A Bayesian State Space Methodology for Forecasting Stock Market Volatility and Associated Time-varying Risk Premia. Accurate prediction of stock market volatility is critical for effective financial risk management. Along with information on volatility embedded in historical stock market returns, the prices of options written on the underlying stocks also reflect the option market's assessment of future volatility. This project will exploit this dual data source in a completely new way, using it ....A Bayesian State Space Methodology for Forecasting Stock Market Volatility and Associated Time-varying Risk Premia. Accurate prediction of stock market volatility is critical for effective financial risk management. Along with information on volatility embedded in historical stock market returns, the prices of options written on the underlying stocks also reflect the option market's assessment of future volatility. This project will exploit this dual data source in a completely new way, using it to produce forecasts of both volatility itself and the premia factored into asset prices as a result of traders' perceptions of volatility risk. State-of-the-art statistical methods will be used to produce up-dates of the probability of extreme volatility and/or extreme risk aversion, as new market data becomes available each trading day.Read moreRead less
Non-parametric estimation of forecast distributions in non-Gaussian state space models. The production of accurate forecasts is arguably one of the most challenging tasks in economics, business and finance, where data often assume strictly positive, integer or binary values, or are characterized by many extreme values far from the average. This project will produce new, state-of-the-art statistical methods for generating accurate estimates of the probabilities attached to different possible futu ....Non-parametric estimation of forecast distributions in non-Gaussian state space models. The production of accurate forecasts is arguably one of the most challenging tasks in economics, business and finance, where data often assume strictly positive, integer or binary values, or are characterized by many extreme values far from the average. This project will produce new, state-of-the-art statistical methods for generating accurate estimates of the probabilities attached to different possible future values of such variables. Although far-ranging in scope, the techniques advocated will have particular impact in the financial sphere, where the concept of future risk is inextricably linked to the probability of occurrence of extreme values and, hence, to the future probability distribution of the financial variable. Read moreRead less
New Approaches to the Analysis of Count Time Series. The focus of this proposal is on the analysis of data that enumerate events over time. Occurrences of such count data abound in economics and business, examples being observations on insurance claims, loan defaults and individual product demand. This project develops a suite of innovative methods for modelling and predicting event counts. The methods explicitly accommodate both the discreteness of the data and possible complexities in its evo ....New Approaches to the Analysis of Count Time Series. The focus of this proposal is on the analysis of data that enumerate events over time. Occurrences of such count data abound in economics and business, examples being observations on insurance claims, loan defaults and individual product demand. This project develops a suite of innovative methods for modelling and predicting event counts. The methods explicitly accommodate both the discreteness of the data and possible complexities in its evolution over time. In so doing, they enable both accurate inferences regarding the dynamic structure of the data to be drawn and accurate forecasts of future event counts to be produced.Read moreRead less
New estimation and testing issues in nonlinear time series econometrics. The outcomes of this project will not only complement but also enhance the existing strengths of Australian researchers in the field of econometrics. The outcomes are also expected to help stabilise the national financial market for more accurate forecasts. It is also expected that the outcomes will provide novel models to respond to climate change and variability and to provide accurate warming estimates for improving the ....New estimation and testing issues in nonlinear time series econometrics. The outcomes of this project will not only complement but also enhance the existing strengths of Australian researchers in the field of econometrics. The outcomes are also expected to help stabilise the national financial market for more accurate forecasts. It is also expected that the outcomes will provide novel models to respond to climate change and variability and to provide accurate warming estimates for improving the policy making process.Read moreRead less
Fractional Integration, Power Laws and Econometric Models: Some Methodological and Theoretical Developments. The fundamental objectives of this project are to: (i) Extend
current econometric practice and consider the use of power laws as
a basis for the construction of a more flexible and realistic
class of models for the analysis of economic and financial time
series. (ii) To develop inferential techniques appropriate for the
modelling of dynamic econometric systems that incorporate
struc ....Fractional Integration, Power Laws and Econometric Models: Some Methodological and Theoretical Developments. The fundamental objectives of this project are to: (i) Extend
current econometric practice and consider the use of power laws as
a basis for the construction of a more flexible and realistic
class of models for the analysis of economic and financial time
series. (ii) To develop inferential techniques appropriate for the
modelling of dynamic econometric systems that incorporate
structure characterized by power laws. This will be achieved by
building upon the class of fractionally integrated processes. New
econometric models and methodologies for the analysis of
non-stationarity series will be developed, along with the
associated theoretical results.Read moreRead less
Persistence in Economic Time Series: Interpretation, Measurement and Inference. An economic time series is said to be persistent if shocks to the series have a permanent effect. Accurate and unambiguous inferences regarding persistence are crucial to an understanding of the response of the variable to shocks, in particular to policy-induced shocks. In this project we will explore new ways of interpreting, measuring and conducting inference on persistence. The aim is to produce significant theor ....Persistence in Economic Time Series: Interpretation, Measurement and Inference. An economic time series is said to be persistent if shocks to the series have a permanent effect. Accurate and unambiguous inferences regarding persistence are crucial to an understanding of the response of the variable to shocks, in particular to policy-induced shocks. In this project we will explore new ways of interpreting, measuring and conducting inference on persistence. The aim is to produce significant theoretical and methodological advances which, when applied to empirical problems, will enable reliable conclusions to be drawn regarding the propagation of shocks and, hence, the likely impact of interventionist government policies.Read moreRead less
Modelling a portfolio of financial assets: structure, estimation, testing and forecasting. Information regarding financial returns and risk is essential for optimal portfolio selection and asset management. Returns and risk have typically been analysed for individual assets. The project provides a theoretical solution to the important practical problem of modelling a portfolio of financial assets in realistic situations. The significance of the research is the development of a new approach to an ....Modelling a portfolio of financial assets: structure, estimation, testing and forecasting. Information regarding financial returns and risk is essential for optimal portfolio selection and asset management. Returns and risk have typically been analysed for individual assets. The project provides a theoretical solution to the important practical problem of modelling a portfolio of financial assets in realistic situations. The significance of the research is the development of a new approach to analyse a portfolio of returns and risk, and the determination of its applicability using numerical simulation techniques. The expected outcomes are an optimal practical method for analysing a portfolio of assets, a scientific monograph, and publications in leading international journals.Read moreRead less
New approaches to the statistical modelling of financial risk: combining structural information with flexible, computationally-intensive non-parametric methods. The aims of this project are to provide a range of novel, rigorous, flexible, statistical methods to assess portfolio risk, with due attention to behaviour of its constituent components; to obtain greater understanding of the complexities of risk; and to give students research training in the nexus of statistics and finance. The anticip ....New approaches to the statistical modelling of financial risk: combining structural information with flexible, computationally-intensive non-parametric methods. The aims of this project are to provide a range of novel, rigorous, flexible, statistical methods to assess portfolio risk, with due attention to behaviour of its constituent components; to obtain greater understanding of the complexities of risk; and to give students research training in the nexus of statistics and finance. The anticipated outcomes of this project will be detailed knowledge of extremal behaviour in portfolios, improved methods for calibrating risk, advances in non-parametric methods in finance, a prototype practitioner toolkit for assessing risk, and high-calibre graduates to contribute to Australia's research capacity.Read moreRead less
Stochastic Index Numbers and Their Application in Accounting, Economics and Finance. Index numbers of prices, such as the Consumer Price Index and the All Ordinaries Index, are among the most important economic statistics for the whole economy. But despite their importance, currently constructed price indexes do not use all the information available in the underlying price data, namely the dispersion among the individual prices. This project will develop and apply a methodology for a new approa ....Stochastic Index Numbers and Their Application in Accounting, Economics and Finance. Index numbers of prices, such as the Consumer Price Index and the All Ordinaries Index, are among the most important economic statistics for the whole economy. But despite their importance, currently constructed price indexes do not use all the information available in the underlying price data, namely the dispersion among the individual prices. This project will develop and apply a methodology for a new approach to index numbers that incorporates this information and leads to tractable ways of estimating the whole distribution of the index value, rather than just one number. The practical usefulness of this mthodology will be demonstrated with applications in accounting (sustainable earnings), economics (real exchange rates) and finance (share prices).Read moreRead less
Distributional Consequences of Mass-Market Higher Education in Business. Increased access to tertiary education has not been evaluated for its effects on the full spectrum of individuals served by the tertiary sector. Using longitudinal data on entire student populations at university business faculties, this project will provide the first Australian evidence on the trade-offs amongst the educational success of students with different levels of preparation that occur when those with poorer prep ....Distributional Consequences of Mass-Market Higher Education in Business. Increased access to tertiary education has not been evaluated for its effects on the full spectrum of individuals served by the tertiary sector. Using longitudinal data on entire student populations at university business faculties, this project will provide the first Australian evidence on the trade-offs amongst the educational success of students with different levels of preparation that occur when those with poorer preparation are added to classrooms. Short-term performance and medium-term attrition, a recent educational policy focus, will be evaluated. Theoretically grounded recommendations will result for undergraduate program design to suit a student population with varying levels of university preparation.Read moreRead less