Kees C. G. Koedijk

The Economic Value of Corporate Eco-Efficiency

This study adds new insights to the long-running corporate environmental-financial performance debate by focusing on the concept of eco-efficiency. Using a new database of eco-efficiency scores, we analyse the relation between eco-efficiency and financial performance from 1997 to 2004. We report that eco-efficiency relates positively to operating performance and market value. Moreover, our results suggest that the markets valuation of environmental performance has been time variant, which may indicate that the market incorporates environmental information with a drift. Although environmental leaders initially did not sell at a premium relative to laggards, the valuation differential increased significantly over time. Our results have implications for company managers, who evidently do not have to overcome a tradeoff between eco-efficiency and financial performance, and for investors, who can exploit environmental information for investment decisions.

The Dynamics of Short-Term Interest Rate Volatility Reconsidered

In this paper we present and estimate a model of short-term interest rate volatility that encompasses both the level effect of Chan, Karolyi, Longstaff and Sanders (1992) and the conditional heteroskedasticity effect of the GARCH class of models. This flexible specification allows different effects to dominate as the level of the interest rate varies. We also investigate implications for the pricing of bond options. Our findings indicate that the inclusion of a volatility effect reduces the estimate of the level effect, and has option implications that differ significantly from the Chan, Karolyi, Longstaff and Sanders (1992) model.

Market opening, regulation and growth in Europe

Deregulation A political economy analysis Lack of urgency explains why continental Europe trails in the deregulation process. Yet there are lessons to be learnt from deregulation elsewhere. This paper reviews the situation and focuses on the political preconditions for successful deregulation. It finds a clear negative relationship between regulation and economic performance. It characterizes European countries by the degree of regulation of labour and product markets, and finds that the latter seems to be more important for economic performance. Finally, it notes the importance of a proper management of the deregulation effort – which may include some re-regulation: deregulation is more likely to succeed the more transparent the economic benefits, and the more clearly stated the objectives and the time schedule. —Kees Koedijk and jeroen Kremers

Safety First Portfolio Selection, Extreme Value Theory and Long Run Asset Risks

The paper motivates the use of the statistical extreme value theory for the problem of portfolio selection in economics, both theoretically and empirically. It is shown that the conventional safety first criterion developed by Roy can be successfully improved upon by exploiting the fat tail property of asset returns. Extreme value theory is seen to provide a better bound than the Chebyshev bound. In the empirical application we calculate minimum threshold return levels given very low exceedance probabilities for bond and equity investors. A proof of a new quantile estimator is obtained in the appendix. The data cover at least a half-century of returns and allow for evaluation of investment risks in the long run.

Socially Responsible Fixed‐Income Funds

A hand-held device, such as a hammer drill, has a replaceable axially extending holder for a working tool. The device includes a sensor and a signal transmitter for adjusting its operating characteristics. The holder has through openings containing locking elements and control elements. The locking elements and control elements are radially displaceable within the through openings by a locking sleeve. The position of the locking sleeve in the axial direction of and relative to the holder determines the cooperation of the sensor and the signal transmitters.

Differences between foreign exchange rate regimes: The view from the tails

In the literature on the empirical unconditional distribution of forein exchange rate returns there is indication that the type of distribution function is related to the form of the exchange rate regime. The analysis has been hampered by the nonnestedness of the alternative distribution models. The paper investigates the issue by means of extremal analysis which allows for a unified treatment. In particular, we try to sort out whether apparent distributional differences are due to differences in techniques or regimes.

Tail Estimates of East European Exchange Rates

In the literature, a consensus exists that distributions of exchange-rate returns are fat tailed. We use a nonparametric tail-index estimator based on extreme-value theory to shed light on some of the characteristics of the empirical distribution of black-market exchange-rate returns for seven East European currencies between 1955 and 1990, focusing on the information in the tails of the distribution. We modify an existing tail-index estimator to take into account information in both tails. The results support the existence of finite second moments in exchange- rate returns. Implicitly, the sum-stable distribution is rejected.

Dominant interest and inflation differentials within the EMS

Abstract This paper investigates nominal interest and inflation behavior in the EMS between March 1979 and September 1989 using a modified version of principal components analysis. Neither over the whole period, nor after March 1983 has the EMS functioned as a Dmark-zone: deviating movements in inflation and interest rates between EMS countries still persist. Most important is the division between Germany, the Netherlands and the United Kingdom on the one hand, and Belgium, France and Italy on the other. Differences in deflationary policies between countries inside and outside the EMS appear to be the most important determinant of this result.

Should We Care? Psychological Barriers in Stock Markets

For three out of five major stockmarkets it is found that those levels which are a multiple of a hundred are approached and transgressed relatively infrequently. We explicitly test for the effect of sample bias and conduct a forecasting experiment.

Stock Market Quality in the Presence of a Traded Option

We use a controlled economic experiment to examine the implications of asymmetric information for informational linkages between a stock market and a traded call option on that stock. The setting is based on the Kyle model and Back (1993). We find that an insider trades aggressively in both the stock and the option, and that this leads to important feedback effects between the two markets: price discovery in the stock market also occurs in the option market and vice versa. The time series properties of the stock price depend directly on the intrinsic value of the option: when the intrinsic value of the option is positive, informational efficiency is higher in the market for the stock, and volatility is lower. We argue that this provides new insights into how the introduction of a traded option improves the market quality of the underlying asset.