Choosing the right options trading strategy: Risk-return trade-off and performance in different market conditions

The main goal of the article is to analyze the role and influence of economic freedom on macroeconomic stability. For this purpose, the authors used the integrated index of economic freedom, calculated by the Heritage Foundation and Democracy Index. It is noted that this index indicator was calculated by the experts from the World Bank using the index of voice and accountability. In the paper, the authors used the multinational panel dataset for 11 countries of the EU for the purpose of checking the correlation between economic freedom, democracy and macroeconomic stability. It should be highlighted that the abovementioned 11 countries are related by the fluctuation of economic growth during the transformation process (1996–2016) from communist party to the democracy and political pluralism. In addition, the authors proposed to add the indicators of political stability and trade openness, which allowed to take into account implementation of flexible macroeconomic instruments, including monetary policy, which towards increasing the economic growth, employment and financial development of the countries. The findings are directed received using the regression equation with fixed and random effects showed the high level of correspondence of the model used with the original observations. Despite the chosen approach to estimate the macroeconomic stability, the findings showed that there is a positive and statistically significant impact of economic freedom and democracy on macroeconomic stability.

This paper investigates the causal relationship between natural disasters (DMS), information and communication technologies (ICT), foreign direct investment (FDI) and economic growth (GDP per capita) for 10 developed countries over the period 1990 to 2016. Panel DOLS and FMOLS results show that there is a positive relationship running from ICT to natural disasters and to foreign direct investment. In addition, ICT have a positive effect on GDP per capita. VECM Granger causality analysis results reveal a unidirectional causality in the short and long term from ICT to natural disaster and to FDI at the 5% and 10% levels. Therefore, one may note that there is a unidirectional relationship running from natural disaster to GDP and a bidirectional relationship between FDI and GDP.

This paper sheds light on the relationship between the Nasdaq Composite Index and a newly proposed Energy Futures Conditions Index (EFCI). While various financial conditions indices provide information about the financial stability of a country, the existence of an energy condition index, using futures markets, is scarce. Using weekly data over the period 1992–2017, this paper introduces an energy futures index using principal component analysis and test its predictability over the Nasdaq Composite Index. The EFCI captures 95% of the variability inherent in crude oil, heating oil and natural gas futures’ total reportable positions. Stability in forecast errors over different lags suggests a one week lag is sufficient to forecast weekly Nasdaq Composite Index. 95% prediction levels support that the estimated model captures actual equity market index values, except for the 2000 technology bubble. Distributions of level data were non-normal, not serially correlated and homoscedastic under the whole sample period, with diagnostics on pre and post technology bubble crisis showing mixed results. While differencing ensured homoscedastic errors in the forecasting model, Granger causality supported non-causality from both energy futures and equity markets, suggesting no evidence of cross market information flows.