forward foreign exchange rates and risk premia a reappraisal abstract analysis of the relationship between the forward exchange rate and actual exchange rate realizations has been interpreted by many researchers as evidence of the existence of time varying risk premia we interpret the negative covariation between the forward premium and the depreciation in the spot exchange rate as being consistent with an optimal least squares forecast of the future exchange rate based on two highly correlated forecasts the spot rate and the forward rate our results show that when the contemporaneous spot exchange rate is replaced by alternative filters the efficiency of the forward rate is not rejected although the empirical tests do not constitute unequivocal rejection of the hypothesis of time varying risk premia they do demonstrate that an alternative and economically plausible reason exists for previous results

a comparison of alternative covariance matrices for models with over lapping observations abstract this paper investigates the relative performance of alternative covariance matrices for models with over lapping observations commonly used in the finance literature the alternative covariance matrices used are those of hansen 1982 newey and west 1987 bartlett and quadratic spectral qs weights and andrews and monahan 1992 qs weights all matrices produce standard errors which are too small yielding empirical size probabilities above their corresponding theoretical values even in large samples empirical examples such as testing efficiency in the foreign exchange market and mean reversion in stock prices show that the choice of covariance matrix can affect the outcome of a hypothesis test

forecasting the exchange rate a monetary or random walk phenomenon abstract this paper evaluates the forecasting accuracy of monetary and random walk models of the exchange rate instrumental variable estimates of the simple monetary model are not supported by the data while the full information maximum liklihood estimates of its rational expectations counterpart are the rational expectations monetary model is operationalized using the results of hansen and sargent 1980 and flavin 1981 and box jenkins time series techniques monthly data on the us and uk economics over the recent flexible exchange rate period serve as the case study

women s access to credit does it matter for household efficiency studies that assess the impact of credit constraints on farm households efficiency have largely used the household as the unit of analysis this can be problematic when there are gender based market imperfections and asymmetries in how rights resources and responsibilities are distributed within the household constraints on women matter in addition to the efficiency loss associated with the husbands credit constraints when women are unable to meet their needs for capital their households experienced an additional 11 drop in efficiency this suggests that there are efficiency based arguments for enhancing women s access to capital and that studies based only on the household s head may significantly underestimate the true economic impact of credit constraints copyright 2008 oxford university press

short run forecasting of the euro dollar exchange rate with economic fundamentals abstract we propose a fundamentals based econometric model for the weekly changes in the euro dollar rate with the distinctive feature of mixing economic variables quoted at different frequencies the model obtains good in sample fit and more importantly encouraging out of sample forecasting results at horizons ranging from one week to one month specifically we obtain statistically significant improvements upon the hard to beat random walk model using traditional statistical measures of forecasting error at all horizons moreover our model obtains a great improvement when we use the direction of change metric which has more economic relevance than other loss measures with this measure our model performs much better at all forecasting horizons than a naive model that predicts the exchange rate as an equal chance to go up or down with statistically significant improvements

women as policy makers evidence from a randomized policy experiment in india this paper uses political reservations for women in india to study the impact of women s leadership on policy decisions since the mid 1990 s one third of village council head positions in india have been randomly reserved for a woman in these councils only women could be elected to the position of head village councils are responsible for the provision of many local public goods in rural areas using a dataset we collected on 265 village councils in west bengal and rajasthan we compare the type of public goods provided in reserved and unreserved village councils we show that the reservation of a council seat affects the types of public goods provided specifically leaders invest more in infrastructure that is directly relevant to the needs of their own genders

trader see trader do how do small fx traders react to large counterparties trades abstract we show that information about the counterparty of a trade affects the future trading decisions of individual traders the effect is such that traders tend to reverse their order flow in line with the better informed counterparties informed traders primarily incorporate their own private as well as publicly available information into prices whereas uninformed traders mainly magnify the effect of the informed this pattern of interaction among traders extends to different order types traders treat their own and others market orders as more informative than limit orders

global microstructures the virtual societies of financial markets using participant observation data interviews and trading transcripts drawn from interbank currency trading in global investment banks this article examines regular patterns of integration that characterize the global social system embedded in economic transactions to interpret these patterns which are global in scope but microsocial in character this article uses the term global microstructures features of the interaction order loosely defined have become constitutive of and implanted in processes that have global breadth this study draws on schutz in the development of the concept of temporal coordination as the basis for the level of intersubjectivity discerned in global markets this article contributes to economic sociology through the analysis of cambist i e trading markets which are distinguished from producer markets and by positing a form of market coordination that supplements relational or network forms of coordination

patterns in three centuries of stock market prices this article applies autoregression and rescaled range statistics to very long stock market series to test the hypothesis that long term temporal dependencies are present in financial data for the annual capital appreciation returns to the london stock exchange evidence of persistence in raw returns greater than five years and of mean reversion in deviations from rolling twenty year averages is found similar patterns are observed for the new york stock exchange however they are not significant at traditional confidence levels copyright 1993 by university of chicago press

overinvestment and macroeconomic uncertainty evidence from renewable and non renewable resource firms abstract investment is an inherent component of business activities however what if firms invest more than they should this study examines this phenomenon which is dubbed as overinvestment among resource firms as induced by the business cycle and macroeconomic uncertainties the analysis is conducted using unbalanced panel data drawn from 584 resource companies across 32 countries covering 1986 to 2017 in four resource sectors 1 alternative energy 2 forestry and paper 3 mining and 4 oil and gas producers the results indicate that the forestry and paper sector overinvests relative to the standard investment level predicted by the investment function regardless of the sample period while the alternative energy sector tends to underinvest also many emerging economies including brazil china india indonesia russia and south korea are found to have overinvested over the last three decades or so in addition the results suggest that commodity price inflation plays a more important role in inducing firms overinvestment than commodity price uncertainty it is also found that the home country s business cycle significantly affects overinvestment with the sign alternating from negative to positive after the global financial crisis furthermore the finding also shows no significant relationship between global geopolitical risk and overinvestment but a significantly positive relationship is found between global economic and country level governance policy uncertainties and overinvestment lastly the results suggest that the effect of overinvestment on firm performance after three years is positive especially for firms in the mining sector

is the investment uncertainty relationship nonlinear an empirical analysis for the netherlands we examine the investment uncertainty relationship for a panel of dutch non financial firms the system generalized method of moments gmm estimates suggest that the effect of uncertainty on investment is nonlinear for low levels of uncertainty an increase in uncertainty has a positive effect on investment while for high levels of uncertainty an increase in uncertainty lowers investment this result is in line with a number of theoretical studies but has never been documented empirically

financial inclusion and poverty a tale of forty five thousand households abstractusing a new nationally representative survey data covering approximately 45 000 indian households we examine the effects of financial inclusion on poverty we construct a multidimensional

the use of flow analysis in foreign exchange exploratory evidence abstract this paper provides questionnaire evidence on the role of flow analysis for professional traders and fund managers this evidence suggests that besides fundamental information and technical analysis the analysis of flows provides an independent third type of information for professionals the view that flows can be used to learn about fundamentals is not consistent with the data instead evidence indicates that flows more likely provide insight into semi fundamental private information

why don t the poor save more evidence from health savings experiments using data from a field experiment in kenya we document that providing individuals with simple informal savings technologies can substantially increase investment in preventative health and reduce vulnerability to health shocks simply providing a safe place to keep money was sufficient to increase health savings by 66 percent adding an earmarking feature was only helpful when funds were put toward emergencies or for individuals that are frequently taxed by friends and relatives group based savings and credit schemes had very large effects

asymmetric information and options in an extension of the kyle 1985 model of continuous insider trading it is shown that asymmetric information can make it impossible to price options by arbitrage even when an option would appear to be redundant its introduction into the market can cause the volatility of the underlying asset to become stochastic this eliminates the potential for dynamically replicating the option the change in the price process of the asset reflects a change in the information transmitted by volume and prices when the option is traded article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

the influence of fundamentals on exchange rates findings from analyses of news effects as we survey the literature of macroeconomic news in the foreign exchange market we can by now look back on nearly 30 years of research the first studies which analysed news effects on exchange rates were established in the early 1990s see for example dornbusch almost at the same time meese and rogoff published their influential paper revealing the forecasting inferiority in exchange rates of structural models against the random walk this finding has shocked the pillars of exchange rate economics and thus cast general suspicion on research focusing on fundamentals in this field the eventual rising popularity of event studies can partly be attributed to the re establishment of the raison d etre of exchange rate economics this work focuses on systematically surveying this literature with particular respect to its primary goal i e shedding light on the analytical value of fundamental research thus its major findings are first fundamental news does matter whereas non fundamental news matters to a lesser degree second news influences exchange rates via two separated channels i e incorporating common information into prices directly or indirectly based upon order flow third with a few exceptions the impact of fundamental news on exchange rates is fairly stable over time

long horizon mean reverting stock prices revisited this paper reexamines long horizon stock returns and finds that previous work overstates the evidence of mean reversion the overstatement is largely due to the implicit weighting of ordinary least squares tests which place more weight on the depression and world war ii observations which have both large error variances and stronger mean reverting tendencies additionally the reliance on asymptotic statistics and the improper focus on only the most negative estimates of mean reversion contribute to the overstatement using generalized least squares randomization tests on the 1926 to 1987 period the random walk cannot be rejected for value or equally weighted real returns at any of 10 return horizons or by joint tests over all 10 horizons simultaneously additionally the random walk cannot be rejected for the extended 1871 to 1987 period

conditional heteroscedasticity in time series of stock returns evidence and forecasts this article presents new evidence about the time series behavior of stock prices daily return series exhibit significant levels of second order dependence and they cannot be modeled as linear white noise processes a reasonable return generating process is empirically shown to be a first order autoregressive process with conditionally heteroskedastic innovations in particular generalized autoregressive conditional heteroskedastic garch 1 1 processes fit to data very satisfactorily various out of sample forecasts of monthly return variances are generated and compared statistically forecasts based on the garch model are found to be superior copyright 1989 by the university of chicago

the labor market effects of sex and race discrimination laws westudytheeffectsofstatesexandracediscriminationlawsthatwerepassedprior to federal antidiscrimination legislation state sex discrimination laws targeted discrimination in pay only because an equal pay constraint raises the relative price of female labor we would expect the relative employment of females to decline we find robust evidence that state equal pay laws for women reduced relative employment of both black women and white women we also find some evidence of positive effects of race discrimination laws on earnings of blacks relative to whites although no evidence of employment effects jel j15 j16 j18 j23 i introduction public policies to narrow the gaps in labor market outcomes between men and women and between whites and minorities have a long and controversial history two pieces of federal legislation stand out as perhaps the most significant such policies the first was the equal pay act of 1963 which requires equal pay for equal work noting some exceptions but explicitly prohibiting a worker s sex as one of them the second was title vii of the civilrightsactof1964 makingitillegaltodiscriminate in hiring discharge compensation and so on on the basis of race color religion sex or national origin two other important landmarks in the evolution of these policies at the federal level were amendments to title vii embodied in the equal employment opportunity act eeoa of 1972 which expanded coverage and increased the enforcement powers of the equal employment opportunity commission eeoc and executive orders 10925 1961 11246 1965 and 11375 1967 which laid the groundwork for affirmative action although the phrase has its origins in title vii 1

real exchange rates and macroeconomics a selective survey the paper discusses real exchange rate issues of industrial and of developing countries for real exchange rates among the key industrial countries we ask what is the best conceptual framework to shed light on this question we look at alternative theoretical approaches and at empirical evidence on the relation among interest rates expectations and depreciation the discussion of developing countries real exchange rates focuses on the link between real exchange rates real wages and the profitability of capital the model highlights the discrepancy between the mobility of capital including in the long run physical capital and

women empowerment and economic development women empowerment and economic development are closely related in one direction development alone can play a major role in driving down inequality between men and women in the other direction empowering women may benefit development does this imply that pushing just one of these two levers would set a virtuous circle in motion this paper reviews the literature on both sides of the empowerment development nexus and argues that the interrelationships are probably too weak to be self sustaining and that continuous policy commitment to equality for its own sake may be needed to bring about equality between men and women

the foreign exchange market a random walk with a dragging anchor this paper explores some anomalies in the foreign exchange market it is hard to find evidence of either short term overshooting or of longer term reversion to an equilibrium the forward exchange rate contains virtually no information on future spot rates discussions with practitioners indicate that longer term speculation based on fundamentals is strictly limited and survey data and other evidence suggest that expectations and speculation are based on a variety of models the interplay between speculation based on fundamentals and on a random walk or chartist approach influences the outcome this endorses the prior model of j a frankel and k a froot copyright 1988 by the london school of economics and political science

using survey data to test standard propositions regarding exchange rate expectations survey data provide a measure of exchange rate expectations superior to the forward rate in that no risk premium interferes we estimate extrapolative adaptive and regressive models of expectations static or random walk expectations and bandwagon expectations are rejected current appreciation generates the expectation of future depreciation because variables other than the contemporaneous spot rate receive weight in comparing expectations to the process governing the spot rate we find statistically significant bias no variable is as ubiquitous in international financial theory and yet as elusive empirically as investors expectations regarding exchange rates in the past expectations have been modeled in an ad hoc way often by using the forward exchange rate there is however a serious problem with using the forward discount as the measure of the expected change in the exchange rate in that the two may not be equal the gap that may separate the forward discount and expected depreciation is generally interpreted as a risk premium most of the large empirical literature testing the unbiasedness of the forward exchange rate for example has found it necessary either arbitrarily to assume away the existence of the risk premium if the aim

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

currency fluctuations in the post bretton woods era the international monetary landscape that has emerged since the felling of bretton woods is characterized by a hybrid exchange rate system that lies somewhere between the textbook polar cases of a gold standard and a pure float this system has relatively flexible exchange rates between major countries active central bank intervention in the market for the major currencies and predominantly fixed exchange rates relative to the dollar or to some basket of currencies for less developed countries and newly industrializing nations the majority of research on currency markets since the early 1970s has focused on the characteristics of flexible exchange rates under this hybrid regime my thesis is that this research has been unsuccessful the proportion of monthly or quarterly exchange rate changes that current models can explain is essentially zero even after the fact forecasts that use actual values instead of forecasted values of the explanatory variables cannot explain major currency movements over the post bretton woods era this result is quite surprising since exchange rate changes would be entirely unpredictable only in very special cases of the theoretical models discussed as the discussion below will argue it is not a general implication of market efficiency that exchange rates follow a random walk process 1

the rise of fund managers in foreign exchange will fundamentals ultimately dominate this paper analyses the behaviour and motivation of fund managers in foreign exchange markets reflected in questionnaire evidence we find that fund managers and fx dealers differ significantly fund managers rely more on fundamentals basically due to their longer forecasting horizons and reject non fundamental influences on exchange rates more than fx dealers however neither can fund managers be considered as pure fundamentalists non fundamentalist positions markedly influence short term decision making they inspire ambivalent views about market imperfections and these views seem to become stronger over time this latter change counterbalances the strengthening fundamental influences resulting from the rise of fund managers

what constrains financial inclusion for women evidence from indian micro data summary the role and relevance of gender in financial inclusion has been an evolving area of research in recent times although there are several cross country studies on this aspect few within country studies have addressed this issue in a comprehensive manner in this context exploiting disaggregated household level data for india we analyze the interface between gender and finance more specifically we examine whether gender matters for financial inclusion and if so what are the possible factors that influence this relationship our findings suggest significant disparity in both the access to as well as the use of finance by gender on average female headed households are 8 less likely to access formal finance and 6 more likely to access informal finance as compared to households that are headed by males after taking into account other relevant household and state level characteristics that are important in explaining financial access by households similar evidence carries over to the use of finance households headed by female use 20 less cash loans as compared to male headed households subsequently we investigate the possible channels which impede financial inclusion for female headed households our analysis highlights that for female headed households education and wages are more relevant in explaining the access to finance whereas political and social factors are much more germane in explaining the use of finance

does the exchange rate follow a random walk a monte carlo study of four tests for a random walk abstract several authors have urged that real and nominal exchange rates follow a random walk conditions under which the exchange rate follows a random walk are reviewed in this paper many of these do not appear to hold therefore the empirical evidence presents a puzzle some evidence suggets the exchange rate follows a random walk while other evidence suggests the opposite should be true this paper attempts to reconcile the evidence it is argued that the tests for a random walk have low power monte carlo evidence on four tests for a random walk is presented that suppors this claim

does exchange rate pegging enhance credibility evidence from the european monetary system the european monetary system ems has been credited with immediately enhancing the credibility of onetary policy among its member countries however there is little empirical evidence to support this view this study provides evidence from exchange rate data that political actions taken to support the ems enhanced rate arangement further empirical results were sensitive to the specification of the estimating equations and varied dramatically if risk premia discounts were absent from estimating equations

investment and the dynamic cost of income uncertainty the case of diminishing expectations in agriculture this paper studies optimal investment and the dynamic cost of income uncertainty applying a stochastic programming approach the motivation is given by a case study in finnish agriculture investment decision is modelled as a markov decision process extended to account for risk a numerical framework for studying the dynamic uncertainty cost is presented modifying the classical expected value of perfect information to a dynamic setting the uncertainty cost depends on the volatility of income e g with stationary income the dynamic uncertainty cost corresponds to a dynamic option value of postponing investment the numerical investment model also yields the optimal investment behavior of a representative farm the model can be applied e g in planning investment subsidies for maintaining target investments in the case study the investment decision is sensitive to risk

are stock returns predictable a test using markov chains this paper uses a markov chain model to test the random walk hypothesis of stock prices given a time series of returns a markov chain is defined by letting one state represent high returns and the other represent low returns the random walk hypothesis restricts the transition probabilities of the markov chain to be equal irrespective of the prior years annual real returns are shown to exhibit significant nonrandom walk behavior in the sense that low high returns tend to follow runs of high low returns in the postwar period

forecasting stock return variance toward an understanding of stochastic implied volatilities we examine the behavior of measured variances from the options market and the underlying stock market under the joint hypotheses that markets are informationally efficient and that option prices are explained by a particular asset pricing model forecasts from time series models of the stockreturn process should not have predictive content given the market forecast as embodied in option prices both in sample and out of sample tests suggest that this hypothesis can be rejected using simulations we show that biases inherent in the procedure we use to imply variances cannot explain this result thus we provide evidence inconsistent with the orthogonality restrictions of option pricing models that assume that variance risk is unpriced these results also have implicationsfor optimal variance forecast rules

the real exchange rate abstract this essay concerns the real value of the u s relative to the g 10 i what are the dynamics of the fundamental determinants of the real exchange rate and its steady state value ii to what extent are the observed movements in the exchange rate from 1973 to 1988 due to the fundamentals iii how integrated are international capital markets iv how does the real exchange rate respond to a changes in the cyclically adjusted government budget deficit and to b changes in the marginal efficiency of investment

a search for long memory in international stock market returns abstract a major issue in financial economics is the behavior of stock returns over long as opposed to short horizons this study provides empirical evidence from the perspective of long memory analysis international evidence on long memory is explored using the morgan stanley capital international stock index data for eighteen countries two tests that are robust to short term dependence and conditional heteroskedasticity are employed a modified rescaled range test and a fractional differencing test the empirical results in general provide little support for long memory in international stock returns the findings are not sensitive to inflation adjustments in stock returns data sources and statistical methods used

efficient market hypothesis evidence from a small open economy this article studies the efficient market hypothesis for the istanbul stock exchange national 100 isen 100 price index within the lumsdaine and papell two structural breaks unit root test framework the main finding of the article shows that the isen 100 index is characterized by a unit root with two structural breaks which is consistent with the efficient market hypothesis in addition the article applies the augmented dickey fuller test runs test and the variance ratio test to test the weak form efficiency of the isen 100 the analyses are repeated for three sub periods delineated in view of the endogenously determined break points

handling uncertainty in agricultural supply chain management a state of the art given the evolution in the agricultural sector and the new challenges it faces managing agricultural supply chains efficiently has become an attractive topic for researchers and practitioners against this background the integration of uncertain aspects has continuously gained importance for managerial decision making since it can lead to an increase in efficiency responsiveness business integration and ultimately in market competitiveness in order to capture appropriately the uncertain conjuncture of most agricultural real life applications an increasing amount of research effort is especially dedicated to treating uncertainty in particular quantitative modeling approaches have found extensive use in agricultural supply chain management this paper provides an overview of the latest advances and developments in the application of operations research methodologies to handling uncertainty occurring in the agricultural supply chain management problems it seeks to i offer a representative overview of the predominant research topics ii highlight the most pertinent and widely used frameworks and iii discuss the emergence of new operations research advances in the agricultural sector the broad spectrum of reviewed contributions is classified and presented with respect to three most relevant discerned features uncertainty modeling types programming approaches and functional application areas ultimately main review findings are pointed out and future research directions which emerge are suggested

an empirical examination of long run purchasing power parity using cointegration techniques this paper presents an empirical analysis of long run purchasing power parity ppp for five major exchange rates using recently developed econometric techniques on the cointegration of economic time series our empirical results are extremely unfavourable to the ppp hypothesis as a long run equilibrium condition even with an allowance made for measurement error and or tranportation costs in particular we are unable to reject the hypothesis of non cointegration of the exchange rate and relative prices for any of the countries concerned far from finding a stable long run proportionality between exchange rates and relative prices our results therefore suggest that they tend to drift apart without bound

sand in the wheels or spanner in the works the tobin tax and global finance this paper presents a radical critique of the tobin tax a tax on currency transactions by undercutting certain assumptions about the size and character of the world s foreign exchange markets which furnish the tax with its basic rationale while it is acknowledged that only a fraction of the massive volumes of fx transactions relate directly to trade in goods and services or to cross border investments it is denied that all the residual transactions are motivated purely by exchange rate considerations speculative or hedging activities rather the argument is that a significant proportion of fx trades have money market characteristics and that these trades together with domestic money market transactions play an important role in the day to day operation of the global financial system this perspective is used to show that the imposition of a tobin tax would cause extensive material damage to the system with consequences that may run counter to the expectations of supporters of the tax

rural women s access to credit market imperfections and intrahousehold dynamics summary credit rationing studies carried out at the household level and based on responses from male heads of households present an incomplete and biased assessment of who is likely to be constrained why they are constrained and what is the extent of the constraints they ignore possibly conflictive intrahousehold dynamics and assume that imperfections in rural financial markets are gender neutral this paper addresses both issues theoretically and empirically the semi cooperative household model developed for this analysis formalizes the conditions under which spouses and particularly women s individual access to credit can be affected by their own position in the financial market as well as by intrahousehold dynamics these notions are then explored empirically using husbands and wives individual perceptions of their access to credit in rural paraguay the most significant empirical findings of the paper are that i compared to men women are more likely to be credit constrained ii women s rationing status responds to a different set of factors than men s and iii husbands may choose not to intermediate capital to their wives even when they are able to do so results from this exercise provide empirically sound support for the assumptions underlying women targeted credit programs

expectations driven distortions in the foreign exchange market this paper explores the phenomenon of lasting deviations of the exchange rate from its fundamental value in the foreign exchange market motivated by empirical observations a chartists fundamentalists model is developed in which boundedly rational agents repeatedly choose between technical and fundamental trading rules to determine their speculative investment positions crucial for the dynamics is how the traders perceive the fundamental exchange rate this perception process is based on psychological evidence simulations give rise to bubbles but simultaneously display quite realistic exchange rate dynamics unit roots in the exchange rates fat tails for returns and volatility clustering

risk aversion foreign exchange speculation and gambler s ruin the apparent persistence of unexploited opportunities for expected profits in foreign exchange markets suggests highly risk averse market participants financial institutions put tight limits on the foreign exchange positions they may have at risk at any time despite beliefs that the odds are favourable that the positions will be profitable this safety first practice is consistent with keeping the probability of ruin low enough to be of no practical concern the setting of a very low probability of ruin for prudential reasons provides a rationale for traders behaving as if they have a degree of risk aversion that might otherwise seem implausibly high

learning to forecast the exchange rate two competing approaches this paper compares two competing approaches to model foreign exchange market participants behavior statistical learning and fitness learning these learning mechanisms are applied to a set of predictors chartist and fundamentalist rules we examine which of the learning approaches is best in terms of replicating the exchange rate dynamics within the framework of a standard asset pricing model we find that both learning methods reveal the fundamental value of the exchange rate in the equilibrium but only fitness learning creates the disconnection phenomenon and only statistical learning replicates volatility clustering none of the mechanisms is able to produce a unit root process but both of them generate non normally distributed returns

dynamic resource management intertemporal substitution and risk aversion we consider resource management with recursive preferences these generalize expected utility while eliminating some well known difficulties monotonicity and convergence properties of optimal decision rules are established using lattice programming methods empirical applications are rangeland and groundwater management decreasing the intertemporal elasticity of substitution implies greater lower resource usage with limited abundant stocks this moderates stock evolution and stabilizes consumption increasing risk aversion implies the same or reduced usage over the state space intertemporal substitution has a substantial effect on the optimal decision rule and a moderate effect on the limiting distribution while risk aversion has a very small effect

the use of technical analysis in the foreign exchange market abstract technica or chartist analysis of financial markets involves providing forecasts or trading advice on the basis of largely visual inspection of past prices without regard to any underlying economic or fundamental analysis this paper reports the results of a questionnaire survey conducted on behalf of the bank of england among chief foreign exchange dealers based in london in november 1988 amongst other findings it is revealed that at least 90 per cent of respondents place some weight on this form of non fundamental analysis when forming views at one or more time horizons there is also a skew towards reliance on technical as opposed to fundamentalist analysis at shorter horizons which becomes steadily reversed as the length of horizon considered is increased a very high proportion of chief dealers view technical and fundamental analysis as complementary forms of analysis and a substantial proportion suggest that technical advice may be self fulfilling jel f31

a markov model of heteroskedasticity risk and learning in the stock market abstract we examine a variety of models in which the variance of a portfolio s excess return depends on a state variable generated by a first order markov process a model in which the state is known to economic agents is estimated it suggests that the mean excess return moves inversely with the level of risk we then estimate a model in which agents are uncertain of the state the estimates indicate that agents are consistently surprised by high variance periods so there is a negative correlation between movements in volatility and in excess returns

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

access to finance in sub saharan africa is there a gender gap we show the existence of an unconditional gender gap in sub saharan africa however when key observable characteristics of the enterprises or individuals are taken into account the gender gap disappears in the case of enterprises we explain our finding with differences in key characteristics and a potential selection bias in the case of individuals the lower use of formal financial services by women can be explained by gender gaps in other dimensions related to the use of financial services such as their lower level of income and education and by their household and employment status

patterns in exchange rate forecasts for twenty five currencies the properties of exchange rate forecasts are investigated with a data set encompassing a broad cross section of currencies over the entire sample expectations appear to be biased this result is robust to the possibility of random measurement error in the survey measures there appear to be statistically significant differences in the degree of bias in subgroupings of the data the bias is lower for the high inflation countries the bias is greater for the major currencies studied in earlier papers and the bias is also greater for the ems currencies copyright 1994 by ohio state university press

quantitative easing is not as unconventional as it seems policy interest rates do not have to be short the means by which monetary authorities influence prices and quantities can differ but the obstacles to altering one rather than the other are not insuperable inflation is sluggish and expectations of future interest rates long and short nominal and real are diverse and uncertain these factors determine the limited power that monetary authorities enjoy when they conduct quantitative easing but this policy is not as unconventional as some have claimed and indeed can be viewed as broadly similar to conventional monetary measures the impact of quantitative easing however could be very different depending on the underlying structure of the economy and the fiscal authorities responses finally we note some important caveats that must be borne in mind when trying to evaluate the impact of quantitative easing particularly given the fact that the world s main financial markets are closely linked copyright 2012 oxford university press

option values under stochastic volatility theory and empirical estimates abstract this paper numerically solves the call option valuation problem given a fairly general continuous stochastic process for return volatility statistical estimators for volatility process parameters are derived and parameter estimates are calculated for several individual stocks and indices the resulting estimated option values do not differ dramatically from black scholes values in most cases although there is some evidence that for longer maturity index options black scholes overvalues out of the money calls in relation to in the money calls

the advantage of hiding both hands foreign exchange intervention ambiguity and private information this paper analyzes a dynamic exchange rate policy game in which the central bank has private information about its short term exchange rate target on the one hand and in which the market is faced with a certain degree of ambiguity concerning the actual intervention volume on the other sterilized interventions are shown to derive their effectiveness from the fact that they transmit information about the short term exchange rate target to the market in this respect we provide an explanation for the presumed inconsistency between intervention secrecy and the effectiveness of the signalling channel since our model predicts that interventions will be more effective on average if the central bank retains some degree of ambiguity moreover it is also shown that sterilized interventions will not exert a lasting effect on the exchange rate finally we have also investigated the extent to which some political and economic parameters determine the size of the intervention bias

the road less travelled institutional aspects of data and their influence on empirical estimates with an application to tests of forward rate unbiasedness the difference between data used in empirical studies and that envisioned in the theory can influence empirical estimates sometimes by enough that the direction of future research is altered this paper illustrates how in the context of tests of forward rate unbiasedness a lack of articulation about the mechanics underlying foreign exchange market speculation and about the institutional aspects governing spot and forward rate contracts leads to sampling of the data in a way that is not consistent with the theory the authors find that the sampling problems account for some but not all of the bias in the coefficient on the forward premium copyright 1996 by royal economic society

is stock price volatility increasing several different measures of stock price volatility over the period from march 1885 through october 20 1989 indicate that volatility has not increased substantially if one looks at the entire period and that volatility today is much less than it was in the 1930s this holds true whether one considers daily movements within a decade monthly movements within a decade or daily movements over the whole period daily market volatility in the 1980s has been greater than in any decade since 1950 however volatility was unusually low in the 1950s and 1960s furthermore the increase in daily volatility in the 1980s disappears when volatility is measured as month to month percentage changes our perception of volatility is a function of the benchmark used to make comparisons and the time period over which volatility is measured

a unified approach to testing for serial correlation in stock returns this article provides a unified approach for testing serial correlation in stock returns the authors describe a general class of statistics that are linear combinations of consistent estimators of autocorrelations as special cases they show that this class captures many of the statistics studied in the recent finance and macroeconomics literature using this result the authors then provide a common perspective on the asymptotic distribution and power of these statistics copyright 1994 by university of chicago press

foreign exchange market efficiency tests implications of recent empirical findings abstract the recent empirical literature on the efficiency of the foreign exchange market has been characterized by strikingly contradictory conclusions drawn from similar empirical evidence these contradictions result because 1 different maintained hypotheses are held and 2 different criteria e g micro versus macroeconomic are used to judge the evidence in this survey we organize the empirical literature under several headings the presence of risk premiums empirical regularities in regression tests profitable trading rules and advanced econometric techniques in integrating this material we consider the implications of the current evidence for investors forecasters policy makers and theorists

a theory of trickle down growth and development this paper develops a model of growth and income inequalities in the presence of imperfect capital markets and it analyses the trickle down effect of capital accumulation moral hazard with limited wealth constraints on the part of the borrowers is the source of both capital market imperfections and the emergence of persistent income inequalities three main conclusions are obtained from this model first when the rate of capital accumulation is sufficiently high the economy converges to a unique invariant wealth distribution second even though the trickle down mechanism can lead to a unique steady state distribution under laissez faire there is room for government intervention in particular redistribution of wealth from rich lenders to poor and middle class borrowers improves the production efficiency of the economy both because it brings about greater equality of opportunity and also because it accelerates the trickle down process third the process of capital accumulation initially has the effect of widening inequalities but in later stages it reduces them in other words this model can generate a kuznets curve

an integer programming dynamic farm household model to evaluate the impact of agricultural policy reforms on farm investment behaviour abstract we develop a multi objective farm household dynamic integer programming model to simulate investment behaviour in different policy and price scenarios with a particular focus on the decoupling of the common agricultural policy cap the model takes into account the characteristics of individual assets including ageing and fixity through the explicit consideration of transaction costs a case study application in the context of arable farming in northern italy is provided as an example the results emphasise different patterns of reaction of different farm household types over time as an effect of the varying opportunity costs of resources and initial asset endowments overall this application highlights the potentialities and limits of the methodology in particular the approach proved to be effective in providing a variety of results depending on the individual features of each farm household such as the differences between a a no reaction attitude b an adaptation of farm activity and assets and c a radical reaction pattern guided by high income alternatives to farming this highlights the potential of this tool as a generator of ideas and working hypotheses we argue that in view of the further developments of the cap the use of instruments able to account for multiple objectives dynamics and investment choices will become even more relevant in the analysis of eu agricultural policy

order flows news and exchange rate volatility abstract this paper examines the roles of order flow reflecting private information and news reflecting public information in explaining exchange rate volatility analyzing four months of a bank s high frequency dollar euro trading three different kinds of order flow are used in addition to seasonal patterns in explaining volatility we find that only larger sized order flows from financial customers and banks indicating informed trading contribute to explaining volatility whereas flows from commercial customers do not the result is robust when we control for news and other measures of market activity this strengthens the view that exchange rate volatility reflects information processing

do rural banks matter evidence from the indian social banking experiment lack of access to finance is often cited as a key reason why poor people remain poor this paper uses data on the indian rural branch expansion program to provide empirial evidence on this issue between 1977 and 1990 the indian central bank mandated that a commercial bank can open a branch in a location with one or more bank branches only if it opens four in locations with no bank branches we show that between 1977 and 1990 this rule caused banks to open relatively more rural branches in indian states with lower initial financial development the reverse is true outside this period we exploit this fact to identify the impact of opening a rural bank on poverty and output our estimates suggest that the indian rural branch expansion program significantly lowered rural poverty and increased non agricultural output

empirical evidence on the properties of exchange rate forecasts and the risk premium abstract the purpose in this note is to examine the properties of the risk premium obtained from a new source of market expectations derived from survey data

does local financial development matter we study the effects of differences in local financial development within an integrated financial market we construct a new indicator of financial development by estimating a regional effect on the probability that ceteris paribus a household is shut off from the credit market by using this indicator we find that financial development enhances the probability an individual starts his own business favors entry of new firms increases competition and promotes growth as predicted by theory these effects are weaker for larger firms which can more easily raise funds outside of the local area these effects are present even when we instrument our indicator with the structure of the local banking markets in 1936 which because of regulatory reasons affected the supply of credit in the following 50 years overall the results suggest local financial development is an important determinant of the economic success of an area even in an environment where there are no frictions to capital movements

the use of fundamental and technical analyses by foreign exchange dealers hong kong evidence abstract this article reports the results of a questionnaire survey conducted in february 1995 on the use by foreign exchange dealers in hong kong of fundamental and technical analyses to form their forecasts of exchange rate movements our findings reveal that 85 of respondents rely on both fundamental and technical analyses for predicting future rate movements at different time horizons at shorter horizons there exists a skew towards reliance on technical analysis as opposed to fundamental analysis but the skew becomes steadily reversed as the length of horizon considered is extended technical analysis is considered slightly more useful in forecasting trends than fundamental analysis but significantly more useful in predicting turning points interest rate related news is found to be a relatively important fundamental factor in exchange rate forecasting while moving average and or other trend following systems are the most useful technical technique

valuation of american call options on dividend paying stocks empirical tests abstract this paper examines the pricing performance of the valuation equation for american call options on stocks with known dividends and compares it with two suggested approximation methods the approximation obtained by substituting the stock price net of the present value of the escrowed dividends into the black scholes model is shown to induce spurious correlation between prediction error and 1 the standard deviation of stock return 2 the degree to which the option is in the money or out of the money 3 the probability of early exercise 4 the time to expiration of the option and 5 the dividend yield of the stock a new method of examining option market efficiency is developed and tested

the term structure of forward exchange premiums and the forecastability of spot exchange rates correcting the errors we develop a framework to extract information regarding subsequent spot rate movements from the term structure of forward exchange premiums while admitting possible deviations from rationality and