Business Commons^™

Structural Identification Of Pair Trades, Yi Liu

Dissertations, Theses, and Capstone Projects

This dissertation examines the structural identification of pair trades based on company fundamentals, stock price paths, and company’s capacity to transform fundamentals into value. The dissertation consists of four chapters. Chapter 1 lays the foundation for the study of pair identification. It designs the pair trading procedure and defines the trading performance measure. It also reviews and compares the performance of commonly used pair identification metrics in the literature, including normalized price squared distance, return correlation, and co-integration tests. Among the three metrics, the squared price distance represents the most effective metric and generates the best pair trading performance. The …

Examining Price Discovery In The Gold Market: Evidence From India, Santosh Kumar Pk, Sanjeev M A

Management Dynamics

Background: Commodity markets are rapidly changing across the globe due to technological and financial innovations. The introduction of commodity exchanges and futures trading has significantly affected their price discovery with ramifications for the commodity users and traders. The price discovery mechanism in commodity markets is dynamic and needs regular reassessment.

Objective: This paper aims to determine the price discovery mechanism (the relation between spot and future prices) of gold in the Indian commodity markets for the ten years between 2011-2020 and the direction of the price influence.

Materials & Methods: The current study uses daily gold price data between January …

Cointegration And Statistical Arbitrage Of Precious Metals, Judge Van Horn

Finance Undergraduate Honors Theses

When talking about financial instruments correlation is often thrown around as a measure of the relation between two securities. An often more useful or tradeable measure is cointegration. Cointegration is the measure of two securities tendency to revert to an average price over time. In other words, cointegration ignores directionality and only cares about the distance between two securities. For a mean reversion strategy such as statistical arbitrage cointegration proves to be a far more reliable statistical measure of mean reversion, and while it is more reliable than correlation it still has its own problems. One thing to consider is …

Contributions Of Agriculture, Smesand Non-Smes Toward Povertyreduction In Bangladesh, Prashanta K. Banerjee, Matiur Rahman

International Review of Business and Economics

This paper studies the contributions of bank-based financing to agriculture, SMEs and non-SMEs in the overall poverty reduction in Bangladesh. Annual data are used from 1980 to 2015. ARDL bounds testing approach is applied for evidence of cointegration among the variables and VECM is subsequently estimated. The empirical results show that financing of non-SMEs significantly reduces overall poverty in the long run. To this effect, SMEs play a marginal role in the current state of affairs. In contrast, agricultural financing reveals, otherwise.

An Empirical Investigation Into The Effect Of Monetary Policy And Inflation On The Exchange Rate In Ghana, Precious Wedaga Allor

2019 Awards for Excellence in Student Research and Creative Activity – Documents

The Ghanaian Cedi has recently experienced persistent depreciation against it's major trading partners. This paper investigates the role inflation and monetary policy plays in the persistent depreciation. The paper makes use of the ARDL and Bounds test of co-integration as well as the Toda & Yamamoto (1995) Augmented Granger Causality test to determine the long and short run dynamics of the impact of monetary policy and inflation on exchange rates in Ghana, using data ranging from 1970 to 2017. The paper finds short-run depreciation effect of contractionary monetary policy on the exchange rate, reflecting the exchange rate puzzle. The long …

Essays On Market Linkages In Nafta And Latin American Countries: Studies Of Cointegration And Contagion, John K. Tarwater

Theses and Dissertations

The globalization of securities in recent years has led to an increase in market linkages. These linkages are strong among countries that have entered into bilateral and multilateral trade agreements. I investigate the linkages of stock markets in NAFTA countries by exploring their cointegrating relationship, and I explore market linkages in Latin America by showing evidence of financial contagion between Brazil and her Latin American neighbors.

In the first essay, I employ a vector error correction model to examine the linkages between price stock indexes of NAFTA countries that have been segregated into tiers based on market capitalization. In each …

Testing The Productivity Bias Hypothesis In Middle East Countries, Ferda Halicioglu, Natalya Ketenci

Topics in Middle Eastern and North African Economies

Divergence of the purchasing power parity from the equilibrium exchange rate is attributed to various factors. Productivity differentials between the countries are said to be one of the main sources, which lead to productivity bias hypothesis. The hypothesis suggests that a relatively more productive country should experience a real appreciation of its currency. This research aims at testing the hypothesis in Middle East countries using the time series data over the period of 1970-2015 and by employing ARDL approach to cointegration. The econometric results support the hypothesis is only in the case of Bahrain, Kuwait and Saudi Arabia. This research …

An Empirical Study Of Elasticity Of Employment Generated In Micro, Small And Medium Manufacturing Enterprises (Manufacturing Msmes) In India, Nihar Ranjan Jena, Lina R. Thatte

International Review of Business and Economics

World over SMEs are playing a major role in the sphere of socio-economic enhancement of lives of millions. In India, the Micro, Small & Medium Enterprises (MSMEs) contribute 8 per cent to the country’s GDP, 45 per cent to the manufactured output and 40 per cent to the country’s exports. They provide employment to 101 million people through 45 million enterprises. As an employment generator, MSMEs are the second largest employment opportunity provider only behind the agriculture sector. The MSMEs also act as a catalyst for social change by helping reduce the income inequality among various social classes as also …

Terrorist Incidents And Tourism Demand: Evidence From Greece, Aristeidis Samitas, Dimitrios Asteriou, Stathis Polyzos, Dimitris Kenourgios

All Works

© 2017 Elsevier Ltd The purpose of this paper is to examine the impact of terrorism on tourism demand in Greece using monthly data from 1977 to 2012. We investigate whether this relationship is bidirectional and whether it exhibits long run persistence. Thus, we employ a large dataset of terrorist incidents and perform cointegration and long-run causality tests, correcting our data for cyclical seasonality and applying PCA to construct a terrorism proxy according to the severity of the incident. Our findings concur that terrorism has a significant negative impact on tourist arrivals to Greece and that causality is noted from …

Towards A Sustainable Islamic Banking System: Re-Embedding Murabaha Mode Of Financing, Wahyu Jatmiko

The Indonesian Capital Market Review

This study is an attempt at solving the chronic problems of banking murabaha, notably the ribawi benchmark rate problem. To this end, the first stage of this study examines whether the recent solution for banking murabaha, namely Islamic Interbank Benchmark Rate (IIBR), is a sustainable solution to solve the problem. The Johansen cointegration test between IIBR and LIBOR, as an international benchmark rate, as well as IIBR and JIBOR, as an Indonesian one, is performed to prove that notion. The results suggest that IIBR has long-run equilibrium relationship with the two ribawi benchmark rates. IIBR hence does not fulfil the …

Are The Asean-5 Foreign Exchange Market Efficient? Evidence From Indonesia, Thailand, Malaysia, Singapore, And Philippines: Post-Global Economic Crisis 2008, Aditya Andika Putra, Hanny Lindawati, Sarah Fitri Sari

The Indonesian Capital Market Review

This paper examines market efficiency of foreign exchange markets in South East Asia (Indonesia, Thailand, Malaysia, Singapore, and Philippines) after the global crisis period 2008. The time span covered by the samples are from 2009 to 2014, with the total number of observations for spot and forward exchange rate data amounting to 1565 data points. This study uses three different approaches to examine efficiency within countries and across countries. The result of this study shows that foreign exchange markets in the ASEAN-5 countries are efficient within countries, but have not been efficient across countries, especially when the country has a …

Exchange Rate Pass-Through To Inflation In Nigeria, Abiodun S. Bada, Ajibola I. Olufemi, Inuwa A. Tata, Idowu Peters, Sani Bawa, Anigwe J. Onwubiko, Udoko C. Onyowo

CBN Journal of Applied Statistics (JAS)

Concerns about the magnitude and length of exchange rate pass-through to consumer prices have increased in many developing countries in view of its profound implications on price and exchange rate stability as well as the macroeconomic policy environment. This paper examines the exchange rate pass-through effect at the aggregate level into import and consumer prices in Nigeria for the period 1995Q1 – 2015Q1. Utilizing the Johansen approach to cointegration and a vector error correction methodology, the paper found the exchange rate pass-through into Nigeria’s CPI inflation to be incomplete. The long run pass-through elasticities were found to be 0.24 and …

Dynamic Interrelationships In Returns And Volatilities Among Shipping Freight Markets, Avinash Kumar

World Maritime University Dissertations

This paper explores and analyzes the return lead-lag relationships and volatility transmission among dry bulk, container and tanker shipping freight market after the financial crisis in 2008. However, there are few numbers of studies that investigates such interactions between shipping freight markets, but no studies that also consider potential linkage between container and tanker freight market. This study fills the gap by examining lead-lag and volatility spillover effects among these three shipping freight markets. The Granger causality test and the co-integration analysis are applied to investigate the lead-lag relationship among the Baltic dry index (BDI), Shanghai (export) containerized freight index …

Cointegration Of Matched Home Purchases And Rental Price Indexes: Evidence From Singapore, Badi H. Baltagi, Jing Li

Research Collection School Of Economics

This paper exploits the homogeneity feature of the Singapore private residential condominium market and constructs matched home purchase price and rental price series using the repeated sales method. These matched series allow us to conduct time series analysis to examine the long-term present value relationship in the housing market. Three key findings are obtained. First, we fail to establish a cointegrating relationship between the home purchase price and rental price based on nationally estimated indexes. Second, area-specific indexes demonstrate strong cross-correlations, invalidating the use of first generation panel unit root tests that ignore these cross-correlations. Third, Pesaran's CIPS test indicates …

Determining The Optimal Monetary Policy Instrument For Nigeria, Solomon I. Udom, Baba N. Yaaba

CBN Journal of Applied Statistics (JAS)

It is considered inapt for central banks to adjust reserve money (quantity of money) and interest rate (price of money) at the same time. Thus, necessitates the need for a choice instrument. Enough evidence abounds in microeconomic theory on the undesirability of manipulating both price and quantity simultaneously in a free market structure. The market, in line with the consensus among economists, either controls the price and allows quantity to be determined by market forces, or influence quantity, leaving prices in the hands of the forces of demand and supply. This paper is, therefore, an attempt to examine the optimal …

Cointegration Analysis Of Public Expenditure On Tertiary Education And Economic Growth In Nigeria, Japheth T. Torruam, Moses A. Chiawa, Cyprian C. Abur

CBN Journal of Applied Statistics (JAS)

The paper investigates the Impact of public expenditure on tertiary education and economic growth in Nigeria using time series data for the period 1990- 2011.The econometric methodology employed was cointegration and error correction technique. The study concludes that public expenditure on tertiary education has positive impact on economic growth in Nigeria. The study recommended that government and private sectors should partner by mobilizing resources to furnish tertiary institutions and equip them with adequate facilities in order to enhance tertiary education development for sustainable economic growth.

Structural Breaks, Cointegration And Demand For Money In Nigeria, Sani I. Doguwa, Olorunsola E. Olowofeso, Stephen O. U. Uyaebo, Ibrahim Adamu, Abiodun S. Bada

CBN Journal of Applied Statistics (JAS)

This paper estimates the money demand function in Nigeria in the aftermath of the recent global financial crisis and examines whether its underlying properties has changed over the years. Specifically, the existence of a stable long-run demand for money function during the period 1991:Q1-2013:Q4, while accounting for the possibility of structural breaks is investigated. The Gregory-Hansen residual based test for cointegration detected both intercept and regime shifts in 2007:Q1 as the null of no cointegration is rejected at 1 per cent significance level, indicating that long run relationship exists between real money supply, real income, real monetary policy rate, exchange …

A Monetary Union In East Asia: What Does The Common Cycles Approach Tell?, K Sato, David E. Allen, Zhaoyong Zhang

Zhaoyong Zhang

There is controversy about whether a monetary union is feasible in the East Asian region. Amongst the criteria for establishing a monetary union, most of the existing studies focus on the symmetric issue of fundamental shocks and the extent of correlations by applying the Blanchard and Quah (1989) structural vector autoregression (VAR) technique, which includes the firstdifferenced variables in the model and examines only bilateral relationships. When forming a monetary union, the member countries need to renounce their monetary policy autonomy. If shocks to respective economies are symmetric, the cost of relinquishing the discretionary monetary policy is likely to be …

Further Evidence On The Spatio-Temporal Model Of House Prices In The United States, Badi H. Baltagi, Jing Li

Research Collection School Of Economics

Holly, Pesaran, and Yamagata (Journal of Econometrics 2010; 158: 160–173) use a panel of 49 states over the period 1975–2003 to show that state-level real housing prices are driven by economic fundamentals, such as real per capita disposable income, as well as by common shocks, such as changes in interest rates, oil prices and technological change. They apply the common correlated effects estimator of Pesaran (Econometrica 2006; 74(4): 967–101), which takes into account spatial interactions that reflect both geographical proximity and unobserved common factors. This paper replicates their results using a panel of 381 metropolitan statistical areas observed over the …

Cointegration And Causality Between Financial Development And Economic Growth: Evidence From Morocco, Abdellatif Chatri, Abdelouahab Maaruf

The Indonesian Capital Market Review

The debate on the relationship between economic growth and financial development has been steadily growing in these recent years. However, the existing theoretical and empirical literature provides conflicting views in this respect. This Headline topic proposes an empirical investigation of the nature of this relationship in the Moroccan context. More precisely, it explores the cointegrating and the causality issue between economic growth and financial development. The later is measured by largely used indicators. In particular, we use capital market proxy, in addition to the traditional indicators of financial intermediation. The findings show that financial development explains significantly the growth, but …

The Role Of Tourism In Poverty Reduction: An Empirical Assessment, Robertico Croes

Rosen Faculty Scholarship and Creative Works

This paper assesses how tourism affects absolute poverty beyond its effects on growth in two developing countries. In particular, the author explores whether tourism spending leads to a decline in the proportion of people below the poverty line. An error correction model is applied to estimate the relationship between poverty and tourism spending. The results reveal that tourism does matter for the poor, but that it does not appear to have systematic effects, and that tourism development matters most for the poor at the lower levels of economic development. The findings from the two developing country case studies show differing …

An Empirical Analysis Of The Relationship Between Capital Flows And The Real Exchange Rate In India, Shashank Goel

International Journal of Applied Management and Technology

This paper analyzes the relationship between the net capital flows (NCFs) and other fundamentals and the real exchange rate (RER) in India consequent to the liberalization of the capital account in 1990s for the period 1996–1997 to 2012–2013 using the Autoregressive Distributed Lag approach to cointegration. Most studies in the literature emphasize the role of a number of real and monetary variables and domestic policies in determination of RER. But there is no consensus on what actually determines the RER. The estimation includes NCFs, government consumption expenditure, terms of trade, trade openness, Gross Domestic Product growth rate, change in foreign …

An Application Of The New Cointegration Techniques In Export-Gdp Nexus In Iran, Mosayeb Pahlavani, Edgar J. Wilson

Edgar Wilson

This paper examines the major determinants of GDP growth in Iran using annual time series data spanning form 1960 to 2003.

Monetary Policy Rule: A Broad Monetary Conditions Index For Nigeria, Yaaba N. Baba

CBN Journal of Applied Statistics (JAS)

To determine the relative importance of both the domestic and external influences on monetary policy formulation, this paper constructs a broad monetary conditions index for Nigeria. It brings together the three key channels of monetary transmission, namely interest rate, exchange rate and credit channels. The result gives dominance to exchange rate channel, followed by credit channel and interest rate channel. The resultant monetary conditions index traces fairly well the policy direction of the Central Bank of Nigeria for the studied period, hence can serve as an adequate gauge of monetary policy stance of the Bank.

Effect Of Monetary-Fiscal Policies Interaction On Price And Output Growth In Nigeria, Musa Yakubu, Asar K. Barfour, Shehu U. Gulumbe

CBN Journal of Applied Statistics (JAS)

This paper investigates the effectiveness of monetary-fiscal policies interaction on price and output growth in Nigeria. The dynamic correlations of variables have been captured by the analyses of impulse response and variance decomposition. From innovation analyses, the results suggest that the policy variables money supply and government revenue have more positive impact on price and economic growth in Nigeria specifically in the long run, thus some time with lag. Although monetary and fiscal policy variables have a dominant effect on economic activity, it is clear from this study that economic activity is dominated by its own dynamics in most of …

Reits And Stock Market Cointegration, Jessie E. Felix

Open Access Theses & Dissertations

Real Estate is popular among investors looking for attractive total returns, predictable price movements, and low correlations to the general equity markets. The financial crisis of 2007 led by real estate mortgage defaults led to a universal bear market, and a credit freeze which impacted REITs ability to raise capital. REITs long viewed perception as a distinct asset class was questioned as a result. Research analyzing REITs long run trends find evidence of an existing long run relationship between REITs, and the S&P. This paper employs the same cointegration framework of prior studies using a longer sample period, and favors …

Exchange Rate Adjustment And Output In South-East Asia, Kamal P. Upadhyaya, Robert Ranish, Neetu Kaushik, Rabindra Bhandari

Finance Faculty Publications

This paper studies the effect of currency devaluation on aggregate output level in South- East Asian countries using panel data from Thailand, Malaysia, Indonesia and the Philippines for a period from 1980 to 2010. An empirical model that includes monetary, fiscal and exchange rate variables is developed. Two versions of the model, one with real exchange rate and another with nominal exchange rate and foreign-to-domestic price ratio are estimated. An error correction model is developed and the time series properties of the panel data are diagnosed before estimating the model. The estimated results suggest that currency devaluations are contractionary in …

Intraday Price Discovery In Emerging Equity Market: Analysis Of Set50 Index, Set 50 Index Futures And Thaidex Set50 (Tdex), Chiraphol New Chiyachantana, Julaluck Choochuay, Tanakorn Likitapiwat

Research Collection Lee Kong Chian School Of Business

This study employs Vector Error Correction Model (VECM), information share and conditional information share methods to investigate price discovery in SET50 Index (cash index), SET50 Index Futures (futures index) and ThaiDex SET50 (exchange traded fund). Our findings indicate that there exists a long run relationship among three markets and a multi-market trading of derivatives markets and its underlying asset helps improve price efficiency. With respect to the degree of price formation process, SET50 Index Futures contributes most in price discovery process, followed by SET50 Index and ThaiDex SET50.

The Determinants Of Real Exchange Rate In Albania, Edmira Cakrani, Pranvera Resulaj

UBT International Conference

RER is one of the most important economic variables, especially in today's conditions of integration processes, the removal of trade barriers and increasing direct competition between countries. RER behavior affects the economy in microeconomic terms defining the allocation of resources between the tradable sector and the non-tradable sector. RER affects economy also in macroeconomic terms, through its impact on key economic variables, such as economic growth, employment and inflation. But RER itself is affected by economic variables. The aim of this paper is to examine the economic fundamentals that determine the level of the RER in Albania and the extent …

Reit Etfs Performance During The Financial Crisis., Stoyu Ivanov

Faculty Publications

In this study the “disintegration hypothesis” is tested. It is examined whether the Vanguard Real Estate Investment Trust and iShares Dow Jones US Real Estate Index Fund exchange traded funds disintegrate from their underlying indexes during the recent financial crisis. Failure to support the “disintegration hypothesis” of the exchange traded fund and underlying index is found. It is also found that the Vanguard Real Estate Investment Trust exchange traded fund is consistently cointegrated with its underlying index the MSCI US REITs Index, before, during and after the financial crisis. It is also found that the iShares Dow Jones US Real …