Date: 26.01.2015 
Time: 5:00 pm
Location: D4.0.144 (30 seats) (Map), Welthandelsplatz 1, Building D4, 1020 Vienna

Dear fellow researchers, students and visitors!

You are cordially invited to a research talk by Dr. Leopold Sögner [Institute for Advanced Studies (IHS), Vienna, Austria].

Parameter Estimation and Inference with Spatial Lags and Cointegration

Abstract. This article studies dynamic panel data models where the long run outcome for a particular cross-section is affected by a weighted average of the outcomes in the other cross-sections. We show that imposing such a structure implies a model with several cointegrating relationships that, unlike in the standard case, are nonlinear in the coefficients to be estimated. Assuming that the weights are exogenously given, we extend the dynamic ordinary least squares methodology and provide a dynamic two-stage least squares estimator. We derive the large sample properties of our proposed estimator under a set of low-level assumptions and investigate its small sample distribution in a simulation study. Then our methodology is applied to US financial market data, which consist of credit default swap spreads, firm specific and industry data. We construct the economic space using a “closeness" measure for firms based on input-output matrices. This measure reflects the spreading or contagion of credit risk through the supply chain. Our estimates show that this particular form of spatial correlation of credit default spreads is substantial and highly significant.

Biographical Sketch – Leopold Sögner is research economist in the Department of Economics and Finance at the Institute for Advanced Studies (IHS) in Vienna. Leopold Sögner obtained his Mag.rer.soc.oec. and Dr. rer.soc.oec. from Vienna University of Economics and Business Administration and joined IHS in 2008. He has been acting as Director of Graduate Studies since June 2013. Since 2009 he is faculty member at the Vienna Graduate School of Finance. Leopold's research interests are quantitative finance and applied econometrics. He has (co)-authored several refereed journal articles. For a full list of his publications see his personal web site.

Selected publications:

“Bayesian Estimation of the Heston Stochastic Volatility Model”, with S. Frühwirth-Schnatter, Communications in Dependability and Quality Management, 4/2008, Vol. 11/4, 5-25.

''Bayesian estimation of stochastic volatility models based on OU processes with marginal Gamma law'', with S. Frühwirth-Schnatter, Annals of the Institute of Statistical Mathematics, 2009, Vol. 61/1, 159-179.

''The Risk Microstructure of Corporate Bonds: A Case Study from the German Corporate Bond Market'', with M. Frühwirth and P. Schneider, European Financial Management, 2010, Vol. 16/4, 658-685.

 ''The Economic Role of Jumps and Recovery Rates in the Market for Corporate Default Risk'', with Paul Schneider and Tanja Veza, Journal of Financial and Quantitative Analysis, 2010, Vol. 45, 1517-1547.