robust tests for unit roots in the foreign exchange market abstract empirical studies that have tested for unit roots in foreign exchange rate data have assumed independent and identically distributed errors in order to apply dickey fuller test procedures this assumption ignores the temporal dependence of the error sequence present in many simple efficient market tests as discussed in hansen and hodrick 1980 as well as krasker 1980 in this paper we apply unit root test statistics that allow for heterogeneously distributed and mildly dependent error processes and thus provide superior tests of the unit root hypothesis in the case of foreign exchange rates

econometric developments in agricultural and resource economics the first 100 years this article reviews the major contributions of agricultural and resource economists in the area of econometrics over the past 100 years early on a number of agricultural economists were in on the ground floor in terms of developing new econometric methods over time as the economics profession became more empirically oriented agricultural and resource economists increasingly assumed the role of early adopters of new econometric methods even so agricultural and resource economists continue to make useful modifications to econometric techniques in order to adapt the methods to the unique nature of the problems and applications that we study

decision specific experience in foreign ownership and establishment strategies evidence from japanese firms in this paper we examine the importance of decision specific experience for a multinational firm s foreign ownership structure and establishment mode decisions a unique procedure to measure the decision specific experience construct is developed based on data for the period 1969 1991 we find strong empirical evidence from experiences of japanese firms to support the hypotheses that firms tend to select ownership structures and establishment modes based on their experiences with similar ownership structures and establishment modes in the past

system theoretic time series forecasts of weekly live cattle prices multivariate time series forecasts of weekly live cattle prices in six different geographic markets are developed using a procedure based on the principles of linear systems theory these forecasts were found to be informative and superior to those obtained from an alternative model following the approach developed for stock prices by cerchi and havenner arbitrage portfolios were constructed from the model parameters a simulation exercise based on 208 weekly observations withheld from model specification and estimation suggests that these arbitrage activities would have been profitable in practice

purchasing power parity yet again evidence from spatially separated commodity markets abstract this paper examines the empirical validity of the law of one price by exploiting the non stationarity of prices set in us dollars of varieties of wheat that are traded simultaneously in the usa rotterdam and japan we demonstrate the crucial role of transport costs in achieving cointegration long run ppp although systematic short run deviations from ppp occur we show that this does not imply profitable arbitrage opportunities jel c5 f3 g1

bivariate cointegration among european monetary system exchange rates in past research on the long run behaviour of exchange rates the possibility of cointegration among spot rates has been rejected this rejection is surprising as some exchange rates are bound by official agreements to comove over time the european monetary system ems is an example of such an officially coordinating system in this paper we extend past research by focusing on only ems rates and use potentially more powerful cointegration tests to show that ems rates are cointegrated

reputation in bargaining national football league contract negotiations michael conlin i introduction the notion of reputation has been used to explain everything from limit pricing to the chain store paradox to cooperation in the finitely repeated prisoners dilemma game robert wilson 1985 states that reputation can explain many behaviors perhaps too many it is too easy to suppose that there is an unobserved state variable called reputation that explains all that happens the better approach is to develop a well specified model in which the effects of reputation are delineated 27 wilson also discusses the difficulty of empirically testing the effects of reputation this difficulty has led researchers such as camerer and weigelt 1988 to perform controlled experiments designed to test these effects this article develops a wellspecified bargaining model in which reputation effects are analyzed a unique data set of national football league nfl player contracts allows me to empirically test the predictions of my model many bargaining games do not occur in isolation rather individuals often negotiate in several bargaining games sequentially for example a union representative often negotiates a sequence of contracts for different locals and a lawyer who represents a number of different clients in sequence may negotiate out of court settlements professional sports teams and professional athletes illustrate another example of sequential bargaining sports teams negotiate with a number of players sequentially in an effort to reach contractual agreements this article addresses the issue of reputation effects in a sequence of bargaining games reputation effects refer to an individual s actions in a bargaining game providing some information about the individual which influences his actions and his opponents beliefs about those actions in subsequent bargaining games in this manner the outcome of a bargaining game has predictive powers on the outcome of subsequent bargaining games this article presents a model in which a buyer faces a sequence of two bargaining games with different sellers the model addresses how reputation effects influence sequential bargaining games by having the buyer s valuation be positively correlated across bargaining games each bargaining game is structured as a war of attrition game where both the buyer and seller can either make a conceding offer continue negotiating or terminate negotiations at any time there are costs per unit time incurred by the buyer and seller during negotiations and their surpluses are discounted after a certain time a unique sequential equilibrium outcome is calculated from which well defined comparative static results are obtained the model is applied to nfl contract negotiations where the team is the buyer who negotiates with different players sequentially the surpluses of the buyer and seller are discounted after the start of training camp based on the commonly held belief that a player s expected performance is adversely affected by missing the start of training camp conlin 1999 finds empirical support for this belief 1 the comparative static results are empirically tested using rookie contract data of players selected in the 1986 through 1991 nfl drafts these empirical results suggest that an nfl team s contract negotiations are affected by the terms agreed to in prior contract negotiations with different players and when these terms were agreed upon the article is organized in the following manner section ii presents a brief literature review on reputation and bargaining and discusses this study s contribution section iii describes a model of two bargaining games where a single buyer negotiates with different sellers sequentially section iv discusses the nfl draft the contract negotiation process for those players drafted and nfl rookie contracts section v relates the model to nfl rookie contract negotiations section vi summarizes the nfl contract data and section vii describes empirical tests of the model s comparative static results

empirical test of a separating equilibrium in national football league contract negotiations i empirically test for a separating equilibrium in the bargaining contract of national football league nfl contract negotiations the separating equilibrium predicts that a player who delays contractual agreement signs a more lucrative contract and has positive private information on his ability level at the time of contract negotiations these predictions are tested using data on 1 873 players selected in the 1986 through 1991 nfl drafts the empirical results support the implications of the separating equilibrium

modelling the link between commodity prices and exchange rates the tale of daily data this paper examines daily data on exchange rates and the prices of three commodities traded on the winnipeg commodity exchange the temporal patterns of commodity prices and exchange rates are shown to be similar daily data are significantly non normal with garch models capturing the processes generating the data commodity prices and exchange rates are examined for cointegration using recent tests proposed by johansen and juselius 1990 currency depreciation is shown to granger cause commodity price inflation this information might be useful to central bankers concerned with reducing general price inflation through targeting commodity price inflation it also suggests that macro events have important effects on commodity markets in canada

mean variance portfolio selection of cointegrated assets abstract this paper considers the continuous time mean variance portfolio selection problem in a financial market in which asset prices are cointegrated the asset price dynamics are then postulated as the diffusion limit of the corresponding discrete time error correction model of cointegrated time series the problem is completely solved in the sense that solutions of the continuous time portfolio policy and the efficient frontier are obtained as explicit and closed form formulas the analytical results are applied to pairs trading using cointegration techniques numerical examples show that identifying a cointegrated pair with a high mean reversion rate can generate significant statistical arbitrage profits once the current state of the economy sufficiently departs from the long term equilibrium we propose an index to simultaneously measure the departure level of a cointegrated pair from equilibrium and the mean reversion speed based on the mean variance paradigm an empirical example is given to illustrate the use of the theory in practice

bargaining with two sided incomplete information an infinite horizon model with alternating offers this paper examines an infinite horizon bargaining model incorporating five features two sided incomplete information with potentially information revealing strategies an infinite horizon uncertainty concerning the potential gains from trade an illumination of interesting qualitative bargaining issues and plausible free from arbitrarily specified out of equilibrium conjectures equilibria these features motivated in the paper have powerful implications a nash equilibrium exists and is generically both unique and sequential comparative static implications of variations in the game s specifications are developed we find that natural indications of bargaining strength emerge from the model and establish the intuitive result that an increase in a player s relative bargaining strength makes that player more likely to capture the gains from bargaining

foreign exchange market efficiency and common stochastic trends abstract in a recent paper baillie and bollerslev 1989 using daily data from 1980 to 1985 identified six common stochastic trends in a vector of seven nominal exchange rates implying the existence of one cointegrating vector cointegration implies that granger causality must run in at least one direction that is at least one of the exchange rates is predictable using current available information this result has been interpreted as foreign exchange market inefficiency by many another interpretation is suggested if the stationary linear combination of spot rates proxies for a time varying risk premium in some way then these results could be explained in a rational and risk averse market this possibility is eliminated if the time series properties of the risk premium are incompatible with those of the error correction term specifically it is demonstrated that the forward risk premium is non stationary for the exchange rates that comprise the exchange rate cointegration relationship in this paper the existence of common stochastic trends in a vector of nominal exchange rates is tested over the period 1974 to 1991 the efficiency of foreign exchange markets is then tested by examining the implications of stochastic trends in the forward premium and what this means for the time series properties of a time varying forward risk premium jel f31 g14

how effective are fiscal incentives for r d a review of the evidence this paper surveys the econometric evidence on the effectiveness of fiscal incentives for r d we describe the effects of tax systems in oecd countries on the user cost of r d the current position changes over time and across different firms in different countries we describe and criticize the methodologies used to evaluate the effect of the tax system on

international stock market efficiency a non bayesian time varying model approach this article develops a non bayesian methodology to analyse the time varying structure of international linkages and market efficiency in g7 countries we consider a non bayesian time varying vector autoregressive tv var model and apply it to estimate the joint degree of market efficiency in the sense of fama 1970 1991 our empirical results provide a new perspective that the international linkages and market efficiency change over time and that their behaviours correspond well to historical events of the international financial system

the market efficiency hypothesis the case of coffee and cocoa futures this study tests the market efficiency hypothesis for coffee and cocoa futures using daily data for contracts with a maturity of 2 and 6 months the hypothesis is tested sequentially the first condition is that future spot and futures prices be cointegrated if this condition is maintained market efficiency requires the cointegrating vector to support a 0 1 restriction that can be likened to an unbiasedness condition finally market efficiency imposes zero restrictions on the parameters of the variables expressed in first differences in the specification of the error correction representation of the relationship between future spot and futures prices brenner and kroner brenner r kroner k 1995 arbitrage cointegration and testing the unbiasedness hypothesis in financial markets journal of financial and quantitative analysis 30 pp 23 42 argue that the cointegration condition is rarely met in practice they attribute this outcome to potentially non stationary net cost of carry which would make the parameters of the cointegration relation unstable it is for this reason that hansen s tests hansen b e 1992 tests of parameter instability in regressions with i 1 processes journal of business and economic statistics 10 about the stability of the parameters in cointegration regressions were used to supplement more traditional cointegration tests johansen and juselius cointegration tests johansen s juselius k 1993 testing structural hypotheses in a multivariate cointegration analysis of the ppp and the uip for uk journal of econometrics 53 could not reject cointegration for all four contracts while hansen s lc test favored cointegration only for the cocoa contracts nested and non nested testing procedures were used to test the 0 1 restriction on the cointegration vector unbiasedness was found to be robust across testing procedures however further testing about the specification of the error correction representation revealed the existence of important short run deviations from unbiasedness even though these results hold strictly for a rather limited number of contracts and commodities they are encouraging for futures markets advocates in developing countries

reputation and imperfect information abstract a common observation in the informal literature of economics and elsewhere is that is multistage games players may seek early in the game to acquire a reputation for being tough or benevolent or something else but this phenomenon is not observed in some formal game theoretic analyses of finite games such as selten s finitely repeated chain store game or in the finitely repeated prisoners dilemma we reexamine selten s model adding to it a small amount of imperfect or incomplete information about players payoffs and we find that this addition is sufficient to give rise to the reputation effect that one intuitively expects

a note on exchange rate expectations and nominal interest differentials a test of the fisher hypothesis this note tests the hypothesis that nominal interest differentials between similar assets denominated in different currencies can be explained entirely by the expected change in the exchange rate over the holding period this proposition often called the fisher open hypothesis or the hypothesis of perfect asset substitutability has been a major component of recent theories of exchange rate determination and has important implications for monetary policy 1 the fisher hypothesis differs from the covered interest parity theorem enunciated by keynes 11 while covered interest parity equates the nominal interest differential between financial centers to a known premium or discount on forward foreign exchange and is thus in principle riskless fisher parity involves risk in an essential way the two conditions are equivalent only when forward exchange rates equal expected future spot rates recent theoretical work for example that of grauer litzenberger and stehle 8 kouri 12 and frankel 6 shows that this need not be the case when market participants are risk averse thus while covered interest parity must always hold exactly in an informationally efficient asset market with no transactions costs fisher parity need not nominal interest differentials may reflect risk premia in addition to expected exchange rate movements 2 it should be emphasized at the outset that the tests conducted in this paper are really joint tests of the fisher hypothesis and a weak form of foreign exchange market informational efficiency levich 14 has argued that tests of market efficiency are always joint tests involving some hypothesized structure of normal equilibrium returns below we assume informational efficiency and instead test fisher s hypothesized arbitrage condition that nominal interest differentials equal expected percentage changes in exchange rates

foreign exchange market efficiency and cointegration in this note we examine an implication of the cointegration literature for the efficiency of foreign exchange markets in particular if foreign exchange markets are efficient then two spot exchange rates cannot be cointegrated this proposition is tested for 10 dollar bilateral exchange rates over the period january 1973 december 1985

cointegration and market efficiency abstract recently many economists have asserted that asset prices determined in efficient asset markets cannot be cointegrated we show that there is no general equivalence between the existence of arbitrage opportunities and cointegration or for that matter a lack of cointegration whether asset prices are cointegrated is a function of the relevant model we first show a convenient way to calculate the cointegrating vector based on necessary and sufficient conditions for cointegration we then examine particular cases including exchange rates interest rates and spot and forward exchange rates and asset prices with incoem flows reinvested and not reinvested jel f31

toward efficiency in the crude oil market the official opec prices of crude oil before the collapse in the oil market in the mid 1980s can be interpreted as contract prices and analysed on the basis of the theory of futures or forward markets this paper uses the generalized method of moments estimation technique to test for efficiency in the relationship between the official prices and the ex post spot prices at the time of delivery efficiency is rejected for the sample period 1978 1985 as a whole but evidence is found of improvements over time further the gmm wald and hansen tests although asymptotically equivalent are shown to differ greatly when applied to a small sample of monthly oil price data

diversification strategy and r d intensity in multiproduct firms this study provides empirical evidence that choice of diversification strategy systematically affects r d intensity in large multiproduct firms research and development intensity in dominant busin

using acquisitions to access multinational diversity thinking beyond the domestic versus cross border m a comparison prior research provides ambiguous results regarding the performance of international acquisitions drawing on a survey of 248 acquisitions we find that acquirers enhance their capabilities when they buy a target with a multinational geographic scope a financial event study uses a subsample of the acquisitions to show that the financial markets also value targets multinational scope both surveys and stock market based studies suggest that targets with access to heterogeneous resource environments provide the acquirer with greater potential for capability enhancement and financial performance in contrast simply acquiring firms across borders has less influence on post acquisition outcomes the study demonstrates greater value of the attributes of the target rather than of international expansion alone thus the multinational scope of the target is more likely to account for the resource diversity provided by the target than the country of origin of the target per se the study changes the emphasis on multinational acquisitions by shifting the focus from foreign market expansion country level emphasis to accessing geographically distributed resources that are embedded in target firms firm level emphasis

cointegration market integration and market efficiency abstract this paper uses a standard dynamic general equilibrium asset pricing model to study the relationship among the concepts of efficient markets integrated markets and cointegrated prices within this setting we show that these concepts are independent of one another and any zero one two or three of these characteristics can emerge in equilibrium depending upon taste endowment and technology parameters in particular the results of tests of cointegration among asset prices have no implications about market efficiency or market integration without additional restrictions on the economy or economies

a note on cointegration and international capital market efficiency abstract in a recent paper in the jimf crowder 1994 claims that evidence that spot exchange rates are cointegrated and forward premiums are non stationary implies international capital markets are not efficient this note argues that the cointegration properties of spot exchange rates are independent of the efficiency or inefficiency of financial markets

knowledge transfer in international acquisitions this paper reports on a multimethod study of knowledge transfer in international acquisitions using questionnaire data we show that the transfer of technological know how is facilitated by communication visits meetings and by time elapsed since acquisition while the transfer of patents is associated with the articulability of the knowledge the size of the acquired unit and the recency of the acquisition using case study data we show that the immediate post acquisition period is characterized by imposed one way transfers of knowledge from the acquirer to the acquired but over time this gives way to high quality reciprocal knowledge transfer

foreign exchange market efficiency revisited abstract the cointegration of spot rates is neither a necessary nor a sufficient condition to account for the lack of foreign exchange market efficiency instead crowder crowder w 1994 1996 j int money finance 13 551 564 15 661 664 and engel engel c 1996 j int money finance 15 557 560 claimed that the stationarity of the forward premium is crucial to the hypothesis of market efficiency in this paper we employ the panel unit root test of im et al to examine the stationarity of forward premia and interest differentials among nine oecd countries we reject the unit root null for both the time series of the forward premium and interest differential which in turn supports the hypothesis of foreign exchange market efficiency

arbitrage cointegration and testing the unbiasedness hypothesis in financial markets we use a no arbitrage cost of carry asset pricing model to show that the existence of coin tegration between spot and forward futures prices depends on the time series properties of the cost of carry we argue that the conditions for cointegration are more likely to hold in currency markets than in commodity markets explaining many of the empirical results in the literature we also use this model to demonstrate why the forward rate forecast error the basis and the forward premium are serially correlated and to develop econometric tests ofthe unbiasedness hypothesis sometimes called the simple efficiency hypothesis in various financial markets the unbiasedness hypothesis is so prevalent in the finance liter ature that many tests for it have been developed we examine four of the common tests and and use our cointegration results to demonstrate why each of these tests should reject the null hypothesis of unbiasedness we find strong support for our hypothesis in the existing empirical literature

endogenous r d and foreign direct investment in international oligopolies abstract this paper examines the impact of the firms mode of foreign expansion on the incentive to innovate as well as the effects of r d activities and technological spillovers on the firms international strategy we consider a two country imperfect competition model where the firms face three different type of decisions how to expand abroad how much to spend on r d and how much to sell in each market market structure is endogenously determined as the equilibrium solution of a three stage game it is shown that the firm that invests more in research is the one which is a mne while the rival is an exporter the results indicate that there is a positive relationship between multinational expansion and r d investment and that in turn investment in research increases the likelihood of multinational expansion the value of the spillover parameter can also be an important determinant of firms international strategy

cointegration among southeast asian and japanese currencies preliminary evidence of a yen bloc abstract financial integration in asia is assessed in this paper by examining the time series stochastic behavior and cointegration in a set of five asian currencies the japanese yen jy hong kong dollar hk malaysian ringgit mr philippines peso pp and the singapore dollar sd for the last eight years of the decade of the 1980s significant non stationarity deviations from normality and the presence of unit roots were documented for each currency furthermore in contrast to the findings for developed country liquid currencies these five currencies were found to be cointegrated these findings have important implications for understanding the expanding international role of the japanese yen and the nature of international financial integration in asia as well as for developing hedging strategies for investments and cash flows denominated in these southeast asian currencies

measuring global money market interrelationships an investigation of five major world currencies abstract this paper extends the study of global money market integration in two primary directions first a technique which combines stationarity and cointegration tests as a basis for constructing an error correction model is applied to assess the existence of long run equilibrium relationships between money market series second analysis for the increasingly significant asian offshore markets of singapore and hong kong is added to traditional european and national markets analysis major findings are 1 the error correction model is an appropriate technique for identifying causality relationships and 2 major domestic markets and included offshore markets are partially segmented

a state space forecasting approach to optimal intertemporal cross hedging cross commodity hedging between fishmeal and soybean meal is investigated the approach uses successively updated out of sample forecasts to approximate subjective price expectations and forecast error variance covariance matrices to measure risk forecasts are generated by state space models of vector valued time series in a stationary environment uncertainty reduces to the difference between the historical autocovariance of the random process and the variance covariance of out of sample forecasts results indicate that weakly risk averse agents can increase average marketing returns within acceptable risk levels by combining information from price forecasting models with an appropriate hedging strategy

cointegration based tests of daily foreign exchange market efficiency abstract an immediate implication of cointegration is the existence of granger causal orderings among cointegrated series this implies that asset prices determined in a weakly efficient market cannot be cointegrated this proposition is tested using daily data for 18 foreign currencies tests are conducted for both pairwise combinations of currencies and higher order systems no significant evidence of cointegration among exchange rates is found

technological effects of m as in spanish manufacturing this article explores whether mergers and acquisitions m as generate differentiated impacts on the acquiring firms r d expenditures patents granted and product innovations considering m as as a way of foreign expansion we examine whether the technological effects differ between domestic and foreign owned acquirers assuming that the effects on the technological efforts and performance may differ across industries the availability of statistical information for a stable sample of manufacturing companies in spain during the 1990s allows us to follow a dynamic approach to the issue our findings confirm the existence of differentiated effects on technological inputs and outputs across industries as well as diversity between domestic and foreign owned firms involved in m as copyright 2009 the author 2009 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

the effect of national culture on the choice of entry mode characteristics of national cultures have frequently been claimed to influence the selection of entry modes this article investigates this claim by developing a theoretical argument for why culture should influence the choice of entry two hypotheses are derived which relate culture to entry mode choice one focusing on the cultural distance between countries the other on attitudes towards uncertainty avoidance using a multinomial logit model and controlling for other effects the hypotheses are tested by analysing data on 228 entries into the united states market by acquisition wholly owned greenfield and joint venture empirical support for the effect of national culture on entry choice is found

mean variance asset liability management cointegrated assets and insurance liability abstract the cointegration of major financial markets around the globe is well evidenced with strong empirical support this paper considers the continuous time mean variance mv asset liability management alm problem for an insurer investing in an incomplete financial market with cointegrated assets the number of trading assets is allowed to be less than the number of brownian motions spanning the market the insurer also faces the risk of paying uncertain insurance claims during the investment period we assume that the cointegration market follows the diffusion limit of the error correction model for cointegrated time series using the markowitz 1952 mv portfolio criterion we consider the insurer s problem of minimizing variance in the terminal wealth given an expected terminal wealth subject to interim random liability payments following a compound poisson process we generalize the technique developed by lim 2005 to tackle this problem the particular structure of cointegration enables us to solve the alm problem completely in the sense that the solutions of the continuous time portfolio policy and efficient frontier are obtained as explicit and closed form formulas

the causal relationships between equity indices on world exchanges the engle and granger cointegration analysis and granger causality tests are applied to monthly time series of nine major stock market indices over the period january 1982 to february 1991 to examine for causal linkages the empirical results indicate that there is adequate evidence to refute the notion of informationally efficient stock markets

technological capabilities of countries firm rivalry and foreign direct investment studies on foreign direct investment fdi have concentrated on sectoral effects but rarely on country patterns in this paper we use u s department of commerce data to identify the largest country shares of new fdi entries into the u s and the technological motivations for their investments based on the technological intensities of major investing countries in manufacturing industries we conclude that technological industries attract a disproportionate share of fdi entries however the acquisition of u s technology is not a major motivation the findings indicate that industry rivalry is an important dimension to understanding fdi

tests of rational expectations and no risk premium in forward exchange markets abstract this paper tests the simple efficiency hypothesis i e that traders have rational expectations and charge no risk premium in the forward exchange market it uses a statistical procedure which is consistent under a large class of heteroscedasticity and a set of data which takes into account the institutional features of the forward exchange market the results show that this procedure leads to stronger rejections of the simple efficiency hypothesis than do procedures using the standard assumption of homoscedasticity

accumulating technological competence its changing impact on corporate diversification and internationalization recent studies have suggested that firm specific technological competence may be diversified and internationalized we show that increases in competence increased corporate technological diversification until the early 1970s and then again more recently however a new interrelationship has now emerged between the accumulation diversification and internationalization of technological competence due to the formation of internationally integrated networks within firms the empirical analysis consists of a dynamic cross section model applied to the corporate patenting in the us of 166 of the largest european and us industrial firms from 1901 to 1995 copyright 2000 by oxford university press

cointegration and predictability of asset prices abstract this article argues that whatever concerns one might have about the identification of a cointegrating relationship with market inefficiency cointegration tests can still be usefully employed to investigate the predictability of asset prices we examine the case of n dimensional systems and show that the standard assumption made in the literature that cointegration implies predictability of all n asset prices is not valid in the presence of r cointegrating vectors only r prices are predictable and standard wald or lm tests carried out within johansen s maximum likelihood ml framework can be used to establish for which prices unpredictability does not hold similarly one can distinguish between joint unpredictability in the short and long run when asset prices are driven by fundamentals

a re examination of an irish popularity function this paper focuses on replication in the sense of herrnson 1995 it re examines the only study of an irish popularity function borooah and borooah 1990 in the light of recent developments in econometric methodology and in irish politics using error correction models the analysis provides an alternative account of the relationship between economics and government popularity to that provided by borooah and borooah the findings indicate that the short term impact of the economy is weaker than and different from that suggested by them economic influences at most set the general level of government approval rather than determine the quarter by quarter fluctuations

manufacturing output and labor productivity further evidence for the united states abstract formulating the so called verdoorn s law in terms of cointegration and granger causality between manufacturing output and labor productivity quaterly u s data for 1950 1988 are used to test the pattern implied by the law evidence is lacking to support the predicted pattern

greenfield vs acquisition the strategy of japanese investors in the united states multinational firms can enter a foreign market by taking over existing local firms acquisitions or by setting up new ventures greenfield investments surprisingly there has been limited empirical work on this topic this paper examines the determinants of this choice by looking at japanese entries into the united states by focusing on firms of one country entering a single market we are able to separate the impact of a firm s strategy from that of the characteristics of the target industry or country this paper tests simultaneously a number of competing hypotheses the results suggest that acquisitions are used by japanese investors with weak competitive advantages while investors with strong advantages find that greenfield investments are a more efficient way to transfer these advantages to the u s acquisitions are also chosen to enter industries with either very high or very low growth rates when entry is at a scale that is large relative to the parent and when entry is into a different industry the japanese investor s previous experience of the u s market its financial situation and its status as a follower in an oligopolistic industry have no statistically significant impact on the entry mode neither do u s stock market conditions

are foreign exchange markets really efficient asset prices determined in a weakly efficient market cannot be cointegrated because cointegration implies a granger causal link however strong evidence of cointegration in currency markets is found using johansen s multivariate procedure on london daily closing rates for the six major currencies in dollar terms an error correction based trading model is implemented

corporate diversification coherence and economic performance within the diversification literature the concept of corporate coherence has been referred to as the ability of the firm to generate and explore synergies of various types however the empirical studies have insofar provided only approaches taking explicitly into account the product market side of the phenomenon the present paper operationalizes the concept of corporate coherence as a dynamic interconnectedness between the company s technological competencies and its downstream activities it also provides some further empirical evidence on the widely discussed relationship between corporate diversification and performance specifically it offers some albeit rather weak evidence that economic performance is positively influenced not by the degree of diversification per se but by the ability of the company to increase its corporate coherence copyright 2004 oxford university press

bargaining under two sided incomplete information the unrestricted offers case chatterjee and samuelson chatterjee k l samuelson 1987 bargaining with two sided incomplete information an infinite horizon model with alternating offers rev econ stud 54 175 192 recently examined a noncooperative game theoretic bargaining model with two sided incomplete information and an infinite horizon results were obtained from the model with the help of restrictions on agents strategies this paper examines the model without these restrictions by doing so we will gain some insight into whether these results are robust in the sense that they do not depend upon the special structure of the model and hence might provide useful theoretical foundations for applied work we find that the basic results generalize as with the restricted model we find an equilibrium in which bargaining will proceed for a finite but endogeneously determined number of stages a terminal condition on the equilibrium sequence of agents beliefs determines the properties of the equilibrium and allows compar

tests of exchange market efficiency fragile evidence from cointegration tests abstract several recent papers have employed engle and granger 1987 cointegration tests to determine whether or not markets are efficient we use a new test for cointegration due to johansen 1988 to examine market efficiency with respect to the us dollar exchange rates for canadian japanese and west german currencies the fragile nature of the test indications suggests that cointegration methodologies cannot be relied upon to provide reliable evidence on market efficiency

testing the hypothesis of market efficiency in the taiwan us forward exchange market since 1990 this article examines the applicability of the hypothesis of market efficiency in taiwan s foreign exchange market using daily data instead of linear regression based models we consider the possibility that the true data generating process may come from two different distributions and we employ the markov switching approach to analyse this from the results of the two state markov switching model we define state 1 as the efficient state and state 2 as the inefficient one only the 30 day forward rate is able to differentiate between the two states based on the unconditional probabilities from the markov switching model we also find that the 30 day forward rate has a 70 probability in the efficient state which indicates that 70 of all speculators fully extract information when predicting future spot rates while 30 of all investors do not

on the specification of granger causality tests using the cointegration methodology the application of granger causality tests to macroeconomic time series frequently necessitates filtering the data to induce stationarity if the relevant variables are cointegrated granger causality tests are misspecified if applied in standard vector autoregressive format to differenced data a common application is illustrated

the impact of m a on the r d process an empirical analysis of the role of technological and market relatedness abstract using information on 31 in depth cases of individual m a deals we show that technological and market relatedness between m a partners distinctly affects the inputs outputs performance and organisational structure of the r d process while the findings in the literature on the effect of m a on r d are quite mixed we can sharpen results by analysing data at the level of the r d process this comes at the price of a smaller sample and more qualitative data for which caution in the interpretation is necessary m a between partners with ex ante complementary technologies result in more active r d performers after the m a in sharp contrast when merged entities are technologically substitutive they significantly decrease their r d level after the m a moreover r d efficiency increases more prominently when merged entities are technologically complementary than when they are substitutive these two findings on the r d level and the performance support the scope economy effect of m a on the one hand and reject the scale economy effect of m a on the other next for cases in which partners were active in the same technological fields before the m a the reduction of r d is more prominent while the r d efficiency gain is smaller if merged entities were rivals in the product market prior to their merger than if they were non rival this suggests that rival firms reap little technology gains from mergers

long and short term dynamic causal transmission amongst international stock markets abstract this paper investigates the dynamic causal linkages amongst nine major international stock price indexes in order to gauge the causal transmission patterns we employ very recent methods of i vector error correction modeling and ii level var modeling with possibly integrated and cointegrated processes advocated by i toda and phillips econometrica 61 1993 1367 and ii toda and yamamoto j econometrics 66 1995 225 respectively the paper illustrates how such methods may be appropriately augmented in a compatible fashion to unearth previously unfounded linkage properties inherent amongst a system of stock price indexes in particular we demonstrate that previous research by using ordinary difference vars ignored an important component of linkages displayed purely over the long run this untapped evidence essentially provides robust and very useful information to international financial analysts and investors at a substantive level results of this study tend to support the contention offered by several studies in the literature of significant interdependencies between the established oecd and the asian markets and also the leadership of the us and uk markets over the short and long run the levels var however illustrate the japanese market s influence as an additional long run leader findings seem to be plausible given that these three markets us uk and japan have consistently contributed over 75 of global stock market capitalization over the major part of the sample under consideration at a methodological level this analysis also provides a primer for the wealth of applied financial econometric research focusing on dynamic causal inference which involve systems containing possibly integrated and cointegrated processes

interdependence and dynamics in currency futures markets a multivariate analysis of intraday data abstract this paper investigates long term interdependencies and short term dynamics in currency futures utilizing intraday data for six major foreign currencies the british pound deutsche mark swiss franc australian dollar canadian dollar and japanese yen lack of cointegration ci among the foreign exchange futures is found to be the prevailing mode of behavior but some temporary deviations from the no ci condition are detected there is a notable overlap between detected ci relationships and the timing of policy changes world events and regime shifts indicating that the observed cis are event driven the robustness of the ci results is checked with respect to variations in the model lag structure data period sample horizon and currency basket grouping impulse response functions irfs reveal that currency markets are in general efficient and absorb new information within the day the interdependence among currencies is found to be asymmetric

common stochastic trends between forward and spot exchange rates abstract the common trend analyses between the forward rate f t and the corresponding future spot rate of the same currency s t 1 have raised several issues notably the sensitivity of the cointegrating relation to a constant term and lag lengths and the non stationarity of the risk premium this paper addresses these issues more rigorously using the daily exchange rate of the pound sterling vis a vis five major currencies viz the canadian dollar french franc german mark japanese yen and us dollar the appropriate deterministic term in the cointegrating space is identified through empirical tests a robust cointegrating relation is found between f t and s t 1 however the hypothesis of unbiasedness of forward rate could not be sustained an alternative measure of risk premium is suggested and its stationarity is confirmed

common nonstationary components of asset prices abstract portfolio separation in a multi period general equilibrium context implies that asset prices are collinear in economies that do not exhibit separation but that move close to separation approximate collinearity or cointegration emerges as a statistical model of actual data a new test for cointegration is proposed it is based on time series canonical correlation analysis and solves the problem of unidentified parameters under the null hypothesis and of identification of the cointegrating vectors when more than two time series are investigated an empirical analysis of prices of five size based portfolios and five industry based portfolios of common stock reveals substantial evidence of cointegration

does comovement among exchange rates imply market inefficiency abstract this paper argues that contrary to what has been reported in the empirical literature previously cointegration between pairs of exchange rates does not necessarily rule out informational efficiency in currency markets the basic reason is that market efficiency does not rule out predictable exchange rate movements but only rules out arbitrage opportunities from predictable exchange rate movements as the usual parity conditions dictate

cointegration and dynamic time series models abstract this paper provides a survey of some of the recent developments in the field of econometric modelling with cointegrated time series in particular we describe the testing and estimation procedures which have become increasingly popular in the recent applied literature in addition to the two stage procedure proposed by engle and granger we consider extensions to the modelling of dynamic models with cointegrated variables such as the estimation of models with multiple cointegration vectors simultaneous systems models with seasonally integrated and cointegrated variables furthermore we illustrate the practical application of the techniques describes in the paper by means of a tutorial data set

long term relationships of major macro variables in a resource related economic model of australia a cointegration analysis abstract the paper reports the results of a simple cointegration analysis applied to bivariate causality models using data on resource output oil prices terms of trade current account and output growth to investigate the long term relationships in the sense of granger among these major macroeconomic aggregates in a resource related economic model of australia for the period 1960 90 the empirical evidence indicates that these five macro variables as formulated in our model are not random walks in addition resource production and oil prices are significantly cointegrated and they are also significantly cointegrated with the current account terms of trade and economic growth these findings provide support to the long term adjustments foundation of our resource related model

a long run view of the european monetary system abstract this papaer analyzes the exchange rates and consumer price indices of six countries participating in the european monetary system ems during the entire period of floating exchange rates the analysis shows that most of these real exchange rates have unit roots even when one allows for the possibility of a structural break at the time of the advent of the ems further proces and exchange rates are not co integrated during the ems period the data suggest that the 12 realignments of the ems have not served fully too offset the member countries inflation differentials

cointegration and stock prices the random walk on wall street revisited abstract one of the more famous and empirically regular instances of unit roots occurs in stock price series where they are consistent with rational expectations and efficient markets under certain assumptions in this paper we investigate the dynamic behavior of five stock prices over the volatile period from january 1972 through december 1979 finding that the series are cointegrated with one dominant common trend a component with an estimated root of 0 95 in addition we find a lesser trend and two complex roots in the cycle model these findings are validated by out of sample forecasts beginning in january 1980 in addition to mean squared error criteria the forecasts are evaluated nonparametrically in two separate applications of a test due to henriksson and merton

qualitative forecast evaluation a comparison of two performance measures agricultural producers and marketers often have access to several sets of forecasts on the same series decision makers must be able to evaluate the relative accuracy of the forecasts the ability to evaluate whether a series will move up or down is important for series related to futures options other asset prices and situations where processes can be modified according to changing economic conditions a measure of qualitative forecast accuracy from naik and leuthold is compared to a probability based measure developed by henriksson and merton the henriksson merton measure is shown to provide additional and more accurate information concerning a model s qualitative forecasting ability

covered interest parity a high frequency high quality data study profitable deviations from covered interest parity cip represent riskless arbitrage opportunities and so indicate market ineffic iency previous empirical work on cip uses noncontemporaneously sampl ed data and reports mixed results this paper uses high frequency te n minute high quality data gathered personally by the author in th e london foreign exchange market to test the cip condition the resu lts overwhelmingly support the market efficiency hypothesis copyright 1987 by the review of economic studies limited

some further evidence on the law of one price the law of one price still holds international trade models often postulate the existence of a representative price i e the price which prevails at all markets this is known as the law of one price in this paper the law of one price is tested for seven commodities among four countries by explicitly considering transaction costs the empirical evidence suggests that in most cases the law of one price cannot be rejected asa maintained hypothesis furthermore for the remaining cases transaction costs seem to cause the failure

common stochastic trends in a system of exchange rates univariate tests reveal strong evidence for the presence of a unit root in the univariate time series representation for seven daily spot and forward exchange rate series furthermore all seven spot and forward rates appear to be cointegrated that is the forward premiums are stationary and one common unit root or stochastic trend is detectable in the multivariate time series models for the seven spot and forward rates respectively this is consistent with the hypothesis that the seven exchange rates possess one longrun relationship and that the disequilibrium error around that relationship partly accounts for subsequent movements in the exchange rates a general consensus has emerged in recent years that many macroeconomic time series such as gnp consumption expenditures disposable income etc can be characterized by a stochastic trend model in particular nelson and plosser 22 described this property as one of being difference stationary so that the first difference of a time series is stationary an alternative trend stationary model where a stationary component is added to a deterministic trend term has generally been found to be less appropriate 1 similarly it has long been recognized that many financial time series such as foreign exchange rates are nonstationary e g in meese and singleton 21 the issue of nonstationary is not merely a statistical curiosity but has several important implications for the modeling of exchange rates for instance many models of exchange rate determination under rational expectations require stationarity assumptions when solving out the expected future values of the fundamentals further there has been some controversy over the appropriate transformations to use when conducting tests of whether the forward rate is an unbiased and efficient predictor of the future spot exchange rate 2 some authors e g frenkel 11 12 have conducted tests in levels while geweke and feige 14

option valuation with co integrated asset prices abstract this paper investigates theoretical and practical aspects of options that are based upon two or more assets which are co integrated for this purpose a new discrete time model of asset prices is developed a model featuring both the co integration property as well as stochastic volatilities using a garch equilibrium based option pricing approach it is shown that when volatilities are deterministic the option prices do not depend on the co integration parameters except for the mis specification effect as to the manner in which the volatilities are estimated however with stochastic volatilities the option prices explicitly depend upon the co integration parameters in order to understand these results better this paper also examines a continuous time diffusion limit of the asset price system and empirically studies the co integration effect using spread options based upon the s p500 and the nasdaq100 these numerical results suggest that consideration of co integration can substantially alter the value delta and vega of a spread option