Varianzquotiententests und Random Walk Verhalten internationaler Aktienmärkte

Variance ratio tests can be considered the state-of-the-art methodology for testing stock markets for random walk behavior. This article reviews recent developments in the area. Furthermore, it analyzes whether the recent financial crisis has influenced the random walk behavior of international stock markets. Our findings based on individual and multiple variance ratio tests can be summarized as follows: (i) There appears to be less evidence against the random walk hypothesis in industrialized markets than there is in emerging markets. (ii) Industrialized countries’ stock market behavior seems to be less affected by the financial crisis than the one of emerging markets. (iii) The choice of individual or multiple variance ratio test does not crucially influence our main conclusions.     

Market efficiency and cointegration: Some evidence in Pacific-Basin black exchange markets

This paper investigates the efficiency of the black exchange markets in Indonesia, Malaysia, the Philippines, South Korea, Taiwan, and Thailand. The study applies unit root and cointegration tests to examine black exchange market efficiency of Pacific-Basin countries. The generating process of black exchange rates appears to be a random walk. This is consistent with Gupta (1981) and other foreign exchange rate unit root test studies. Johansen cointegration tests are performed for these black exchange markets together with Japan and Singapore. The results suggest that there is at least one unit root among the black market exchange rates. Hence, black exchange markets are not collectively efficient.     

The random walk hypothesis for Chinese stock markets: Evidence from variance ratio tests

This study examines the random walk hypothesis for the Shanghai and Shenzhen stock markets for both A and B shares, using daily data over the period 1992–2007. The hypothesis is tested with new multiple variance ratio tests – Whang-Kim subsampling and Kim's wild bootstrap tests – as well as the conventional multiple Chow-Denning test. We find that Class B shares for Chinese stock exchanges do not follow the random walk hypothesis, and therefore are significantly inefficient. The Class A shares seem more efficient.     

EXCHANGE RATE FUNDAMENTALS,FORECASTING, AND SPECULATION: BAYESIAN MODELS IN BLACK MARKETS

Although speculative activity is central to black markets for currency, the out‐of‐sample performance of structural models in those settings is unknown. We substantially update the literature on empirical determinants of black market rates and evaluate the out‐of‐sample performance of linear models and non‐parametric Bayesian treed Gaussian process (BTGP) models against the random walk benchmark. Fundamentals‐based models outperform the benchmark in out‐of‐sample prediction accuracy and trading rule profitability measures given future values of fundamentals. In simulated real‐time trading exercises, however, the BTGP achieves superior realized profitability, accuracy and market timing, while linear models do no better than a random walk. Copyright © 2013 John Wiley & Sons, Ltd.     

A simple framework for analysing bull and bear markets

Bull and bear markets are a common way of describing cycles in equity prices. To fully describe such cycles one would need to know the data generating process (DGP) for equity prices. We begin with a definition of bull and bear markets and use an algorithm based on it to sort a given time series of equity prices into periods that can be designated as bull and bear markets. The rule to do this is then studied analytically and it is shown that bull and bear market characteristics depend upon the DGP for capital gains. By simulation methods we examine a number of DGPs that are known to fit the data quite well—random walks, GARCH models, and models with duration dependence. We find that a pure random walk provides as good an explanation of bull and bear markets as the more complex statistical models. In the final section of the paper we look at some asset pricing models that appear in the literature from the viewpoint of their success in producing bull and bear markets which resemble those in the data. Copyright © 2002 John Wiley & Sons, Ltd.     

Theory, Reality, and Performativity in Markets

A bstract .   The purpose of this article is to analyze the relation between scientific knowledge in the form of theories and the world that such theories are about. The focus is on market theories. I argue that everyday knowledge, conceptualized using the notion of "lifeworld," is the bedrock of scientific knowledge. I also make two distinctions, one between types of markets and one between principles of order in markets. There are two different types of markets, fixed-role markets and switch-role markets, and no existing theory can be used to explain both of them. In fixed-role markets, such as a producer market of garments, actors are identified as either sellers or buyers. In switch-role markets, such as the stock exchange market or currency market, actors are not identified with one role. The other distinction is between standard and status markets. In a status market, order is maintained because the identities of actors on both sides of the market are ranked according to status, which is a more entrenched social construction than the commodity traded in the market. In a market characterized by standards, the situation is reversed: the commodity is a more entrenched social construction than the social status of actors in the market. These distinctions are the backdrop of my analysis of the idea that markets are performed. It is concluded that the performativity approach is useful today for analyzing switch-role markets. A further conclusion is that neoclassical economic theory can be used in understanding switch-role markets, but not fixed-role markets.     

Comparing exchange rate forecasting models: Accuracy versus profitability

In this paper we compare the rankings of alternative exchange rate forecasting models using two different evaluation criteria: forecast accuracy and profitability in forward market speculation. Either or both of these criteria may be useful to the practitioner depending on the forecasting application. We use both time-series and static and dynamic structural models to construct forecasts for the Canadian dollar/U.S. dollar and German mark/U.S. dollar exchange rates over the period 1976 :12–1984: 9. Our results confirm earlier findings that simple time-series models such as the random walk rank highest in forecast accuracy. The random walk also ranks high in terms of profitability for the German mark, but for the Canadian dollar the profitability rankings are quite different than the accuracy results. For both currencies we find that some models are very profitable in forward speculation, which is evidence against the speculative efficiency hypothesis but may be consistent with the existence of risk premia in foreign exchange markets.     

VARIANCE-RATIO TESTS OF RANDOM WALK: AN OVERVIEW

Abstract.  This paper reviews the recent developments in the field of the variance-ratio (VR) tests of the random walk and martingale hypothesis. In particular, we present the conventional individual and multiple VR tests as well as their improved modifications based on power-transformed statistics, rank and sign tests, subsampling and bootstrap methods, among others. We also re-examine the weak-form efficiency for five emerging equity markets in Latin America.     

Spillovers of currency carry trade returns,market risk sentiment,and U.S. market returns

This paper examines the link between spillovers of currency carry trade returns and U.S. market returns. Following Tse and Zhao (2012), this paper hypothesizes that the magnitude of spillovers of currency carry trade returns is positively correlated with market risk sentiment and, therefore, has an impact on market returns. Using the G10 currencies and S&P 500 index futures, the empirical results present a high magnitude of spillover effects of currency carry trade markets. The empirical findings also show a significantly positive relationship between spillovers of currency carry trade returns and subsequent market returns. Furthermore, the results indicate that this relationship is stronger in bear markets than in bull markets. Finally, our findings show that spillovers of currency carry trade returns significantly affect the subsequent transition probabilities of market returns.     

我国股票市场上艾略特波浪模式存在性初探

上证指数是描述中国股票市场运动状况的重要代表,Fibonacci数列包含了艾略特波浪模式中重要的数量特征。本文验证了在艾略特波浪模式下,上证指数中黄金比率和Fibonacci数字的存在性,给出了我国股票市场上艾略特波浪模式存在的一个重要实例,是对股票价格随机游动假说的一个冲击。     

中国内地、香港与美国股票市场的长期协整关系研究

随着中国经济不断地融入国际经济环境中,中国内地证券市场的国际化进程也逐渐加快,表现为与世界主要资本市场的联动效应明显增强。本文通过运用协整检验对中国内地、香港以及美国股票市场联动效应的研究发现,金融危机改变了三地股市间的长期均衡关系。     

Forecasting bulk prices of Bordeaux wines using leading indicators

Agricultural price forecasting has been being abandoned progressively by researchers ever since the development of large-scale agricultural futures markets. However, as with many other agricultural goods, there is no futures market for wine. This paper draws on the agricultural prices forecasting literature to develop a forecasting model for bulk wine prices. The price data include annual and monthly series for various wine types that are produced in the Bordeaux region. The predictors include several leading economic indicators of supply and demand shifts. The stock levels and quantities produced are found to have the highest predictive power. The preferred annual and monthly forecasting models outperform naive random walk forecasts by 27.1% and 3.4% respectively; their mean absolute percentage errors are 2.7% and 3.4% respectively. A simple trading strategy based on monthly forecasts is estimated to increase profits by 3.3% relative to a blind strategy that consists of always selling at the spot price.     

On the globalization of stock markets: An application of Vector Error Correction Model,Mutual Information and Singular Spectrum Analysis to the G7 countries

This paper analyzes stock market relationships among the G7 countries between 1973 and 2009 using three different approaches: (i) a linear approach based on cointegration, Vector Error Correction (VECM) and Granger Causality; (ii) a nonlinear approach based on Mutual Information and the Global Correlation Coefficient; and (iii) a nonlinear approach based on Singular Spectrum Analysis (SSA). While the cointegration tests are based on regression models and capture linearities in the data, Mutual Information and Singular Spectrum Analysis capture nonlinear relationships in a non-parametric way. The framework of this paper is based on the notion of market integration and uses stock market correlations and linkages both in price levels and returns. The main results show that significant co-movements occur among most of the G7 countries over the period analyzed and that Mutual Information and the Global Correlation Coefficient actually seem to provide more information about the market relationships than the Vector Error Correction Model and Granger Causality. However, unlike the latter, the direction of causality is difficult to distinguish in Mutual Information and the Global Correlation Coefficient. In this respect, the nonlinear Singular Spectrum Analysis technique displays several advantages, since it enabled us to capture nonlinear causality in both directions, while Granger Causality only captures causality in a linear way. The results also show that stock markets are closely linked both in terms of price levels and returns (as well as lagged returns) over the 36 years analyzed.     

Testing for spatial market integration and law of one price in Turkish wheat markets

This paper examines co-integration models in testing for spatial market integration and the Law of One Price (LOP) for Turkish wheat market. The multivariate co-integration tests show that there is one co-integrating vector in the system which implies that though the markets are integrated, the LOP does not hold. Vector error correction model restrictions tests also show that structural breaks have impacts on the long-run linkage among the prices. These results are important for wheat production policies and for wheat market liberalization considerations in the future.     

Equity market contagion during the global financial crisis: Evidence from the world's eight largest economies

The global financial crisis (2007–2009) saw sharp declines in stock markets around the world, affecting both advanced and emerging markets. In this paper we test for the existence of equity market contagion originating from the US to advanced and emerging markets during the crisis period. Using a latent factor model, we provide strong evidence of contagion effects in both advanced and emerging equity markets. In the aggregate equity market indices, contagion from the US explains a large portion of the variance in stock returns in both advanced and emerging markets. However, in the financial sector indices we find less evidence of contagion than in the aggregate indices, and this is particularly the case for the advanced markets. The results suggest that contagion effects are not strongly related to high levels of global integration.     

Contagion testing in frontier markets under alternative stressful S&P 500 market scenarios

We use alternative approaches to identify stable and stressful scenarios in the S&P 500 market, to offer a new perspective for constructing contagion tests in recipient frontier markets vulnerable to disturbances from this source market. The S&P 500 market is decomposed into discrete conditions of: (1) tranquil versus turbulent volatility; (2) bull versus bear market phases; (3) normal periods versus asset bubbles and crashes. Based on these identified scenarios, we use various co-moment contagion tests to analyse the changing relationship between the S&P 500 market and major frontier markets in the Caribbean region that have prominent trade related exposure to the US. Our findings show that, outside of the events of the Great Recession, the Caribbean stock exchanges are largely independent of the S&P 500 market.     

Risk spillover between the US and the remaining G7 stock markets using time-varying copulas with Markov switching: Evidence from over a century of data

This paper analyses the risk spillover effect between the US stock market and the remaining G7 stock markets by measuring the conditional Value-at-Risk (CoVaR) using time-varying copula models with Markov switching and data that covers more than 100 years. The main results suggest that the dependence structure varies with time and has distinct high and low dependence regimes. Our findings verify the existence of risk spillover between the US stock market and the remaining G7 stock markets. Furthermore, the results imply the following: 1) abnormal spikes of dynamic CoVaR were induced by well-known historical economic shocks; 2) The value of upside risk spillover is significantly larger than the downside risk spillover and 3) The magnitudes of risk spillover from the remaining G7 countries to the US are significantly larger than that from the US to these countries.     

Risk aversion,forward markets and the competitive labor-managed firm under price uncertainty

This paper examines the behavior of a labor-managed co-operative firm which can sell its output in both spot and forward markets, where the random spot price varies between a price floor and a price ceiling but the forward price is a known parameter. We demonstrate that a risk-averse labor-managed firm will base its production decision on the forward market price, and that risk aversion is sufficient to give the direct relationship between a change in uncertainty and the amount hedged in the forward market.     

Product market integration,wage dispersion and unemployment

International product market integration enhances both the export possibility of supplying to foreign markets and the import threat of foreign firms penetrating into domestic markets. These mechanisms affect labour markets since they amount to increased job mobility. At the same time heterogeneity may increase since it is unlikely that the opportunities and threats are uniformly distributed across different groups/sectors. In a Ricardian trade model admitting heterogeneity in the labour market, it is shown that lower trade frictions are associated with aggregate welfare gains, increased trade and specialization, but also more dispersion in wages. Structural labour market problems caused by union market power are reduced while those caused by minimum (reservation) wages are strengthened.     

Adaptive permutation tests for serial independence

Permutation tests for serial independence using three different statistics based on empirical distributions are proposed. These tests are shown to be consistent under the alternative of m‐dependence and are all simple to perform in practice. A small simulation study demonstrates that the proposed tests have good power in small samples. The tests are then applied to Canadian gross domestic product (GDP data), corroborating the random‐walk hypothesis of GDP growth.