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Breaking Trends And The Money-Output Correlation, David Fernandez
Breaking Trends And The Money-Output Correlation, David Fernandez
Research Collection Lee Kong Chian School Of Business
This paper examines the impact on the money-output correlation of a univariate specification that allows time series to be characterized as stationary around a broken trend function. Though pretesting suggests that U.S. real output (industrial production) can be described as broken-trend stationary, this result has only limited impact on the money-output correlation. Before 1985 there is a strong Granger causal relationship between money and broken-detrended output (hut not first-differenced output), even when different short-term interest rates are used as regressors. However, after 1985 this relationship weakens significantly, whether or not one determines that output has a unit root.
A Variance Decomposition Analysis Of The Information In The Term Structure, Louis H. Ederington, Jeremy C. Goh
A Variance Decomposition Analysis Of The Information In The Term Structure, Louis H. Ederington, Jeremy C. Goh
Research Collection Lee Kong Chian School Of Business
Based on a market efficiency assumption, we use variance decomposition analysis is to separate information in the term structure on expected future spot rates from information on time-varying term premia and to examine the market's ability to forecast both future rate changes and excess returns on long versus short securities. We find that fluctuations in the slope of the yield curve are due more to changing term premia than to fluctuations in expected future spot rates and that the market correctly predicts about 40 percent of the month-to-month changes in spot rates, a considerably higher percentage than that found by …
Joint Variance Ratio Tests Of The Martingale Hypothesis For Exchange Rates, Wai Mun Fong, Benedict Seng Kee Koh, Sam Ouliaris
Joint Variance Ratio Tests Of The Martingale Hypothesis For Exchange Rates, Wai Mun Fong, Benedict Seng Kee Koh, Sam Ouliaris
Research Collection Lee Kong Chian School Of Business
There is considerable interest in whether exchange rates behave like martingales. Liu and He tested the martingale hypothesis for exchange rates using the variance-ratio methodology of Lo and MacKinlay. They found that exchange rates have violated the martingale property since the inception of floating rates in 1973. Liu and He did not consider the joint implications of their tests, however. In this article, we reassess the martingale hypothesis for exchange rates using the joint tests developed by Hochberg and by Richardson and Smith. Contrary to the findings of Liu and He, the joint tests indicate that the martingale model worked …
The Opening Price Behavior: Foreign Exchange Futures Market Versus Equity Market, Quentin C. Chu, David K. Ding, C. S. Pyun
The Opening Price Behavior: Foreign Exchange Futures Market Versus Equity Market, Quentin C. Chu, David K. Ding, C. S. Pyun
Research Collection Lee Kong Chian School Of Business
Daily opening, noon, and closing prices of Deutschemark and Japanese yen futures are examined for the efficiency of the foreign exchange futures (FXF) market. Variance ratio and multiple variance ratio tests, are employed. The prices are found to be serially uncorrelated. This random walk behavior sheds light on the differences between the FXF and commodity or equity markets. The conclusions suggest that the FXF market is a 24-hour global market, reflecting a disparity with equity markets where round-the-clock trading is advocated since the high volatility during market opening would be eliminated, leading to potential cost reductions for traders as spreads …
The Information Content Of Fdi Announcements: Evidence From An Emerging Market, David K. Ding, Qian Sun
The Information Content Of Fdi Announcements: Evidence From An Emerging Market, David K. Ding, Qian Sun
Research Collection Lee Kong Chian School Of Business
This study examines the stock return responses to the announcements of foreign direct investments (FDI) by Singaporean companies. A standard event study methodology is used to ascertain the abnormal returns around the announcement day (day 0). The study covers the period from 1989 to 1994 with a sample size of 70 events. The announcement effect is positive and significant around the announcement day. The average abnormal return is 0.4913 percent on day 0, and the two-day (days 0 and 1) cumulative abnormal return is 0.9642 percent. However, the abnormal return is unequally distributed across the sample firms. A cross-sectional analysis …