LE PEN Yannick

This paper thesis is composed of four self-contained chapters, contributing to the field of nonlinear econometrics. The first chapter focuses on the contribution of nonlinear econometrics through the measurement of financial performance using a dichotomous variable as the independent variable. The next three chapters are based on nonlinear regression models where the dichotomous variable is the dependent variable of the equation. Given the links between financial risk and the macroeconomic context, this part is linked to the theme of optimal allocation via the study of crises and recessions. This class of model (probit / logit) is used in the second chapter to study empirically the role of financial development in the probability of occurrence of banking crises. Then the last two chapters focus on the methodological framework developed by Kauppi and Saikkonen (2008) and Candelon, Dumitrescu and Hurlin (2012 . 2014) about forecasting business cycles from probit / logit models. Thus, the third chapter studies the empirical relationship linking the evolution of the credit spread and the future probability of expansion/recession in an extended data panel while testing the homogeneity of this relationship. Finally, the fourth chapter proposes a theoretical contribution by deriving the response functions of probit / logit models from the approach of Kauppi and Saikkonen (2008). These response functions are then used in an empirical framework to estimate the impact of an exogenous shock on the expansion/recession cycle.

This thesis aims to analyze the systemic risk on commodity futures markets. Indeed, several research works highlight the importance of these futures in the determination of the physical price of commodities. Their incorporation into traditional finance as a diversifying asset has led to a similar price evolution to that of various financial assets since about 2004. The question that motivated this thesis was therefore to quantify this systemic risk (since it affects commodities, which are directly involved in the real economy), to see precisely the means of transmission (which markets affect which other markets) and finally to allow for an evaluation of the consequences, for example, based on scenarios (stress tests). It therefore makes it possible to develop market surveillance tools and could therefore contribute to the regulation of these markets.

Interconnecting two adjacent areas of electricity production generates benefits in combined consumer surplus and welfare by allowing electricity to flow from the low cost area to the high cost area. It will lower prices in the high cost area, raise them in the low cost area and will thus have prices in the two areas converge. With unconstrained interconnection capacity, price convergence is, of course, complete and the two areas are merged into a single area. With constrained interconnection capacity, the challenge for transport system operators (TSOs) and market operators is using the available capacity in an optimal manner. This was the logic behind the “market coupling” mechanism installed by European power market operators in November 2009 in the Central Western Europe (CWE) electricity market, of which France and Germany constitute by far the two largest members. Market coupling aims at optimising welfare by ensuring that buyers and sellers exchange electricity at the best possible price taking into account the combined order books all power exchanges involved as well as the available transfer capacities between different bidding zones. By doing so, interconnection capacity is allocated to those who value it most.

As speculative flows into commodity futures are expected to link commodity prices more strongly to equity indices, we investigate whether this process also creates increased correlations amongst the commodities themselves. Considering U.S. oil and gas futures, we investigate whether common factors, derived from a large international data set of real and nominal macroeconomic variables by means of the large approximate factor models methodology, are able to explain both returns and whether, beyond these fundamental common factors, the residuals remain correlated. We further investigate a possible explanation for this residual correlation by using some proxies for trading intensity derived from CFTC publicly available data, showing most notably that the proxy for speculation in the oil market increases the oil-gas correlation. We thus identify the central role of financial activities in shaping the link between oil and gas returns.

This thesis studies the role played by financial investors in commodity markets, known as commodity financialization. It consists of a theoretical and an empirical part. The research aims to study the participation of investors, holding equity portfolios, in commodity futures markets, for diversification reasons. Moreover, this diversification can be achieved by investing in a basket of commodities. The first chapter analyzes theoretically the interaction between the commodity and equity markets. The second chapter empirically studies the impact of financial investors' choice on the risk premium of commodity futures contracts. It focuses on three commodities: crude oil (WTI), heating oil and natural gas. The third chapter theoretically studies the integration of two commodity markets. We clarify some considerations regarding the effect of financialization on which the existing literature remains hesitant. We demonstrate the power of influence that investors have on the commodity market. However, this depends on the nature of the investor's position in the futures market. In general, financialization leads to higher spot prices, higher futures prices and higher inventory levels. We also show that investors represent a transmission channel between commodity markets. Their extended effects are limited to the cross-correlation of commodity markets. Finally, we show that equity market returns became a determinant of the futures risk premium after the 2008 financial crisis. This effect of equity returns is indifferent between short and long maturities.

We empirically reinvestigate the issue of the excess co-movement of commodity prices initially raised in Pindyck and Rotemberg (1990). Excess co-movement appears when commodity prices remain correlated even after adjusting for the impact of fundamentals. We use recent developments in large approximate factor models to consider a richer information set and adequately model these fundamentals. We consider a set of eight unrelated commodities along with 184 real and nominal macroeconomic variables, from developed and emerging economies, from which nine factors are extracted over the 1993–2013 period. Our estimates provide evidenceof time-varying excess co-movement which is particularly high after 2007. Wefurther show that speculative intensity is a driver of the estimated excess comovement, as speculative trading is both correlated across the commodity futures markets and correlated with the futures prices. Our results can be taken as direct evidence of the significant impact of financialization on commodity-price crossmoments.

This thesis aims to analyze whether environmental, social and governance (ESG) performance is integrated by corporate and sovereign debt markets. The first chapter focuses on ESG information published with negative content and its negative impact on the cost of debt. Specifically, in the industrial and utility sectors, negative social and governance events increase the cost of debt. Also, a good general level of ESG performance acts as an insurance mechanism against these negative events. In a second chapter, the results of a portfolio simulation integrating corporate ESG performance will be presented. A portfolio manager can improve the aggregate level of ESG performance of the portfolio by 1.5 standard deviations without decreasing the financial performance. Thus, the manager can combine this integration with financial asset allocation strategies or absolute return strategies. In a third chapter, I analyze the results on the reduction of the cost of debt due to a good environmental and social performance of emerging sovereigns. Finally, in the fourth chapter I describe how the governance performance of sovereigns influences the difference between the yield issued in foreign currency and that issued in local currency. In developed countries this difference increases with political risk, i.e. foreign yield increases faster than domestic yield. In emerging countries, the opposite effect is observed. This difference between the two yields varies more strongly with an increasing proportion of domestic debt held by foreign investors.

Deregulation of the electricity market has shown many changes in the economy and has influenced researchers to initiate studies in this area. Italy provides an interesting case study to explore the electricity market because of its specifications. Our project consists of three independent quantitative studies to view the Italian electricity market from three different angles. The first study answers the question of forecasting caused by the volatility of the electricity market. The result suggests an alternative forecasting method for modeling electricity prices in Italy. The second research examines the impact of renewable energy on the occurrence of congestion and its costs. We analyze the quantitative properties of the econometric estimation in order to understand the economic mechanism and derive the policy suggestion. Finally, the final research analyzes the price interdependence in six macro-areas of the Italian electricity market.

As speculative flows into commodity futures are expected to link commodity prices more strongly to equity indices, we investigate whether this process also creates increased correlations amongst the commodities themselves. Considering U.S. oil and gas futures, we investigate whether common factors, derived from a large international data set of real and nominal macroeconomic variables by means of the large approximate factor models methodology, are able to explain both returns and whether, beyond these fundamental common factors, the residuals remain correlated. We further investigate a possible explanation for this residual correlation by using some proxies for trading intensity derived from CFTC publicly available data, showing most notably that the proxy for speculation in the oil market increases the oil-gas correlation. We thus identify the central role of financial activities in shaping the link between oil and gas returns.

The thesis analyzes the effects of regulation on the systematic risk of a panel of 17 large European telecommunications operators between 1997 and 2012. The regulation/risk relationship is studied from three perspectives: (i) via the modification of the firm's revenue distribution, (ii) the promotion of competitive intensity, and (iii) the operators' financial structure choices. A model of the impact of regulation on the firm's financial structure shows that the strategic increase in debt can increase or decrease systematic risk. Three risk estimation methodologies are used: OLS and Kalman filter without and with TGARCH effect. The three aspects of the risk/regulation relationship are then addressed via a panel data study (covering financial ratios, competitive intensity, regulatory intensity and regime) and then by assessing the risk response to announcements of changes in the European regulatory framework (event study).

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We measure the impact of negative environmental, social and governance news on corporate bond prices and credit default swap premiums for the Eurozone market. Each firm is affected at least by one piece of news related to its environmental, social and governance practices. Each news is then flagged with an indicator of importance. Ab- normal bond returns are computed by subtracting return from a matching portfolio to the return of the observed bond return. Abnormal credit default swap return is calculated with a regression of the observed bond return on an equiweighted index that is constructed to transpose our bond universe on the credit default swap market. Several parametric and non parametric tests do not show any significant impact of these negative events as a whole on corporate bond prices, even though there is evidence of some impact of two subcategories of social events. When considering all events, we find a slight but counter-intuitive decrease of the credit default swap premium within the 5 following days of the event. REMARK: We did finish the database and have now more than 2000 events associated to 212 firms. Unfortunately, the calculation of the matching portfolios takes more time than we expected due to the various constraints. However, we joined the first results for the credit default swap market (Table 7). It does not change the results we found with our subsample of 85 firms.

We measure the impact of negative environmental, social and governance news on corporate bond prices and credit default swap premiums for the Eurozone market. Each firm is affected at least by one piece of news related to its environmental, social and governance practices. Each news is then flagged with an indicator of importance. Ab- normal bond returns are computed by subtracting return from a matching portfolio to the return of the observed bond return. Abnormal credit default swap return is calculated with a regression of the observed bond return on an equiweighted index that is constructed to transpose our bond universe on the credit default swap market. Several parametric and non parametric tests do not show any significant impact of these negative events as a whole on corporate bond prices, even though there is evidence of some impact of two subcategories of social events. When considering all events, we find a slight but counter-intuitive decrease of the credit default swap premium within the 5 following days of the event. REMARK: We did finish the database and have now more than 2000 events associated to 212 firms. Unfortunately, the calculation of the matching portfolios takes more time than we expected due to the various constraints. However, we joined the first results for the credit default swap market (Table 7). It does not change the results we found with our subsample of 85 firms.

We empirically reinvestigate the issue of excess comovement of commodity prices initially raised in Pindyck and Rotemberg (1990) and show that excess comovement, when it exists, can be related to hedging and speculative pressure in commodity futures markets. Excess comovement appears when commodity prices remain correlated even after adjusting for the impact of common factors. While Pindyck and Rotemberg and following c ontributions examine this issue using a relevant but arbitrary set of control variables, we use recent developments in large approximate factor models so that a richer information set can be considered and “fundamentals” are likely to be adequately modeled. We consider a set of 8 unrelated commodities along with 187 real and nominal macroeconomic variables from which 9 factors are extracted over the period 1993-2010. Our estimates provide evidence of a time-varying excess comovement which is only occasionally significant, even after controlling for heteroscedasticity. Interestingly, excess comovement is mostly significant in recent years when a large increase in the trading of commodities is observed and also in crisis periods. However, we show that this increase in trading activity alone has no explanatory power for the excess comovement. Conversely, measures of hedging and speculative pressure explain around 60% of the estimated ex cess comovement thereby showing the strong impact not only of the financialization process, but also the impact of behaviour of some categories of traders on the price of commodities and the fact that supply and demand variables are not the sole factors in determining equilibrium prices.

We empirically reinvestigate the issue of excess comovement of commodity prices initially raised in Pindyck and Rotemberg (1990) and show that excess comovement, when it exists, can be related to hedging and speculative pressure in commodity futures markets. Excess comovement appears when commodity prices remain correlated even after adjusting for the impact of common factors. While Pindyck and Rotemberg and following contributions examine this issue using a relevant but arbitrary set of control variables, we use recent developments in large approximate factor models so that a richer information set can be considered and "fundamentals" are likely to be adequately modeled. We consider a set of 8 unrelated commodities along with 187 real and nominal macroeconomic variables from which 9 factors are extracted over the period 1993-2010. Our estimates provide evidence of a time-varying excess comovement which is only occasionally significant, even after controlling for heteroscedasticity. Interestingly, excess comovement is mostly significant in recent years when a large increase in the trading of commodities is observed and also in crisis periods. However, we show that this increase in trading activity alone has no explanatory power for the excess comovement. Conversely, measures of hedging and speculative pressure explain around 60% of the estimated excess comovement thereby showing the strong impact not only of the financialization process, but also the impact of behaviour of some categories of traders on the price of commodities and the fact that supply and demand variables are not the sole factors in determining equilibrium prices.

The relationship between macroeconomic variables and oil prices has been of great interest to economists for many years. These interactions depend not only on the variables selected, but also on the time horizon considered. The purpose of this thesis is to study the relationships between the price of oil and various macroeconomic and financial variables by considering different time horizons and by using various complementary econometric methodologies. After a historical review of the oil industry since 1860, we study the relationship between the price of oil and the behavior of the member countries of the Organization of the Petroleum Exporting Countries using time series and panel data techniques. Subsequently, the estimation of time-varying VAR models allows us to study the impact of the US dollar exchange rate on the price of Brent. Finally, we analyze the joint movements between commodity prices and oil prices using non-stationary panel data econometrics.

The purpose of this thesis is to analyze the energy transition. In particular, we are interested in technological learning as a driver of endogenous technological change, the main vector of the transition. In the first chapter, we show the difficulty of quantifying learning effects and we identify a set of factors whose inclusion can improve the reliability of the estimates. We also show that, although incorporating technological learning into energy-environment-economy models can pose methodological and mathematical problems, it can improve our understanding of the dynamics of adoption and diffusion of energy innovations. In the second chapter, we focus on the issue of competition between competing energy technologies. We show that dynamic learning effects and static scale effects are responsible for the current situation of energy system lock-in on conventional energy sources. In the third chapter, we focus on the controversial case of nuclear energy as a possible future energy alternative. We analyze the question of its competitiveness for the case of France. We show that learning effects improve competitiveness but that long construction times can hamper it. In the fourth chapter, we focus on the issue of primary uranium supply. We show that uranium prices have a significant positive effect on production and exploration expenditures but not on reserves. We also show that production and exploration expenditures are more sensitive to a price increase than to a price decrease.

This thesis contributes to the debate on the relationship between economic growth and the environment. The literature review on the environmental Kuznets curve, constituting the first chapter, is the basis for the empirical tests described in the following chapters. The second chapter examines eight indicators of sustainable development and presents their numerical evaluations at the national level between 1990 and 2000. The comparison of the evolution of the different measures shows that France's development was sustainable in the weak sense, but not sustainable in the strong sense over the decade studied. The third chapter focuses on the stochastic convergence of individual sulphur dioxide (SO2) and carbon dioxide (CO2) emissions over samples composed of 81 nations from 1950 to 1990 and 127 countries from 1950 to 2003, respectively. We test this hypothesis by applying an alternative and recent econometric methodology developed by Pesaran (2007). The results of the unit root and stationarity tests suggest that the process of environmental convergence is limited, even among OECD countries. In the last chapter, based on the study of Hausmann et al. (2005), we identify episodes of accelerating CO2 emissions growth and episodes of decay for 124 economies from 1950 to 2004. We use binary panel econometrics to identify the economic, demographic and institutional factors that explain the occurrence of these episodes. Since the explanatory power of the significant variables is low, our empirical analysis suggests that the onset of acceleration and deceleration episodes remains highly unpredictable.

This thesis focuses on testing the hypothesis of convergence of GDP per capita across nations. In Chapter I, we summarize the theoretical debates and present the main approaches followed to test the convergence hypothesis of GDP per capita. Our definition of convergence corresponds to the hypothesis of stationary GDP per capita differentials of zero mean. In chapter II, we characterize one by one the GDP per capita series of 16 industrialized countries between 1900 and 1989 and of 23 OECD countries between 1950 and 1988 and show that they contain a stochastic trend. In chapter III, we test the convergence hypothesis itself. We characterize the GDP gaps separately and then simultaneously. The rejection of the stationarity of the gaps leads us to look for cointegration relationships between GDP per capita in order to determine whether there are no common stochastic trends. In chapter IV, we apply unit root tests with panel data. These tests reject the stationarity of the differences for 100 countries between 1960 and 1985. We accept stationarity of deviations with a non-zero mean for OECD countries between 1950 and 1988. In chapter V, we consider a less strict definition of convergence: the lower the initial GDP per capita, the higher the growth rate per capita if the countries have common levels for some variables. We then estimate a heterogeneous dynamic panel model.