trends and cycles in historical gold and silver prices abstract the study proposes an alternative modelling specification for the real prices of gold and silver that allows the long run trend and cyclical behaviour to be modelled simultaneously by incorporating two differencing parameters in a fractional integration framework however we also consider the separate cases of a standard i d process with a pole or singularity at the zero frequency and a cyclical i d model that incorporates a single pole in the spectrum at a non zero frequency we use annual data spanning from 1833 to 2013 for gold and 1792 to 2013 for silver based on the more flexible model that permits a pole at both zero trend and non zero cycle frequencies we find that in general the estimates associated to the long run or zero frequency appear to be above 1 in case of gold and below 1 for silver while the order of integration associated with the cyclical frequency is slightly above 0 in the majority of the cases in the two series further higher orders of integration are associated to the long run component compared with the cyclical one the implications of these findings are highlighted

can the stock market success of montreal s ipos be predicted by the prospectus content in this paper we investigated if it is possible for investors to objectively estimate the probability of success of newly public companies using the information contained in offering prospectuses analysing prospectuses of small firms that went public on the montreal stock exchange revealed that the age of the firm at the time of the ipo the percentage of voting rights sold by managers the sales growth potential and the subscription price of newly quoted firms could be good predictors of long term performance on the stock market however it is relatively difficult to link any information contained in the issuing prospectus to short term performance the findings of this study should help authorities to define more stringent criteria to accept new public offerings and make the small cap market more attractive to investors and new growing companies

portfolio insurance in complete markets a note this note presents an elementary derivation of the optimal investment strategy of an investor who wants to assure that his investment in risky assets does not lead his wealth to fall below a predetermined floor copyright 1989 by the university of chicago

benchmarking portfolio insurance and technical analysis a monte carlo comparison of dynamic strategies of asset allocation abstract this paper makes an extensive simulation comparison of popular dynamic strategies of asset allocation for each strategy alternative measures have been calculated for risk return and risk adjusted performance sharpe ratio sortino ratio return at risk moreover the strategies are compared in different market situations bull bear no trend markets and with different market volatility taking into account transaction costs and discrete rebalancing of portfolios the simulations show a dominant role of constant proportion strategies in bear and no trend markets and a preference for benchmarking strategies in bull markets these results are independent of the volatility level and the risk adjusted measure adopted

optimal portfolio policies with borrowing and shortsale constraints abstract we characterize optimal intertemporal portfolio policies for investors with crra utility facing either a borrowing constraint or shortsale restrictions or both the optimal constrained portfolios are identified as optimal unconstrained portfolios for a higher riskless rate or for a subset of the risky assets or for a combination of the two settings our characterization is based on duality results in cvitanic and karatzas 1992 annals of applied probability 2 767 818 for optimal portfolio investment when portfolio values are more generally constrained to a closed convex nonempty subset of r n

metal volatility in presence of oil and interest rate shocks abstract this study uses three two factor volatility models of the garch family to examine the volatility behavior of three strategic commodities gold silver and copper in the presence of crude oil and interest rate shocks the results of the standard garch models suggest that gold and silver have almost the same volatility persistence which is greater than that of copper the cgarch estimates indicate that the short run transitory component of volatility converges to zero much faster for copper than for gold and silver in this sequence however the permanent volatility component demonstrates equally strong persistence in the long run for all three metals the egarch results suggest that the leverage effect is present and significant for copper only implying that gold and silver can be good investment in anticipation of bad times past oil shock does not impact all three metals similarly monetary policy and to leaser extent the oil shocks have calming effects on precious metals but not on copper if the t bill rate is used crises such as the 2003 iraq war heighten metal volatility these results have implications for derivatives valuations using gold as a reserve asset risk analysis and for the commodity exporting countries and commodity producing firms

long memory in foreign exchange rates using the geweke porter hudak test we find evidence of long memory in exchange rate data this implies that the empirical evidence of unit roots in exchange rates may not be robust to long memory alternatives fractionally integrated autoregressive moving average arfima models are estimated by both the time domain exact maximum likelihood ml method and the frequency domain approximate ml method impulse response functions and forecasts based on these estimated arfima models are evaluated to gain insight into the long memory characteristics of exchange rates some tentative explanations of the long memory found in the exchange rates are discussed

dynamics of oil price precious metal prices and exchange rate this study examines the co movements and information transmission among the spot prices of four precious metals gold silver platinum and palladium oil price and the us dollar euro exchange rate we find evidence of a weak long run equilibrium relationship but strong feedbacks in the short run the spot precious metal markets respond significantly but temporarily to a shock in any of the prices of the other metal prices and the exchange rate furthermore we discover some evidence of market overreactions in the palladium and platinum cases as well as in the exchange rate market in conclusion whether there are overreactions and re adjustments or not investors may diversify at least a portion of the risk away by investing in precious metals oil and the euro policy implications are provided

misspecification of capital asset pricing this study documents empirical anomalies which suggest that either the simple one period capital asset pricing model capm is misspecified or that capital markets are inefficient in particular portfolios based on firm size or earnings price e p ratios experience average returns systematically different from those predicted by the capm furthermore the abnormal returns persist for at least two years this persistence reduces the likelihood that these results are being generated by a market inefficiency rather the evidence seems to indicate that the equilibrium pricing model is misspecified however the data also reveals that an e p effect does not emerge after returns are controlled for the firm size effect the firm size effect largely subsumes the e p effect thus while the e p anomaly and value anomaly exist when each variable is considered separately the two anomalies seem to be related to the same set of missing factors and these factors appear to be more closely associated with firm size than e p ratios

effectiveness of cppi strategies under discrete time trading abstract the paper analyzes the effectiveness of the constant proportion portfolio insurance cppi method under trading restrictions if the cppi method is applied in continuous time the cppi strategies provide a value above a floor level unless the price dynamics of the risky asset permit jumps the risk of violating the floor protection is called gap risk in practice it is caused by liquidity constraints and price jumps both can be modelled in a setup where the price dynamics of the risky asset are described by a continuous time stochastic process but trading is restricted to discrete time we propose a discrete time version of the continuous time cppi strategies which satisfies three conditions the resulting strategies are self financing the asset exposure is non negative and the value process converges we determine risk measures such as the shortfall probability and the expected shortfall and discuss criteria which ensure that the gap risk does not increase to a level which contradicts the original intention of portfolio insurance in addition we introduce proportional transaction costs and analyze their effects on the risk profile

market values earnings yields and stock returns evidence from singapore abstract results of u s studies about the relation between stock returns and the effects of firm size and earnings to price ratio e p are not consistent basu 1983 argues that e p dominates size while others conclude that size dominates e p this paper attempts to provide evidence on these two effects with a sample of data 1975 1985 from the stock exchange of singapore we find that stock returns are significantly related to both size and e p but the size effect appears to be of secondary importance when compared with e p effect

long memory and structural changes in the forward discount an empirical investigation abstract we analyze the evidence for long memory and structural changes in the five g7 countries forward discount we establish evidence for long memory by estimating the long memory parameter without allowing for structural breaks we also document evidence for multiple structural breaks in the mean of the forward discount we then adjust for structural changes in the forward discount rate and re estimate the long memory parameter after removing the breaks we still find evidence of stationary long memory in each country s forward discount

optimal consumption and portfolio policies when asset prices follow a diffusion process abstract we consider a consumption portfolio problem in continuous time under uncertainty a martingale technique is employed to characterize optimal consumption portfolio policies when there exist nonnegativity constraints on consumption and on final wealth we also provide a way to compute and verify optimal policies our verification theorem for optimal policies involves a linear partial differential equation unlike the nonlinear partial differential equation of dynamic programming the relationship between our approach and dynamic programming is discussed we demonstrate our technique by explicitly computing optimal policies in a series of examples in particular we solve the optimal consumption portfolio problem for hyperbolic absolute risk aversion utility functions when the asset prices follow a geometric brownian motion the optimal policies in this case are no longer linear when nonnegativity constraints on consumption and on final wealth are included by these examples one can see that our approach is much easier than the dynamic programming approach

world oil prices precious metal prices and macroeconomy in turkey we examine the long and short run transmissions of information between the world oil price turkish interest rate turkish lira us dollar exchange rate and domestic spot gold and silver price we find that the world oil price has no predictive power of the precious metal prices the interest rate or the exchange rate market in turkey the results also show that the turkish spot precious metals exchange rate and bond markets do not also provide information that would help improve the forecasts of world oil prices in the long run the findings suggest that domestic gold is also considered a safe haven in turkey during devaluation of the turkish lira as it is globally it is interesting to note that there does not seem to be any significant influence of developments in the world oil markets on turkish markets in the short run either however transitory positive initial impacts of innovations in oil prices on gold and silver markets are observed the short run price transmissions between the world oil market and the turkish precious metal markets have implications for policy makers in emerging markets and both local and global investors in the precious metals market and the oil market

level shifts and the illusion of long memory in economic time series when applied to time series processes containing occasional level shifts the log periodogram gph estimator often erroneously finds long memory for a stationary short memory process with a slowly varying level i show that the gph estimator is substantially biased and derive an approximation to this bias the asymptotic bias lies on the 0 1 interval and its exact value depends on the ratio of the expected number of level shifts to a user defined bandwidth parameter using this result i formulate the modified gph estimator which has a markedly lower bias i illustrate this new estimator via applications to soybean prices and stock market volatility

small firm effect evidence from korean stock exchange the objective of the paper is to examine the small firm and earnings yield effects on the korean stock returns during 1982 1988 we find that smaller or high e p ratio firms obtain higher risk adjusted returns on average than larger or low e p ratio firms we also document that the existence of january effect in korean stock returns unlike the findings for the us market stock returns of small and as well as large korean firms are found to be 2 or 3 times higher in january than the other months however the well known tax loss selling hypothesis can not be used to explained these anomalies because there are no capital tax or loss offsets in korea

long memory and structural breaks in the returns and volatility of gold evidence from turkey this article examines the long memory properties and structural breaks in spot and futures gold returns and volatility in turkey the data cover the period from 2008 through 2013 in which gold prices hit an all time high arfima figarch model provides evidence of dual long memory in spot series and a lack of long memory property in futures returns anti persistence in spot returns is indicative of an overreaction of gold prices to new information thus disconfirming the weak form of market efficiency the findings further provide evidence of one structural break which is associated with correction in the gold prices during the post global financial crisis the analyses suggest that the long memory is true not spurious this implies that long memory is a feature of the data instead of an outcome of structural changes

a short run pricing model for a speculative asset tested with data from the gold bullion market 1983 a short run pricing model for a speculative asset tested with data from the gold bullion market applied economics vol 15 no 5 pp 563 581

optimal investment with minimum performance constraints abstract we consider the portfolio problem of an investor whose wealth is constrained to be at least as large as that generated by investment in a stochastic benchmark portfolio using standard option pricing results the optimal portfolio policy of a hara utility investor is derived explicitly this policy is shown to be equivalent at any point in time to the investor s optimal unconstrained policy when he has contracted to paying out a proportion of the value of the benchmark portfolio at the terminal date this proportion which lies between zero and one is smaller the more likely it is that the investor will strictly outperform the benchmark over the investment horizon

general properties of option prices when the underlying price process is a one dimensional diffusion as well as in certain restricted stochastic volatility settings a contingent claim s delta is bounded by the infimum and supremum of its delta at maturity further if the claim s payoff is convex concave the claim s price is a convex concave function of the underlying asset s value however when volatility is less specialized or when the underlying process is discontinuous or non markovian a call s price can be a decreasing concave function of the underlying price over some range increasing with the passage of time and decreasing in the level of interest rates much of the financial options literature derives precise option prices when the underlying asset price process is completely specified since it is empirically difficult to ascertain what the true underlying process is another part of that literature is concerned with deriving general properties of option prices when the underlying price process is not fully specified but instead is assumed to belong to some general class of stochastic processes merton 1973 cox and ross 1976 jagannathan 1984 in particular in the absence of arbitrage opportunities and assuming that the risk neutralized stock price follows a proportional stochastic process a risk neutral return distribution independent of price merton 1973 and jagannathan 1984 show that a call option s price is an increasing convex function of the stock price cox and ross 1976

real and spurious long memory properties of stock market data we test for the presence of long memory in daily stock returns and their squares using a robust semiparametric procedure of lobato and robinson spurious results can be produced by nonstationarity and aggregation we address these problems by analyzing subperiods of returns and using individual stocks the test results show no evidence of long memory in the returns by contrast there is strong evidence in the squared returns