Forecasting Credit Spread Volatility: Evidence from the Japanese Eurobond Market

Different approaches to forecasting the volatility associated with the credit spreads on Yen Eurobonds are investigated. The actual volatility, historical volatility and estimated conditional volatility on spreads derived from a regression-based model with a GARCH and ARMA specification are compared within an adaptation of Black’s (J. Finance, 31, 1976, 361–367) option-pricing model. Surprisingly, the regression forecast over a medium forecasting horizon suggests that historic volatility provides the better forecast. The implications of these results for volatility forecasting and credit spread modelling are also discussed.JEL Classification: C32; G15     

Momentum and Autocorrelation in Stock Returns

This article studies momentum in stock returns, focusing onthe role of industry, size, and book-to-market (B/M) factors.Size and B/M portfolios exhibit momentum as strong as that inindividual stocks and industries. The size and B/M portfoliosare well diversified, so momentum cannot be attributed to firm-or industry-specific returns. Further, industry, size, and B/Mportfolios are negatively autocorrelated and cross-seriallycorrelated over intermediate horizons. The evidence suggeststhat stocks covary "too strongly" with each other. I argue thatexcess covariance, not underreaction, explains momentum in theportfolios.     

Optimal consumption and portfolio rules with intertemporally dependent utility of consumption

In the usual consumption portfolio problem, lifetime utility is assumed to be time-additive. This assumption has been criticized for failing to capture important intertemporal dependencies in utility such as intertemporal risk aversion and habit formation. This paper studies the consumption portfolio problem for a class of intertemporally dependent utility functions.     

Financial globalization and real regionalization

Over the period 1972-1986, the US business cycle was strongly correlated with the business cycle in the rest of the industrialized world. Over the period 1986-2000, international co-movement was much weaker (real regionalization). At the same time, US international asset trade has increased significantly ( financial globalization). We first document these phenomena in detail and then argue that they are related. In particular, we present a model in which financial globalization occurs endogenously in response to less correlated real shocks. Financial globalization, by enhancing cross-border capital flows, further reduces the international correlations in GDP and factor supplies. We find that both less correlated shocks and the endogenous change in international financial markets are needed to quantitatively account for the observed changes in the international business cycle.     

An Empirical Examination of the Stability of Housing Price Equations Over Time

This study investigates the extent to which the coefficients of housing price equations are stable over time. Using annual data from 1959 to 1979 for a large neighbourhood in Vancouver, British Columbia, a series of twenty-four housing price equations is estimated. The estimated coefficients exhibit substantial instability over the period. Further, prediction errors are generally minimized for a given year when the coefficients estimated for that year are used to predict. The results strongly suggest that such equations should be recalibrated each year.     

Adaptability and flexibility in urban transportation policy and planning

The poor representation of uncertainty in the urban transportation planning process can lead to excessively large and permanent facilities. Such inflexible facilities and systems may condition and severely constrain options available to future generations for organizing the production, consumption, and distribution of goods and services. The relationship between facility size and permanence and flexibility has received too little recognition in practice and too little attention in research. This paper calls for increased to provide policy makers and practitioners with a greater understanding of the consequences of the present approach and the advantages and disadvantages of more flexible approaches.     

Rice farming in Nigeria : in praise of the smallholder

Food production policy in Nigeria is now oriented towards large scale commercial production. The Federal Government proposes 20000 hectares of public cassava farming in all 19 states and in the Abuja capital territory. The National Grains Board and the National Root Crops Production Company are establishing large farms in their operational zones. The Nigerian Agricultural and Cooperative Bank is loaning millions of naira to individual private farmers to encourage them to establish large farms. Virtually every state government has its Agricultural Development Corporation directly involved in agricultural production on a large scale. It is presumed that the smallholder system on which Nigeria currently depends is inefficient and could not be relied upon to achieve the necessary increases in production.