Acta Oeconomica Pragensia, 2007 (vol. 15), issue 4

Stock Market Optimism and Cointegration among Stocks: The Case of the Prague Stock Exchange

Jaromír Baxa

Acta Oeconomica Pragensia 2007, 15(4):5-16 | DOI: 10.18267/j.aop.69  

The PSE noted incredible increase in both trading volumes and prices of traded stocks during last five years. The PX index (former PX-50) reached the level of 1600 points at the end of 2006, which is almost four times higher than in 2001. Cointegration analysis can show us if the growth has been driven by some hidden common factor(-s), either optimistic perception of the market or common fundamentals, or if the main forces have been in case of each stock individual and specific and the fact, that the increase was similar among many of stocks is only due to coincidence. We have found that the results differ substantially upon the choice of frequencies...

Testing Cointegration for Czech Stock Market

Tran Van Quang

Acta Oeconomica Pragensia 2007, 15(4):17-31 | DOI: 10.18267/j.aop.70  

Based on cointegration analysis of daily data of the most liquid Czech stock from September 1, 1997 to February 28, 2007, a long run equilibrium relationship was revealed to exist between prices of stocks of Komerční banka (KB), České energetické závody (CEZ) and Unipetrol (UNPE). Prices time series of these stocks have a unit root and are cointegrated. There is a unique combination of these stocks which is mean reverting and can be used to achieve statistical arbitrage. However, in order to exploit this possibility, a number of challenges need to be dealt with. Investors should take into account the speed of the mean reversion rate, the size of the...

Are Limit Orders Rational?

Martin Šmíd

Acta Oeconomica Pragensia 2007, 15(4):32-38 | DOI: 10.18267/j.aop.71  

We examine whether it is rational to put limit orders in a limit order market. We find that limit orders are not needed and may be even disadvantageous given that the agent trades on-line. Further, we present a numerical study indicating that putting limit orders may be optimal given that the agent trades at discrete times but the benefit from using them in comparison with immediate buying and selling is negligible.

Weather Derivatives

Jan Pígl

Acta Oeconomica Pragensia 2007, 15(4):39-48 | DOI: 10.18267/j.aop.72  

The article deal with the problems of weather derivatives which take the value in sequence nowadays. The aim of this work is the definition of weather derivatives and the way how to price them. We show as well that linear and nonlinear models of time series of temperatures measured in Prague and in Brno have not good results in the estimation of parameters μI and σI of the probability distribution function P(I) of the weather index which is essential in their pricing.

Fractal Properties of the Financial Market

Lukáš Vácha

Acta Oeconomica Pragensia 2007, 15(4):49-55 | DOI: 10.18267/j.aop.74  

The paper is concerned with an implementation of behavioral aspects of a heterogeneous agents model (HAM) with the worst out algorithm (WOA). The WOA replaces periodically the trading strategies that have the lowest performance level of all strategies presented on the market by the new ones. The model includes a possibility to change the mood of the investors on the market. This modification allows for changing phases of optimism and pessimism. This feature enables generation of more realistic financial time series. It is shown how a mood change on the financial market influence a persistence of financial time series.

Exchange Rate Dynamics and the Disconnect

Miroslava Jindrová

Acta Oeconomica Pragensia 2007, 15(4):56-68 | DOI: 10.18267/j.aop.75  

In this paper we bring the survey of the contemporaneous research on the behaviour of exchange rate and so called exchange rate disconnect puzzle. We have introduced several directions in which research on this object could be developed. They are basically concerned with the monopolistically competition, which allows for exchange rate fluctuations from its long run equilibrium level, so that purchasing power parity condition doesn't holds. The alternative approach incorporates heterogeneous agents' setup.

Dynamics of Hume's Law

David Martinčík, Blanka Šedivá

Acta Oeconomica Pragensia 2007, 15(4):69-78 | DOI: 10.18267/j.aop.76  

David Hume formulated the oldest theory of balance of payment adjustment mechanism in 1752. In his model foreign trade is sensitive to the difference between the home and foreign price levels and that is why it is also called price - specie - flow mechanism. Hume, likewise the whole generation of classical political economists coming after him, failed to see the impact of then strong British economy on economic variables of the rest of the world and in effect he developed a model for a small economy. Although the authorship of the quantitative monetary equation is ascribed to him, Hume did not represent pure monetarism, i.e. neutrality of money. He...

Production, Capital Stock, and Price Level Dynamics in the Light of Kaldorian Model

Jan Kodera, Miloslav Vošvrda

Acta Oeconomica Pragensia 2007, 15(4):79-87 | DOI: 10.18267/j.aop.77  

The purpose of this paper is to study a price level dynamics in a simple fourequation model. A basis of this model is developed from dynamical Kaldorian model which could be noticed very frequently in works of non-linear economic dynamics. Our approach is traditional. The difference is observed in a choice of an investment function. The investment function depending on the difference of logarithm of production and logarithm of capital (logarithm of the productivity of capital) is in a form of the logistic function. These two equations create relatively closed sub-model generating both production and capital stock trajectories. Two other equations describe...

Stochastic Growth Models With No Discounting

Karel Sladký

Acta Oeconomica Pragensia 2007, 15(4):88-98 | DOI: 10.18267/j.aop.78  

In this note, we consider in discrete time the Ramsey growth model without discounting under stochastic uncertainty modelled by Markov processes. To make the model computationally tractable we shall consider finite state approximations of the original model. Properties of policies maximizing mean value of the global utility of consumers over an infinite time horizon, along with algorithmic procedures finding optimal and suboptimal policies, are reported.

Multistage Stochastic Programming via Autoregressive Sequences

Vlasta Kaňková

Acta Oeconomica Pragensia 2007, 15(4):99-110 | DOI: 10.18267/j.aop.79  

Economic activities developing over time are very often influenced simultaneously by a random factor (modeled mostly by a stochastic process) and a "decision" parameter (that has to be chosen according to economic possibilities). Theory of multistage stochastic programming, controlled Markov processes as well as empirical processes can be employed to treat the economic processes. We focus on the multistage stochastic problems with the individual probability constraints and random element following an autoregressive (generally) nonlinear sequence.

Role of Dependence in Chance-constrained and Robust Programming

Michal Houda

Acta Oeconomica Pragensia 2007, 15(4):111-120 | DOI: 10.18267/j.aop.80  

The paper deals with two methods of solving optimization programs where uncertainties occur: stochastic (in particular chance-constrained) programming and robust programming. We review briefly how these two methods deal with uncertainty and what approximations are commonly used. Furthermore, we are concentrated on approximations based on sample sets where some type of weak dependence occurs. We demonstrate that such kind of dependence does not imply any important malfunction of optimization methods used there. Numerical illustration on simple optimization program is given.