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Dr. Victor Troster
Department of Applied Economics, Universitat de les Illes Balears, Cra. Valldemossa km 7.5, 07122, Palma de Mallorca, Spain

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Research Keywords & Expertise

0 Backtesting
0 Financial Econometrics
0 Portfolio Management
0 Quantile regression
0 Granger-causality in quantiles

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Granger-causality in quantiles
Backtesting
Quantile regression
Spillovers

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Article
Published: 12 August 2021 in Journal of Time Series Econometrics
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In this paper, we propose a robust test of monotonicity in asset returns that is valid under a general setting. We develop a test that allows for dependent data and is robust to conditional heteroskedasticity or heavy-tailed distributions of return differentials. Many postulated theories in economics and finance assume monotonic relationships between expected asset returns and certain underlying characteristics of an asset. Existing tests in literature fail to control the probability of a type 1 error or have low power under heavy-tailed distributions of return differentials. Monte Carlo simulations illustrate that our test statistic has a correct empirical size under all data-generating processes together with a similar power to other tests. Conversely, alternative tests are nonconservative under conditional heteroskedasticity or heavy-tailed distributions of return differentials. We also present an empirical application on the monotonicity of returns on various portfolios sorts that highlights the usefulness of our approach.

ACS Style

Cleiton G. Taufemback; Victor Troster; Muhammad Shahbaz. A Robust Test for Monotonicity in Asset Returns. Journal of Time Series Econometrics 2021, 1 .

AMA Style

Cleiton G. Taufemback, Victor Troster, Muhammad Shahbaz. A Robust Test for Monotonicity in Asset Returns. Journal of Time Series Econometrics. 2021; ():1.

Chicago/Turabian Style

Cleiton G. Taufemback; Victor Troster; Muhammad Shahbaz. 2021. "A Robust Test for Monotonicity in Asset Returns." Journal of Time Series Econometrics , no. : 1.

Regular article
Published: 21 March 2021 in Journal of Economic Interaction and Coordination
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Banks may be reluctant to remove bad loans from their portfolios during liquidity shortfalls, giving rise to a moral hazard problem. In this paper, we analyze how liquidity shortages affect the ability of the interbank market to provide liquidity in a moral hazard setting. We distinguish two types of liquidity shocks that arise due to a deposit flight (a contraction in the deposit supply) or to a cash-flow shock (an increase in the non-performing loans). We show that the source of a liquidity shortfall is the main determinant of the decision of banks to stop lending in the interbank market, rather than the extra amount of funds that banks need to cover. An increase in the non-performing loans has more adverse effects on balance sheets than a deposit flight. We also demonstrate that competition has a dual effect on financial stability. Interbank competition enhances financial stability by reducing the liquidity provision cost, whereas credit market competition worsens financial stability by inducing banks to take riskier profiles.

ACS Style

Demian Macedo; Victor Troster. Liquidity shocks and interbank market failures: the role of deposit flights, non-performing loans, and competition. Journal of Economic Interaction and Coordination 2021, 1 -42.

AMA Style

Demian Macedo, Victor Troster. Liquidity shocks and interbank market failures: the role of deposit flights, non-performing loans, and competition. Journal of Economic Interaction and Coordination. 2021; ():1-42.

Chicago/Turabian Style

Demian Macedo; Victor Troster. 2021. "Liquidity shocks and interbank market failures: the role of deposit flights, non-performing loans, and competition." Journal of Economic Interaction and Coordination , no. : 1-42.

Research article
Published: 01 February 2021 in Journal of Forecasting
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This paper shows that lagged information transmission between industry portfolio and market prices entails cointegration. We analyze monthly industry portfolios in the US market for the period 1963‐2015. We find cointegration between six industry portfolio and market prices. We show that the equilibrium error, the long‐term common factor between industry portfolio and market cumulative returns, has strong predictive power for excess industry portfolio returns. In line with gradual information diffusion across connected industries, the equilibrium error proxies for changes in the investment opportunity set that lead to industry return predictability by informed investors. Forecasting models including the equilibrium error have superior forecasting performance relative to models without it, illustrating the importance of cointegration between the industry portfolio and market prices. Overall, our findings have important implications for investment and risk‐management decisions, since the out‐of‐sample explanatory power of the equilibrium error is economically meaningful for making optimal portfolio allocations.

ACS Style

Victor Troster; José Penalva; Abderrahim Taamouti; Dominik Wied. Cointegration, information transmission, and the lead‐lag effect between industry portfolios and the stock market. Journal of Forecasting 2021, 1 .

AMA Style

Victor Troster, José Penalva, Abderrahim Taamouti, Dominik Wied. Cointegration, information transmission, and the lead‐lag effect between industry portfolios and the stock market. Journal of Forecasting. 2021; ():1.

Chicago/Turabian Style

Victor Troster; José Penalva; Abderrahim Taamouti; Dominik Wied. 2021. "Cointegration, information transmission, and the lead‐lag effect between industry portfolios and the stock market." Journal of Forecasting , no. : 1.

Chapter
Published: 18 June 2020 in Econometrics of Green Energy Handbook
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This chapter searches for optimal models for forecasting the Wilder Hill Clean Energy Index (ECO), the Standard and Poor’s Global Clean Energy Index (SPCLE), the MAC Global Solar Energy Index (SUN), and the European Renewable Energy Index (EURIX). These indices measure the stock market performance of renewable energy companies. We employ fat-tailed distributed models, and we analyze their in-sample and out-of-sample performance for the returns and the 1%-Value-at-Risk (VaR) of renewable energy indices. Heavy-tailed distributed GARCH and GAS are optimal for all renewable energy returns. They also have the lowest out-of-sample mean-squared error and the best coverage for 1%-VaR of renewable energy returns. These findings highlight the relevance of modeling the kurtosis for renewable energy returns, and they are relevant for policymakers and investors who invest in the renewable energy sector.

ACS Style

Victor Troster; Muhammad Shahbaz; Demian Nicolás Macedo. Optimal Forecast Models for Clean Energy Stock Returns. Econometrics of Green Energy Handbook 2020, 89 -109.

AMA Style

Victor Troster, Muhammad Shahbaz, Demian Nicolás Macedo. Optimal Forecast Models for Clean Energy Stock Returns. Econometrics of Green Energy Handbook. 2020; ():89-109.

Chicago/Turabian Style

Victor Troster; Muhammad Shahbaz; Demian Nicolás Macedo. 2020. "Optimal Forecast Models for Clean Energy Stock Returns." Econometrics of Green Energy Handbook , no. : 89-109.

Articles
Published: 15 May 2020 in Econometric Reviews
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This paper proposes a practical and consistent specification test of conditional distribution models for dependent data in a general setting. Our approach covers conditional distribution models indexed by function-valued parameters, allowing for a wide range of useful models for risk management and forecasting, such as the quantile autoregressive model, the CAViaR model, and the distributional regression model. The new specification test (i) is valid for general linear and nonlinear conditional quantile models under dependent data, (ii) allows for dynamic misspecification of the past information set, (iii) is consistent against fixed alternatives, and (iv) has nontrivial power against Pitman deviations from the null hypothesis. As the test statistic is non-pivotal, we propose and theoretically justify a subsampling approach to obtain valid inference. Finally, we illustrate the applicability of our approach by analyzing models of the returns distribution and Value-at-Risk (VaR) of two major stock indexes.

ACS Style

Victor Troster; Dominik Wied. A specification test for dynamic conditional distribution models with function-valued parameters. Econometric Reviews 2020, 40, 109 -127.

AMA Style

Victor Troster, Dominik Wied. A specification test for dynamic conditional distribution models with function-valued parameters. Econometric Reviews. 2020; 40 (2):109-127.

Chicago/Turabian Style

Victor Troster; Dominik Wied. 2020. "A specification test for dynamic conditional distribution models with function-valued parameters." Econometric Reviews 40, no. 2: 109-127.

Journal article
Published: 14 February 2020 in Studies in Nonlinear Dynamics & Econometrics
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This paper examines how different uncertainty measures affect the unemployment level, inflow, and outflow in the U.S. across all states of the business cycle. We employ linear and nonlinear causality-in-quantile tests to capture a complete picture of the effect of uncertainty on U.S. unemployment. To verify whether there are any common effects across different uncertainty measures, we use monthly data on four uncertainty measures and on U.S. unemployment from January 1997 to August 2018. Our results corroborate the general predictions from a search and matching framework of how uncertainty affects unemployment and its flows. Fluctuations in uncertainty generate increases (upper-quantile changes) in the unemployment level and in the inflow. Conversely, shocks to uncertainty have a negative impact on U.S. unemployment outflow. Therefore, the effect of uncertainty is asymmetric depending on the states (quantiles) of U.S. unemployment and on the adopted unemployment measure. Our findings suggest state-contingent policies to stabilize the unemployment level when large uncertainty shocks occur.

ACS Style

Ali Ahmed; Mark Granberg; Victor Troster; Gazi Salah Uddin. Asymmetric dynamics between uncertainty and unemployment flows in the United States. Studies in Nonlinear Dynamics & Econometrics 2020, 1 .

AMA Style

Ali Ahmed, Mark Granberg, Victor Troster, Gazi Salah Uddin. Asymmetric dynamics between uncertainty and unemployment flows in the United States. Studies in Nonlinear Dynamics & Econometrics. 2020; ():1.

Chicago/Turabian Style

Ali Ahmed; Mark Granberg; Victor Troster; Gazi Salah Uddin. 2020. "Asymmetric dynamics between uncertainty and unemployment flows in the United States." Studies in Nonlinear Dynamics & Econometrics , no. : 1.

Journal article
Published: 23 November 2019 in Journal of Multinational Financial Management
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We examine the influence of financial, economic, and seasonal factors on the performance of equity, fixed income, cash, and balanced Islamic mutual funds across global regions. We employ a global data sample (106 funds) of monthly mutual fund return observations along with Islamic funds’ factor exposure over time, global developed Fama and French (1993, 2015) factors for equity and balanced funds, three factors of the Huij and Derwall (2008) for cash and bond funds, and monthly seasonal effects. Seasonal effects are non-significant in balanced, equity, and cash funds. The Fama and French factors significantly affect the performance of equity and balanced funds, whereas the three factors of Huij and Derwall (2008) are important for explaining the performance of cash and fixed income funds for almost over the whole year. Our findings suggest that investors should not worry about a potential seasonal effect from the Ramadan period.

ACS Style

Gazi Salah Uddin; Jose Arreola Hernandez; Chiraz Labidi; Victor Troster; Seong-Min Yoon. The impact of financial and economic factors on Islamic mutual fund performance: Evidence from multiple fund categories. Journal of Multinational Financial Management 2019, 52-53, 100607 .

AMA Style

Gazi Salah Uddin, Jose Arreola Hernandez, Chiraz Labidi, Victor Troster, Seong-Min Yoon. The impact of financial and economic factors on Islamic mutual fund performance: Evidence from multiple fund categories. Journal of Multinational Financial Management. 2019; 52-53 ():100607.

Chicago/Turabian Style

Gazi Salah Uddin; Jose Arreola Hernandez; Chiraz Labidi; Victor Troster; Seong-Min Yoon. 2019. "The impact of financial and economic factors on Islamic mutual fund performance: Evidence from multiple fund categories." Journal of Multinational Financial Management 52-53, no. : 100607.

Journal article
Published: 22 October 2019 in Journal of Multinational Financial Management
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We investigate dynamic spillovers between ASEAN-5 and world stock markets using a dynamic equicorrelation (DECO) model and the spillover index of Diebold and Yilmaz (2012), which identifies net directional spillovers for each one of the markets. The DECO model uses more information to calculate dynamic correlations between each pair of returns than standard dynamic conditional correlation models, decreasing the estimation noise of the correlations. Directional spillovers from the world stock market to ASEAN-5 stock markets were higher than in the opposite direction. Besides, our results indicate heterogeneity among the ASEAN-5 stock markets in the degree of spillover to world markets over time. We verify an increase in both return and volatility spillovers during financial crises, confirming the intensity of information transmission during periods of turmoil. These findings help understand the economic channels through which the ASEAN-5 equity markets are connected, and they have important implications for emerging and frontier markets.

ACS Style

Sang Hoon Kang; Gazi Salah Uddin; Victor Troster; Seong-Min Yoon. Directional spillover effects between ASEAN and world stock markets. Journal of Multinational Financial Management 2019, 52-53, 100592 .

AMA Style

Sang Hoon Kang, Gazi Salah Uddin, Victor Troster, Seong-Min Yoon. Directional spillover effects between ASEAN and world stock markets. Journal of Multinational Financial Management. 2019; 52-53 ():100592.

Chicago/Turabian Style

Sang Hoon Kang; Gazi Salah Uddin; Victor Troster; Seong-Min Yoon. 2019. "Directional spillover effects between ASEAN and world stock markets." Journal of Multinational Financial Management 52-53, no. : 100592.

Journal article
Published: 19 October 2019 in Journal of Empirical Finance
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We contribute to the literature by providing a more comprehensive understanding of the impact the euro has had on financial market integration with economies of different characteristics outside and within the European market via inclusion of market conditions influence on the level of financial integration. Our paper employs the recently developed cross-quantilogram (Han et al., 2016) approach to examine quantile dependence between the conditional stock return distributions of Germany and the UK with that of three common currency groups within EMU (Finland, France, and Italy), two global leading markets (the US and Japan), and two of the most promising emerging markets (China and India). We find three key results. First, both the EU membership and the common currency union affect the degree of financial market integration. Nevertheless, disentangling the effects of EU membership from the common currency shows that the common currency group has an additional impact on financial integration, as the degree of dependence is stronger in the common currency group than in the sovereign currency group and other groups. Second, there is a heterogeneous dependence structure, which is strongly observed for the UK and German stock returns with that of developed (the US and Japan) and emerging markets (India and China). Third, cross-quantile correlations change over time, especially in low and high quantiles, indicating that they are prone to jumps and discontinuities in the dependence structure. As far as we are aware, this is the first study in this field employing a cross-quantilogram method to examine the impact of different market conditions on the correlations, making our study a pioneer in the field of stock market integration.

ACS Style

Sebastian Lindman; Tom Tuvhag; Ranadeva Jayasekera; Gazi Salah Uddin; Victor Troster. Market Impact on financial market integration: Cross-quantilogram analysis of the global impact of the euro. Journal of Empirical Finance 2019, 56, 42 -73.

AMA Style

Sebastian Lindman, Tom Tuvhag, Ranadeva Jayasekera, Gazi Salah Uddin, Victor Troster. Market Impact on financial market integration: Cross-quantilogram analysis of the global impact of the euro. Journal of Empirical Finance. 2019; 56 ():42-73.

Chicago/Turabian Style

Sebastian Lindman; Tom Tuvhag; Ranadeva Jayasekera; Gazi Salah Uddin; Victor Troster. 2019. "Market Impact on financial market integration: Cross-quantilogram analysis of the global impact of the euro." Journal of Empirical Finance 56, no. : 42-73.

Chapter
Published: 21 May 2019 in Smart and Sustainable Planning for Cities and Regions
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This chapter uncovers the dynamics between CO2 emissions, globalization, energy use, and economic growth in the US over the period 1970–2014. As an aftermath of the recent global financial crisis, it is important to assess the effects of globalization on CO2 emissions. We extend the analyses of previous studies to evaluate causal relationship across the quantiles that allows us to examine asymmetric causal patterns associated with different CO2 emissions regimes (normal, bad, and good). We find bidirectional causality between changes in the globalization index and changes in CO2 emissions. Besides, very large decreases in energy use contribute to reductions in CO2 emissions in the US, although linear tests find no relationship between them. Further, both linear and quantile-causality tests fail to support the environmental Kuznets curve hypothesis in the US. Our results call for policies for promoting the efficiency in energy use and for importing technologies that reduce the level of CO2 emissions in the US.

ACS Style

Victor Troster; Muhammad Shahbaz. Globalization and CO2 Emissions: Addressing an Old Question with New Techniques. Smart and Sustainable Planning for Cities and Regions 2019, 251 -270.

AMA Style

Victor Troster, Muhammad Shahbaz. Globalization and CO2 Emissions: Addressing an Old Question with New Techniques. Smart and Sustainable Planning for Cities and Regions. 2019; ():251-270.

Chicago/Turabian Style

Victor Troster; Muhammad Shahbaz. 2019. "Globalization and CO2 Emissions: Addressing an Old Question with New Techniques." Smart and Sustainable Planning for Cities and Regions , no. : 251-270.

Journal article
Published: 02 November 2018 in Resources Policy
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In this paper, we perform a quantile regression analysis of flights-to-safety with the implied market volatilities of stock, gold, gold-mining, and silver. We verify whether flights-to-safety from US equities to gold are significant under different volatility conditions. We test for linear and nonlinear Granger-causality in quantiles. We find unidirectional causality running from the volatility of stock market to the market volatilities of gold, gold-mining, and silver. Besides, there is no causality between gold and silver market volatilities. We also find evidence of unidirectional causality from the market volatilities of stock, gold, and silver to the gold-mining volatility in lower- and upper-tail quantiles. Therefore, gold-mining stocks act as a good substitute for gold, coupled with negative return correlations between these two assets. Overall, our results have important implications for adopting optimal hedging and investing strategies.

ACS Style

Victor Troster; Elie Bouri; David Roubaud. A quantile regression analysis of flights-to-safety with implied volatilities. Resources Policy 2018, 62, 482 -495.

AMA Style

Victor Troster, Elie Bouri, David Roubaud. A quantile regression analysis of flights-to-safety with implied volatilities. Resources Policy. 2018; 62 ():482-495.

Chicago/Turabian Style

Victor Troster; Elie Bouri; David Roubaud. 2018. "A quantile regression analysis of flights-to-safety with implied volatilities." Resources Policy 62, no. : 482-495.

Journal article
Published: 25 September 2018 in Finance Research Letters
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This paper performs a general GARCH and GAS analysis for modelling and forecasting bitcoin returns and risk. Since Bitcoin trading exhibits excess volatility compared with other securities, it is important to model its risk and returns. We consider heavy-tailed GARCH models as well as GAS models based on the score function of the predictive conditional density of the bitcoin returns. We compare out-of-sample 1%-Value-at-Risk (VaR) forecasts under 45 different specifications using three backtesting procedures. We find that GAS models with heavy-tailed distributions provide the best out-of-sample forecast and goodness-of-fit properties to bitcoin returns and risk modelling. Normally-distributed GARCH models are always outperformed by heavy-tailed GARCH or GAS models. Besides, heavy-tailed GAS models provide the best conditional and unconditional coverage for 1%-VaR forecasts, illustrating the importance of modelling excess kurtosis for bitcoin returns. Hence, our findings have important implications for risk managers and investors for using bitcoin in optimal hedging or investment strategies.

ACS Style

Victor Troster; Aviral Kumar Tiwari; Muhammad Shahbaz; Demian Nicolás Macedo. Bitcoin returns and risk: A general GARCH and GAS analysis. Finance Research Letters 2018, 30, 187 -193.

AMA Style

Victor Troster, Aviral Kumar Tiwari, Muhammad Shahbaz, Demian Nicolás Macedo. Bitcoin returns and risk: A general GARCH and GAS analysis. Finance Research Letters. 2018; 30 ():187-193.

Chicago/Turabian Style

Victor Troster; Aviral Kumar Tiwari; Muhammad Shahbaz; Demian Nicolás Macedo. 2018. "Bitcoin returns and risk: A general GARCH and GAS analysis." Finance Research Letters 30, no. : 187-193.

Journal article
Published: 01 February 2018 in Energy Economics
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This paper analyzes the causal relationship between renewable energy consumption, oil prices, and economic activity in the United States from July 1989 to July 2016, considering all quantiles of the distribution. Although the concept of Granger-causality is defined for the conditional distribution, the majority of papers have tested Granger-causality using conditional mean regression models in which the causal relations are linear. We apply a Granger-causality in quantiles analysis that evaluates causal relations in each quantile of the distribution. Under this approach, we can discriminate between causality affecting the median and the tails of the conditional distribution. We find evidence of bi-directional causality between changes in renewable energy consumption and economic growth at the lowest tail of the distribution; besides, changes in renewable energy consumption lead economic growth at the highest tail of the distribution. Our results also support unidirectional causality from fluctuations in oil prices to economic growth at the extreme quantiles of the distribution. Finally, we find evidence of lower-tail dependence from changes in oil prices to changes in renewable energy consumption. Our findings call for government policies aimed at developing renewable energy markets, to increase energy efficiency in the U.S.

ACS Style

Victor Troster; Muhammad Shahbaz; Gazi Salah Uddin. Renewable energy, oil prices, and economic activity: A Granger-causality in quantiles analysis. Energy Economics 2018, 70, 440 -452.

AMA Style

Victor Troster, Muhammad Shahbaz, Gazi Salah Uddin. Renewable energy, oil prices, and economic activity: A Granger-causality in quantiles analysis. Energy Economics. 2018; 70 ():440-452.

Chicago/Turabian Style

Victor Troster; Muhammad Shahbaz; Gazi Salah Uddin. 2018. "Renewable energy, oil prices, and economic activity: A Granger-causality in quantiles analysis." Energy Economics 70, no. : 440-452.

Journal article
Published: 01 August 2017 in Economic Modelling
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ACS Style

André M. Marques; Gilberto Tadeu Lima; Victor Troster. Unemployment persistence in OECD countries after the Great Recession. Economic Modelling 2017, 64, 105 -116.

AMA Style

André M. Marques, Gilberto Tadeu Lima, Victor Troster. Unemployment persistence in OECD countries after the Great Recession. Economic Modelling. 2017; 64 ():105-116.

Chicago/Turabian Style

André M. Marques; Gilberto Tadeu Lima; Victor Troster. 2017. "Unemployment persistence in OECD countries after the Great Recession." Economic Modelling 64, no. : 105-116.

Journal article
Published: 04 June 2016 in Econometric Reviews
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ACS Style

Victor Troster. Testing for Granger-causality in quantiles. Econometric Reviews 2016, 37, 850 -866.

AMA Style

Victor Troster. Testing for Granger-causality in quantiles. Econometric Reviews. 2016; 37 (8):850-866.

Chicago/Turabian Style

Victor Troster. 2016. "Testing for Granger-causality in quantiles." Econometric Reviews 37, no. 8: 850-866.