Asymmetric dynamic relations between stock prices and mutual fund units in Japan. An application of hidden cointegration technique

This paper examines “causality” effects between mutual fund flows and stock index prices in Japan. In particular, both the short and long run dynamics between stock prices and fund units are investigated. The novelty of our paper is the use of the hidden cointegration technique which attempts to capture heterogeneous fund flow reactions when stock index prices move up or down. Moreover, we employ the crouching error correction model (CECM) to assess the relationship between stock market movements and fund flow changes. The results show that stock prices and mutual fund units are cointegrated. In the case of positive movements there is a bi-directional effect interconnecting them, whereas for negative movements, causality runs only from fund flows to stock prices. The dynamics structure provides evidence that market microstructure, taxation and investors' sentiment affect stock price and unit formation.     

Symmetric and asymmetric nonlinear causalities between oil prices and the U.S. economic sectors

This study investigates the causal dynamics of the U.S. sector price changes and oil price changes using the symmetric nonlinear and asymmetric nonlinear causality tests. We find a unidirectional causality from each sector to the oil market using the Granger and MWald linear causality tests. However, the symmetric nonlinear and asymmetric nonlinear causality for negative price changes tests yield unidirectional causality from the oil to the sector price changes which sharply contrast the evidence using the linear models. We find bidirectional causality using the asymmetric nonlinear test for positive price changes, suggesting temporal, dual and nonlinear information flow during bull markets. Our results from the nonlinear and asymmetric causality tests remain robust after accounting for structural breaks. The empirical findings unravel nonlinear interactions between sector price and oil price changes as well as the importance of signs of changes in the interacting variables, implying oil returns may need to be priced when forecasting sector returns.     

Binomial option pricing with stochastic parameters: A beta distribution approach

This research extends the binomial option-pricing model of Cox, Ross, and Rubinstein (1979) and Rendleman and Barter (1979) to the case where the up and down percentage changes of stock prices are stochastic. Assuming stochastic parameters in the discrete-time binomial option pricing is analogous to assuming stochastic volatility in the continuous-time option pricing. By assuming that the up and down parameters are independent random variables following beta distributions, we are able to derive a closed-form solution to this stochastic discrete-time option pricing. We also derive an upper and a lower bounds of the option price.     

中国A股量价之间动态关系的实证研究

本文采用了VAR模型以及Granger因果检验的方法来考察量价之间的动态相关关系.我们选定1996年12月16日至2008年12月31日作为样本研究区间,实证发现滞后期的交易量和收益对当前期交易量与收益的解释力度存在下降趋势;同时,交易量同收益之间由收益对交易量的单向引导发展为双方互为Granger原因.本文得到的交易模式的动态演变轨迹反映了我国投资者式逐步趋于理性成熟.     

INTERNATIONAL TRANSFER OF PRICING INFORMATION BETWEEN DUALLY LISTED STOCKS

International multiple listing offers a unique opportunity to study the efficiency of information transmission across national markets. The knowledge gained from observing a stock of the same company priced in multiple markets differs from what may be gained from observing relations across markets of aggregate price indices. We investigate five companies based in Israel whose stocks are listed on both the Tel Aviv Stock Exchange and NASDAQ. Our empirical tests of causality in price changes use the side-by-side Box-Jenkins ARIMA models and the Sims VAR model. Overall, the results show that price causality in dually listed stocks is unidirectional from the domestic market to the foreign market.     

Do birds of the same feather flock together?: The case of the Chinese states equity markets

We examine the equity market price interdependence between China, Hong Kong, Singapore, and Taiwan based on the [Journal of Econometrics 66 (1995) 225] causality test which we bootstrap with leveraged adjustments. A new information criterion is used to choose the optimal lag order. We cover the period January 1, 1993–September 10, 2001 taking into account the Asian financial crisis in 1997. We find that before the Asian crisis, the only interaction among the Chinese markets was between Singapore and the markets of Taiwan and Hong Kong with the causality running from the former to the latter. However, after the Asian crisis, the Chinese equity markets became more interdependent among themselves although Hong Kong remained non-influential.     

Underwriter Reputation, Initial Returns, and the Long-Run Performance of IPO Stocks

We find that the underperformance of IPO stocks relative to the market over a three-year holding period is less severe for IPOs handled by more prestigious underwriters. Consistent with prior studies, we also find that IPOs managed by more reputable underwriters are associated with less short-run underpricing. Among the various existing proxies for underwriter reputation, the Carter–Manaster measure is the most significant in the context of initial returns and also in the context of the three-year performance of IPOs. The study also provides an updated list of the Carter–Manaster measure for various underwriters.     

An empirical analysis of the stock price-volume relationship

This paper investigates the empirical relationship between absolute stock price changes and trading volume in the stock market. Using Granger causality tests we find that there is a significant causal relationship between absolute price changes and volume at the firm level and that this relationship is stronger in periods surrounding earnings announcements. We view this as suggesting that information arrival follows a sequential rather than a simultaneous process, although the results do not support an extreme version of either information arrival model.     

我国资产价格波动与通货膨胀关系的理论研究与实证分析

随着次贷危机引发全球性金融危机,学术界对于货币政策是否以及如何对资产价格做出反应的争议再起。本文根据协整分析技术、Granger因果检验方法和误差修正模型,利用1998—2008年中国的季度数据,对资产价格与通货膨胀之间的关系进行了实证研究。实证研究表明：第一,我国资产价格与通货膨胀之间确实存在长期的均衡关系,其中房价变动对通货膨胀的影响大于股价变动对通货膨胀的影响;第二,我国资产价格与通货膨胀之间存在着单向的因果关系,即股票价格与房价上涨是通货膨胀的原因。     

Causality and cointegration of stock markets among the United States,Japan and the South China Growth Triangle

This paper explores the causality and cointegration relationships among the stock markets of the United States, Japan and the South China Growth Triangle (SCGT) region. Applying the recently advanced unit root and cointegration techniques that allow for structural breaks over the sample period (October 2, 1992 to June 30, 1997), we find that there exists no cointegration among these markets except for that between Shanghai and Shenzhen. By invoking the Granger causality test and considering the non-synchronous trading problem, we will show that stock price changes in the US have more impact on SCGT markets than do those of Japan. More specifically, price changes in the US can be used to predict those of the Hong Kong and Taiwan markets on next day. Similarly, price changes on the Hong Kong stock market lead the Taiwan market by 1 day. Furthermore, the stock returns of the US and Hong Kong markets are found to be contemporaneous. Finally, there is a significant feedback relationship between the Shanghai and the Shenzhen Stock Exchanges.     

Do Stock Prices Fully Reflect the Implications of Special Items for Future Earnings?

Previous research (Rendleman, Jones, and Latane [1987]; Freeman and Tse [1989]; Bernard and Thomas [1990]; and Ball and Bartov [1996]) indicates that security prices do not fully reflect predictable elements of the relation between current and future quarterly earnings. We investigate whether this finding also holds for the special items component of earnings. Given that special items are prominent in financial analysis and are assumed to have relatively straightforward implications for future earnings (special items are assumed to be largely transitory), one might expect that prices would fully impound the implications of special items for future earnings. Based on the "two-equation" approach used in Ball and Bartov [1996] and other studies (e.g., Abarbanell and Bernard [1992]; Sloan [1996]; Rangan and Sloan [1998]; and Soffer and Lys [1999]), we find that while prices reflect relatively more of the effects of special items compared to other earnings components, we still reject the null hypothesis that prices fully impound the implications of special items for future earnings. The "two-equation" approach assesses the consistency of coefficients in a pair of prediction and pricing equations, and thus depends on an assumed functional form. However, a less structured abnormal returns methodology like that used in Bernard and Thomas [1990] also supports the conclusion that the implications of special items are not fully impounded in prices. Specifically, a trading strategy based only on the sign of special items earns small but statistically significant abnormal returns during a 3-day window four quarters subsequent to the original announcement of special items.     

Expected Inflation, Interest Rates, and Stock Returns

This paper documents a long-lived asymmetrical relationship between interest rate changes and subsequent stock returns. Drops in interest rates are followed by twelve months of excess stock returns, while increases in interest rates have little effect. The results are robust to the choices of short-term interest rate and stock index. These findings cannot be explained by Geske and Roll's [10] reversed causality argument; nor do they appear to result from periods of unusual interest rates or stock returns. Since interest rate changes are generally used as proxies for changes in expected inflation, the results provide new insights into previous research on inflation and stock returns, and there are important implications for the literature on time-varying risk premia.     

大陆与台湾股指期货价格发现功能比较研究

本文利用日内15分钟交易数据,对大陆与台湾股指期货的价格发现功能进行了比较,发现沪深300股指期货和现货间存在双向价格引导关系,但在信息传导效率上,期货领先现货,对台湾市场而言,仅存在期货对现货的单向引导关系;期货市场在长期价格发现功能中占主导地位,但台指期货的主导作用要强于沪深300股指期货。文章从投资者结构、合约设计、交易制度等影响因素分析了两岸股指期货价格发现功能的差异,并提出改善大陆股指期货价格发现功能的建议。     

中国A股量价之间动态关系的实证研究

本文采用了VAR模型以及Granger因果检验的方法来考察量价之间的动态相关关系。我们选定1996年12月16日至2008年12月31日作为样本研究区间,实证发现滞后期的交易量和收益对当前期交易量与收益的解释力度存在下降趋势;同时,交易量同收益之间由收益对交易量的单向引导发展为双方互为Granger原因。本文得到的交易模式的动态演变轨迹反映了我国投资者式逐步趋于理性成熟。     

Price Linkages Between the US,Japan and UK Stock Markets

This study presents an empirical analysis of the short- and long-term relationships among stock prices in the US, Japan and the UK. We re-examine the evidence of market linkages and cointegration between S&P 500, Nikkei 225 and FTSE-100 stock indices. The results suggest that mature markets are cointegrated, indicating a stationary long-run relationship. Furthermore, Granger causality tests show a bi-directional causality between Nikkei 225–FTSE-100, and unidirectional causalities between S&P 500–FTSE-100 and S&P 500–Nikkei 225. These findings suggest that the potential for diversifying risk by investing in mature markets is limited.     

Cointegration and causality between macroeconomic variables and stock market returns

The purpose of this study is to investigate whether current economic activities in Korea can explain stock market returns by using a cointegration test and a Granger causality test from a vector error correction model. This study finds that the Korean stock market reflects macroeconomic variables on stock price indices. The cointegration test and the vector error correction model illustrate that stock price indices are cointegrated with a set of macroeconomic variables—that is, the production index, exchange rate, trade balance, and money supply—which provides a direct long-run equilibrium relation with each stock price index. However, the stock price indices are not a leading indicator for economic variables, which is inconsistent with the previous findings that the stock market rationally signals changes in real activities.     

Sovereign credit ratings and financial markets linkages: Application to European data

We use EU sovereign bond yield and CDS spreads daily data to carry out an event study analysis on the reaction of government yield spreads before and after announcements from rating agencies (Standard & Poor’s, Moody’s, Fitch). Our results show significant responses of government bond yield spreads to changes in rating notations and outlook, particularly in the case of negative announcements. Announcements are not anticipated at 1–2 months horizon but there is bi-directional causality between ratings and spreads within 1–2 weeks; spillover effects especially among EMU countries and from lower rated countries to higher rated countries; and persistence effects for recently downgraded countries.     

Value maximization and the information content of corporate investment with respect to earnings

In this paper we study the dynamic nature of the relationship between earnings and investment. If managers act as wealth maximizers, we would expect that new investments should lead to increased earnings. However, past research has found that investment is not causally prior to earnings. Using recent developments in time-series econometrics, we show that the dynamic nature of the relationship between earnings and investment exhibits bi-directional causality. Our results are consistent with managers investing in positive NPV projects, but managers appear to face financing constraints because investment decisions are driven by the availability of internally generated earnings.     

What role do futures markets play in Bitcoin pricing? Causality,cointegration and price discovery from a time-varying perspective?

Recent papers that have explored spot and futures markets for Bitcoin have concluded that price discovery takes place either in the spot, or the futures market. Here, we consider the robustness of previous price discovery conclusions by investigating causal relationships, cointegration and price discovery between spot and futures markets for Bitcoin, using appropriate daily data and time-varying mechanisms. We apply the time-varying Granger causality test of Shi, Phillips, and Hurn [2018]; time-varying cointegration tests of Park and Hahn [1999], and time-varying information share methodologies, concluding that futures prices Granger cause spot prices and that futures prices dominate the price discovery process.