This paper develops a new covariance-based test of orthogonality that may be attractive when regressors have roots close or equal to unity. In this case standard regression-based orthogonality tests can suffer from (i) size distortions and (ii) uncertainty regarding the appropriate model in...

Exchange rate markets exhibit correlation in the short run, but the issue is whether such correlation lingers over long periods of time, and under extreme events (i.e., either large appreciations or depreciations). In this paper, we analyze dependence between nominal exchange rates under extreme...

Recent empirical evidence suggests that the weekend and holiday calendar effects are much stronger and statistically significant in volatility as opposed to expected returns. This paper seeks an explanation for this empirical finding by undertaking a comprehensive investigation of the predictive...

Conditional volatility models, such as GARCH, have been used extensively in financial applications to capture predictable variation in the second moment of asset returns. However, with recent theoretical literature emphasising the loss averse nature of agents, this paper considers models which...

In this paper, we attempt to study the time series dynamics of the stock trading volume, or equivalently stock turnover using recently available data for individual stocks traded on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Stock turnover has been studied intensively...

This paper examines the long-run dynamics and the cyclical structure of the US stock market using fractional integration techniques. We implement a version of the tests of Robinson (1994a), which enables one to consider unit (or fractional) roots both at the zero (long-run) and at the cyclical...

A large class of fixed income trading strategies focuses on opportunities offered by the interest rate term structure. This paper studies a set of yield curve trading strategies that are based on the view that the yield curve mean-reverts to an unconditional curve. These mean-reverting trading...

A new model is developed that augments a structural VAR specification with a GARCH covariance matrix. The model is utilised to study time series dependencies between three size-sorted portfolios from the Australian Stock Exchange. Even after accounting for contemporaneous correlations the...

Most work showing the yield curve predicts future economic growth relies on post WWII data. We demonstrate that the yield curve has predictive content for most of the post Civil War period. This predictive ability, however, is closely related to the credibility of the monetary regime in place,...

We explore the role of dealers to determine whether they are liquidity-providing market makers or liquidity-taking information traders. Standard models of market making, such as Kyle (1985) and Grossman and Miller (1988), imply a negative contemporaneous correlation between market maker order...