Market Dynamics and the Forward Premium Anomaly: A Model of Interacting Agents
By Phillip Hogan and Evan Myer This paper presents a stochastic model of exchange rates, which is used to explain the forward premium anomaly. In the model, agents switch between four trading strategies, and these changes drive the evolution of the exchange rate. This framework is meant to more realistically represent the important market dynamics […]
The Impact of Macroeconomic Surprises on Mergers & Acquisitions for Real Estate Investment Trusts
By John Battinelli and John Reid This paper examines the impact of various macroeconomics and real estate specific surprises on M&A transactions involving Real Estate Investment Trust. The 2008 financial crisis drastically affected merger & acquisitions activity, especially within the real estate market. The number of M&A transactions involving Real Estate Investment Trusts were very […]
Variance Risk Premium Dynamics: The Impact of Asset Price Jumps on Variance Risk Premia
By Jackson Pfeiffer This paper utilizes the high-frequency stock price data and the corresponding daily option price data of several highly capitalized corporations in order to investigate the impact that asset price jumps of individual equities have on the equities’ respective variance risk premia. The findings of this paper describe many characteristics of the variance […]
Enhanced versus Traditional Indexation for International Mutual Funds: Evaluating DFA, Wisdom Tree and RAFI PowerShares
By Heehyun Lim This paper uses stye analysis to compare the performance of traditional international index funds and enhanced international index funds. It attempts to measure the value added beyond classic indexation by the consideration of fundamentals. By employing Sharpe’s style analysis, I formulate a synthetic portfolio composed of DFA traditional funds to imitate each […]
The Predictability of the Chilean Yield Spread as an Economic Indicator
By Yunze Chen “Don’t forget that your incredible success in consistently making each move at the right time in the market is but my pathetic failure in making each move at the wrong time. … … I don’t know anyone who can do it successfully, nor anyone who has done so in the past. Heck, […]
Simultaneous Occurrence of Price Jumps and Changes in Diffusive Price Volatility
By Shunting Wei This paper uses high frequency financial data to study the changes in diffusive stock price volatility when price jumps are likely to have occurred. In particular, we study this effect on two levels. Firstly, we compare diffusive volatility on jump and non-jump days. Secondly, we study the change in diffusive volatility in […]
Examination of Time-Variant Asset Correlations Using High-Frequency Data
By Mingwei Lei Drawing motivation from the 2007-2009 global financial crises, this paper looks to further examine the potential time-variant nature of asset correlations. Specifically, high frequency price data and its accompanying tools are utilized to examine the relationship between asset correlations and market volatility. Through further analyses of this relationship using linear regressions, this […]
Relative Contribution of Common Jumps in Realized Correlation
By Kyu Won Choi This paper studies common intraday jumps and relative contribution of these common jumps in realized correlation between individual stocks and market index, using high-frequency price data. We find that the common jumps significantly contribute in realized correlation at different threshold cut-offs and both common jumps and realized correlation are relatively consistent […]
Motivation and Reasoning Behind Chinese Enterprises Overseas Listing
By Sjing Liang and Xiao Chen Starting from the early 90s, the number of Chinese firms going public overseas has been increasing rapidly. By running a probit regression, this paper investigates the different factors that affect a Chinese firm’s choice of listing location, either a domestic or a foreign stock exchange. Our data consists of […]
Volatility and Correlation Modeling for Sector Allocation in International Equity Markets
By Melanie Fan and Kate Yuan Reliable estimates of volatility and correlation are crucial in asset allocation and risk management. This paper investigates Static, RiskMetrics, and Dynamic Conditional Correlation (DCC) models for estimating volatility and correlation by testing them in an asset allocation context. Optimal allocation weights for one year found using estimates from each […]
