Search Results
Working Paper
Can risk explain the profitability of technical trading in currency markets?
Academic studies show that technical trading rules would have earned substantial excess returns over long periods in foreign exchange markets. However, the approach to risk adjustment has typically been rather cursory. We examine the ability of a wide range of models: CAPM, quadratic CAPM, downside risk CAPM, Carhart’s 4-factor model, the C-CAPM, an extended C-CAPM with durable consumption, Lustig-Verdelhan (LV) carry-trade factor model, and models including macroeconomic factors, and foreign exchange volatility, skewness and liquidity, to explain these technical trading returns. No model ...
Working Paper
Predictability in international asset returns: a reexamination
This paper argues that inferring long-horizon asset-return predictability from the properties of vector autoregressive (VAR) models on relatively short spans of data is potentially unreliable. We illustrate the problems that can arise by re-examining the findings of Bekaert and Hodrick (1992), who detected evidence of in-sample predictability in international equity and foreign exchange markets using VAR methodology for a variety of countries over the period 1981-1989. The VAR predictions are significantly biased in most out-of-sample forecasts and are conclusively outperformed by a simple ...
Journal Article
Why Price Controls Should Stay in the History Books
Prices allocate scarce resources. Price controls distort those signals, leading to the inefficient allocation of goods and services.
Journal Article
Financial Engineering Versus Cancer
If financial engineering can distribute the pecuniary risk of medical research, then it can play a role in curing cancer.
What Happens to Expected Stock Volatility around Election Day?
Presidential elections create uncertainty about future economic policy that translates into volatility in asset prices. How has the VIX performed around U.S. elections since 1988?
Journal Article
The Rise and Fall of M2
Inflation followed M2 and monetary base growth up over the past three years, and now M2 and base growth are negative.
Working Paper
The microstructure of the U.S. treasury market
This article discusses the microstructure of the U.S. Treasury securities market. Treasury securities are nominally riskless debt instruments issued by the U.S. government. Microstructural analysis is a field of economics/finance that examines the roles played by heterogenous agents, institutional detail, and asymmetric information in the trading process. The article describes types of Treasury issues; stages of the Treasury market; the major players, including the role of the Federal Reserve Bank of New York and the interdealer brokers; the structure of both the spot and futures markets; the ...
Journal Article
The mysterious Greek yield curve
The hump in the Greek yield curve exists because the calculated yields assume that the bonds will pay off at their full value but market prices incorporate expectations that the payoff will be much lower.>
Journal Article
Deflation and real economic activity under the gold standard
Journal Article
Technical analysis and the profitability of U.S. foreign exchange intervention
This article reconciles an apparent contradiction found by recent research on U.S. intervention in foreign exchange markets. LeBaron (1996) and Szakmary and Mathur (1997) show that extrapolative technical trading rules trade against U.S. foreign exchange intervention and produce excess returns during intervention periods. Leahy (1995) shows that U.S. intervention itself is profitable over long periods of time. In other words, technical trades make excess returns when they take positions contrary to U.S. intervention - U.S. intervention itself is profitable, however. This article will first ...