Business and Economics Research Journal

17-29

Authors: Shelly Singhal, P. C. Biswal

Time series models investigating the linkages between various asset markets (Commodity and Equity) in India have assumed a symmetric and linear relationship between them. They examine these interrelationships by assuming the presence of a uniform economic state. However the returns from commodity futures and stock market do not show a continuous trend but exhibit time varying behaviour i.e. the returns of stocks might be higher in a certain economic condition and it may fall as the economic environment changes due to financial crises, oil price rise, rupee depreciation etc. Similarly the return of commodities is also subject to variation with the changing economic conditions due to which the basic assumptions of stationary and linearity of time series models gets refuted. Therefore, this paper empirically examines the interrelationships between commodity futures (Energy, Metal and Agriculture) and stock markets in dynamic economic states by employing Markov Regime Switching model proposed by Hamilton (2005) which has the capability of capturing temporal asymmetries and nonlinear dynamics of time series. For each market a composite index indicating the overall movement and performance of a particular investment asset has been considered. In order to provide robust results this paper uses daily data from 2006 to 2014 which significantly represents different states in the Indian Economy. The result of the study confirms the impact of economic environment on Indian commodity and stock markets and validates the presence of two distinct regimes: a “tranquil regime” representing the state of economic expansion and a “crisis regime” representing the state of economic decline. Additionally, the result confirms that commodities and stock markets oscillate between high and low volatility regimes and this movement is different across different commodity class (Energy, Metal and Agriculture). In a portfolio, when commodity futures are combined with stock, due consideration must be given to the state varying behaviour of different asset class. However, previous studies on performance of commodity futures in context of portfolio have been done in a single time period/static context and therefore the results of the study provide interesting insights for investors and portfolio managers. By detecting the switching points in the economic states, they can rebalance their portfolio accordingly so as to reduce loss and enhance portfolio returns.

51-66

Authors: Elif Öznur Acar

This study examines the impacts of the global economic crisis on the dynamics of the Turkish labor market, 2006-2009 Income and Living Conditions Survey (SILC) panel data set and Markov transition analysis. For this purpose, Markov probabilities of annual individual flows between four market labor market states of salaried employment, self-employment, unemployment and inactivity are compared across pre-crisis and crisis period. Further, the analysis is conducted for gender, age and education subcategories to analyze the extent and nature of the crisis on different labor market groups. The results show that the crisis has negatively affected the Turkish labor market, particularly through salaried employment and unemployment channels. During the crisis, the probability of becoming unemployed for salaried workers fell significantly, while the probability of remaining unemployed increased. Moreover, the probability of moving into employment decreased and that into unemployment rose for the inactive group. Women, low skilled and youth are found to be the most negatively affected from the crisis.