Contagion or integration effects?... 21 Jakub Koziński - Does investment in fixed assets determine the company value increase?... 22 Stanisław Wanat, Cracow University of Economics eswanat@cyf-kr.edu.pl; Monika Papież, Cracow University of Economics papiezm@uek.krakow.pl, Sławomir Śmiech Cracow University of Economics smiechs@uek.krakow.pl Causality in distribution between European stock markets and commodity prices: using independence test based on the empirical copula The aim of the paper is to investigate dynamic linkages between the main European stock markets and two commodity prices: crude oil and gold. For the empirical analysis we use daily data from the period January 2, 1998 to June 30, 2014. To investigate Granger causality a nonparametric test based on the empirical copula is used, which was proposed by Christian Genest and Bruno Rémillard (2004). The analysis is conducted in rolling windows. There are three main findings of the study. First, relations between commodity prices and stock markets are not stable in time. Second, commodity prices do not Granger cause the European stock market indexes. Third, only the price of gold depends on past values of stock market indexes for almost all sub-periods. Keywords: Granger causality in distribution, nonparametric test based on the empirical copula, European stock markets, crude oil, gold Genest C., Quessy J.F., Rémillard B., 2006, Local efficiency of a Cramer-von Mises test of independence, Journal of Multivariate Analysis, vol. 97, s. 274 294. 19
Dorota Szczygieł Wrocław University of Economics dorota.szczygiel@ue.wroc.pl Book of Abstracts Session B1 Application of three dimensional copula functions in the analysis of currency market The multivariate analysis of financial data has gained more attention. Investors are no longer interested in knowing only the dependence between two components of their portfolio but between all of them as it allows understanding better the market and assessing the situation on the financial market. Copula functions seem to be a tool efficient enough to provide deep and understandable results regarding instruments dependence. This paper has a goal to analyze the relation between three currencies: USD, EUR and PLN jointly. The literature research has shown that such analyses are performed but the use of elliptical copulas, namely normal and t-student copula functions dominates. Another disadvantage is that instruments are grouped in pairs enabling a bivariate analysis. Hence, in order to examine n instruments, n!/2(n-2)! pairs need to be constructed. Multivariate approach can simplify calculations and lead to more reliable results. Therefore, this study performed by the use of three dimensional Archimedean copula functions such as the Frank, Clayton and Gumbel constitutes an introduction to multivariate analysis of financial underlying instruments. Keywords: multivariate, copulas, exchange rates Bibliography Bhat C. R., A New Generalized Gumbel Copula for Multivariate Distributions, Technical paper, Department of Civil, Architectural and Environmental Engineering, The University of Texas at Austin, 2009 Cherubini U., Luciano E., Vecchiato W., Copula Methods in Finance, John Wiley & Sons Ltd., 2004 Embrachts P., Hofert M., Statistical Inference for Copulas in High Dimensions: a Simulation Study, ASTIN Bulletin, 2013, 43, pp. 81-95 Heilpern S., Funkcje łączące, Wydawnictwo Akademii Ekonomicznej im. Oskara Langego we Wrocławiu, 2007 Jajuga K., Papla D., Extreme Value Analysis and Copulas, W: Cižek P., Härdle W., Weron R. (red.), Statistical Tools for Finance and Insurance, Springer 2005, pp. 45-64 Jaworski P., Durante F., Härdle W., Rychlik T. (red.), Copula Theory and Its Applications, Springer, 2009 Nelsen R. B., An Introduction to Copulas, Springer, Venter G., Barnett J., Kreps R., Major J., Multivariate Copulas for Financial Modeling, Variance Journal 2007, Vol. 01, Issue 01, pp. 103-119 20