Do global financial crises validate assertions of fractal market hypothesis?

The frequent occurrence of crises in recent decades has triggered a debate between the proponents of Efficient market hypothesis and Fractal market hypothesis. While, the proponents of Efficient market hypothesis view crises as non-existent and highly improbable, the advocates of Fractal market hypothesis view crises as the dominance of certain investment horizons. We test whether the assertion of Fractal Market hypothesis regarding the dominance of certain frequencies during financial crises hold for the global stock markets. Following Kristoufek (Sci Rep 3:2857, 2013) the wavelet power spectra based on continuous wavelet framework are used to test the said hypothesis. It is shown that stock markets around the globe indicate the dominance of higher frequencies during the crises periods, hence, validate the assertions of Fractal market hypothesis. The results drawn are robust to the use of different countries as well as different crises.     

Renewable and nonrenewable energy production and economic growth in sub-Saharan Africa: a hidden cointegration analysis

The objective of this article is to investigate the hypothesis of asymmetric effects between economic growth and renewable and nonrenewable energy production. To this end, both the linear cointegration and the hidden cointegration methodology are employed, with the latter allowing a straightforward delimitation of the data in an economically sensible way. We test for the presence of hidden cointegration across 12 sub-Saharan African countries spanning the period 1971–2011. The empirical results confirm the growth hypothesis for a subset of countries, suggesting that their growth could be adversely affected by conservation policies, while for a second subgroup of countries they confirm the conservation hypothesis, indicating that conservation policies could enhance the growth process in these countries. The differentiation of the results could be captured entirely by the linear approach, indicating that the lack of cointegration between renewable energy production and economic growth found in previous studies may be due to failures to properly delimit the nonlinearity property in the data.     

Are exchange rates interdependent? Evidence using wavelet analysis

We examine the co-movement in daily returns of USD–INR, EUR–INR, GBP–INR, and JPY–INR currency pair futures contracts traded on the National Stock Exchange of India (NSE) using the wavelet cohesion approach. This study contributes to the literature by examining the scantly studied area of co-movement in exchange rates and using the wavelet approach, which allows us to analyse time–frequency-wise co-movement of the time series. The empirical results indicate that the currency futures markets are nearly perfectly integrated in the long run (monthly, quarterly and biannual scales) offering little potential gains from international portfolio diversification. The discrepancies between currency futures markets are small and almost fade away within 3–6 months. Moreover, international currency diversification might offer relatively higher potential gains at intraweek, weekly, and fortnightly time horizons owing to lower correlations among the currencies under consideration. Finally, our multiple-wavelet correlation and cross-correlation analysis shows that GBP acts as a potential leader/follower across scales. The results of our analysis indicate the dynamic pattern of co-movement among the major currency futures contracts, which provides several implications for portfolio managers and international investors participating in the Indian market.     

Does international tourism affect international trade and economic growth? The Indian experience

This study attempts to investigate the relationship between international tourism, trade, and economic growth in India over the period from April 1991 to July 2012. To account for potential asymmetries in the relationship, we make use of new asymmetric Granger-causality tests and frequency analysis. We show that there is bidirectional Granger-causality between trade and tourism in positive components, whereas unidirectional Granger-causality runs from tourism to trade for negative components. Moreover, we find evidence of bidirectional Granger-causality between economic growth and tourism in positive components, but unidirectional Granger-causality running from economic growth to tourism for negative components. On the other hand, the results from frequency analysis provide evidence of Granger-causality between trade and tourism, and also between economic growth and tourism, at different frequency bands.