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Option Pricing with the Realized GARCH Model: An Analytical Approximation Approach

We derive a pricing formula for European options for the Realized GARCH framework based on an analytical approximation using an Edgeworth expansion for the density of cumulative return. Existing approximations in this context are based on a Gram–Charlier expansion while the proper Edgeworth expansion is more accurate. In relation to existing discrete-time option pricing models with realized volatility, our model is log-linear, non-affine, with a flexible leverage effect.


The impact of privatization on TFP: A quasi-experiment in China

Using the data of SOEs and Non-SOEs in industrial sector of China from 1998 to 2007, we investigate the impact of privatization on TFP. We construct a difference in difference model and use propensity score method to avoid the selection bias. We use the type of enterprises registration to identify the SOEs and define the privatization. The regress results show, privatization of SOEs can improve the efficiency of enterprises significantly. Some characteristics of firms will affect the effect of privatization.


Stock liquidity and firm value: evidence from China

Empirical evidence for the effect of stock liquidity on firm value is limited and mixed due to a severe endogeneity problem. This article adds to the literature on this topic by providing new empirical evidence using the nontradable share reform in China as a quasi-natural experiment. Our results show that higher stock liquidity can lead to significant firm value improvement.


Risk perceptions in environmental social governance: A review of fifty years of studies

The essence of environmental social governance is the simultaneous involvement of individuals and organizations in multiple ways to manage environmental common affairs. Good governance requires the government to create an enabling context in its first place through institutional building and policy making. To create an enabling context requires a fundamental understanding on what people think about the environmental problems and what shapes such perception.


Job opportunities, institutions, and the jobs-housing spatial relationship: Case study of Beijing

In this paper, we use household travel survey data and employment establishment survey data collected in Beijing to empirically investigate the extent to which institutional arrangements influence the jobs-housing spatial relationship, and whether such arrangements interact with local job opportunities in shaping the jobs-housing relationship. Dynamic buffering is used to derive the number of job opportunities within specific distances of each home.


How do Payments for Environmental Services Affect Land Tenure? Theory and Evidence From China

Recent academic endeavours have questioned whether the rapidly unfolding Payments for Environmental Services (PES) may have profound influence on land tenure which would in turn impact the conservation efficacy of PES. This paper developed a game-theory model in the context of rural China, which describes the endogenous formation of land rights as a bargaining process between ordinary villagers and village leaders.


Temperature and industrial output: Firm-level evidence from China

We pair a firm-level panel of annual industrial output with a fine-scale daily weather data set, to estimate the responses of industrial output to temperature changes in China. We have four primary findings. First, industrial output is nonlinear in temperature changes. With seasonal average temperatures as temperature variables, output responds positively to higher spring temperatures and negatively to elevated summer temperatures.


High Daytime and Nighttime Temperatures Exert Large and Opposing Impacts on Winter Wheat Yield in China

We analyzed a provincial-scale data set of observed winter wheat yield, together with fine-scale daily weather outcomes from 1979 to 2011, to assess the responses of winter wheat yield in China to changes in the daytime temperature (Tmax) and the nighttime temperature (Tmin). Contrasting with the literature’s emphasis on a negative correlation between Tmin and wheat yield, we showed that winter wheat yield in China responded positively to higher Tmin, with the positive yield responses varying across wheat growing seasons.


Impact of information feedback on residential electricity demand in China

This paper examines the relationship between information feedback and residential electricity consumption, based on a household survey dataset collected in 2012 that covered 26 provinces in China. The results show that information feedback is strongly associated with residential electricity consumption. Electricity consumption is statistically lower in households who obtain consumption information through interactions with meter readers, receive ex ante feedback (use a prepaid metering system), and receive explicit feedback by directly paying meter readers.


Strategic carbon taxation and energy pricing under the threat of climate tipping events

An appropriate design of climate mitigation policies such as carbon taxes may face a lot of challenges in reality, e.g., the strategic behavior of fossil fuel producers, and huge uncertainty surrounding the climate system. This paper investigated the effect of possible climate tipping events on optimal carbon taxation and energy pricing, taking into account the strategic behavior of energy consumers/producers and the uncertainty of tipping points through a stochastic dynamic game.


Strategic oil stockpiling for energy security: The case of China and India

Compared with the developed countries, the developing countries could be more vulnerable to oil supply disruptions due to their lack of strategic petroleum reserves (SPRs). Several developing countries, including China and India, are establishing their SPRs to ensure energy security. In the common world oil market, one country's SPR decisions can be affected by the decisions of other countries.


Can an Emission Trading Scheme Promote the Withdrawal of Outdated Capacity in Energy-Intensive Sectors? A Case Study on China's Iron and Steel Industry

Outdated capacity and substantial potential for energy conservation are the two main features of energy-intensive sectors in developing countries. Such countries also seek to implement market-based options to further control domestic carbon emissions as well as to promote the withdrawal of outdated capacity and upgrade production level. This paper presents a quantitative assessment of the emission trading scheme (ETS) for China's iron and steel industry. The diverse array of normal and outdated capacities was modeled in a two-country, three-good partial equilibrium model.


Optimal health and environmental policies in a pollution-growth nexus

This paper shows how policies aimed at insuring health risks and those intended to improve the environment are (and should be) deeply intertwined. In the model economy inspired by recent Chinese experience, pollution raises the likelihood of future, poor health prompting households to save more so as to self-insure against anticipated medical expenses. Increased household saving generates more capital while capital use by firms generates more pollution.


Impacts of climate change on agriculture: Evidence from China

To move China's climate policy forward, improved analyses of climate impacts on economic sectors using rigorous methodology and high quality data are called for. We develop an empirical framework, using fine-scale meteorological data, to estimate the link between corn and soy bean yields and weather in China.


Will urbanization increase residential energy demand?

City is the major energy user and emission source in China,which accounts for 70% of total energy consumption. To achieve the sustainable development, China need to further boost the urban development while lower the huge energy demand. Will the accelerating urbanization process lead to higher energy demand? This issue raises intensive attention from the decision-makers, public, and academic society. Most previous studies concluded that the urbanization is positively associated with household energy demand.


Assessing the abatement potential and cost of Chinese industrial water pollutants

Water pollution is becoming an increasing threat to China's sustainable development. To respond to this challenge, China has pledged to cut emissions of two major water pollutants, chemical oxygen demand (COD) and ammonia nitrogen (NH4), and has disaggregated the national target among provinces. However, the abatement potential and costs have not been thoroughly assessed. This paper aims to examine the reduction potential and associated costs of COD and NH4 in the Chinese industrial sector.


Household fuel choice in urban China: evidence from panel data

Using eight rounds of household survey data that span two decades, this paper analyzes the determinants of household fuel choice in urban China. Using the correlated random effects generalized ordered probit model, the authors find that household fuel choice in urban China is related to fuel prices, households’ economic status and size and household head’s gender and education.


The Political Intergenerational Welfare State

Using a three-period overlapping generations economy framework, we characterize an intergenerational welfare state with endogenous education and pension under voting. We show that although politically establishing Pay-As-You-Go (PAYG) social security in isolation in a dynamically efficient economy will always reduce the capital investment and therefore the social welfare as expected, in contrast politically implementing education-pension policy package instead can improve both human and physical capital accumulation and social welfare over laissez faire.


Off-farm employment and rural crime: Evidence from village panel of rural China

This paper uses a unique village-level panel dataset on rural social public security to estimate the link between off-farm employment and rural crime in China. We find that, firstly, with one percent increase in off-farm employment, rural crimes and violating the security management and punishment regulations are projected to increase by 0.28 percent and 0.62 percent, respectively; secondly, there are no significant correlation between off-farm employment and rural civil disputes.


Credit reporting system is the key to P2P regression information intermediaries

The efficient and perfect credit reporting system plays a key role in breaking through the development bottleneck of P2P. An analysis on the causes and defects for P2P platform acting as credit intermediary and a discussion about several credit models on the P2P platform will be inductive to finding some reasonable suggestions for the further development of P2P platform. 


Environmental policies of local governments: A panel data analysis of SO2 abatement

This paper constructs a theoretic model to study the behaviors of China local governments in environmental policy-making process. In our model, local governments make environmental policies under promotion incentives, while polluting firms produce according to such policies. The model predicts a Ushaped relationship between the GDP ratio of local secondary industry and the strictness of local environmental policies, which we use the 2003-2011 "China City Statistical Yearbook" panel data to test.


Effects of key state-owned forestry reforms on the inequality of household incomes

Based on the survey on 1 454 households in 24 forestry bureaus in 3 provinces, this paper used both MEL and OLS methods to evaluate the impact of state-owned forestry reforms on the inequality of household income. The study found that inequality of households in state-owned forestry regions has further aggravated and the reforms take the main responsibility for this phenomenon.


Property rights reform, grassroots democracy and investment incentive

Since 2006, China began a property reform on rural forest land, which is called "the second land reform" after the implementation of China's rural household contract responsibility system. Using a unique household survey data, we analyze the impact of grassroots democratic decision-making on investment incentives of the property right reform on forest land.


Analysis on the effects of key state-owned forestry reform on employment

[Objective] Based on the micro survey data of key state-owned forestry area, this paper analyzed the impacts of state-owned forestry region reform on the changes in employment, which would provide a useful reference for the policy of key state-owned forestry region. [Method] We described the changes of industries, departments and aspects of employment in state-owned forestry region by statistical methods. Furthermore, we applied an econometric model to estimate the effect of state-owned forestry reforms on the employments.


Economic and environmental effects of improved auto fuel economy standard in China: A CGE analysis

The authors use CHINAGEM, a computable general equilibrium model to investigate the economic effect and pollution reduction impacts of improved auto fuel economy standard in China. The policy change is modelled as shocks to production tax rate of two industries - petrol refine and motor vehicle parts. The results show that the shocks lead to higher labor cost, slightly decreased GDP and improved terms of trade. The majority of industries, such as motor vehicle manufacturing, will undergo downsizing because of new standards and


Empirical study on rural households’ demand for energy consumption in Western ethnical minority areas

Based on a household survey in western ethnical minority areas of Gansu and Yunnan province, this paper first describes rural households’energy consumption pattern, and further investigates the relevant factors determining households’demand for fuel wood consumption by using a Tobit model. The empirical results show that sample households have strong dependence on fuel wood consumption.


Impact of reform on household income in the key state-owned forest areas

Based on the survey data of 1 454 households in 24 forestry bureaus of 3 provinces, this research used both MEL and OLS methods to evaluate the impact of the reform on household’s per-capita income in the key state-owned forest areas. The study found that the proportion of both non-forestry income and income from


Empirical study on compensation mechanism in the context of government’s purchase of ecological forest

Based on a household survey on farmers’Willingness To Accept (WTA) the goverment’s ecological compensation in Sichuan Province, this paper attempts to study the compensation mechanism in the context of goverment’s purchase of ecological forest by establishing the ecological forest supply curve. We find that, given the budget constraint of 500000 CNY, the appropriate purchase price is 5400 CNY/hm2, and the survey villages can supply 80% of their forest lands.


Wheels of fortune: Subway expansion and property values in Beijing

China is experiencing rapid urbanization. Its capital city, Beijing, experienced a 53 percent increase in population from 2001 to 2013. To address traffic congestion and air pollution, two of the most pressing urban challenges, Beijing has been investing heavily in transportation infrastructure. In particular, the subway system added 15 new subway lines with a total length of 410 km of over the 12-year period.


Tenure Security and Investment Effects of Forest Tenure Reform in China

Tenure security in land is considered crucial in order to stimulate investment and create economic growth, for three reasons; higher expected returns from investment, better functioning land markets allowing land transfers to more efficient producers, and better access to credit (Demsetz, 1967; Besley, 1995; Brasselle et al., 2002). Land allocation has played a special role in China as a key resource that has been shared based on strong equity principles in rural areas where land has been the main resource pillar of the economy (Carter and Yao, 1998; Jacoby et al., 2002).


Spatial Distribution of Coal-Fired Power Plants in China

Coal has fueled China’s fast growth in the last decades, but it also severely pollutes the air and causes many health issues. The magnitude of the health damage caused by air pollution depends on the location of emission sources. In this paper, we look into the spatial distribution of coal-fired power plants, the major emission sources in China, and investigate the determining factors behind the distribution. We see an overall increase in installed coal-fired power capacity in recent years, with capacity leaps in some provinces.


Positional concern, gender, and household expenditures: A case study in Yunnan province

Purpose: The purpose of this paper is to attempt to investigate farmer's positional concerns in rural China, and how the positional concerns correlate with household expenditures on visible goods. Design/methodology/approach: The authors conduct a survey-based experiment to measure farmers' positional concerns, and employ econometric models to examine the determinants of the degree of positional concern and how the positional concern affects household expenditures on visible goods.


People at risk of influenza pandemics: The evolution of perception and behavior

Influenza pandemics can severely impact human health and society. Understanding public perception and behavior toward influenza pandemics is important for minimizing the effects of such events. Public perception and behavior are expected to change over the course of an influenza pandemic, but this idea has received little attention in previous studies. Our study aimed to understand the dynamics of public perception and behavior over the course of the 2009 H1N1 influenza pandemic.


The effect on forestation of the collective forest tenure reform in China

The Chinese government has allowed collective village forest land to pass into individualized ownership. The purpose was to alleviate rural poverty and stimulate investment in forests. Using data collected from 288 villages, in eight provinces, over three years, this paper measures the effect of the individualization on one aspect of forest investment, forestation. Because villages voted on the reform, we identify the causal effect of the reform by an instrumental variable estimator based on the countywide decision to offer the reform package.


Automobile usage and urban rail transit expansion: Evidence from a natural experiment in Beijing, China

Using individual travel diary data collected before and after a rail transit expansion in urban Beijing, the impact of urban rail accessibility improvement on the usage of rail transit, automobiles, buses, walking and bicycling, as well as the cross-area externality induced by congestion alleviation, is estimated. The results show that rail transit usage significantly increased for commuters residing in the affected areas and that the additional rail passengers were previously auto users, rather than bus passengers.


Environmental regulation and firm location choice in China

How may environmental regulation affect firm location choice? While this question has generated great research interest from high-standard, industrial economies, in this article we turn the spotlight to low-standard, developing countries and use China’s Census of Manufactures data during 2003–2008 to explore how firms with different ownership, during different policy regimes as well as from different industries may respond to environmental regulations in different ways.


The spirit of capitalism and the equity premium

This paper evaluates whether the spirit of capitalism can explain the equity premium puzzle. The spirit of capitalism implies that investors acquire wealth not just for consumption, but also to improve their social status. We set up a consumption-based capital asset pricing model incorporating this component. The simulated results from our calibrated model match the mean and the volatility of the equity premium observed in the data. 


Revisiting the risk-return relation in the Chinese stock market: Decomposition of risk premium and volatility feedback effect

The empirical results of the risk-return relationship are mixed for both mature and merging markets. In this paper, we develop a new volatility model to revisit the risk-return relation of the aggregate stock market index by extending the Realized GARCH model of Hansen et al. (2012) with the Wang and Yang (2013) framework, in which the overall risk-return relation is decomposed into a risk premium and a volatility feedback effect.


Who will be affected by a congestion pricing scheme in Beijing

Equity concerns have been an important obstacle to adopting congestion pricing, in both developed and developing countries. However, the existing evidence on the equity effects of congestion pricing has come only from developed countries. In this paper, we shed light on the distributional consequences of a congestion pricing scheme currently under consideration in Beijing. We find that under this scheme, which covers the areas within the city's third ring road, a very small proportion of motorized trips would be subject to the full congestion charge.


Modeling long memory volatility using realized measures of volatility: A realized HAR GARCH model

Long memory is an important feature of the volatility of financial returns. We document that the recently developed Realized GARCH model (Hansen et al., 2012) is insufficient for capturing the long memory of underlying volatility. We develop a parsimonious variant of the Realized GARCH model by introducing the HAR specification of Corsi (2009) into the volatility dynamics. A comparison of the theoretical and sample autocorrelation functions shows that the new model specification better captures the long memory dynamics of volatility.


China's personal credit reporting system in the internet finance era: challenges and opportunities

The credit reporting system plays an important role in a credit economy, alleviating information asymmetry and reducing transaction costs. This article reviews the historical developments and describes the current structure of China’s government-oriented personal credit reporting system. The article summarizes the rapid development of Internet finance since 2013, and analyzes the challenges and opportunities for the next generation of China's personal credit reporting system.


Exponential GARCH modeling with realized measures of volatility

We introduce the realized exponential GARCH model that can use multiple realized volatility measures for the modeling of a return series. The model specifies the dynamic properties of both returns and realized measures, and is characterized by a flexible modeling of the dependence between returns and volatility. We apply the model to 27 stocks and an exchange traded fund that tracks the S&P 500 index and find specifications with multiple realized measures that dominate those that rely on a single realized measure.


Impacts of weather variations on rice yields in China based on province-level data

Using province-level yield data and daily weather data from 1980 to 2012, we investigated the responses of early rice, middle-season rice, and late rice yields to weather variations in China. In contrast to prior studies that found negative impacts of elevated daily minimum temperature (Tmin) on rice yield in tropical and subtropical regions, we discovered that rising Tmin increased early and late rice yields in China, with the positive temperature effects varying by rice-growth stage.


Supply of cellulosic biomass in Illinois and implications for the Conservation Reserve Program

We developed a mathematical programming model to estimate the supply of cellulosic biomass in Illinois at various biomass prices and examine the implications of biomass production for the maintenance costs of the Conservation Reserve Program (CRP). We find that Illinois has the potential to produce about 38.4–54.5 million dry metric tons (MT) of biomass in 2020 at a biomass price of $150/MT, depending on the production costs of cellulosic feedstocks, residue collection technology, and rates of yield increases of conventional crops.


Economic potential of biomass supply from crop residues in China

Using a mathematical programming model, we estimate the economic potential of biomass supply from crop residues in China at various exogenously-given biomass prices and identify the areas that are likely to produce crop residues. Our analysis indicates that China can potentially produce about 174.4–248.6 million dry metric tons of crop residues per year when biomass prices are larger than $100 per metric ton. Rice straw is expected to account for about 47% of total residue production across the different biomass prices and residue production scenarios that we considered.


Endogenous borrowing constraints and wealth inequality

This paper studies the evolution of wealth inequality in an economy with endogenous borrowing constraints. In the model economy, young agents need to borrow to finance human capital investments but cannot commit to repaying their loans. Creditors can punish defaulters by banishing them permanently from the credit market. At equilibrium, loan default is prevented by imposing a borrowing limit tied to the borrower's inheritance.