joint with Eco-Lunch
12:30 - 13:30 : Christelle Lecourt (University of Namur) :"Are Sovereign Wealth Funds’ Investments Determined by Macroeconomic Factors ?" (joint with Bertrand Candelon- and Malik Kerkoury)
13:30 - 14:30 : Sébastien Laurent (Maastricht University) : "Consistent ranking of multivariate volatility models" (joint with Jeroen Rombouts and Francesco Violante)
1 "Are Sovereign Wealth Funds’ Investments Determined by Macroeconomic Factors ?"
In this paper, we examine empirically the macroeconomic determinants of sovereign wealth funds’ (SWFs) investments. Using both a novel dataset of SWF investments and a dynamic panel tobit model, we evaluate the role of structural macroeconomic factors (as governance, democracy,..) in the decision to invest between SWFs and targeted countries. Considering a large panel (73 countries over the period 1989-2011), we find that indeed SWFs take into account macroeconomic characteristics to decision wether or not they should invest in a particular country. It is also interesting to observe that whereas exchange rate stability matters when the targeted country is Europe or North American, structural factors as democracy or governance and crude oil prices turn out to be the strategic variables for the rest of the world. Finally, -nancial factors do not show to a-ect the decision, but rather the amount to be to invest of the SWF.
2 "Consistent ranking of multivariate volatility models"
A large number of parameterizations have been proposed to model conditional variance dynamics in a multivariate framework. However, little is known about the ranking of multivariate volatility models in terms of their forecasting ability. The ranking of multivariate volatility models is inherently problematic because it requires the use of a proxy for the unobservable volatility matrix and this substitution may severely affect the ranking. We point out that the appearance of the objective bias is strictly tied to the level of the accuracy of the volatility proxy. We propose a generalized necessary and sufficient functional form for a class of non-metric distance measures suited to vector and matrix spaces which ensure consistency of the ordering and discuss some examples. An application to three foreign exchange rates, where we compare the forecasting performance of 24 multivariate GARCH specifications over two forecast horizons, is provided.