stock market linkages evidence from latin america abstract this study investigates the dynamic interdependence of the major stock markets in latin america using data from 1995 to 2000 we examine the stock market indexes of argentina brazil chile colombia mexico and venezuela the index level series are non stationary and so we employ cointegration analysis and error correction vector autoregressions var techniques to model the interdependencies we find that there is one cointegrating vector which appears to explain the dependencies in prices the results are robust to sensitivity tests based on translating indexes to us dollars i e a common currency for all the markets and to partitioning the sample into periods before and after the asian and russian financial crises of 1997 and 1998 respectively our results suggest that the potential for diversifying risk by investing in different latin american markets is limited

after hours stock prices and post crash hangovers after hours pricing in foreign equity markets of multiple listed u s securities appeared to be efficient in predicting new york prices in the weeks immediately following the october 1987 crash but relatively uninformative in succeeding months by contrast daily changes in new york prices appear to be efficiently incorporated in after hours trading on both the tokyo and london exchanges throughout the sample period this paper suggests that the asymmetry and temporal variations in cross market correlations are consistent with rational investor behavior in equity markets with nonzero transaction costs and time varying share price volatility in the wake of the october 1987 crash a number of studies have provided evidence of significant international linkages among national equity markets where high frequency movements in the share price indices of national exchanges appear to induce sympathetic price movements in subsequent trading on other national exchanges however the cross market correlations are generally much larger in periods of extreme volatility and appear to subside to modest or even negligible associations during periods of more normal trading activity since the constituent stocks of national exchange indices are not identical it may be that the episodic increases in correlated movements of the indices are due to changes in the actual or perceived relative importance of common factors in periods of unusual volatility the thrust of this paper is to remove the issue of the disparate composition of the price indices of national exchanges by examining the prices of a set of

causality in variance and the type of traders in crude oil futures abstract this article examines the causal relationship and in particular informational dependence between crude oil futures return and the trading volume using daily data over a ten year period using a recent econometric methodology the two step procedure developed by cheung and ng 1996 cheung y w ng l k 1996 a causality in variance test and its applications to financial market prices journal of econometrics 72 33 48 is robust to distributional assumption and does not depend on simultaneous modeling of the two variables we find only causality at higher order lags running from return to volume in the mean as well as in conditional variance our result is not in complete agreement with several earlier studies in this area however the result does indicate mild support for noise traders hypothesis in the crude oil futures market

agricultural price instability a survey of competing explanations and remedies there are two explanations for agricultural price dynamics one follows cobweb logic and models fluctuations driven by expectation errors but emphasises that these expectations create complex dynamics and possibly chaos the other stems from the rational expectations tradition of dynamics driven by real shocks the empirical evidence tends to support the latter but is not conclusive the rational expectations model generates an optimal dynamic path from which no improvement can be expected from public intervention however if we take account of all the potential market failures in agricultural markets and especially in developing countries this conclusion might require some qualifications although an appropriate policy design for stability has still to be achieved this paper surveys the positive and normative literature on agricultural prices highlighting empirical evidence and identifying remaining unresolved issues

spillovers from the usa to stock markets in asia a quantile regression approach this article analyses return spillovers from the usa to stock markets in asia by means of quantile regressions traditional studies consider spillovers as effects of the conditional means of foreign returns onto the conditional means of chronologically succeeding domestic markets returns we by contrast study the full range of quantiles of the conditional distribution of the domestic markets returns this enables us to document the detailed structure of spillovers across return quantiles generally we find spillovers from the usa to asia to be negative specifically however we reveal an asymmetric structure of spillovers with an increasing negative magnitude from lower to upper return quantiles theoretically this pattern is consistent with an asymmetric overreaction of traders in asia to news from the us market extensions from the baseline model further suggest the presence of contagion throughout the financial crisis of 2007 2008 as well as of calm down effects over weekends

structural breaks in volatility spillovers between international financial markets contagion or mere interdependence abstract this paper conducts an investigation of volatility transmission between stock markets in hong kong europe and the united states covering the time period from 2000 up to 2011 using intra daily data we compute realized volatility time series for the three markets and employ a heterogeneous autoregressive distributed lag model as our baseline econometric specification motivated by the presence of various crisis events contained in our sample we detect time variation and structural breaks in volatility spillovers particularly during the financial crisis of 2007 we find effects consistent with the notion of contagion suggesting strong and sudden increases in the cross market synchronization of chronologically succeeding volatilities investigating the role of mean breaks and conditional heteroskedasticity in the realized volatilities however we find the latter to be the main driver of breaks in volatility spillovers taking the volatility of realized volatilities into account we find no evidence of contagion anymore

who uses interest arbitration the case of british columbia s teachers 1947 1981 several researchers have attempted to identify the circumstances under which parties subject to compulsory interest arbitration will actually push a contract dispute to arbitration in this paper a simple model that incorporates elements of the leading hypotheses is tested using a unique data set spanning 35 years of compulsory conventional arbitration experience among teachers in british columbia the strongest empirical finding is that bargaining units that used arbitration in the previous round of negotiations were at least ten percent more likely than other units to use it in the current round on the other hand variables intended to capture attitudes toward risk changes in the degree of uncertainty associated with arbitral outcomes differing beliefs about likely arbitral outcomes and principal agent problems were found to have little impact on the estimated probability of using arbitration

contagion and banking crisis international evidence for 2007 2009 abstract policy makers aim to avoid banking crises and although they can to some extent control domestic conditions internationally transmitted crises are difficult to tackle this paper identifies international contagion in banking during the 2007 2009 crisis for 54 economies we identify three channels of contagion systematic idiosyncratic and volatility and find evidence for these in 45 countries banking crises are overwhelmingly associated with the presence of both systematic and idiosyncratic contagion the results reveal that crisis shocks transmitted from a foreign jurisdiction via idiosyncratic contagion increase the likelihood of a systemic crisis in the domestic banking system by almost 37 percent whereas increased exposure via systematic contagion does not necessarily destabilize the domestic banking system thus while policy makers and regulatory authorities are rightly concerned with the systematic transmission of banking crises reducing the potential for idiosyncratic contagion can importantly reduce the consequences for the domestic economy

international transmission of information evidence from the euroyen and eurodollar futures markets abstract this paper examines the information transmission between japan and the us by using the tokyo euroyen and chicago eurodollar futures these two interest rate futures markets provide a better understanding of international information transmission than stock markets which have been shown to exhibit nonsynchronous trading and market segmentation the results show that traders in tokyo chicago use information that is revealed overnight in chicago tokyo the bivariate egarch t model provides no evidence of volatility spillovers in either direction suggesting that the opening price rapidly reflects foreign information the overall results support the hypothesis that the domestic market efficiently adjusts to foreign news the results are also broadly consistent with the covered interest arbitrage effects

futures hedging effectiveness under the segmentation of bear bull energy markets abstract this article undertakes eight hedging models regression md garch bekk garch ccc garch ecm md ecm bekk ecm ccc and state space models to investigate hedging effectiveness of different price scenarios in energy futures markets different models have systematically evidenced that hedging effectiveness is higher in an increasing pattern termed bull markets than in a decreasing pattern termed bear markets for crude oil and gasoline futures that is findings show asymmetric hedging performance between upward and downward price trends consistently from the most popular hedging models in literature out of sample examination also suggests that the ranking of hedging effectiveness of different hedging models is not parallel in different price patterns across futures contracts implying that investors should adjust their hedging strategies accordingly

a new approach to measuring financial contagion this article proposes a new approach to evaluate contagion in financial markets our measure of contagion captures the coincidence of extreme return shocks across countries within a region and across regions we characterize the extent of contagion its economic significance and its determinants using a multinomial logistic regression model applying our approach to daily returns of emerging markets during the 1990s we find that contagion is predictable and depends on regional interest rates exchange rate changes and conditional stock return volatility evidence that contagion is stronger for extreme negative returns than for extreme positive returns is mixed

volatility spillovers across international swap markets the us japan and the uk abstract this paper examines volatility spillovers across the three major international swap markets namely the us japan and the uk we apply a multivariate var egarch model by incorporating the slope of term structure and corporate spread variables to capture the time varying nature of swap spread volatility across countries our empirical findings show that the changes in the swap spreads are significantly influenced by the slope of term structure variable in all three currencies we find that the us swap market has a major influence on the japanese and uk swap markets but not vice versa we also find that reciprocal spillovers exist between japanese and the uk swap markets in almost all cases the degree of volatility persistence is fairly strong and in many cases we find asymmetric volatility spillovers across maturity and country

dynamic relations between international equity and currency markets the role of currency order flow previous research on the dynamic linkages between international financial markets focused on bivariate interequity or intercurrency relationships and do not allow a specific role for the currency or equity market respectively in this paper we hypothesize that there are important yet not well understood dynamic relationships between international equity and currency markets and these are driven by information spillover via the mechanism of currency order flow using a trivariate asymmetric garch framework we find that the relationships between equity and currency markets are significant bidirectional and pervasive these relationships which coexist with the relationships between u s and foreign equity markets are much stronger in the volatilities than in the means importantly we find strong support for our information spillover hypothesis where currency order flow is the economic mechanism by which information is transmitted

information trading volume and international stock return comovements evidence from cross listed stocks we investigate the joint dynamics of returns and trading volume of 556 foreign stocks cross listed on u s markets heterogeneous agent trading models rationalize how trading volume reflects the quality of traders information signals and how it helps to disentangle whether returns are associated with portfolio rebalancing trades or information motivated trades based on these models we hypothesize that returns in the home u s market on high volume days are more likely to continue to spill over into the u s home market for those cross listed stocks subject to the risk of greater informed trading our empirical evidence provides support for these predictions which confirms the link between information trading volume and international stock return comovements that has eluded previous empirical investigations

an examination of the robustness of the weekend effect this paper analyzes the robustness of the day of the week dow and weekend effects to alternative estimation and testing procedures the results show that sample size can distort the interpretation of classical test statistics unless the significance level is adjusted down ward specification tests reveal widespread departures from ols assumptions hypothe sis tests results are reported using robust econometric methods and a garch model the strength of the dow and weekend effect evidence appears to depend on the estimation and testing method both effects seem to have disappeared by 1975

correlations in price changes and volatility across international stock markets the short run interdependence of prices and price volatility across three major international stock markets is studied daily opening and closing prices of major stock indexes for the tokyo london and new york stock markets are examined the analysis utilizes the autoregressive conditionally heteroskedastic arch family of statistical models to explore these pricing relationships evidence of price volatility spillovers from new york to tokyo london to tokyo and new york to london is observed but no price volatility spillover effects in other directions are found for the pre october 1987 period article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

the effects of commodity price stabilization programs in this paper the authors analyze the effects of commodity programs in which the government attempts to support and stabilize price through open market purchases and sales specifically they as sess the effects of such programs on the u s soybean market using a rational expectations model that allows for private storage expected price responsive production and arbitrary support and release price s a salient feature of the model is that private storage and product ion behavior adjusts to changes in government policy stochastic simu lations of the market model demonstrate that price stabilization prog rams can reduce long run market price and destabilize producer revenu e copyright 1988 by american economic association

volatility persistence and stock valuations some empirical evidence using garch summary in this paper issues of volatility persistence and the changing risk premium in the stock market are investigated using the garch estimation technique we get a point estimate of the index of relative risk aversion of 4 5 and confirm the existence of changing equity premiums in the us during 1962 1985 the persistence of shocks to the stock return volatility is so high that the data cannot reject a non stationary volatility process specification the results of this paper are consistent with malkiel and pindyck s hypothesis that it is the unforseen rise ini the investment uncertainty during 1974 that causes the market to plunge

learning by striking estimates of the teetotaler effect we hypothesize that past strike experience will have a negative or teetotaler effect on a collective bargaining unit s propensity to strike in future negotiations other things being equal we test this using a unique micro level sample comprising four consecutive negotiations by 147 bargaining units in u s manufacturing industries controlling for observable and unobservable differences among bargaining pairs in the propensity to strike our results are consistent with the view that the experience of striking is indeed sobering lagged strike experience variables have a significantly negative effect on the propensity to strike in the current negotiation

on measuring synchronization of bulls and bears the case of east asia abstract this paper implements estimation and testing procedures for comovements of stock market cycles or phases in asia we extend the harding and pagan harding d pagan a p 2006 synchronization of cycles journal of econometrics 132 1 59 79 test for strong multivariate nonsynchronization smns between business cycles to a test that allows for an imperfect degree of multivariate synchronization between stock market cycles moreover we propose a test for endogenously determining structural change in the bivariate and multivariate synchronization indices upon applying the technique to five asian stock markets we find a significant increase in the cross country comovements of asian bullish and bearish periods in 1997 a power study of the stability test suggests that the detected increase in comovement is more of a sudden nature i e contagion or asian flu instead of gradual i e financial integration it is furthermore argued that stock market cycles and their propensity toward increased synchronization contain useful information for both investors policy makers and financial regulators

when risk generates chaos abstract with risk averse producers the traditional linear cobweb model becomes nonlinear the currently produced quantity is an homographic function of previous years quantities this may result in the market generating chaotic price and quantity series especially if demand is rigid hedging facilities are unable to reduce the magnitude of fluctuations which are socially detrimental especially from the consumers point of view this might justify public intervention on markets such as staple food commodities or health cares

the copula garch model of conditional dependencies an international stock market application abstract modeling the dependency between stock market returns is a difficult task when returns follow a complicated dynamics when returns are non normal it is often simply impossible to specify the multivariate distribution relating two or more return series in this context we propose a new methodology based on copula functions which consists in estimating first the univariate distributions and then the joining distribution in such a context the dependency parameter can easily be rendered conditional and time varying we apply this methodology to the daily returns of four major stock markets our results suggest that conditional dependency depends on past realizations for european market pairs only for these markets dependency is found to be more widely affected when returns move in the same direction than when they move in opposite directions modeling the dynamics of the dependency parameter also suggests that dependency is higher and more persistent between european stock markets

can exchange rates forecast commodity prices we show that commodity currency exchange rates have surprisingly robust power in predicting global commodity prices both in sample and out of sample and against a variety of alternative benchmarks this result is of particular interest to policy makers given the lack of deep forward markets in many individual commodities and broad aggregate commodity indices in particular we also explore the reverse relationship commodity prices forecasting exchange rates but find it to be notably less robust we offer a theoretical resolution based on the fact that exchange rates are strongly forward looking whereas commodity price fluctuations are typically more sensitive to short term demand imbalances

return and volatility linkages between the us and the german stock market abstract this study investigates the contemporaneous correlation and the spillover effects between the us and the german stock markets around the opening of the two markets it is based on a newly compiled sample of intra day data for the two blue chip indices the dow jones industrial average dow and the deutsche aktienindex dax our main findings are as follows foreign daytime returns can significantly influence the domestic overnight returns this holds for both the us and the german market there is no evidence of spillovers from the previous daytime returns in the us to the dax morning trading short lived mean spillovers especially from the dax noon to 3 30 pm cet segment into the dow can be identified and the uncritical use of the dax opening quote is very likely to produce spurious results due to institutional peculiarities to avoid this problem we propose a proxy for the dax opening that appears satisfactory

the nobel memorial prize for robert f engle work is a fine example of best practice applied time series econometrics he identifies important dynamic economic phenomena formulates precise and interesting questions about those phenomena constructs sophisticated yet simple econometric models for measurement and testing and consistently obtains results of widespread substantive interest in the scientific policy and financial communities although many of engle s contributions are fundamental i will focus largely on the two most important the theory and application of cointegration and the theory and application of dynamic volatility models moreover i will discuss much more extensively engle s volatility models and their role in financial econometrics for several reasons first engle s nobel citation was explicitly for methods of analyzing economic time series with time varying volatility arch whereas granger s was for for methods of analyzing economic time series with common trends cointegration second the credit for

estimating the narcotic effect of public sector impasse procedures this paper first describes in a relatively nontechnical fashion several econometric techniques that the authors believe should be useful to industrial relations researchers those techniques are then applied to an analysis of whether public sector impasse procedures create a narcotic effect that is a tendency for the bargaining parties once they use the procedures to become increasingly reliant on them in future negotiations the authors reanalyze data from thomas kochan and jean baderschneider s study of the impasse experience of police and firefighters under new york state s taylor law during the 1968 76 period and find that while a narcotic effect did exist as kochan and baderschneider argued that relationship lasted only during the early years of the period and was actually reversed in later years the authors conclude by explaining how such a pattern of results could occur tracing the implications of their findings for public policy and suggesting other research questions that could be anal

extreme us stock market fluctuations in the wake of 9 11 we apply extreme value analysis to us sectoral stock indices in order to assess whether tail risk measures like value at risk and extremal linkages were significantly altered by 9 11 we test whether semi parametric quantile estimates of downside risk and upward potential have increased after 9 11 the same methodology allows one to estimate probabilities of joint booms and busts for pairs of sectoral indices or for a sectoral index and a market portfolio the latter probabilities measure the sectoral response to macro shocks during periods of financial stress so called tail s taking 9 11 as the sample midpoint we find that tail s often increase in a statistically and economically significant way this might be due to perceived risk of new terrorist attacks copyright 2008 john wiley sons ltd

the long haul effects of interest arbitration the case of new york state s taylor law the authors examine debates about the effects of mandatory interest arbitration on police and firefighters in new york state under the taylor law from 1974 to 2007 comparing experience with interest arbitration in the first three years after the law was adopted with experiences from 1995 to 2007 the authors find that no strikes occurred under arbitration and that rates of dependence on arbitration declined considerably moreover the effectiveness of mediation prior to and during arbitration remained high the tripartite arbitration structure continued to foster discussion of options for resolution among arbitration panel members and wage increases awarded under arbitration matched those negotiated voluntarily by the parties econometric estimates of the effects of interest arbitration on wage changes in a national sample suggest wage increases differed little in states with arbitration from those without it the authors therefore propose a role for interest arbitration in national labor policy

winter blues a sad stock market cycle and god said let there be light and there was light and god saw that the light was good genesis 1 3 depression has been linked with seasonal affective disorder sad a condition that affects many people during the seasons of relatively fewer hours of daylight experimental research in psychology has documented a clear link between depression and lowered risktaking behavior in a wide range of settings including those of a financial nature through the links between sad and depression and between depression and risk aversion seasonal variation in length of day can translate into seasonal variation in equity returns based on supportive evidence from psychology which suggests sad is linked closely with hours of daylight we consider stock market index data from countries at various latitudes and on both sides of the equator we model differences in the seasonal variation of daylight across coun

the economics of nested names name specificity reputations and price premia a good can be identified by its region or country of origin the firm that produces it and its product name in other words names can nest within each other to categorize goods with increasing specificity this article develops a conceptual framework for jointly analyzing the effect of product firm and collective reputations on market price the model is estimated via quantile regression with california wine market data the results portray how the structure and relative importance of reputations change as product prices vary specifically reputation premia migrate from collective to specific names as prices increase

common volatility in international equity markets in this article we take advantage of the time varying structure of stock returns variances to investigate whether two international stock markets share the same volatility process we use a test recently developed by engle and kozicki this test is also used to assess the validity of a one factor autoregressive conditional heteroscedasticity model we find that some international stock markets have the same time varying volatility

international commodity agreements an obituary notice abstract it is widely believed that international commodity agreements have lapsed because they have failed the reality is more complex the tin agreement did collapse but for sugar and cocoa adverse market conditions and lack of general support made stabilization impractical control of the coffee market ceased largely because of disagreements both between and within the producing countries on the division of the benefits resulting from higher prices overall commodity control fits uneasily in an increasingly globalized and competitive world and this perception has resulted in a diminished willingness to resolve the practical difficulties of price stabilization

are commodity prices chaotic we conduct tests for the presence of low dimensional chaotic structure in the futures prices of four important agricultural commodities though there is strong evidence of non linear dependence the evidence suggests that there is no long lasting chaotic structure the dimension estimates for the commodity futures series are generally much higher than would be for low dimension chaotic series our test results indicate that autoregressive conditional heteroskedasticity arch type processes with controls for seasonality and contract maturity effects explain much of the non linearity in the data we make a case that employing seasonally adjusted price series is important in obtaining robust results via some of the existing tests for chaotic structure finally maximum likelihood methodologies that are robust to the non linear dynamics lend strong support to the samuelson hypothesis of maturity effects in futures price changes 2002 elsevier science b v all rights reserved

hourly volatility spillovers between international equity markets abstract this paper examines the timing of mean and volatility spillovers between new york and london equity markets using an arch model it is found that the evidence of volatility spillovers between these markets is minimal and have a duration which lasts only an hour or so the most significant effects surround the movement of share prices around the new york opening but these results are not strong several new arch models are estimated including an asymmetric or leverage model and a non linear model which allows big shocks to have a different impact from small shocks

forecasting crude oil market volatility further evidence using garch class models abstract this paper extends the work of kang et al 2009 we use a greater number of linear and nonlinear generalized autoregressive conditional heteroskedasticity garch class models to capture the volatility features of two crude oil markets brent and west texas intermediate wti the one five and twenty day out of sample volatility forecasts of the garch class models are evaluated using the superior predictive ability test and with more loss functions unlike kang et al 2009 we find that no model can outperform all of the other models for either the brent or the wti market across different loss functions however in general the nonlinear garch class models which are capable of capturing long memory and or asymmetric volatility exhibit greater forecasting accuracy than the linear ones especially in volatility forecasting over longer time horizons such as five or twenty days

asymmetric volatility transmission in international stock markets abstract the transmission mechanism of price and volatility spillovers across the new york tokyo and london stock markets is investigated the asymmetric impact of good news market advances and bad news market declines on volatility transmission is described by an extended multivariate exponential generalized autoregressive conditionally heteroskedastic egarch model using daily open to close returns we find strong evidence that volatility spillovers in a given market are much more pronounced when the news arriving from the last market to trade is bad a before and after october 1987 crash analysis reveals that the linkages and interactions among the three markets have increased substantially in the post crash era suggesting that national markets have grown more interdependent

wine market prices and investment under uncertainty an econometric model for bordeaux crus classes this paper describes an econometric assessment of wine market prices for 21 of the crus classes ch teaux in the bordeaux region of france the model developed in the analysis attempt to define the relationship between factors that influence wine quality and those that influence wine prices characteristics of the models are 1 climate influences on grape composition acid and sugar levels 2 grape composition influences on market prices 3 subjective quality evaluations parker points on market prices and 4 the effects of age of the wine on market prices the results indicate that composition levels of merlot dominated wines are more climate sensitive than those from cabernet sauvignon dominated wines overall warm dry summers result in high sugar and low acid levels at harvest which in turn lead to higher quality wines wine market price sensitivity to parker point ratings indicates that properties with high cabernet sauvignon dominated wines are highly dependent on the external ratings while merlot dominated wines have a decreased rating sensitivity smaller properties tend to gain over proportionally from high ratings indicating great jumps in price from year to year additionally ch teaux that have experienced high ratings for past vintages exhibit great sensitivity to point steps in ratings for current vintages aging has a positive effect on bordeaux wine pricing this is due to the increasing maturity as well as the increasing absolute scarcity absolute scarcity of product is expressed by the size of the property with small properties producing less per vintage and therefore having less in the market additionally merlot dominated wines exhibit more maturing potential and profit more from aging than cabernet sauvignon dominated wines average per ch teau real annual profit ranges from 1 to 10 high levels of grape ripeness absolute scarcity and smaller properties that are dominated by merlot in their blend lead to the highest profits forecasts for a vintage not yet on the market indicates that 1995 is better than 1994 for both cabernet sauvignon and merlot dominated wines but that 1996 and 1997 are not as good as 1995 especially for merlot dominated wines 2001 elsevier science b v all rights reserved

a factor model for co movements of commodity prices abstract we fit a factor model to two monthly panels of deflated prices of energy metals and agricultural commodities prices consistently display a tendency to revert towards the factor though the speed of reversion to the factor is slow using both in and out of sample metrics we compare the factor model to that of a no change model and to two simple models that tie changes in commodity prices to percentage change in either global industrial production or the u s dollar the factor model does relatively well at long 12 month horizons in terms of commodities the factor model s performance is best for energy prices worst for metals with agricultural prices falling in between

third party intervention and the preservation of bargaining relationships this article uses longitudinal bargaining contract data to examine whether third party dispute resolution procedures improve the health of bargaining relationships and contribute to their preservat

forecasting bordeaux wine prices using state space methods generic bordeaux red wine basic claret can be regarded as being similar to an agricultural commodity production volumes are substantial they are traded at high frequency and the quality of the

predicting the quality and prices of bordeaux wine bordeaux wines have been made in much the same way for centuries this article shows that the variability in the quality and prices of bordeaux vintages is predicted by the weather that created the grapes the price equation provides a measure of the real rate of return to holding wines about 2 3 per annum and implies far greater variability in the early or en primeur wine prices than is observed the analysis provides a useful basis for assessing market inefficiency the effect of climate change on the wine industry and the role of expert opinion in determining wine prices

intraday linkages between the spanish and the us stock markets evidence of an overreaction effect this paper focuses on short term information transmission between the us stock market properly the dow index and the main spanish stock index ibex 35 in its early and final hours we follow the approaches of lin engle and ito 1994 susmel and engle 1994 and baur and jung 2005 who use a garch model to analyze the influence of the previous daytime and overnight returns and volatility of the dow upon the overnight returns and daytime returns of the ibex from open to 3 30 and from 3 30 to close the results suggest that the spanish stock market usually has a low price movement till wall street opens additionally they indicate that the spanish market reacts quickly to the news basically in the first four minutes following the opening of the us market furthermore we find the existence of an overreaction effect during the two hours before the closing of the spanish market

the global transmission of volatility in the foreign exchange market volatility spillovers of the dm and exchange rate across regional markets are examined using the integrated volatility of high frequency data an analysis of quoting patterns reveals five distinct regions asia asia europe overlap europe europe america overlap and america after reviewing theoretical foundations for persistence of volatility in dealership markets regional volatility models are constructed where volatility in one region is a function of yesterday s volatility in that region heat wave effect and volatility in other regions meteor shower effect evidence of statistically significant effects is found for both own region and interregional spillovers but the economic significance of own region spillovers indicates that heat waves are more important than meteor showers

reinterpreting arbitration s narcotic effect an experimental study of learning in repeated bargaining field evidence suggests that arbitration increases negotiation dispute rates we study repeated bargaining in a laboratory to understand the reasons why our results represent a reinterpretation of an explanation known as the narcotic effect the standard interpretation assumes that the probability of dispute without arbitration is constant across negotiations but field evidence suggests that experienced bargainers have fewer disputes to properly assess arbitration s impact we compare bargainer learning with and without arbitration under otherwise comparable laboratory conditions and develop a model to measure learning we find strong evidence that learning occurs in both cases but is slower with arbitration journal of economic literature classification numbers c78 c92 d77 j52 q 1998 academic press

var implied tail correlation matrices empirical evidence suggests that asset returns correlate more strongly in bear markets than conventional correlation estimates imply we propose a method for determining complete tail correlation matrices based on value at risk var estimates we demonstrate how to obtain more efficient tail correlation estimates by use of overidentification strategies and how to guarantee positive semidefiniteness a property required for valid risk aggregation and markowitz type portfolio optimization an empirical application to a 30 asset universe illustrates the practical applicability and relevance of the approach in portfolio management

meteor showers or heat waves heteroskedastic intra daily volatility in the foreign exchange market this paper seeks to explain the causes of volatility clustering in exchange rates careful examination of intra daily exchange rates provides a test of two hypotheses heat waves and meteor showers the heat wave hypothesis is that the volatility has only country specific autocorrelation alternatively the meteor shower is a phenomenon of intra daily volatility spillovers from one market to the next using the garch model to specify the heteroskedasticity across intra daily market segments we find that the empirical evidence is generally against the null hypothesis of the heat wave using a volatility type of vector autoregression we examine the impact of news in one market on the time path of per hour volatility in other markets

spillover effects in energy futures markets price discovery in crude oil and refined oil products has been extensively undertaken in organised futures markets for over a decade now there are two dominant such markets today the first one in the new york mercantile exchange and the second in london s international petroleum exchange with the demise of opec as the leading price setter for crude and products nymex light sweet crude and brent crude have usurped the role of benchmark grades for price setting to date considerable work has been done to scrutinise the degree to which these two markets price efficiently but little with regard to the way the two markets interact participants in these markets move with relative ease from one market to the other and usually take positions in both of them it is of interest therefore to investigate the information transmission mechanism by looking at spillover effects and perhaps identify which market is the true price leader this paper is a first attempt to look at such a problem in the energy market although similar studies have been done on stock market indices it is found that substantial spillover effects do exist when both markets are trading simultaneously although ipe morning prices seem to be considerably affected by the close of the previous day on nymex q 2001 elsevier science b v all rights reserved

long memory and regime switching a simulation study on the markov regime switching arfima model abstract recent research argues that if the cause of confusion between long memory and regime switching were properly controlled for they could be effectively distinguished motivated by this idea our study aims to distinguish between them of financial series we firstly model long memory and regime switching via the autoregressive fractionally integrated moving average arfima and markov regime switching mrs models respectively their finite sample properties and the confusion are investigated via simulations to control for the cause of this confusion we propose the mrs arfima model a monte carlo study shows that this framework can effectively distinguish between the pure arfima and pure mrs processes furthermore mrs arfima outperforms the ordinary arfima model for data simulated from the mrs arfima process finally empirical studies of hourly and five minute garman klass and realized volatility of the ftse index is conducted to demonstrate the advantages and usefulness of the proposed mrs arfima framework compared with the arfima and mrs models in practice

conditional volatility skewness and kurtosis existence persistence and comovements abstract recent portfolio choice asset pricing value at risk and option valuation models highlight the importance of modeling the asymmetry and tail fatness of returns these characteristics are captured by the skewness and the kurtosis we characterize the maximal range of skewness and kurtosis for which a density exists and show that the generalized student t distribution spans a large domain in the maximal set we use this distribution to model innovations of a garch type model where parameters are conditional after demonstrating that an autoregressive specification of the parameters may yield spurious results we estimate and test restrictions of the model for a set of daily stock index and foreign exchange returns the estimation is implemented as a constrained optimization via a sequential quadratic programming algorithm adequacy tests demonstrate the importance of a time varying distribution for the innovations in almost all series we find time dependency of the asymmetry parameter whereas the degree of freedom parameter is generally found to be constant over time we also provide evidence that skewness is strongly persistent but kurtosis is much less so a simulation validates our estimations and we conjecture that normality holds for the estimates in a cross section setting we also document covariability of moments beyond volatility suggesting that extreme realizations tend to occur simultaneously on different markets

where does the meteor shower come from the role of stochastic policy coordination abstract this paper examines the intra daily volatility of the yen dollar exchange rate over three different regimes from 1979 to 1988 which correspond to different degrees of international policy coordination in each regime we test for heat wave vs meteor shower effects the heat wave hypothesis assumes that volatility has only country specific autocorrelations while the meteor shower hypothesis allows volatility spillovers across markets meteor shower showers can be caused by stochastic policy coordination or by gradual release of private information the rejection of the heat wave hypothesis in the early 1980s discredits the stochastic policy coordination interpretation

intraday bidirectional volatility spillover across international stock markets does the global financial crisis matter this article studies volatility spillover between the us and the three largest european stock markets frankfurt london and paris around the time of the recent subprime crisis in order to investigate the impact of the latter we break our sample down into two sub periods a pre crisis period and a post crisis period using a structural break test that has the advantage of endogenously testing for further breaks in the data unlike previous studies that have frequently investigated this issue using low frequency data our article makes use of intraday data accordingly using threshold generalized autoregressive conditional heteroscedasticity garch model estimations we find weak evidence of volatility transmission between the two regions before the subprime crisis however during the post crisis period we record returns and volatility spillover from us to european markets and vice versa at different times of the trading day indicating that the two regions became more dependent during the recent su

adaptive learning and roads to chaos the case of the cobweb abstract we investigate the dynamics of the cobweb model with adaptive expectations a linear demand curve and a nonlinear s shaped increasing supply curve both stable periodic and chaotic price behaviour can occur we investigate how the dynamics of the model depend on the parameters both infinitely many period doubling and period halving bifurcations can occur when the demand curve is shifted upwards the same result holds with respect to the expectations weight factor

asset market linkages in crisis periods we characterize asset return linkages during periods of stress by an extremal dependence measure contrary to correlation analysis this nonparametric measure is not predisposed toward the normal distribution and can allow for nonlinear relationships our estimates for the g 5 countries suggest that simultaneous crashes between stock markets are much more likely than between bond markets however for the assessment of financial system stability the widely disregarded cross asset perspective is particularly important for example our data show that stock bond contagion is approximately as frequent as flight to quality from stocks into bonds extreme cross border linkages are surprisingly similar to national linkages illustrating a potential downside to international financial integration

information transmission between the nasdaq and asian second board markets abstract in the 1980s and early 1990s the nasdaq s success helped to prompt singapore sesdaq japan jasdaq taiwan taisdaq and south korea kosdaq to set up or formalize their own second board markets in 1999 malaysia mesdaq and hong kong gem followed suit given the growing importance of these second board markets we examine whether there is any evidence of spillovers from nasdaq returns and volatilities to asian second board market returns and volatilities after controlling for spillovers from the nyse and whether these cross country spillovers are strong relative to domestic spillovers from the corresponding main board markets we employ egarch models dynamic causality tests and var based forecast error decompositions using daily data of a recent sample period that includes the asian financial crisis of 1997 and continues until april 20 2001 there is strong evidence of lagged returns and volatility spillovers from the nasdaq market to the asian second board markets when we exclude contemporaneous main board market returns there is also strong evidence of contemporaneous and lagged returns and volatility spillovers from the local main board markets to the corresponding second board markets however even in the presence of contemporaneous main board market returns there are substantial spillovers from the lagged nasdaq returns and volatilities to asian second board market returns and volatilities these findings are not sensitive to whether we use us dollar based data or local currency based data given the difference in the trading hours between the nasdaq and asian stock markets we use available intra day return data and canadian return data the findings seem quite robust there is substantial information spillover from the nasdaq to the asian and canadian second board markets these findings indicate the existence of a substantial cross country industry effect or meteor shower effect as well as a domestic market effect or heat wave effect and imply that both country diversification and industry diversification are important

intraday volatility in international stock index futures markets meteor showers or heat waves the international transmission of intraday price volatility among the united states united kingdom and japanese stock index futures markets in the period 1988 1994 is investigated in this paper the empirical results based on extreme value estimators and vector autoregression indicate the rapid transmission of information between markets the volatilities of the u s and u k futures markets appear to follow a meteor shower rather than a heat wave type of process this means that these volatilities react to shocks from other markets i e they cannot be described only by their past values however the heat wave hypothesis is not rejected for the japanese market meaning that the shocks to japanese volatility are mostly country specific a multivariate garch model supports the u k and japanese but not the u s results

intra day and inter market volatility in foreign exchange rates four foreign exchange spot rate series recorded on an hourly basis for a six month period in 1986 are examined a seasonal garch model is developed to describe the time dependent volatility apparent in the percentage nominal return of each currency hourly patterns in volatility are found to be remarkably similar across currencies and appear to be related to the opening and closing of the worlds major markets robust lm tests designed to deal with the extreme leptokurtosis in the data fails to uncover any evidence of misspecification or the presence of volatility spillover effects between the currencies or across markets

stock returns and volatility most asset pricing models postulate a positive relationship between a stock portfolio s expected returns and risk which is often modeled by the variance of the asset price this paper uses garch in mean models to examine the relationship between mean returns on a stock portfolio and its conditional variance or standard deviation after estimating a variety of models from daily and monthly portfolio return data we conclude that any relationship between mean returns and own variance or standard deviation is weak the results suggest that investors consider some other risk measure to be more important than the variance of portfolio returns