Search Results
Journal Article
Are markets really efficient?
Conference Paper
Automated trade execution systems
Working Paper
Transmission of information across international equity markets
This paper provides evidence of transmission of information from the U.S. and Japan to Korean and Thai equity markets during the period from 1995 through 2000. Information is defined as important macroeconomic announcements in the U.S., Japan, Korea, and Thailand. Using high-frequency intraday data, I focus the study on return volatility and trading volume because the implications of new information are much clearer than for returns. I find a large and significant association between emerging-economy equity volatility and trading volume and developed-economy macroeconomic announcements at ...
Working Paper
The immediacy implications of exchange organization
The paper introduces a connection between the needs of exchanges to respond to the immediacy needs of their clientele and the need to manage the credit risks faced by exchange members. Queueing theory is used to represent the opportunity loss suffered by brokers engaging in multiple activities: order-flow origination and its intermediation. The role of market-making locals is depicted as enabling specialization. Brokers focus on originating order flow and locals on fulfilling intermediation needs. The capacity to specialize is constrained by the availability of creditworthy members acting as ...
Working Paper
Money demand and equity markets
Money demand in part reflects a portfolio decision. As equities have become a significant store of household wealth, it seems plausible that variations in equity markets could affect money demand. We re-specify a standard money demand equation to include stock market volatility and revisions to analyst earnings projections. We find that these equity market variables are statistically significant and reduce the errors from money demand models.
Journal Article
The evolution of the Philadelphia Stock Exchange
In "The Evolution of the Philadelphia Stock Exchange," one of our visiting scholars, Swarthmore College professor John Caskey, explains some of the factors that account for the PHLX's long life. Although Caskey focuses on the evolution of the PHLX, he also profiles some of the seismic shifts in U.S. securities markets in recent decades and illuminates the role of the largely overlooked regional stock exchanges.
Working Paper
Equity portfolio diversification under time-varying predictability and comovements: evidence from Ireland, the US, and the UK
We use multivariate regime switching vector autoregressive models to characterize the time-varying linkages among short-term interest rates (monetary policy) and stock returns in the Irish, the US and UK markets. We find that two regimes, characterized as bear and bull states, are required to characterize the dynamics of returns and short-term rates. This implies that we cannot reject the hypothesis that the regimes driving the markets in the small open economy are largely synchronous with those typical of the major markets. We compute time-varying Sharpe ratios and recursive mean-variance ...
Working Paper
Aggregate idiosyncratic volatility in G7 countries
The paper analyzes average idiosyncratic volatility in G7 countries. We find that idiosyncratic volatility is highly correlated across countries and there is a significant Granger causality from the U.S. to the other countries and vice versa. Consistent with U.S. data, when combined with stock market volatility, idiosyncratic volatility has significant predictive power for stock market returns and the value premium in many other G7 countries. Moreover, in U.S. data, idiosyncratic volatility has explanatory power for stock returns very similar to that of value premium volatility in both ...
Working Paper
On the cross section of conditionally expected stock returns
In this paper, we use macrovariables advocated by recent authors to make out-of-sample forecast for returns on individual stocks and then sort stocks equally into ten portfolios on this proxy of conditionally expected returns. The average returns increase monotonically from the first decile (stocks with the lowest expected returns) to the tenth decile (stocks with the highest expected returns), and the difference between the tenth and first deciles is a significant 4.8 percent per year. While these portfolios pose a challenge to the CAPM, they appear to be explained by Carhart's (1997) ...