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on Financial Markets |
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Issue of 2011‒11‒07
four papers chosen by |
| By: | Paulo M.M. Rodrigues; Nazarii Salish |
| Abstract: | Over recent years several methods to deal with high-frequency data (economic, financial and other) have been proposed in the literature. An interesting example is for instance interval valued time series described by the temporal evolution of high and low prices of an asset. In this paper a new class of threshold models capable of capturing asymmetric e¤ects in interval-valued data is introduced as well as new forecast loss functions and descriptive statistics of the forecast quality proposed. Least squares estimates of the threshold parameter and the regression slopes are obtained; and forecasts based on the proposed threshold model computed. A new forecast procedure based on the combination of this model with the k nearest neighbors method is introduced. To illustrate this approach, we report an application to a weekly sample of S&P500 index returns. The results obtained are encouraging and compare very favorably to available procedures.<br> |
| JEL: | C12 C22 C52 C53 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:ptu:wpaper:w201128&r=fmk |
| By: | RICHARD C. K. BURDEKIN; PIERRE L. SIKLOS |
| Abstract: | This paper applies a variety of short-run and long-run time series techniques to data on a broad group of Asia-Pacific stock markets and the United States extending to 2010. Our empirical work confirms the importance of crises in affecting the persistence of equity returns in the Asia-Pacific region and offers some support for contagion effects. Post-Asian financial crisis quantile regressions yield substantial evidence of long-run linkages between the Shanghai market, the US market and many regional exchanges. Cointegration is particularly prevalent at the higher end of the distribution. Our results suggest that the enormous growth of the Shanghai market in the new millennium has been accompanied by a meaningful level of integration with other regional and world markets in spite of ongoing capital controls. |
| JEL: | G15 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:acb:camaaa:2011-35&r=fmk |
| By: | Virginie Coudert; Valérie Mignon |
| Abstract: | Carry-trade strategies which consist of buying forward high-yield currencies tend to generate positive excess returns during long periods of time. Here, we aim at explaining this puzzle by the default risk, which is frequently taken on by investing in high-yield currencies. We empirically test for this hypothesis on a sample of 18 emerging currencies over the period from June 2005 to September 2010, the default risk being proxied by the sovereign credit default swap spread. Relying on smooth transition regression models, we show that default risk fuels the carry-trade gains during periods of upbeat financial markets, and worsens the losses in bear markets. We then introduce the default risk into the “Fama regression” linking the exchange-rate depreciation to the interest-rate differential. The “forward bias”, usually evidenced by a coefficient smaller than unity in this regression, is somewhat alleviated, as the default risk partially explains the excess return. |
| Keywords: | Carry trades, Forward premium, UIP puzzle, Default risk, Smooth transition regression models |
| JEL: | G15 G30 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2011-17&r=fmk |
| By: | IVANDO SILVA DE FARIA (UFF); HELDER FERREIRA DE MENDONÇA (UFF) |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:anp:en2010:108&r=fmk |