Market Efficiency and the Returns to Simple Technical Trading Rules: New Evidence from U.S. Equity Market and Chinese Equity Markets

Numerous studies in the finance literature have investigated technical analysis to determine its validity as an investment tool. This study is an attempt to explore whether some forms of technical analysis can predict stock price movement and make excess profits based on certain trading rules in markets with different efficiency level. To avoid using arbitrarily selected 26 trading rules as did by Brock, Lakonishok and LeBaron (1992) and later by Bessembinder and Chan (1998), this paper examines predictive power and profitability of simple trading rules by expanding their universe of 26 rules to 412 rules. In order to find out the relationship between market efficiency and excess return by applying trading rules, we examine excess return over periods in U.S. markets and also compare the excess returns between U.S. market and Chinese markets. Our results found that there is no evidence at all supporting technical forecast power by these trading rules in U.S. equity index after 1975. During the 1990s break-even costs turned to be negative, –0.06%, even failing to beat a buy-holding strategyin U.S. equity market. In comparison, our results provide support for the technical strategies even in the presence of trading cost in Chinese stock markets.     

Probability Forecasts of Macroaggregates in the Turkish Economy

We provide probability forecasts of key Turkish macroeconomic variables such as inflation and output growth. The probability forecasts are derived from a core vector error correction model of the Turkish economy and its several variants. We use model and window averaging to address uncertainties arising from estimated models and possible structural breaks. The performances of the different models and their combinations are evaluated using relevant forecast accuracy tests in different pseudo out-of-sample settings. The results indicate that successful directional forecasts can be obtained for output growth and inflation. Averaging over both the models and the estimation windows improves the level of accuracy of the forecasts.     

Aplicación de bicorrelación cruzada al rendimiento diario del precio del café

This paper uses the cross bicorrelation methodology, which can capture nonlinear trascendence periods through window functions and third-order moments. It applies to the return of four sets of commodities of coffee traded on the New York market (Arabica Colombian, mild Arabica, Arabica Brazilian and Other Arabicas), during the 20/06/1997 - 27/10/2010 period. The results conclude that there is a cross bicorrelation among the four series, with Brazilian type coffee being the leader and a lower bicorrelation with other Arabicas. This complicates decisions for investors in such series.     

Competing for Order Flow in OTC Markets

We develop a model of a two‐sided asset market in which trades are intermediated by dealers and are bilateral. Dealers compete to attract order flow by posting the terms at which they execute trades—which can include prices, quantities, and execution speed—and investors direct their orders toward dealers who offer the most attractive terms. We characterize the equilibrium in a general setting, and we illustrate theoretically and numerically how the model can account for several important trading patterns in over‐the‐counter markets, which do not emerge from existing models.     

Frictions, Heterogeneity and Optimality in Mortgage Modeling

The purpose of this article is to provide a unified framework for incorporating frictions into a theoretical options-pricing model (OPM) for mortgages. This article presents formulation for a frictions-adjustable mortgage model that integrates borrower heterogeneity while simultaneously preserving prepayment and default financial decisions. Our model demonstrates the flexibility of the OPM by simulating separate and concurrent effects of three categories of frictions on the mortgage and mortgage components. Researchers can use our example formulation to determine the effects of specific borrower characteristics on mortgage values without destroying the options theoretic framework.     

企业边界:静态决定模型及动态演变

作为企业理论的重要分支,对企业边界的研究从古典经济学到现代经济学等诸多流派都广为关注。企业边界在现实中的任一时点上都客观存在,其大小依赖于划分的方法,这种划分方式是多样化的,从而也就产生了不同的边界。但是,从动态角度考虑,企业的边界是变化和模糊的。     

上下级税务机关间的交易成本与契约选择

通过对上下级税务机关之间出现交易成本的原因的分析,我们发现上下级税务机关之间的信息不对称、上下级税务机关之间的效用函数不一致以及下级税务机关的机会主义行为是导致税务机关之间出现高昂的交易成本的根本原因。对固定工资契约、分成契约和税收计划契约进行比较研究,可以看出税收计划契约是一个能有效地节约交易成本的契约安排,因而也是在现有条件下税务机关做出的一个理性选择。     

交易费用视角下的金融集聚效应

从交易费用视角看,产业集聚可以扩大市场广度,增加市场深度,从而拓展市场范围,促进分工的进一步发展并实现分工的利益.金融集聚作为产业集聚的一种形式,通过和当地服务业、制造业的互动拓展了金融产业的市场广度;通过金融企业之间的竞争合作关系增加了金融产业的市场深度,对区域金融产业产生积极的集聚效应,促进了地区金融业的良性发展.     

The Effect of Crossing‐Network Trading on Dealer Market's Bid‐Ask Spreads

This article provides new insights into market competition between traditional exchanges and alternative trading systems in Europe. It investigates the relationship between the trading activity of a crossing network (CN) and the liquidity of a traditional dealer market (DM) by comparing data from the SEAQ quote‐driven segment of the London Stock Exchange (LSE) and internal data from the POSIT crossing network. A cross‐sectional analysis of bid‐ask spreads shows that DM spreads are negatively related to CN executions. Risk‐sharing benefits from CN trading dominate fragmentation and cream‐skimming costs. Further, risk‐sharing gains are found to be related to dealer trading in the CN.     

Trends and determinants of Australian managed fund transaction costs

The present paper examines the often-overlooked managed fund fee that is incurred when investors enter and exit managed fund products. The present paper documents that transaction costs for investors, measured by the application-redemption spread, are above stock market brokerage rates although they have declined since 1995. The study analyses the relationship between this transaction fee and several variables. In summary, retail fund transaction costs are positively related to retail funds’ assets under management, whilst this relationship is negative for larger wholesale funds, consistent with economies of scale. Direct entry and exit fees and initial commissions are positively related to transaction costs which raises the possibility that the commissions are used to levy soft-dollar payments. The paper also documents a relationship between transaction costs and fund flows which differs between retail and wholesale funds. Overall, the findings are consistent with the proposition that the various fees are used by managers as interchangeable and the different fee regimes reflect different products and markets.     

Efficient Option Replication in the Presence of Transactions Costs

In the presence of transaction costs, a risk-return trade-off exists between the quality and the cost of a replicating strategy. In that context, I show how to expand the set of all possible time-based strategies through the introduction of a multi-scale class of strategies, which consist in rebalancing different fractions of an option portfolio at different time frequencies. The method, based on time-scale diversification, is to dynamic replication what investment in diversified portfoliosis to static portfolio selection: in a dynamic context, one may enjoy the benefits of diversification by using different time scales in trading the same asset. This revised version was published online in November 2006 with corrections to the Cover Date.     

The Economic Significance of the Cross-Sectional Autoregressive Model: Further Analysis

We reexamine whether investors can gain abnormal returns using the cross-sectional autoregressive model of stock returns. We find that the pattern of abnormal returns obtained is inconsistent over the time period 1934–94. We adjust for the higher commission costs in the pre-May 1 1975 period, a point overlooked in Jegadeesh (1990), by assuming a conservative one-way transaction cost of 0.75%. For the post-May 1 1975 period, we use a one-way transaction cost of 0.25%. The results show that investors who invest only on the long side would earn insignificant 'after-transaction cost' abnormal returns in the post-World War II period, 1946–94. The 'after-transaction cost' abnormal return from the short strategy is about 0.5% for the period 1946–94. This article shows that an investor would not earn abnormal returns using this model considering that it is more costly in practice to sell securities short and that most investors would not earn interest on short sale proceeds.     

产业集群交易费用分析及其超边际模型研究

产业集群是当今世界经济中颇具特色的经济组织形式,其自身具有较强的竞争优势,而交易费用是使产业集群具有竞争优势的关键因素。运用超边际分析方法结合交易费用内部化理论,在对产业集群交易费用分析的基础上,构建产业集群交易费用超边际模型和逻辑模型,并通过模型超边际结构模式分析得出:产业集群有助于减少交易间服务费用和学习费用,使得交易费用降低,促进产业分工进一步深化,提高企业的竞争优势。