Bernard Ben Sita

Volatility links between US industries

I investigate volatility linkages between 30 U.S. industries by examining their Granger-causal volatility structure and quantifying the amount of volatility that spills over from industry i to industry j. I apply the volatility spillovers index of Diebold and Yilmaz (2009) on industry-specific residuals obtained from a variance model regressing quarterly realized variances on past variances and latent factor variances. I find that the volatility transmission mechanism between industries builds a web of volatility relationships in the sense that industry i can be either directly related to industry j or indirectly related to j through industry k. I identify the business equipment, the manufacturing and the financial intermediation industry as industries k through which the entire economic system can be either stimulated when the economy is contracting or cooled when the economy is expanding.

Evidence on managerial entrenchment effects on firm value

We investigate managerial entrenchment effects on firm value. Conditioning investment and Research and Development (R%D) spending on a managerial entrenchment indicator, we find that under managerial entrenchment investment and spending tend to be higher. Under some simplifying assumptions, we find that overinvestment is greater under capital investment than under R%D spending.

Crude oil and gasoline volatility risk into a Realized-EGARCH model

This paper disentangles oil volatility risk to two components. The first component is attributed to crude oil, while the second is related to gasoline. This disentanglement serves the purpose of investigating the extent to which crude oil and gasoline are complementary in impacting return and variance residuals. The Realized-EGARCH model of Hansen et al. (J Appl Econom 29(5):774–799, 2014) is used to test the hypothesis that stock markets show some delay in incorporating oil information. This study shows that both crude oil- and gasoline-based information impact stock markets contemporaneously in a complementary fashion. Unlike the underreaction hypothesis, which is suggested as an explanation to the negative lagged effect of crude oil price change on return, the sequential information hypothesis explains better the ways information about oil is disseminated among U.S. industry portfolios.

Measuring the Oil Risk Effect on Industry Volatility Shocks

I examine the information sequential hypothesis in complementary oil markets. Unlike the underreaction hypothesis suggested as an explanation to the lagged negative oil effect of financial return, a sequential information schedule through crude oil and gasoline provides a differential dynamic in the way oil risk is channeled to financial markets. Not only do I find that the market response to oil volatility risk is contemporaneous, but that crude oil triggers financial risk at the time of information, whereas gasoline effects of financial risk are subsequent to crude oil effects.

Short and Long-run Budgetary Relationships: Evidence from Lebanon

We empirically estimate the short- and the long-run effects of fiscal policy on the Lebanese economy. Such estimates should be valuable in shaping the administrative reforms of the budgetary process in Lebanon where the debt-to-GDP ratio reached about 146% in 2013 (Bank Audi, 2013). A Vector Error Correction model is estimated to determine the long-run relationship between government spending and government revenues and their short-run dynamics. The results indicate that long-run adjustments are better managed through government revenues and expenditures, whereas short-run imbalances should be offset by changes in spending. Two adjustment mechanisms leading to long-run equilibrium are identified and their dynamics are explained. The first is “value-based” which stipulates that government reduces spending and increases revenues when the economy is growing. The second is “cost-based” where reduction in government expenditures is called for when interest rates increase.

US Energy Policies and Variance in the GCC Stock Markets

We investigate the impact of bills about energy policy, introduced and discussed in the US Congress, on the conditional variance process of the five largest Gulf Cooperation Council (GCC) stock markets. Using an augmented asymmetric Generalized AutoRegressive Conditional Heteroskedasticity (GARCH) model, we investigate the hypothesis that public news associated with US energy policy leads to the reversion of the conditional variance process. Our findings are consistent with the information hypothesis. GCC stock variance tends to revert on days when bills are introduced and discussed in the US Congress.

Oil Products and the Volatility Index: Bivariate Volatility Relationships Within a T-GARCH Model

I provide, in this paper, evidence on the contribution of crude oil excess volatility to the volatility index. Crude oil leads the volatility index by 16 basis points (BP) 6 months ahead of time. This leadership is reversal and covers the period from January 21, 2000 to the end of 2011. The lagged and the contemporaneous effects amount to 35BP and 21BP, respectively. Moreover, I provide volatility quantities that would spill over from crude oil to refined oil products, and from crude oil to the volatility index. Based on a T-GARCH model augmented with correlation-weighted volatility ratios, I document quantities that can be useful in program trading.