Exchange Rate Uncertainty and International Portfolio Flows
|
|
- Diane Skinner
- 8 years ago
- Views:
Transcription
1 196 Dscusson Papers Deutsches Insttut für Wrtschaftsforschung 13 Exchange Rate Uncertanty and Internatonal Portfolo Flows Guglelmo Mara Caporale, Faek Menla Al and Ncola Spagnolo
2 Opnons expressed n ths paper are those of the author(s) and do not necessarly reflect vews of the nsttute. IMPRESSUM DIW Berln, 13 DIW Berln German Insttute for Economc Research Mohrenstr Berln Tel. +49 (3) Fax +49 (3) ISSN prnt edton ISSN electronc edton Papers can be downloaded free of charge from the DIW Berln webste: Dscusson Papers of DIW Berln are ndexed n RePEc and SSRN:
3 Exchange Rate Uncertanty and Internatonal Portfolo Flows Guglelmo Mara Caporale a,b,c, Faek Menla Al a and Ncola Spagnolo a,d a Department of Economcs and Fnance, Brunel Unversty, London, UK b CESfo, Munch, Germany c DIW Berln, Germany d Centre for Appled Macroeconomc Analyss (CAMA), Canberra, Australa Aprl 13 Abstract Ths paper examnes the mpact of exchange rate uncertanty on dfferent components of portfolo flows, namely equty and bond flows, as well as the dynamc lnkages between exchange rate volatlty and the varablty of these two types of flows. Specfcally, a bvarate GARCH-BEKK-n-mean model s estmated usng blateral data for the US vs-à-vs Australa, the UK, Japan, Canada, the euro area, and Sweden over the perod 1988:1-11:1. The results ndcate that the effect of exchange rate uncertanty on equty flows s negatve n the euro area, the UK and Sweden, and postve n Australa, whlst t s negatve n all countres except Canada (where t s postve) n the case of bond flows. Under the assumpton of rsk averson, ths suggests that exchange rate uncertanty nduces a home bas and causes nvestors to reduce ther fnancng actvtes to maxmse returns and mnmse exposure to uncertanty. Furthermore, snce exchange rate volatlty and the varablty of flows are nterlnked, exchange rate or credt controls on these flows can be used to pursue economc and fnancal stablty. Keywords: Exchange rate uncertanty, Equty flows, Bond flows, Causalty-n-varance JEL Classfcaton: F31, F3, G15 Correspondng author. Emal: Guglelmo-Mara.Caporale@brunel.ac.uk
4
5 1. Introducton The macroeconomc effects of exchange rate uncertanty, especally on trade flows, have attracted consderable attenton snce the collapse of the Bretton Woods system n 1971 and the adopton of floatng exchange rates n March 1973, both n the theoretcal and emprcal lterature (see McKenze, 1999, for a comprehensve revew). By contrast, the mpact at the mcro level on equty and bond flows has yet to be nvestgated emprcally. In an nfluental study, Hau and Rey (6) develop an equlbrum framework n whch exchange rate returns, equty returns, and captal flows are jontly determned under ncomplete foregn exchange rsk tradng. Ther analyss s motvated by the recent mcrostructure approach to exchange rate determnaton whch has been shown to mprove remarkably the performance of exchange rate models, wth currency order flows explanng a substantal proporton of exchange rate changes (see, e.g., Evans and Lyons, ; 5; 8; Payne, 3; Rme et al., 1; Chnn and Moore, 11; and Duffuor et al., 1 among others). In addton, they argue that currency order flows and portfolo flows are ntmately related wthn the portfolo rebalancng framework snce they both reflect nvestors behavour. However, whle ther paper provdes a theoretcal framework for analysng the mplcatons of ncomplete foregn exchange rsk tradng for the correlaton structure of exchange rate changes and equty returns as well as net portfolo flows, t does 1
6 not nclude statstcal tests for the mpact of exchange rate uncertanty on portfolo flows across borders. The underlyng dea s that exchange rate volatlty ncreases transacton costs and reduces potental gans from nternatonal dversfcaton by makng the acquston of foregn securtes such as bonds and equtes more rsky, whch n turn affects negatvely portfolo flows across borders. Indeed, Eun and Resnck (1988) had prevously shown that exchange rate uncertanty s non-dversfable and has an adverse mpact on the performance of nternatonal portfolos. Ths fndng s also consstent wth the evdence presented n the study by Levch et al. (1999), who found, by surveyng 98 US nsttutonal nvestors, that foregn exchange rsk hedgng consttutes only 8% of total foregn equty nvestment. However, Eun and Resnck (1988) suggest that hedgng through forward exchange contracts and multcurrency dversfcaton are effectve ways to reduce exchange rate rsk. Glen and Joron (1993) and Eun and Resnck (1994) further provde evdence that hedgng n the forward exchange markets mproves the performance of dversfed portfolos of equtes and bonds. The present study makes a fourfold contrbuton to the exstng lterature. Frst, t analyses emprcally whether exchange rate uncertanty affects nternatonal portfolo flows and ther varablty. It s n fact the frst emprcal nvestgaton of ths knd, based on blateral monthly data for the US vs-à-vs sx developed economes, namely Australa,
7 Canada, the euro area, Japan, Sweden, and the UK over the perod 1988:1-11:1. Second, unlke Hau and Rey (6) who assume that the supply of bonds s nfntely elastc, thereby smplfyng the dynamcs of bond acqustons n ther model, we examne the mpact of exchange rate uncertanty on bond and equty flows (as well as ther varablty) n turn. In ths way, we are able to evaluate the mpact of uncertanty on the ndvdual components of portfolo flows across borders. Accordng to Hau and Rey (6), exchange rate uncertanty should affect equty, but not bond flows; we provde some relevant emprcal evdence on ths ssue. Thrd, exstng emprcal studes on the relatonshp between exchange rate changes and portfolo flows nvestgate short-run dynamc nteractons only wth lnear dependence technques (.e., frst moment analyss). For example, Brooks et al. (4) and Hau and Rey (6) use smple correlatons and regresson analyss for the US vs-à-vs the euro area and Japan, and 17 OECD countres respectvely; Sourouns (4), Chaban (9), and Kodong and Ojah (1) estmate VAR models for four developed countres (the UK, Japan, Germany, and Swtzerland), three ol-exportng countres (Canada, Australa, and New Zealand), and four Afrcan countres (Egypt, Morocco, Ngera, and South Afrca) vs-à-vs the US. Ther results are charactersed by sgnfcant devatons from normalty and condtonal heteroscedastcty,.e. volatlty clusterng or the so-called ARCH effects (see Engle, 198) that are not captured by ther setup. By contrast, we model frst and second 3
8 moments smultaneously to analyse the dynamc nteractons between exchange rate changes and portfolo flows, n ths way avodng the potental ptfalls of earler studes. Fourth, snce volatlty s a measure of the nformaton flow (see Ross, 1989), t s of paramount mportance to understand how the stochastc nformaton arrvals n the form of smple portfolo nvestment shfts n bonds and equtes are transmtted to the foregn exchange market, and vceversa. Our analyss sheds lght on ths mechansm and thus provdes mportant nformaton to polcy-makers and regulators to formulate approprate polces based on mposng or relaxng credt controls on these flows dependng on the state of the economy, wth the am of achevng economc and fnancal stablty. The remander of the paper s organsed as follows. Secton descrbes the data and reports some descrptve statstcs. Secton 3 outlnes the econometrc model. Secton 4 dscusses the emprcal results, and fnally Secton 5 concludes.. The econometrc model We employ a bvarate VAR-GARCH (1, 1) n the BEKK specfcaton (Engle and Kroner, 1995) allowng for n-mean effects n order to examne the mpact of exchange rate uncertanty on equty and bond flows as well as the dynamc lnkages n the frst and second moments of these varables over the perod 1988:1-11:1. Varous lags of exchange rate 4
9 volatlty affectng the condtonal mean of equty and bond flows are ncluded n the specfcaton to avod the potental ptfalls of models allowng only for contemporaneous nteractons. The economc nterpretaton s that t mght take some tme for the nvestors response to exchange rate volatlty to be ncorporated nto ther strateges. Therefore the condtonal mean equaton s specfed as follows: y t p 1 y t p 1 h t t 1 ; ; ; t 1, t, t (1) where =[,, E t and EF t (BF t ) ndcate respectvely exchange rate changes and net equty (bond) flows. =[,,,, h 11,t and h,t represent the condtonal varances of exchange rate changes and net flows dependng on whether equtes or bonds respectvely are consdered. The parameters, measure the response of exchange rate changes and net flows to ther own lags, whlst, represent the mean spllovers from exchange rate changes to net flows, and vceversa. If the parameter s sgnfcantly dfferent from zero, ths mples that exchange rate uncertanty affects equty flows and/or bond flows. The nnovatons vector s assumed to be normally dstrbuted ~, wth ts correspondng varance-covarance matrx gven by ; s the nformaton set 5
10 avalable at tme t-1. Lags are ncluded sequentally n Equ. (1) untl seral correlaton s removed by employng the Hoskng (1981) multvarate Q-statstcs on the standardsed resduals / for = 1,. Note that contegraton tests between exchange rates and net flows have not been carred out as the former appear to be I (1) n most cases, whlst both equty and bond flows follow I () processes 1 (see Fg. 1). Hence, an error correcton term s not ncluded n Equ. (1). Havng specfed the condtonal mean equaton, we then estmate the multvarate GARCH model n ts BEKK representaton, ths beng a straghtforward generalsaton of the unvarate GARCH model of Bollerlslev (1986). The BEKK specfcaton has advantages compared to other multvarate GARCH specfcatons such as the VEC-GARCH model of Bollerslev et al. (1988) because of ts quadratc forms ensurng that the condtonal covarance matrces n the system are postve defnte. Unlke the Dynamc Condtonal Correlaton model of Engle (), whch estmates the tme-varyng correlatons drectly, the BEKK specfcaton allows for tme-varyng correlatons and also for nteractons between the varances n a lead-lag framework. Furthermore, the curse of dmensonalty hghlghted by Caporn and McAleer (1) s not a serous ssue n the present case wth only two varables. The model can be represented as follows: 1 Ths s confrmed by a battery of unt root tests; the results are avalable from the authors on request. For a survey on multvarate GARCH models, see Bauwens et al. (6). 6
11 H CC A A BH B () t t 1 t 1 t 1 In matrx form, t can be specfed as: H H 11, t 1, t H H c C c 1, t 11 1, t u CC A u, t c a, A a , t 1 1 a a u 1 1, t 1 u, B 1, t 1 u u, t 1, t 1 b b 11 1 H A B H b b 1 11, t 1 1, t 1 H H 1, t 1, t 1 B (3) where C s constraned to be a lower trangular matrx and A and B are respectvely ARCH and GARCH parameter matrces. Equ. (3) shows that n the BEKK model each condtonal varance and covarance n H t s modelled as a functon of lagged condtonal varances and covarances, lagged squared nnovatons and the cross-product of the nnovatons. Volatlty s transmtted between exchange rate changes and net equty/bond flows through two channels represented by the off-dagonal parameters n the ARCH and GARCH matrces: a symmetrc shock, and the condtonal varance,. Volatlty transmsson from exchange rate changes to net equty/bond flows can be analysed by testng the null hypothess, and n the opposte drecton. Such causalty-n-varance tests wthn the multvarate GARCH-BEKK models have superor power to the cross correlaton functon 7
12 (CCF) two-step approach of Cheung and Ng (1996) (see Hafner and Hewartz, 8). Causalty-n-varance s tested usng the followng lkelhood rato test statstc: LR = (L r L ur ) x df (4) where L r and L ur ndcate the restrcted and unrestrcted log-lkelhood test statstc; LR follows the ch-squared dstrbuton wth degrees of freedom equal to the number of the restrcted coeffcents (df). Gven that, as stated earler, the nnovatons are assumed to be normally dstrbuted, the log lkelhood functon for such a model s gven by: Tn 1 L( ) ln( ) t t1 (lnh t H t 1 t ) t (5) where n s the number of equatons, two n our case; T s the number of observatons, whch s 87; and s a vector of unknown parameters to be computed. More specfcally, we use the Quas-Maxmum Lkelhood (QML) method of Bollerslev and Woolbrdge (199) to calculate the standard errors that are robust to devatons from normalty. 3 As a fnal check of the 3 We use the SIMPLEX free-dervatve method, whch s useful to mprove the ntal values, and then the BFGS standard algorthm to obtan the standard errors (see Engle and Kroner, 1995; Kearney and Patton, among others). Ths procedure was mplemented wth a convergence crteron of.1. 8
13 adequacy of the estmated model we employ the Hoskng (1981) multvarate Q-statstc for the standardsed squared resduals to evaluate whether or not the ARCH and GARCH dynamcs have been approprately captured n the condtonal varance equaton, Equ. (3). 3. Data descrpton We examne the mpact of exchange rate uncertanty on dfferent components of portfolo flows, namely equty and bond flows, as well as the dynamc lnkages between these flows and exchange rate changes for the US vs-à-vs the UK, Japan, Canada, Australa, Sweden, and the euro area. Throughout, the US s consdered the domestc or home economy. Snce the data on portfolo nvestment flows, obtaned from the US Treasury Internatonal Captal (TIC) System, 4 are sampled at a monthly frequency, we employ monthly data from 1988:1 to 11:1 for all seres. The reason for selectng ths start date s that portfolo flows for the perod precedng 1988 are known to be nsgnfcant (see Brooks et al., 4). Net equty (bond) flows are calculated as equty (bond) nflows mnus outflows. Whle nflows are measured as net purchases and sales of domestc (US) assets (equtes and bonds) by foregn resdents, outflows are measured as net purchases and sales of foregn assets (equtes and bonds) by domestc resdents (US). Wth regard to the euro area, we aggregate the data for the 4 They are retreved from the US Treasury Department webste 9
14 ndvdual EMU countres (Austra, Belgum-Luxemburg, Fnland, France, Germany, Ireland, Italy, the Netherlands, Portugal, Span) to extract cross-border bond and equty flows between the US and ths regon. Postve numbers mply net equty and bond nflows (n mllons of US dollars) towards the US or outflows from the counterpart countres. Followng Brennan and Cao (1997), Hau and Rey (6), and Chaban (9) among others, we normalse these flows usng the average of ther absolute values over the prevous 1 months, snce wthout scalng model convergence s dffcult to acheve. The exchange rates are end of perod data, defned as US dollars per unt of foregn currency; the source s the IMF s Internatonal Fnancal Statstcs (IFS). Exchange rate changes are calculated as 1, /, where P E,t represents the log of the exchange rate at tme t. For the perod precedng the ncepton of the euro,.e. before 1999, we use US dollar per ECU as the euro area s exchange rate. Descrptve statstcs are dsplayed n Table 1. The mean of monthly exchange rate changes s postve (US dollar deprecaton) for Japan and Canada, and negatve (US dollar apprecaton) for the rest of the countres. On the other hand, the monthly mean of net equty flows s postve for Sweden and Canada and negatve for the remanng countres, ndcatng equty nflows from Sweden and Canada towards the US and outflows from the US towards the other countres. The monthly mean of net bond flows s negatve for Australa and postve 1
15 for the other countres. Ths ndcates the exstence of bond nflows from all countres except Australa (for whch there s evdence of bond outflows) vs-à-vs the US. Exchange rate changes are found to exhbt hgher volatlty than the two flows. Furthermore, equty flows appear to be charactersed by hgher volatlty than bond flows (although ther volume s very small). As for the thrd and fourth moments, exchange rate changes, net equty flows, and net bond flows all exhbt skewness and excess kurtoss n most cases. The Jarque-Bera (JB) test statstcs mply a rejecton at the 1% level of the null hypothess that exchange rate changes and the two flows are normally dstrbuted n all countres n queston. [Insert Table 1 about here] Fg. 1 shows monthly exchange rate changes, net equty flows and net bond flows for all countres over the perod under nvestgaton. Volatlty clusterng s clearly present n all cases, suggestng that an ARCH model mght be requred to capture t. The seres also appear to be covarance statonary. [Insert Fg. 1 about here] 4. Emprcal results 11
16 The mcrostructure approach s partcularly suted to analysng the relatonshp between bond and equty flows and exchange rate changes. The objectve of our analyss s to establsh whether exchange rate uncertanty affects equty and bond flows across borders, and also whether there s a volatlty transmsson (hence nformaton flows) between these flows and exchange rate changes and, f so, n what drecton causalty runs. The QML estmates of the bvarate GARCH (1, 1) BEKK parameters as well as the assocated multvarate Q-statstcs (Hoskng, 1981) are dsplayed n Tables 7 for Australa, Canada, the euro area, Japan, Sweden, and the UK, respectvely. Panel A and B n each Table concern the bvarate regresson of exchange rate changes aganst equty and bond flows respectvely. The Hoskng multvarate Q-statstcs of order (6) and (1) for the standardsed resduals n the exchange rate changes-equty flows equaton ndcate the exstence of no seral correlaton at the 5% level, when the condtonal mean equatons are specfed wth p=1 for Japan, p= for Sweden and p=3 for the other countres (the nsgnfcant parameters n the mean equatons have been dropped). Wth regard to the exchange rate changes-bond flows relatonshp, whlst no dynamc terms appear to be necessary for Sweden, settng p=1 for the UK, p= for the euro area, p=3 for Australa and Canada and p=5 for Japan s requred to capture adequately the dynamc structure n these cases. [Insert Tables -7 about here] 1
17 As can be seen from the Tables, the dynamc nteractons between exchange rate changes and net equty and bond flows, captured by and, suggest that there exst lmted dynamc lnkages between the frst moments compared to the second ones. The results n the mean equaton ndcate the exstence of mean spllovers between exchange rate changes and net bond flows n Japan, from bond flows to exchange rate changes n Canada and the UK, and from equty flows to exchange rate changes n the euro area. Wth regard to the mpact of exchange rate uncertanty on equty flows, the results suggest that exchange rate volatlty affects equty flows negatvely n the euro area, Sweden, and the UK, and postvely n Australa, and has no effect n Canada and Japan. Its mpact on bond flows, on the other hand, appears to be negatve n all countres except Canada for whch t s postve. The observed negatve mpact on equty as well as bond flows has mportant mplcatons. Frst, t ndcates that rsk averse market partcpants respond to exchange rate uncertanty by reducng ther fnancng actvtes, hence favourng domestc rather than foregn securtes n ther portfolos to reduce ther exposure to exchange rate volatlty. Second, n contrast to Hau and Rey (6) who assume that bonds are usually hedged nstruments not affected by exchange rate uncertanty, t appears that uncertanty n fact affects bond as well as equty flows, and the former more wdely, snce a negatve mpact s found n fve of the sx countres consdered. Ths s consstent wth the results of Fdora et al. 13
18 (7), who found n a wde set of ndustralsed and emergng economes that exchange rate volatlty s an mportant factor for blateral portfolo home bas, ths beng hgher for bonds than for equtes. Ther ratonalsaton of the hgher home bas for bonds compared to equtes s that t s consstent wth Markowtz-type nternatonal CAPM specfcatons n whch less volatle fnancal assets should show larger home bas. The estmates of the condtonal varance equatons ndcate that exchange rate changes (net equty/bond flows) exhbt condtonal heteroscedastcty: the dagonal elements of the ARCH matrces are sgnfcant at the 1% level n all cases except for equty flows n Australa and bond flows n Australa, Sweden, and the UK. Furthermore, the condtonal varances exhbt persstence n all cases except for equty flows n Canada. Whle the persstence of the condtonal varance of exchange rate changes ranges from.54 (Japan) to.98 (euro area), the persstence of the correspondng flows ranges from.38 (Sweden) to.91 (euro area) for net equty flows and from.43 (Japan) to.98 (Canada) for net bond flows. The ARCH, 11, and GARCH, 11, estmates for exchange rate changes n the bvarate GARCH BEKK models are rather smlar, regardless of whether the relatonshp wth bond or equty flows s consdered (see Panels A and B respectvely n all Tables). More specfcally, the change n 11 s less than 1% and ths also apples to 11, except for Japan where the change s around 6%. Furthermore, the off-dagonal elements of the ARCH and 14
19 GARCH matrces ndcate that shocks to exchange rate changes (net equty flows) affect the condtonal varance of net equty flows (exchange rate changes) at the 1% level n the euro area and Japan. The results also show that shocks to exchange rate changes (net bond flows) affect the condtonal varance of net bond flows (exchange rate changes) at the 1% level n all cases except Japan. More specfcally, the causalty-n-varance (.e., the nformaton flow) tests based on lkelhood rato test statstcs provde evdence of strong causalty-n-varance from equty flows to exchange rate changes n the case of the euro area and bdrectonal causalty-nvarance n the case of Japan. There s also causalty-n-varance from bond flows to exchange rate changes n Australa, the euro area, and Sweden, as well as bdrectonal causalty n Canada and the UK. A possble explanaton for the exstence of stronger dynamc lnkages between exchange rate changes and bond flows rather than equty flows s that foregn exchange dealers usually follow bond yelds n ther tradng behavour, wth such yelds, n turn, drvng cross-border bond acqustons, whch results n volatle exchange rates. Spllovers from the exchange rates may also be due to the fact that nvestors adjust ther portfolos on the bass of ther volatlty. Also, the lmted lnkage between exchange rate changes and bond flows n Japan can be explaned by the fact that a hgh percentage of Japanese debt s fnanced nternally, prmarly by Japanese penson funds, hence blateral 15
20 bond flows between the US and Japan have no mpact on exchange rate volatlty, and vceversa. Fnally, the Hoskng multvarate Q-statstcs of order (6) and (1) for the squared standardsed resduals suggest that the multvarate GARCH (1, 1) structure s suffcent to capture the volatlty n the seres. 5. Conclusons In ths paper, we have analysed the mpact of exchange rate uncertanty on bond and equty flows, as well as the dynamc lnkages between exchange rate volatlty and the varablty of these flows, usng data for the US vs-à-vs sx advanced economes, namely Australa, the UK, Canada, Japan, Sweden, and the euro area over the perod 1988:1-11:1. Estmatng bvarate GARCH BEKK n mean models, we fnd evdence that exchange rate volatlty mpacts on equty flows negatvely n the euro area, Sweden, and the UK and postvely n Australa. Furthermore, n contrast to Hau and Rey (6), t also affects bond flows negatvely n all countres except Canada where the effect s postve. The general concluson that can be drawn from these results s that exchange rate volatlty nduces rsk averse nvestors to reduce ther fnancng actvtes and to favour domestc to foregn assets n ther portfolos n order to mnmse ther exposure to volatlty. 16
21 The causalty-n-varance analyss suggests the exstence of strong spllovers from equty flows to exchange rate changes n the euro area and bdrectonal causalty-n-varance n Japan. As for the lnkages between exchange rate changes and bond flows, causalty-nvarance from bond flows to exchange rate changes s found for Australa, the euro area, and Sweden, and bdrectonal causalty for Canada and the UK. These fndngs have mportant polcy mplcatons, snce they suggest that polcy-makers and economc and fnancal regulators could use exchange rate or credt controls on equty as well as bond flows as nstruments to acheve economc and fnancal stablty. 17
22 References, R.F. and K.F. Kroner Bauwens, L., Laurent, S., Rombouts, J.V.K., 6. Multvarate GARCH models: a survey. Journal of Appled Econometrcs 1, Bollerslev, T., Generalzed autoregressve condtonal heteroskedastcty. Journal of Econometrcs 31, Bollerslev, T.P, Engle, R.F., Wooldrdge, J.M., A captal asset prcng model wth tme varyng covarances. Journal of Poltcal Economy 96, Bollerslev, T.P., Wooldrdge, J.M., 199. Quas-maxmum lkelhood estmaton and nference n dynamc models wth tme-varyng covarances. Econometrc Revew 11, Brennan, M.J., Cao, H.H., Internatonal portfolo nvestment flows. Journal of Fnance 5, Brooks, R., Edson, H., Kumar, M.S., Sløk, T., 4. Exchange rates and captal flows. European Fnancal Management 1, Caporn, M., McAleer, M., 1. Do we really need both BEKK and DCC? A tale of two multvarate GARCH models. Journal of Economc Surveys 6, Chaban, M., 9. Commodty currences and equty flows. Journal of Internatonal Money and Fnance 8,
23 Cheung,Y.W., Ng, L.K., A causalty n varance test and ts applcaton to fnancal market prces. Journal of Econometrcs 7, Chnn, M.D., Moore, M., 11. Order flow and the monetary model of exchange rates: evdence from a novel data set. Journal of Money, Credt and Bankng 43, Duffuor, K., Marsh, I.W., Phylakts, K., 1. Order flow and exchange rate dynamcs: an applcaton to emergng markets. Internatonal Journal of Fnance and Economcs 17, Engle, R.F., 198. Autoregressve condtonal heteroskedastcty wth estmates of the varance of U.K. nflaton. Econometrca 5, Engle, R.F.,. Dynamc Condtonal Correlaton- a smple class of multvarate GARCH models. Journal of Busness and Economc Statstcs, Engle, R.F., Kroner, K.F., Multvarate smultaneous generalzed ARCH. Econometrc Theory 11, Eun, C.S., Resnck, B.G., Exchange rate uncertanty, forward contracts, and nternatonal portfolo selecton. The Journal of Fnance 43, Eun, C.S., Resnck, B.G., Internatonal dversfcaton of portfolo nvestment: U.S. and Japanese perspectves. Management Scence 4, Evans, M., Lyons, R.K.,. Order flow and exchange rate dynamcs. Journal of Poltcal Economy 11,
24 Evans, M., Lyons, R.K., 5. Meese-Rogoff redux: mcro-based exchange rate forecastng. Amercan Economc Revew Papers and Proceedngs, Evans, M., Lyons, R.K., 8. How s macro news transmtted to exchange rates? Journal of Fnancal Economcs 88, 6-5. Fdora, M., Fratzscher, M., Thmann, C., 7. Home bas n global bond and equty markets: the role of real exchange rate volatlty. Journal of Internatonal Money and Fnance 6, Glen, J., Joron, P., Currency hedgng for nternatonal portfolos. The Journal of Fnance 48, Hafner, C.M., Herwartz, H., 8. Testng for causalty n varance usng multvarate GARCH models. Annals of Economcs and Statstcs 89, Hau, H., Rey, H., 6. Exchange rates, equty prces, and captal flows. The Revew of Fnancal Studes 19, Hoskng, J.R.M., Equvalent forms of the multvarate portmanteau statstc. Journal of the Royal Statstcal Socety 43, Kearney, C., Patton, A.J.,. Multvarate GARCH modelng of exchange rate volatlty transmsson n the European Monetary System. Fnancal Revew 35, 9-48.
25 Kodongo, O., Ojah, K., 1. The dynamc relaton between foregn exchange rates and nternatonal portfolo flows: evdence from Afrca s captal markets. Internatonal Revew of Economcs and Fnance 4, Levch, R.M., Hayt, G.S., Rpston, B.A., survey of dervatve and rsk management practces by U.S. nsttutonal nvestors, Survey conducted by the NYU Salomon Center, CIBC World Markets, and KPMG, avalable at McKenze, M.D., The mpact of exchange rate volatlty on nternatonal trade flows. Journal of Economc Surveys 13, Payne, R., 3. Informed trade n spot foregn exchange markets: an emprcal nvestgaton. Journal of Internatonal Economcs 61, Rme, D., Sarno, L., Sojl, E., 1. Exchange rate forecastng, order flow and macroeconomc nformaton. Journal of Internatonal Economcs 8, Ross, S.A., Informaton and volatlty: the no-arbtrage martngale approach to tmng and resoluton rrelevancy. Journal of Fnance 44, Sourouns, G., 4. Captal flows and exchange rates: an emprcal analyss. Avalable at: 1
26 E-Australa 1 E-Canada 1 E- Euro area BF-Australa 5 BF-Canada 5. BF-Euro area EF-Australa EF-Canada 5 EF-Euro area E-Japan 1 E-Sweden 1 E-UK BF-Japan BF-Sweden 5 BF-UK EF-Japan.5 EF-Sweden EF-UK Fg. 1. Tme seres of exchange rate changes (E), net bond flows (BF), and net equty flows (EF) of the sx advanced economes over the perod 1988:1 11:1.
27 Table 1 Summary of descrptve statstcs for the normalzed net portfolo flows and exchange rate changes. Statstcs Varable Australa Canada Euro area Japan Sweden UK Mean E t EF t BF t St. Dev E t EF t BF t Skewness E t EF t BF t Ex. kurtoss E t EF t BF t JB E t EF t BF t Notes: E t, EF t, and BF t ndcate exchange rate changes, net equty flows, and net bond flows, respectvely; JB s the Jarque-Bera test for normalty. ndcate sgnfcance at the 1 % level. 3
28 Table The estmated bvarate GARCH BEKK n mean model for Australa. Panel A: Exchange rates (E t ) and equty flows (EF t ) Panel B: Exchange rates (E t ) and bond flows (BF t ) E t (=1) EF t (=) E t (=1) BF t (=) Condtonal Mean Equaton (.159), t (.79) 1, t3, t5 (.1).18 (.157).158 (.19).157, t3.19 (.49).11, t.6 (.6).14 (.7) Condtonal Varance Equaton c 1 c 1 b 1 b.496 (.496) c (.545) c.4 (1.76).363 (.87).133 (.41).9 (.37).6 (.785).7 1 (.58).5 (.311).14 b 1 (.39).47 b (.56) (.1).13 (.81).753 (.19).54 (.46).38 (.76).949 (.1).33 (.71).8 (1.148).11 (.3).76 (.15).1 (.4).849 Loglk Loglk Q (6) 7.654[.74] Q (6) 9.83[.981] Q (6) 1.73 [.979] Q (6) 6.41 [.4] Q (1) 49.47[.414] Q (1) 3.46[.95] Q (1) [.966] Q (1) [.319] Tests of No Volatlty Transmsson: () Bdrectonal between E t and EF t Tests of No Volatlty Transmsson: () Bdrectonal between E t and BF t H : 1 1 b 1 b 1 LR=1.748[.781] H : 1 1 b 1 b 1 LR=11.66 [.] () From E t to EF t () From E t to BF t H : 1 b 1 LR=.15[.939] H : 1 b 1 LR=.135 [.934] () From EF t to E t () From BF t to E t H : 1 b 1 LR=1.639[.44] H : 1 b 1 LR=1.37 [.5] Note: E t, EF t, and BF t ndcate exchange rate changes, net equty flows, and net bond flows, respectvely; whle LR ndcates lkelhood rato test statstcs. Heteroscedastcty-consstent standard errors are n parentheses (.), whereas p- values are reported n [.]. Q (p) and Q (p) are multvarate Hoskng (1981) tests for p th order seral correlaton on the standardzed resduals z t and ther squares z, respectvely where = 1 (for exchange rate changes (E t t )), (for net equty flows (EF t ) and net bond flows (BF t )). The covarance statonarty condton s satsfed by all the estmated models, all the egenvalues of (A 11 A 11 + B 11 B 11 ) beng less than one n modulus. ndcates statstcal sgnfcance at the 1% level. ndcates statstcal sgnfcance at the 5% level. ndcates statstcal sgnfcance at the 1% level. (.65) 4
29 Table 3 The estmated bvarate GARCH BEKK n mean model for Canada. Panel A: Exchange rates (E t ) and equty flows (EF t ) Panel B: Exchange rates (E t ) and bond flows (BF t ) E t (=1) EF t (=) E t (=1) BF t (=) Condtonal Mean Equaton (.97 ) (.81).16 (.99 ), t1 (.61), t3 (.53) (.84).49 1, t.136 (.67).143, t3.11,t Condtonal Varance Equaton c 1.6 c 1 c 1 b 1 b (.164) 1.7 (.4).38 (.5).1 (.97 ).91 (.34).74 (.158).1 (3.6 ).17 (.61) c 1.6 (.13).3 (.18).5 (.63 ).314 (.47).6 (.131) (.38 ) b (.18).97 (.13).4 b (.63)..4 (.13 ) (.7).7 (.1 ).7 (.31).19 (.36).17 (.8).989 Loglk Loglk Q (6) 16.1 [.88] Q (6) [.897] Q (6) [.96] Q (6) [.99] Q (1) 9.31 [.984] Q (1) 37.1 [.788] Q (1) [.968] Q (1) 3.7 [3.7] Tests of No Volatlty Transmsson: () Bdrectonal between E t and EF t Tests of No Volatlty Transmsson: () Bdrectonal between E t and BF t H : 1 1 b 1 b 1 LR=.11[.733] H : 1 1 b 1 b 1 LR=8.697 [.69] () From E t to EF t () From E t to BF t H : 1 b 1 LR=1.38[.538] H : 1 b 1 LR=8.116 [.17] () From EF t to E t () From BF t to E t H : 1 b 1 LR=.798[.67] H : 1 b 1 LR=7.77 [.] Note: See notes to Table. (.6) 5
30 Table 4 The estmated bvarate GARCH BEKK n mean model for the euro area. Panel A: Exchange rates (E t ) and equty flows (EF t ) Panel B: Exchange rates (E t ) and bond flows (BF t ) E t (=1) EF t (=) E t (=1) BF t (=) Condtonal Mean Equaton , t1 (.178 ) (.916).9, t1 (.11).3 (.194) (.74).14, t.314, t.171 (.58) (.59), t3.19, t.49 (.57) (.7),t. (.15) Condtonal Varance Equaton c 1 c 1 b 1 b.48 c 1 (.113) c.819 (.69).115 (.3).1 (.74 ).98 (.7).38 (.7 ).1 (.181).1 (.7 ) 1.38 (.73).3 (.7 ) b 1.91 b (.3).94 (.5 ).4 (.96).174 (.66).313 (.1).968 (.).134 (.49 ) (.58).5 (.56 ).1 (.7 ).159 (.67).18 (.8).936 Loglk Loglk Q (6).615 [.661] Q (6) [.64] Q (6) 18.9 [.788] Q (6) [.95] Q (1) [.645] Q (1) [.656] Q (1) 4.47 [.771] Q (1) [.66] Tests of No Volatlty Transmsson: () Bdrectonal between E t and EF t Tests of No Volatlty Transmsson: () Bdrectonal between E t and BF t H : 1 1 b 1 b 1 LR=9.35[.5] H : 1 1 b 1 b 1 LR=1.87 [.11] () From E t to EF t () From E t to BF t H : 1 b 1 LR=1.83[.41] H : 1 b 1 LR=3.86 [.13] () From EF t to E t () From BF t to E t H : 1 b 1 LR=7.86[.19] H : 1 b 1 LR=1.88 [.1] Note: See notes to Table. (.1) 6
31 Table 5 The estmated bvarate GARCH BEKK n mean model for Japan. Panel A: Exchange rates (E t ) and equty flows (EF t ) Panel B: Exchange rates (E t ) and bond flows (BF t ) E t (=1) EF t (=) E t (=1) BF t (=) Condtonal Mean Equaton , t1 (.19 ) (.8).1 1, t1.6), t1 (.46) Condtonal Varance Equaton c 1 c 1 b 1 b.53, 1 t, t 1, t3, t3 1, t4 1, t5,t.19 c 1 (.3).1. c (.66 ) (.156 ).356 (.98).357 (.315 ).54 (.13).64 (.349).31 (.3 ) 1.37 (.133).31 (.31) b (.81) b.86 (.11 ).77 (.6).65 (.).14 (.48).37 (.1) (.46).39 (.19).16 (.73).84 (.46).98 (.59).15 (.55).91 (.5) 1.6 (.14).43 (.196 ).65 (.73).59 (.343).799 (.3).41 (.65 ).37 (.1).11 (.49).743 (.89).47 (.3 ).58 (.9).14 (.38).439 Loglk Loglk Q (6) [.136] Q (6) [.776] Q (6) 3.66 [.484] Q (6) 1.51 [.94] Q (1) [.57] Q (1) [.97] Q (1) [.161] Q (1) [.971] Tests of No Volatlty Transmsson: () Bdrectonal between E t and EF t Tests of No Volatlty Transmsson: () Bdrectonal between E t and BF t H : 1 1 b 1 b 1 LR=16.95 [.1] H : 1 1 b 1 b 1 LR=5.8 [.1] () From E t to EF t () From E t to BF t H : 1 b 1 LR=1.55 [.5] H : 1 b 1 LR=1.457 [.48] () From EF t to E t () From BF t to E t H : 1 b 1 LR=9.661 [.7] H : 1 b 1 LR=4.14 [.16] Note: See notes to Table. (.84) 7
32 Table 6 The estmated bvarate GARCH BEKK n mean model for Sweden. Panel A: Exchange rates (E t ) and equty flows (EF t ) Panel B: Exchange rates (E t ) and bond flows (BF t ) E t (=1) EF t (=) E t (=1) BF t (=) Condtonal Mean Equaton , t1 (.179).45 (.196 ), t.137 (.69), t5.13 (.8) Condtonal Varance Equaton c 1 c 1 b 1 b.75, t (.59) 1.18 c (.81 ) (.757 ).5 (.94).47 (.55).74 (.79).68 (.38) c (.41).3 1 (.47).56 (.51).13 b 1 (.3).38 b (.185).66 (.165).8 (.4) (.38).881 (.17).4 (.93).433 (.97).79 (.83).445 (.13) (.13).1 (.38).17 (.41 ).116 (.16 ). (.3).88 Loglk Loglk Q (6) [.84] Q (6) 1.66 [.968] Q (6) 4.57 [.43] Q (6) [.76] Q (1) [.9] Q (1) 3.93 [.945] Q (1) [.797] Q (1) [.764] Tests of No Volatlty Transmsson: () Bdrectonal between E t and EF t Tests of No Volatlty Transmsson: () Bdrectonal between E t and BF t H : 1 1 b 1 b 1 LR=5.611 [.3] H : 1 1 b 1 b 1 LR= [.9] () From E t to EF t () From E t to BF t H : 1 b 1 LR=.6 [.73] H : 1 b 1 LR=.369 [.831] () From EF t to E t () From BF t to E t H : 1 b 1 LR=4.9 [.1] H : 1 b 1 LR=1.913 [.1] Note: See notes to Table. (.61) 8
33 Table 7 The estmated bvarate GARCH BEKK n mean model for the UK. Panel A: Exchange rates (E t ) and equty flows (EF t ) Panel B: Exchange rates (E t ) and bond flows (BF t ) E t (=1) EF t (=) E t (=1) BF t (=) Condtonal Mean Equaton (. ), t1 (.139), t (.51), t3.156 (.48), t3.8 (.17) Condtonal Varance Equaton c 1 c (.5) 1 (.7) b 1 b.186 1, t1 (.54).96,.659 c 1 (.146). c (.7 ) (.154).899 (.7).5 (.56).3 1 (.4) (.194) t.6 (.97) b 1.3 (.4).468 b (.3) (.185).34.5 (.5).9 (.16).173 (.41).65 (.139).39 (.67 ).968 (.38).34 (.88) (.19). (.63).7 (.4).1 (.36).66 (.9).9 Loglk Loglk Q (6) [.85] Q (6) [.989] Q (6) 1. [.637] Q (6) 7.45 [.157] Q (1) [.776] Q (1) 4.9 [.993] Q (1) [.837] Q (1) [.698] Tests of No Volatlty Transmsson: () Bdrectonal between E t and EF t Tests of No Volatlty Transmsson: () Bdrectonal between E t and BF t H : 1 1 b 1 b 1 LR=4.181 [.381] H : 1 1 b 1 b 1 LR=.154 [.] () From E t to EF t () From E t to BF t H : 1 b 1 LR=1.161 [.559] H : 1 b 1 LR= [.] () From EF t to E t () From BF t to E t H : 1 b 1 LR=.866 [.38] H : 1 b 1 LR=6.743 [.34] Note: See notes to Table. (.) 9
Can Auto Liability Insurance Purchases Signal Risk Attitude?
Internatonal Journal of Busness and Economcs, 2011, Vol. 10, No. 2, 159-164 Can Auto Lablty Insurance Purchases Sgnal Rsk Atttude? Chu-Shu L Department of Internatonal Busness, Asa Unversty, Tawan Sheng-Chang
More informationAn Alternative Way to Measure Private Equity Performance
An Alternatve Way to Measure Prvate Equty Performance Peter Todd Parlux Investment Technology LLC Summary Internal Rate of Return (IRR) s probably the most common way to measure the performance of prvate
More informationThe impact of hard discount control mechanism on the discount volatility of UK closed-end funds
Investment Management and Fnancal Innovatons, Volume 10, Issue 3, 2013 Ahmed F. Salhn (Egypt) The mpact of hard dscount control mechansm on the dscount volatlty of UK closed-end funds Abstract The mpact
More informationMacro Factors and Volatility of Treasury Bond Returns
Macro Factors and Volatlty of Treasury Bond Returns Jngzh Huang Department of Fnance Smeal Colleage of Busness Pennsylvana State Unversty Unversty Park, PA 16802, U.S.A. Le Lu School of Fnance Shangha
More informationThe Impact of Stock Index Futures Trading on Daily Returns Seasonality: A Multicountry Study
The Impact of Stock Index Futures Tradng on Daly Returns Seasonalty: A Multcountry Study Robert W. Faff a * and Mchael D. McKenze a Abstract In ths paper we nvestgate the potental mpact of the ntroducton
More informationPSYCHOLOGICAL RESEARCH (PYC 304-C) Lecture 12
14 The Ch-squared dstrbuton PSYCHOLOGICAL RESEARCH (PYC 304-C) Lecture 1 If a normal varable X, havng mean µ and varance σ, s standardsed, the new varable Z has a mean 0 and varance 1. When ths standardsed
More informationClay House Case Study and Comparison of Two Behemoths ofEC term
Drk Schoenmaker (Netherlands), Thjs Bosch (Netherlands) Is the home bas n equtes and bonds declnng n Europe? Abstract Fnance theory suggests that nvestors should hold an nternatonally dversfed portfolo.
More informationTourism and trade in OECD countries. A dynamic heterogeneous panel data analysis
Toursm and trade n OECD countres. A dynamc heterogeneous panel data analyss María Santana-Gallego a, Francsco Ledesma-Rodríguez a, Jorge V. Pérez-Rodríguez b* a Facultad de Cencas Económcas y Empresarales,
More informationHow To Calculate The Accountng Perod Of Nequalty
Inequalty and The Accountng Perod Quentn Wodon and Shlomo Ytzha World Ban and Hebrew Unversty September Abstract Income nequalty typcally declnes wth the length of tme taen nto account for measurement.
More informationWorld currency options market efficiency
Arful Hoque (Australa) World optons market effcency Abstract The World Currency Optons (WCO) maket began tradng n July 2007 on the Phladelpha Stock Exchange (PHLX) wth the new features. These optons are
More informationCourse outline. Financial Time Series Analysis. Overview. Data analysis. Predictive signal. Trading strategy
Fnancal Tme Seres Analyss Patrck McSharry patrck@mcsharry.net www.mcsharry.net Trnty Term 2014 Mathematcal Insttute Unversty of Oxford Course outlne 1. Data analyss, probablty, correlatons, vsualsaton
More informationHOUSEHOLDS DEBT BURDEN: AN ANALYSIS BASED ON MICROECONOMIC DATA*
HOUSEHOLDS DEBT BURDEN: AN ANALYSIS BASED ON MICROECONOMIC DATA* Luísa Farnha** 1. INTRODUCTION The rapd growth n Portuguese households ndebtedness n the past few years ncreased the concerns that debt
More informationAnalysis of Premium Liabilities for Australian Lines of Business
Summary of Analyss of Premum Labltes for Australan Lnes of Busness Emly Tao Honours Research Paper, The Unversty of Melbourne Emly Tao Acknowledgements I am grateful to the Australan Prudental Regulaton
More informationTHE DETERMINANTS OF THE TUNISIAN BANKING INDUSTRY PROFITABILITY: PANEL EVIDENCE
THE DETERMINANTS OF THE TUNISIAN BANKING INDUSTRY PROFITABILITY: PANEL EVIDENCE Samy Ben Naceur ERF Research Fellow Department of Fnance Unversté Lbre de Tuns Avenue Khéreddne Pacha, 002 Tuns Emal : sbennaceur@eudoramal.com
More informationTHE IMPLIED VOLATILITY OF ETF AND INDEX OPTIONS
The Internatonal Journal of Busness and Fnance Research Volume 5 Number 4 2011 THE IMPLIED VOLATILITY OF ETF AND INDEX OPTIONS Stoyu I. Ivanov, San Jose State Unversty Jeff Whtworth, Unversty of Houston-Clear
More informationTransition Matrix Models of Consumer Credit Ratings
Transton Matrx Models of Consumer Credt Ratngs Abstract Although the corporate credt rsk lterature has many studes modellng the change n the credt rsk of corporate bonds over tme, there s far less analyss
More informationManagement Quality and Equity Issue Characteristics: A Comparison of SEOs and IPOs
Management Qualty and Equty Issue Characterstcs: A Comparson of SEOs and IPOs Thomas J. Chemmanur * Imants Paegls ** and Karen Smonyan *** Current verson: November 2009 (Accepted, Fnancal Management, February
More informationThe Choice of Direct Dealing or Electronic Brokerage in Foreign Exchange Trading
The Choce of Drect Dealng or Electronc Brokerage n Foregn Exchange Tradng Mchael Melvn & Ln Wen Arzona State Unversty Introducton Electronc Brokerage n Foregn Exchange Start from a base of zero n 1992
More informationIIIS Dscusson & World Market Niche
IIIS Dscusson Paper No.136/Aprl 2006 Integraton Of Smaller European Equty Markets : A Tme-Varyng Integraton Score Analyss Gregory Brg School of Busness Studes and Insttute for Internatonal Integraton,
More informationThe DAX and the Dollar: The Economic Exchange Rate Exposure of German Corporations
The DAX and the Dollar: The Economc Exchange Rate Exposure of German Corporatons Martn Glaum *, Marko Brunner **, Holger Hmmel *** Ths paper examnes the economc exposure of German corporatons to changes
More informationCriminal Justice System on Crime *
On the Impact of the NSW Crmnal Justce System on Crme * Dr Vasls Sarafds, Dscplne of Operatons Management and Econometrcs Unversty of Sydney * Ths presentaton s based on jont work wth Rchard Kelaher 1
More information! # %& ( ) +,../ 0 1 2 3 4 0 4 # 5##&.6 7% 8 # 0 4 2 #...
! # %& ( ) +,../ 0 1 2 3 4 0 4 # 5##&.6 7% 8 # 0 4 2 #... 9 Sheffeld Economc Research Paper Seres SERP Number: 2011010 ISSN 1749-8368 Sarah Brown, Aurora Ortz-Núñez and Karl Taylor Educatonal loans and
More informationDO LOSS FIRMS MANAGE EARNINGS AROUND SEASONED EQUITY OFFERINGS?
DO LOSS FIRMS MANAGE EARNINGS AROUND SEASONED EQUITY OFFERINGS? Fernando Comran, Unversty of San Francsco, School of Management, 2130 Fulton Street, CA 94117, Unted States, fcomran@usfca.edu Tatana Fedyk,
More informationThe Probability of Informed Trading and the Performance of Stock in an Order-Driven Market
Asa-Pacfc Journal of Fnancal Studes (2007) v36 n6 pp871-896 The Probablty of Informed Tradng and the Performance of Stock n an Order-Drven Market Ta Ma * Natonal Sun Yat-Sen Unversty, Tawan Mng-hua Hseh
More informationExhaustive Regression. An Exploration of Regression-Based Data Mining Techniques Using Super Computation
Exhaustve Regresson An Exploraton of Regresson-Based Data Mnng Technques Usng Super Computaton Antony Daves, Ph.D. Assocate Professor of Economcs Duquesne Unversty Pttsburgh, PA 58 Research Fellow The
More informationbenefit is 2, paid if the policyholder dies within the year, and probability of death within the year is ).
REVIEW OF RISK MANAGEMENT CONCEPTS LOSS DISTRIBUTIONS AND INSURANCE Loss and nsurance: When someone s subject to the rsk of ncurrng a fnancal loss, the loss s generally modeled usng a random varable or
More informationRisk-Adjusted Performance: A two-model Approach Application in Amman Stock Exchange
Internatonal Journal of Busness and Socal Scence Vol. 3 No. 7; Aprl 01 Rsk-Adjusted Performance: A two-model Approach Applcaton n Amman Stock Exchange Hussan Al Bekhet 1 Al Matar Abstract The purpose of
More informationPortfolio Loss Distribution
Portfolo Loss Dstrbuton Rsky assets n loan ortfolo hghly llqud assets hold-to-maturty n the bank s balance sheet Outstandngs The orton of the bank asset that has already been extended to borrowers. Commtment
More informationL10: Linear discriminants analysis
L0: Lnear dscrmnants analyss Lnear dscrmnant analyss, two classes Lnear dscrmnant analyss, C classes LDA vs. PCA Lmtatons of LDA Varants of LDA Other dmensonalty reducton methods CSCE 666 Pattern Analyss
More informationESTIMATING THE MARKET VALUE OF FRANKING CREDITS: EMPIRICAL EVIDENCE FROM AUSTRALIA
ESTIMATING THE MARKET VALUE OF FRANKING CREDITS: EMPIRICAL EVIDENCE FROM AUSTRALIA Duc Vo Beauden Gellard Stefan Mero Economc Regulaton Authorty 469 Wellngton Street, Perth, WA 6000, Australa Phone: (08)
More informationManagement Quality, Financial and Investment Policies, and. Asymmetric Information
Management Qualty, Fnancal and Investment Polces, and Asymmetrc Informaton Thomas J. Chemmanur * Imants Paegls ** and Karen Smonyan *** Current verson: December 2007 * Professor of Fnance, Carroll School
More informationStatistical Methods to Develop Rating Models
Statstcal Methods to Develop Ratng Models [Evelyn Hayden and Danel Porath, Österrechsche Natonalbank and Unversty of Appled Scences at Manz] Source: The Basel II Rsk Parameters Estmaton, Valdaton, and
More informationInternational Commodity Prices and the Australian Stock Market
Internatonal Commodty Prces and the Australan Stock Market Chrs Heaton, George Mlunovch and Anthony Passé-de Slva Abstract We propose a method for estmatng the earlest tme durng the tradng day when overnght
More informationNew evidence of the impact of dividend taxation and on the identity of the marginal investor
New evdence of the mpact of dvdend taxaton and on the dentty of the margnal nvestor LEONIE BELL AND TIM JENKINSON * * Economcs Department, Oxford Unversty and Saïd Busness School, Oxford Unversty and CEPR
More informationWORKING PAPER SERIES TAKING STOCK: MONETARY POLICY TRANSMISSION TO EQUITY MARKETS NO. 354 / MAY 2004. by Michael Ehrmann and Marcel Fratzscher
WORKING PAPER SERIES NO. 354 / MAY 2004 TAKING STOCK: MONETARY POLICY TRANSMISSION TO EQUITY MARKETS by Mchael Ehrmann and Marcel Fratzscher WORKING PAPER SERIES NO. 354 / MAY 2004 TAKING STOCK: MONETARY
More informationScale Dependence of Overconfidence in Stock Market Volatility Forecasts
Scale Dependence of Overconfdence n Stoc Maret Volatlty Forecasts Marus Glaser, Thomas Langer, Jens Reynders, Martn Weber* June 7, 007 Abstract In ths study, we analyze whether volatlty forecasts (judgmental
More informationTwo Faces of Intra-Industry Information Transfers: Evidence from Management Earnings and Revenue Forecasts
Two Faces of Intra-Industry Informaton Transfers: Evdence from Management Earnngs and Revenue Forecasts Yongtae Km Leavey School of Busness Santa Clara Unversty Santa Clara, CA 95053-0380 TEL: (408) 554-4667,
More informationForecasting the Direction and Strength of Stock Market Movement
Forecastng the Drecton and Strength of Stock Market Movement Jngwe Chen Mng Chen Nan Ye cjngwe@stanford.edu mchen5@stanford.edu nanye@stanford.edu Abstract - Stock market s one of the most complcated systems
More informationAnswer: A). There is a flatter IS curve in the high MPC economy. Original LM LM after increase in M. IS curve for low MPC economy
4.02 Quz Solutons Fall 2004 Multple-Choce Questons (30/00 ponts) Please, crcle the correct answer for each of the followng 0 multple-choce questons. For each queston, only one of the answers s correct.
More informationCausal, Explanatory Forecasting. Analysis. Regression Analysis. Simple Linear Regression. Which is Independent? Forecasting
Causal, Explanatory Forecastng Assumes cause-and-effect relatonshp between system nputs and ts output Forecastng wth Regresson Analyss Rchard S. Barr Inputs System Cause + Effect Relatonshp The job of
More informationThe Investor Recognition Hypothesis:
The Investor Recognton Hypothess: the New Zealand Penny Stocks Danel JP Cha, Department of Accountng and Fnance, onash Unversty, Clayton 3168, elbourne, Australa, and Danel FS Cho, Department of Fnance,
More informationFinancial Instability and Life Insurance Demand + Mahito Okura *
Fnancal Instablty and Lfe Insurance Demand + Mahto Okura * Norhro Kasuga ** Abstract Ths paper estmates prvate lfe nsurance and Kampo demand functons usng household-level data provded by the Postal Servces
More informationAn Evaluation of the Extended Logistic, Simple Logistic, and Gompertz Models for Forecasting Short Lifecycle Products and Services
An Evaluaton of the Extended Logstc, Smple Logstc, and Gompertz Models for Forecastng Short Lfecycle Products and Servces Charles V. Trappey a,1, Hsn-yng Wu b a Professor (Management Scence), Natonal Chao
More informationGender differences in revealed risk taking: evidence from mutual fund investors
Economcs Letters 76 (2002) 151 158 www.elsever.com/ locate/ econbase Gender dfferences n revealed rsk takng: evdence from mutual fund nvestors a b c, * Peggy D. Dwyer, James H. Glkeson, John A. Lst a Unversty
More informationA Simplified Framework for Return Accountability
Reprnted wth permsson from Fnancal Analysts Journal, May/June 1991. Copyrght 1991. Assocaton for Investment Management and Research, Charlottesvlle, VA. All rghts reserved. by Gary P. Brnson, Bran D. Snger
More informationBid/Ask Spread and Volatility in the Corporate Bond Market
Bd/Ask Spread and Volatlty n the Corporate Bond Market Madhu Kalmpall Faculty of Management McGll Unversty Arthur Warga Department of Fnance, College of Busness Unversty of Houston Correspondence to: Arthur
More informationThe Choice of Direct Dealing or Electronic Brokerage in Foreign Exchange Trading
The Choce of Drect Dealng or Electronc Brokerage n Foregn Exchange Tradng Mchael Melvn Arzona State Unversty & Ln Wen Unversty of Redlands MARKET PARTICIPANTS: Customers End-users Multnatonal frms Central
More informationThe Application of Fractional Brownian Motion in Option Pricing
Vol. 0, No. (05), pp. 73-8 http://dx.do.org/0.457/jmue.05.0..6 The Applcaton of Fractonal Brownan Moton n Opton Prcng Qng-xn Zhou School of Basc Scence,arbn Unversty of Commerce,arbn zhouqngxn98@6.com
More informationCahiers de la Chaire Santé
Cahers de la Chare Santé The nfluence of supplementary health nsurance on swtchng behavour: evdence from Swss data Auteurs : Brgtte Dormont, Perre-Yves Geoffard, Karne Lamraud N 4 - Janver 2010 1 The nfluence
More informationAn Analysis of the relationship between WTI term structure and oil market fundamentals in 2002-2009
MPRA Munch Personal RePEc Archve An Analyss of the relatonshp between WTI term structure and ol market fundamentals n 00-009 Mleno Cavalcante Petrobras S.A., Unversdade de Fortaleza. August 00 Onlne at
More informationCARDIFF BUSINESS SCHOOL WORKING PAPER SERIES
CARDIFF BUSINESS SCOO WORKING PAPER SERIES Cardff Economcs Workng Papers Woon K. Wong, Dun Tan and Yxang Tan Nonlnear ACD Model and Informed Tradng: Evdence from Shangha Stock Exchange E2008/8 Cardff Busness
More informationForecasting Irregularly Spaced UHF Financial Data: Realized Volatility vs UHF-GARCH Models
Forecastng Irregularly Spaced UHF Fnancal Data: Realzed Volatlty vs UHF-GARCH Models Franços-Érc Raccot *, LRSP Département des scences admnstratves, UQO Raymond Théoret Département Stratége des affares,
More informationPRIVATE SCHOOL CHOICE: THE EFFECTS OF RELIGIOUS AFFILIATION AND PARTICIPATION
PRIVATE SCHOOL CHOICE: THE EFFECTS OF RELIIOUS AFFILIATION AND PARTICIPATION Danny Cohen-Zada Department of Economcs, Ben-uron Unversty, Beer-Sheva 84105, Israel Wllam Sander Department of Economcs, DePaul
More informationKiel Institute for World Economics Duesternbrooker Weg 120 24105 Kiel (Germany) Kiel Working Paper No. 1120
Kel Insttute for World Economcs Duesternbrooker Weg 45 Kel (Germany) Kel Workng Paper No. Path Dependences n enture Captal Markets by Andrea Schertler July The responsblty for the contents of the workng
More informationThe announcement effect on mean and variance for underwritten and non-underwritten SEOs
The announcement effect on mean and varance for underwrtten and non-underwrtten SEOs Bachelor Essay n Fnancal Economcs Department of Economcs Sprng 013 Marcus Wkner and Joel Anehem Ulvenäs Supervsor: Professor
More informationReturns to Experience in Mozambique: A Nonparametric Regression Approach
Returns to Experence n Mozambque: A Nonparametrc Regresson Approach Joel Muzma Conference Paper nº 27 Conferênca Inaugural do IESE Desafos para a nvestgação socal e económca em Moçambque 19 de Setembro
More informationA Model of Private Equity Fund Compensation
A Model of Prvate Equty Fund Compensaton Wonho Wlson Cho Andrew Metrck Ayako Yasuda KAIST Yale School of Management Unversty of Calforna at Davs June 26, 2011 Abstract: Ths paper analyzes the economcs
More informationThe impact of bank capital requirements on bank risk: an econometric puzzle and a proposed solution
Banks and Bank Systems, Volume 4, Issue 1, 009 Robert L. Porter (USA) The mpact of bank captal requrements on bank rsk: an econometrc puzzle and a proposed soluton Abstract The relatonshp between bank
More informationSTAMP DUTY ON SHARES AND ITS EFFECT ON SHARE PRICES
STAMP UTY ON SHARES AN ITS EFFECT ON SHARE PRICES Steve Bond Mke Hawkns Alexander Klemm THE INSTITUTE FOR FISCAL STUIES WP04/11 STAMP UTY ON SHARES AN ITS EFFECT ON SHARE PRICES Steve Bond (IFS and Unversty
More informationInstitute of Informatics, Faculty of Business and Management, Brno University of Technology,Czech Republic
Lagrange Multplers as Quanttatve Indcators n Economcs Ivan Mezník Insttute of Informatcs, Faculty of Busness and Management, Brno Unversty of TechnologCzech Republc Abstract The quanttatve role of Lagrange
More informationThe timing ability of hybrid funds of funds
The tmng ablty of hybrd funds of funds Javer Rodríguez* Graduate School of Busness Admnstraton Unversty of Puerto Rco PO 23332 San Juan, PR 00931 Abstract Hybrd mutual funds are funds that nvest n a combnaton
More informationSIMPLE LINEAR CORRELATION
SIMPLE LINEAR CORRELATION Smple lnear correlaton s a measure of the degree to whch two varables vary together, or a measure of the ntensty of the assocaton between two varables. Correlaton often s abused.
More informationHow To Know If A Fscal Insurance Mechansm Shocks On An Eccu Member Country
WP/12/17 The Eastern Carbbean Currency Unon: Would a Fscal Insurance Mechansm Mtgate Natonal Income Shocks? Antono Lemus and Paul Cashn 2012 Internatonal Monetary Fund WP/12/17 IMF Workng Paper Mddle East
More informationThis study examines whether the framing mode (narrow versus broad) influences the stock investment decisions
MANAGEMENT SCIENCE Vol. 54, No. 6, June 2008, pp. 1052 1064 ssn 0025-1909 essn 1526-5501 08 5406 1052 nforms do 10.1287/mnsc.1070.0845 2008 INFORMS How Do Decson Frames Influence the Stock Investment Choces
More informationDynamics of Toursm Demand Models in Japan
hort-run and ong-run structural nternatonal toursm demand modelng based on Dynamc AID model -An emprcal research n Japan- Atsush KOIKE a, Dasuke YOHINO b a Graduate chool of Engneerng, Kobe Unversty, Kobe,
More informationThe Development of Web Log Mining Based on Improve-K-Means Clustering Analysis
The Development of Web Log Mnng Based on Improve-K-Means Clusterng Analyss TngZhong Wang * College of Informaton Technology, Luoyang Normal Unversty, Luoyang, 471022, Chna wangtngzhong2@sna.cn Abstract.
More informationThe role of time, liquidity, volume and bid-ask spread on the volatility of the Australian equity market.
The role of tme, lqudty, volume and bd-ask spread on the volatlty of the Australan equty market. Allster Keller* Bruno Rodrgues** Mawell Stevenson* * Dscplne of Fnance School of Busness The Unversty of
More informationCalendar Corrected Chaotic Forecast of Financial Time Series
INTERNATIONAL JOURNAL OF BUSINESS, 11(4), 2006 ISSN: 1083 4346 Calendar Corrected Chaotc Forecast of Fnancal Tme Seres Alexandros Leonttss a and Costas Sropoulos b a Center for Research and Applcatons
More informationIDENTIFICATION AND CORRECTION OF A COMMON ERROR IN GENERAL ANNUITY CALCULATIONS
IDENTIFICATION AND CORRECTION OF A COMMON ERROR IN GENERAL ANNUITY CALCULATIONS Chrs Deeley* Last revsed: September 22, 200 * Chrs Deeley s a Senor Lecturer n the School of Accountng, Charles Sturt Unversty,
More informationEfficient Project Portfolio as a tool for Enterprise Risk Management
Effcent Proect Portfolo as a tool for Enterprse Rsk Management Valentn O. Nkonov Ural State Techncal Unversty Growth Traectory Consultng Company January 5, 27 Effcent Proect Portfolo as a tool for Enterprse
More informationForecasting and Stress Testing Credit Card Default using Dynamic Models
Forecastng and Stress Testng Credt Card Default usng Dynamc Models Tony Bellott and Jonathan Crook Credt Research Centre Unversty of Ednburgh Busness School Verson 4.5 Abstract Typcally models of credt
More informationRisk Model of Long-Term Production Scheduling in Open Pit Gold Mining
Rsk Model of Long-Term Producton Schedulng n Open Pt Gold Mnng R Halatchev 1 and P Lever 2 ABSTRACT Open pt gold mnng s an mportant sector of the Australan mnng ndustry. It uses large amounts of nvestments,
More informationADVERSE SELECTION IN INSURANCE MARKETS: POLICYHOLDER EVIDENCE FROM THE U.K. ANNUITY MARKET *
ADVERSE SELECTION IN INSURANCE MARKETS: POLICYHOLDER EVIDENCE FROM THE U.K. ANNUITY MARKET * Amy Fnkelsten Harvard Unversty and NBER James Poterba MIT and NBER * We are grateful to Jeffrey Brown, Perre-Andre
More informationTESTING FOR EVIDENCE OF ADVERSE SELECTION IN DEVELOPING AUTOMOBILE INSURANCE MARKET. Oksana Lyashuk
TESTING FOR EVIDENCE OF ADVERSE SELECTION IN DEVELOPING AUTOMOBILE INSURANCE MARKET by Oksana Lyashuk A thess submtted n partal fulfllment of the requrements for the degree of Master of Arts n Economcs
More informationAbstract. 260 Business Intelligence Journal July IDENTIFICATION OF DEMAND THROUGH STATISTICAL DISTRIBUTION MODELING FOR IMPROVED DEMAND FORECASTING
260 Busness Intellgence Journal July IDENTIFICATION OF DEMAND THROUGH STATISTICAL DISTRIBUTION MODELING FOR IMPROVED DEMAND FORECASTING Murphy Choy Mchelle L.F. Cheong School of Informaton Systems, Sngapore
More informationStress test for measuring insurance risks in non-life insurance
PROMEMORIA Datum June 01 Fnansnspektonen Författare Bengt von Bahr, Younes Elonq and Erk Elvers Stress test for measurng nsurance rsks n non-lfe nsurance Summary Ths memo descrbes stress testng of nsurance
More informationCopulas. Modeling dependencies in Financial Risk Management. BMI Master Thesis
Copulas Modelng dependences n Fnancal Rsk Management BMI Master Thess Modelng dependences n fnancal rsk management Modelng dependences n fnancal rsk management 3 Preface Ths paper has been wrtten as part
More informationRECENT DEVELOPMENTS IN QUANTITATIVE COMPARATIVE METHODOLOGY:
Federco Podestà RECENT DEVELOPMENTS IN QUANTITATIVE COMPARATIVE METHODOLOGY: THE CASE OF POOLED TIME SERIES CROSS-SECTION ANALYSIS DSS PAPERS SOC 3-02 INDICE 1. Advantages and Dsadvantages of Pooled Analyss...
More informationThe Cross Section of Foreign Currency Risk Premia and Consumption Growth Risk
The Cross Secton of Foregn Currency Rsk Prema and Consumpton Growth Rsk By HANNO LUSTIG AND ADRIEN VERDELHAN* Aggregate consumpton growth rsk explans why low nterest rate currences do not apprecate as
More informationAn Interest-Oriented Network Evolution Mechanism for Online Communities
An Interest-Orented Network Evoluton Mechansm for Onlne Communtes Cahong Sun and Xaopng Yang School of Informaton, Renmn Unversty of Chna, Bejng 100872, P.R. Chna {chsun,yang}@ruc.edu.cn Abstract. Onlne
More informationMomentum Trading, Mean Reversal and Overreaction in Chinese Stock Market *
Momentum Tradng, Mean Reversal and Overreacton n Chnese Stock Market * YANGRU WU Rutgers Unversty and Hong Kong Insttute for Monetary Research December 2003 (Prelmnary, Comments Welcome) ABSTRACT Whle
More informationA Multistage Model of Loans and the Role of Relationships
A Multstage Model of Loans and the Role of Relatonshps Sugato Chakravarty, Purdue Unversty, and Tansel Ylmazer, Purdue Unversty Abstract The goal of ths paper s to further our understandng of how relatonshps
More informationCorporate Real Estate Sales and Agency Costs of Managerial Discretion
Corporate Real Estate Sales and Agency Costs of Manageral Dscreton Mng-Long Lee * Department of Fnance Natonal Yunln Unversty of Scence & Technology Yunln, Tawan Mng-Te Lee Department of Accountng Tamkang
More informationThe Relationship between Exchange Rates and Stock Prices: Studied in a Multivariate Model Desislava Dimitrova, The College of Wooster
Issues n Poltcal Economy, Vol. 4, August 005 The Relatonshp between Exchange Rates and Stock Prces: Studed n a Multvarate Model Desslava Dmtrova, The College of Wooster In the perod November 00 to February
More informationHealth Insurance and Household Savings
Health Insurance and Household Savngs Mnchung Hsu Job Market Paper Last Updated: November, 2006 Abstract Recent emprcal studes have documented a puzzlng pattern of household savngs n the U.S.: households
More informationUnderwriting Risk. Glenn Meyers. Insurance Services Office, Inc.
Underwrtng Rsk By Glenn Meyers Insurance Servces Offce, Inc. Abstract In a compettve nsurance market, nsurers have lmted nfluence on the premum charged for an nsurance contract. hey must decde whether
More informationAre Women Better Loan Officers?
Are Women Better Loan Offcers? Ths verson: February 2009 Thorsten Beck * CentER, Dept. of Economcs, Tlburg Unversty and CEPR Patrck Behr Goethe Unversty Frankfurt André Güttler European Busness School
More informationDiscount Rate for Workout Recoveries: An Empirical Study*
Dscount Rate for Workout Recoveres: An Emprcal Study* Brooks Brady Amercan Express Peter Chang Standard & Poor s Peter Mu** McMaster Unversty Boge Ozdemr Standard & Poor s Davd Schwartz Federal Reserve
More informationEUROPEAN. ThePriceandRiskEfects ofoptionintroductionsonthenordicmarkets. EconomicPapers434 December2010. StafanLindén EUROPEANCOMMISSION
EUROPEAN ECONOMY EconomcPapers434 December heprceandrskefects ofoptonintroductonsonthenordcmarkets StafanLndén EUROPEANCOMMISSION Economc Papers are wrtten by the Staff of the Drectorate-General for Economc
More informationDay-of-the-Week Trading Patterns of Individual and Institutional Investors
Day-of-the-Week Tradng Patterns of Indvdual and Instutonal Investors Joel N. Morse, Hoang Nguyen, and Hao M. Quach Ths study examnes the day-of-the-week tradng patterns of ndvdual and nstutonal nvestors.
More informationHow To Evaluate A Dia Fund Suffcency
DI Fund Suffcency Evaluaton Methodologcal Recommendatons and DIA Russa Practce Andre G. Melnkov Deputy General Drector DIA Russa THE DEPOSIT INSURANCE CONFERENCE IN THE MENA REGION AMMAN-JORDAN, 18 20
More informationTesting Adverse Selection Using Frank Copula Approach in Iran Insurance Markets
Journal of mathematcs and computer Scence 5 (05) 54-58 Testng Adverse Selecton Usng Frank Copula Approach n Iran Insurance Markets Had Safar Katesar,, Behrouz Fath Vajargah Departmet of Statstcs, Shahd
More informationHARVARD John M. Olin Center for Law, Economics, and Business
HARVARD John M. Oln Center for Law, Economcs, and Busness ISSN 1045-6333 ASYMMETRIC INFORMATION AND LEARNING IN THE AUTOMOBILE INSURANCE MARKET Alma Cohen Dscusson Paper No. 371 6/2002 Harvard Law School
More informationScaling Models for the Severity and Frequency of External Operational Loss Data
Scalng Models for the Severty and Frequency of External Operatonal Loss Data Hela Dahen * Department of Fnance and Canada Research Char n Rsk Management, HEC Montreal, Canada Georges Donne * Department
More informationEvaluating credit risk models: A critique and a new proposal
Evaluatng credt rsk models: A crtque and a new proposal Hergen Frerchs* Gunter Löffler Unversty of Frankfurt (Man) February 14, 2001 Abstract Evaluatng the qualty of credt portfolo rsk models s an mportant
More informationFiscal Spillovers in the Euro Area
Fscal Spllovers n the Euro Area Guglelmo Mara Caporale Brunel Unversty, London, CESfo and DIW Berln Alessandro Grard Istat, Rome Abstract Ths paper analyses the dynamc effects of fscal mbalances n a gven
More informationDiagnostic Tests of Cross Section Independence for Nonlinear Panel Data Models
DISCUSSION PAPER SERIES IZA DP No. 2756 Dagnostc ests of Cross Secton Independence for Nonlnear Panel Data Models Cheng Hsao M. Hashem Pesaran Andreas Pck Aprl 2007 Forschungsnsttut zur Zukunft der Arbet
More informationA Structure for General and Specc Market Rsk Eckhard Platen 1 and Gerhard Stahl Summary. The paper presents a consstent approach to the modelng of general and specc market rsk as dened n regulatory documents.
More informationQuantification of qualitative data: the case of the Central Bank of Armenia
Quantfcaton of qualtatve data: the case of the Central Bank of Armena Martn Galstyan 1 and Vahe Movssyan 2 Overvew The effect of non-fnancal organsatons and consumers atttudes on economc actvty s a subject
More informationTesting for imperfect competition on EU deposit and loan markets. with Bresnahan s market power model
Testng for mperfect competton on EU depost and loan markets wth Bresnahan s market power model J.A. Bkker 1 February 2003 Research Seres Supervson no. 52 Secton Bankng and Supervsory Strateges, Drectorate
More information