Download or read book Stochastic Trends and Cointegration in the Market for Equities written by Marie D. Racine and published by . This book was released on 1998 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Stochastic Trends and Cointegration in the Market for Equities written by Lucy F. Ackert and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We use a no-arbitrage, cost-of-carry pricing model to examine whether equity spot and futures markets are cointegrated. A stock index and its futures price should be cointegrated if the cost of carry is stationary. Otherwise, the appropriate cointegrating relationship is trivariate and includes the index, futures price, and cost of carry. We study the relationships among the Standard and Poor's 500 index, associated index futures price series, and interest rate for January 4, 1988, through June 30, 1995, and find that all three series are nonstationary. We further find that the index and futures price are not cointegrated unless the cost of carry is included in the cointegrating relationship. Our findings are consistent with the no-arbitrage pricing model and do not appear to be sensitive to the presence of structural breaks in the series.
Download or read book Comovements in National Stock Market Returns written by Anthony John Richards and published by International Monetary Fund. This book was released on 1996-04 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper is a response to the literature that tests for cointegration between national stock market indices. It argues that apparent findings of cointegration in other studies may often be due to the use of asymptotic, rather than small-sample, critical values. In fact, economic theory suggests that cointegration is unlikely to be observed in efficient markets. However, this paper finds some evidence for the long-horizon predictability of relative returns, and the existence of “winner-loser” reversals across 16 national equity markets. A conclusion is that national stock market indices include a common world component and two country-specific components, one permanent and one transitory.
Download or read book Common Stochastic Trends in International Stock Markets written by Dimitris A. Georgoutsos and published by . This book was released on 2000 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study we explore the implications for the identification of common stochastic trends among stock price indices of using data transformed in a quot;real dollarquot; basis. By applying a quot;generalquot; VAR model where all the relevant variables (stock indices, consumer priced indices and the exchange rate) appear, we show that the expected results from the cointegration analysis differ substantially. In particular, the use of the quot;transformedquot; data pre-supposes that the Purchasing Power Parity condition has been imposed. If this is not the case then the adoption of the quot;transformedquot; data leads to an entirely different economic identification of the model where demand shocks play a crucial role and the coefficients of the cointegrating vectors should satisfy different restrictions. Other contributions of this paper is that it studies the problem under the light of recent developments in cointegration theory which allows us to implement our tests in the presence of 1(2) variables. Furthermore we fill a gap in previous studies by testing for the temporal stability of the cointegration results. Our results, on data for the USA and the UK, validate our approach since they make clear that the necessary restrictions for the Purchasing Power Parity to hold are not satisfied and moreover the results are sample dependent.
Download or read book Using Non Linear Tests to Examine Integration between Real Estate and Stock Markets written by John Okunev and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study we present an alternative approach to test whether the real estate and stock markets are cointegrated. We develop a nonlinear test which allows for a stochastic trend term as opposed to a deterministic drift term. This is a reasonable approach, because if the real estate market is related to the stock market then it is desirable to incorporate the stochastic nature of the stock market into the model. We compare the results of the nonlinear model to the results obtained using conventional cointegration tests. The cointegration results support the view that the real estate and stock markets are segmented, whereas the nonlinear model supports the view that the markets are fractionally integrated. A possible reason for this apparent discrepancy between the results could be due to the underlying assumption of a linear relationship between the variables. It is possible that the tests of cointegration will reject that the two variables are related even though the relationship may be nonlinear.
Download or read book Financial Modeling of the Equity Market written by Frank J. Fabozzi and published by John Wiley & Sons. This book was released on 2006-03-31 with total page 673 pages. Available in PDF, EPUB and Kindle. Book excerpt: An inside look at modern approaches to modeling equity portfolios Financial Modeling of the Equity Market is the most comprehensive, up-to-date guide to modeling equity portfolios. The book is intended for a wide range of quantitative analysts, practitioners, and students of finance. Without sacrificing mathematical rigor, it presents arguments in a concise and clear style with a wealth of real-world examples and practical simulations. This book presents all the major approaches to single-period return analysis, including modeling, estimation, and optimization issues. It covers both static and dynamic factor analysis, regime shifts, long-run modeling, and cointegration. Estimation issues, including dimensionality reduction, Bayesian estimates, the Black-Litterman model, and random coefficient models, are also covered in depth. Important advances in transaction cost measurement and modeling, robust optimization, and recent developments in optimization with higher moments are also discussed. Sergio M. Focardi (Paris, France) is a founding partner of the Paris-based consulting firm, The Intertek Group. He is a member of the editorial board of the Journal of Portfolio Management. He is also the author of numerous articles and books on financial modeling. Petter N. Kolm, PhD (New Haven, CT and New York, NY), is a graduate student in finance at the Yale School of Management and a financial consultant in New York City. Previously, he worked in the Quantitative Strategies Group of Goldman Sachs Asset Management, where he developed quantitative investment models and strategies.
Download or read book Stochastic Trends and Economic Fluctuations written by Robert Graham King and published by . This book was released on 1991 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Common Stochastic Trends Among Far East Stock Prices written by Taufiq Choudhry and published by . This book was released on 2004 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the effect of the Asian financial crisis of 1997-98 on the long-run relationship(s) between the stock prices of Far East countries. Further tests are conducted to check the change in the dominance of the Japanese and the US stock markets in the Far East Region. Empirical investigations are conducted by means of fractional unit root tests and the Johansen multivariate cointegration method. Cointegration results show significant long-run relationship(s) between the Far East markets before and during/after the crisis. The size of the normalized coefficients and the speed of rate of adjustment may indicate the dominance of the Japanese market as compared to the US market in the region during both periods.
Download or read book Common Trends Cointegration and Competitive Price Behaviour written by and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book A Note on Cointegration of International Stock Market Indices written by Thomas Dimpfl and published by . This book was released on 2016 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: Cointegration has frequently been used in the financial econometrics literature to assess the degree of interdependence of financial markets. We show that if individual stock prices are generated by random walks with possibly contemporaneously correlated innovations, the resulting indices cannot be cointegrated as they are a combination of n random walks which itself is non-stationary by construction. This result holds if (as in factor models) an additional common global or local random walk is allowed for. There will, however, never be less than n random walk components, as otherwise company specific characteristics would be ruled out to affect the stock price permanently. To substantiate the theoretical propositions we simulate stock prices (allowing for heteroscedasticity, correlated innovations and common factors), construct indices and test whether these indices are cointegrated. We show that while heteroscedasticity alone is able to mislead cointegration tests, it is not sufficient to explain at the same time the empirically found high correlation between stock market indices. A common stochastic factor as well as correlated price innovations are necessary to reproduce the empirical characteristic features. We conclude that cointegration is not a suitable method to analyze stock market interdependence.
Download or read book Reconsidering Cointegration in International Finance written by Godbout, Marie-Josée and published by . This book was released on 1997-01-01 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Stochastic Trends and Multivariate Cointegration Tests in Exchange Rate Models written by Sanath C. Jayanetti and published by . This book was released on 1992 with total page 258 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Common Stochastic Trends in International Stock Prices and Dividends written by Tom Engsted and published by . This book was released on 1994 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Cointegration of International Stock Market Indices written by Ray Y. Chou and published by International Monetary Fund. This book was released on 1994-08 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we derive evidence on the integration of international stock markets from the cointegration properties of international stock market prices. Using the multivariate cointegration test of Johansen, we find that the set of six country stock price indices, including that of the United States, Canada, the United Kingdom, France, Germany, and Japan are cointegrated. The results suggest that there are long-run equilibrium relationships among the stock market prices. Subsample and subgroup analyses also indicate that the cointegration relationships have become stronger over time. This is consistent with greater stock market integration amid the increasing liberalization and globalization of capital markets.
Download or read book Long Run Equilibrium Relationships in the International Stock Market Factor Systems written by Hyung-Suk Choi and published by . This book was released on 2015 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt: The main objective of this paper is to investigate the international linkages among local, country-specific stock market factors in order to better understand the dependence structure of increasingly integrated world financial markets. The seeming discordance between Fama and French (1998) and Griffin (2002) regarding the multi-factor model in the international stock markets motivates us to study the international relationship among local factors. With the individual stock data from the six major developed countries in the international stock market, we compose daily returns to the Fama-French three factors (i.e. market, size, and value) and the momentum factor over the period from January 2000 to June 2010. We investigate the international linkages among local stock market factors, focusing on their equilibrium relationship in the integrated world financial market. The cointegration analysis indicates that local factor indices, constructed from the cumulative factor returns, are cointegrated for each of the four factor classes. Thus, we conclude that local factors are globally bound to each other through a long-run equilibrium relationship and that although stock market factors may be local, rather than global, individual stock returns are driven by common global stochastic trends.
Download or read book Common Stochastic Trends in International Stock Prices and Dividends written by Tom Engsted (IFI) and published by . This book was released on 1994 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Market Segmentation and Information Diffusion in China s Stock Markets written by Niklas Ahlgren and published by . This book was released on 2003 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies market segmentation, information asymmetry and diffusion on the Chinese stock exchanges. Previous studies indicate that the price difference between domestic investors' A shares and foreign investors' B shares are driven by a stochastic trend. In this paper we test the stationarity of the A share price premium, and cointegration between A and B share prices using panel data methods. We use standard Augmented Dickey-Fuller (ADF) unit root tests and likelihood ratio (LR) tests for cointegration for the cross-sectional units or individual firms. Our panel data tests are based on the Fisher (1932) test suggested by Maddala and Wu (1999), i.e. the tests are based on combining the individual p-values from the cross-sectional units or firms. Using panel data, we find that the A share price premium is stationary, and we find cointegration between A and B share prices for most firms, but not for all. A probit model is used to identify the firm characteristics that determine whether A and B share prices cointegrate or not. The results show that cointegration is more likely to be found for firms that have listed their B shares in more recent years, and for firms in the service and manufacturing sectors.
