MONEY SUPPLY ANNOUNCEMENTS AND INTEREST SENSITIVE STOCKS

Much of the money announcement literature provides evidence that there is a significant response of nominal interest rates to unexpected changes in the money stock, especially in the October 1979-October 1982 period. These money announcements provide a proxy for unexpected interest rate changes which can be used in a novel test for the interest sensitivity of stocks. Using the response of disaggregated stock price data to money announcements, we reach two major conclusions. First, that the interest rate response observed in the money announcement literature was predominantly a change in real rates. Second, an unusual group of stocks are excessively sensitive to these real rate changes and many groups of stocks that might logically have been expected to be sensitive are not.     

RESPONSE OF STOCK PRICES TO MONEY SUPPLY ANNOUNCEMENTS: AUSTRALIAN EVIDENCE

This paper extends the literature on the money supply announcement effect by examining the response of stock prices to the monthly announcements of the money supply made in Australia. The unexpected component of the money supply change is identified using both a market based survey of expectations and rolling ARIMA time series models. The analysis is further extended to examine the impact of the money supply announcements during the period of monetary target-ting; the cross-sectional impact of the announcements across various stock price indices and the pre- and post-announcement responses of stock prices. The results documented show no evidence of a significant stock price response to the money supply announcements in Australia.     

THE EFFICIENCY OF THE INTERNATIONAL MONEY MARKETS

In markets which are efficient in the weak form, investors are not able to use the information contained in historical yields to earn excess returns. Using a rum test, this paper examines the weak form efficiency of a number of international money markets. While most of the markets examined were found to be efficient in the weak form, the study was not able to confirm the weak form efficiency of the markets for three-month German DM bank deposits, Swiss Ffr. bank deposits, French Ffr. bank deposits, and six-month Eurodollar CDs.     

DEREGULATION AND THE VOLATILITY OF UK STOCK PRICES

This paper examines the behaviour of the UK stock market for significant changes in volatility over the four years surrounding Big Bang i.e. 27 October, 1986 when the market was substantially deregulated. The main findings are that after Big Bang but prior to Black Monday, the UK stock market was no more volatile than prior to Big Bang, but that after Black Monday, the UK market was more volatile than prior to Big Bang even after adjusting for increases in global volatility.     

AIRLINE DEREGULATION AND THE PROBABILITY OF AIR CARRIER INSOLVENCY

This study investigates the effects of deregulation from the perspective of airline lenders. Airline-specific, pre- and post-deregulation insolvency probabilities are used to assess the effects on creditors. The results suggest that the financial condition of several airlines has significantly deteriorated as a by-product of deregulation, although most have been unaffected.