Prague Economic Papers, 2019 (vol. 28), issue 4

Profitability of Trading in the Direction of Asset Price Jumps - Analysis of Multiple Assets and Frequencies

Milan Fičura

Prague Economic Papers 2019, 28(4):385-401 | DOI: 10.18267/j.pep.703  

Profitability of a trading system based on the momentum-like effects of asset price jumps was tested on four currency markets (EUR/USD, GBP/USD, USD/CHF and USD/JPY) and three futures markets (Light Crude Oil, E-Mini S&P 500 and VIX), on 7 frequencies (1-minute to 1-day), over a period of more than 20 years. The proposed trading system entered long and short trades in the direction of asset price jumps and held the positions for a fixed horizon, optimized on the in-sample period. The system achieved statistically significant out-sample profits for the USD/CHF, EUR/USD and GBP/USD exchange rates, especially on the 15-minute, 30-minute and 1-hour...

Global Risk Factors and Stock Returns during Bull and Bear Market Conditions: Evidence from Emerging Economies in Europe

Sercan Demiralay

Prague Economic Papers 2019, 28(4):402-415 | DOI: 10.18267/j.pep.680  

This paper explores the dependence of emerging European stock markets (Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Russia, Turkey and Ukraine) on global risk factors (changes in gold prices, US implied volatility index and oil prices) based on daily data from 6 January 2004 to 31 December 2013. We employ a quantile regression model to analyse how the global factors affect stock returns under different market circumstances, such as bearish (lower quantiles), normal (intermediate quantile) and bullish (higher quantiles) times. Empirical results reveal that the response of stock markets is heterogeneous; larger equity markets, such as...

Subsidies to Less Favoured Areas in the Czech Republic: Why Do They Matter?

Jana Poláková

Prague Economic Papers 2019, 28(4):416-432 | DOI: 10.18267/j.pep.701  

Subsidy to less favoured area (LFA) farms is central to rural development policy in the European Union. Here, three categories of LFA support are assessed: farm competitiveness measures, LFA measures, and agri-environment measures. These categories of measures are complementary to safeguarding land management and delivering ecosystem benefits. Based on historical data for the Czech Republic, this paper endeavours to illustrate potential methods for assessing the LFA subsidies. In sum, rigorous methods to evaluate LFA evidence are still at their very starting point, even as they are necessary in order to ascertain the Community's capability, alongside...

Versioning Goods and Joint Purchases with Network Externality

Jiangli Dou, Bing Ye

Prague Economic Papers 2019, 28(4):433-448 | DOI: 10.18267/j.pep.702  

This paper analyses the monopolist's production and pricing decisions on two vertically diffe-rentiated versions of a product in the presence of network externality. We show that offering only the higher-quality version of the product is the optimal strategy when negative externality exists and the utility from joint purchase is not large. If both versions are provided, the monopolist will charge a monopoly price for each version to induce separate purchases if these two versions are too close substitutes. Moreover, in the equilibrium with joint purchases, with an increase in externality or the utility from a joint purchase, the prices of both versions...

Impact of Harmonization on the Implicit Tax Rate of Consumption

Andrea Feher, Bogdan Virgil Condea, Daniela Harangus

Prague Economic Papers 2019, 28(4):449-464 | DOI: 10.18267/j.pep.705  

This paper brings to the foreground an indicator rather less used in specialized studies - the implicit tax rate of consumption - as an effective tax rate of consumption. In an empirical analysis, we try to analyse the impact of the main determinants on the implicit tax rate of consumption. The analysis is based on the panel technique in order to show the impact of tax harmonization on consumer taxation at EU27, EU15 and NMS12 levels, testing three hypotheses: (1) the implicit tax rate of consumption is directly influenced by the economic growth rate; (2) the effects of harmonization are more pronounced in the new EU member states; (3) during an economic...

Household Ecological Preferences and Renewable Energy Spending

Maciej Malaczewski

Prague Economic Papers 2019, 28(4):465-478 | DOI: 10.18267/j.pep.713  

In this paper, we propose a model that demonstrates the influence of household ecological preferences on their acceptance of spending on renewable energy. The model discusses the production of energy from both non-renewable and renewable sources, the quality of the natural environment, pollution emissions, and utility maximization. If households choose to reduce pollutant emissions, they should reduce their levels of consumption. The main aspect that distinguishes the proposed model is the assumption of complementarity between physical capital and energy. This complementarity exists due to the fact that non-renewable natural resources are the main...

Meaning and Problems of Identification of Beta Coefficient When Valuing Financial Institutions

Milan Hrdý, Markéta Pláničková

Prague Economic Papers 2019, 28(4):479-495 | DOI: 10.18267/j.pep.704  

The aim of this article consists in the analysis of the beta coefficient presented in different areas for three types of financial institutions: banks, investment banks and life insurance companies. In the final evaluation, we analyse whether the beta coefficient has a high tendency to reach number one and whether there is a relatively stabilized position of the beta coefficient different from one for a certain period and a certain financial institution on a certain market and whether it is possible to avoid a relatively complicated process of beta coefficient identification in income valuation. For that reason, the analysis of the five-year beta coefficient...