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Financial Econometrics

Field characteristic

A research in the financial econometrics is on the cutting edge of the current research. Financial markets have very complex nature and cannot be easily understood using simple, tractable models. Thus the financial markets are investigated from the various perspectives.

 The most important one, heterogeneous agents approach, shifts the traditional paradigm of financial markets from the fully rational agent to the agent with rationality constraints. Thus traditional efficient market hypothesis can be abandoned and stock markets can be viewed as a system of the interacting heterogeneous agents. The idea of bounded rationality in the market participants' decisions is also supported by the fractal features of the stock market prices.

 The notion of multifractality incorporates different investment horizons of the market p layers with potentially various dynamics. Closely related to fractality is a research on long-range dependence of volatility. A combination of these two phenomena brings new approaches to financial econometrics, and new theoretical and empirical results. Our research also includes the study of stock market crashes, which have great impact on our society and are of a great interest.

 Finally, part of our research team focuses also on the high-frequency data analysis. In recent years, this research changed direction thanks to availability of high-frequency data and so-called realized measures became a workhorse of financial econometrics. While they have appealing asymptotic features, the assumptions on zero microstructure noise and no jump presence in the data are too restrictive. These observations cause a large bias to most of the estimators. While inference under the noise and jumps in realized variation theory is widely studied in recent contributions, realized covariation theory still waits for its development. The covariation between asset returns is crucial in risk management, portfolio optimization and trading strategies as well as for option pricing. Wavelet methods allow us to study volatility and correlations on various investment horizons.

 

People

Selected publications

  • Baruník Jozef, Křehlík Tomáš:  Measuring the Frequency Dynamics of Financial Connectedness and Systemic Risk, Journal of Financial Econometrics vol.16, 2 (2018), p. 271-296 .
  • Baruník Jozef , Vácha Lukáš :  Do co-jumps impact correlations in currency markets? , Journal of Financial Markets vol.37, 1 (2018), p. 97-119.
  • Žikeš F., Baruník Jozef, Shenai N. :    Modeling and forecasting persistent financial durations ,   Econometric Reviews vol.36, 10 (2017), p. 1081-1110.
  • Žikeš  F., Baruník Jozef   :    Semi-parametric Conditional Quantile Models for Financial Returns and Realized Volatility ,   Journal of Financial Econometrics vol.14, 1 (2016), p. 185-226.
  • Baruník Jozef, Vácha Lukáš :  Realized wavelet-based estimation of integrated variance and jumps in the presence of noise ,   Quantitative Finance vol.15, 8 (2015), p. 1347-1364.
  • Baruník Jozef, Kukačka Jiří :  Realizing stock market crashes: stochastic cusp catastrophe model of returns under time-varying volatility ,   Quantitative Finance vol.15, 6 (2015), p. 959-973.
  • Derviz Alexis :  Collateral Composition, Diversification Risk, and Systemically Important Merchant Banks, Journal of Financial Stability vol.14, 1 (2014), p. 23-34
  • Krištoufek Ladislav :  Leverage effect in energy futures , Energy Economics vol.45, 1 (2014), p. 1-9
  • Krištoufek Ladislav, Vošvrda Miloslav :  Commodity futures and market efficiency, Energy Economics vol.42, 1 (2014), p. 50-57
  • Krištoufek Ladislav :  Spectrum-based estimators of the bivariate Hurst exponent, Physical Review. E vol.90
  • Krištoufek Ladislav, Janda K., Zilberman D. :  Price transmission between biofuels, fuels and food commodities, Biofuels Bioproducts & Biorefining-Biofpr vol.8, 3 (2014), p. 362-373
  • Vácha Lukáš, Janda K., Krištoufek Ladislav, Zilberman D. :  Time-Frequency Dynamics of Biofuel-Fuel-Food System, Energy Economics vol.40, 1 (2013), p. 233-241
  • Vácha Lukáš, Baruník Jozef :  Co-movement of energy commodities revisited: Evidence from wavelet coherence analysis, Energy Economics vol.34, 1 (2012), p. 241-247
  • Barunik J., Kristoufek L. (2010): On Hurst exponent estimation under heavy-tailed distributions, Physica A: Statistical Mechanics and its Applications , 389 (18), pp. 3844-3855
  • Barunik, J., Vosvrda, M. (2009): Can a stochastic cusp catastrophe model explain stock market crashes? Journal of Economic Dynamics and Control 33, pp. 1824-1836  
  • Barunik J., Vacha L., Vosvrda M. (2009): Smart predictors in the heterogeneous agent model, Journal of Economic Interaction and Coordination , vol. 4(2), pp. 163-172, Springer 
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Grants and projects 

  • Dynamic correlations and financial market risk
    Baruník Jozef, grant No. 14-2412195 of the Czech Science Foundation.
  • Bivariate long memory analysis of financial time series; 
    Krištoufek Ladislav, grant 14-11402P of the Czech Science Foundation.
  • Systemic Risks and Imbalances in European Economies during the Crisis: Theory and Evidence
    Alexis Derviz, grant No. 13-11983S of the Czech Science Foundation.
  • Multivariate spectral analysis of financial markets
    Baruník Jozef, grant No. 13-32263S of the Czech Science Foundation.
  • DYME - Dynamical models in Economics
    Miloslav Vošvrda, grant No. GAP402/12/G097 of the Czech Science Foundation.
  • Fractality and multi-fractality of Financial Markets: Methods and Applications  
      Krištoufek Ladislav, grant 5183 Science Foundation of the Charles University
  • New Nonlinear Capital Markets Theories: Fractal, Bifurcational and Behavioral Approach  
      Baruník Jozef, grant 46108 Science Foundation of the Charles University
  • Analysis of the Heterogeneous Agents Models in Finance
    Vácha Lukáš, grant No. 402/08/P207 of the Czech Science Foundation.
  • Monetary Policy Financial Stability and Financial Crisis
    Horvath Roman, grant No. P402/11/1487 of the Czech Science Foundation.
  • Nonlinear Dynamics in Monetary and Financial Economics. Theory and Empirical Models
    Jan Kodera, Miloslav Vošvrda, grant No. 402/09/H045 of the Czech Science Foundation.
  • New Approach to Monitoring and Forecasting Financial Markets
    Miloslav Vošvrda, grant No. 402/09/0965 of the Czech Science Foundation.
  • System and Non-system Components of a Quotation Risk in the Czech Economy
    Alexis Derviz, grant No. 402/05/0671 of the Czech Science Foundation.
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