Technical analysis in the foreign exchange market

This article introduces the subject of technical analysis in the foreign exchange market, with emphasis on its importance for questions of market efficiency. Technicians view their craft, the study of price patterns, as exploiting traders’ psychological regularities. The literature on technical analysis has established that simple technical trading rules on dollar exchange rates provided 15 years of positive, risk-adjusted returns during the 1970s and 80s before those returns were extinguished. More recently, more complex and less studied rules have produced more modest returns for a similar length of time. Conventional explanations that rely on risk adjustment and/or central bank intervention are not plausible justifications for the observed excess returns from following simple technical trading rules. Psychological biases, however, could contribute to the profitability of these rules. We view the observed pattern of excess returns to technical trading rules as being consistent with an adaptive markets view of the world.Foreign exchange rates

E-Fulfillment and Multi-Channel Distribution – A Review

This review addresses the specific supply chain management issues of Internet fulfillment in a multi-channel environment. It provides a systematic overview of managerial planning tasks and reviews corresponding quantitative models. In this way, we aim to enhance the understanding of multi-channel e-fulfillment and to identify gaps between relevant managerial issues and academic literature, thereby indicating directions for future research. One of the recurrent patterns in today’s e-commerce operations is the combination of ‘bricks-and-clicks’, the integration of e-fulfillment into a portfolio of multiple alternative distribution channels. From a supply chain management perspective, multi-channel distribution provides opportunities for serving different customer segments, creating synergies, and exploiting economies of scale. However, in order to successfully exploit these opportunities companies need to master novel challenges. In particular, the design of a multi-channel distribution system requires a constant trade-off between process integration and separation across multiple channels. In addition, sales and operations decisions are ever more tightly intertwined as delivery and after-sales services are becoming key components of the product offering.Distribution;E-fulfillment;Literature Review;Online Retailing

Capturing macroprudential regulation effectiveness: a DSGE approach with shadow intermediaries

Artículo de revistaWe develop a New Keynesian DSGE model with heterogeneous agents to investigate how the shadow financial system affects macroeconomic activity and financial stability. In the adopted framework, regulated commercial banks finance small firms through traditional business loans and exert costly effort to screen the projects they finance. Shadow financial intermediaries finance large firms, provide short-term lending to commercial banks, and are engaged in the secondary market for loans. In this market, commercial banks originate asset-backed securities under moral hazard to exploit regulatory arbitrage. Shadow intermediaries purchase these loans from commercial banks under adverse selection. In general equilibrium, this set of externalities is not internalized by the financial system. We show that a macroprudential authority may successfully mitigate the externalities by activating caps to both the leverage ratio and the securitization ratio in the traditional banking sector. Such policy actions are effective in safeguarding financial stability, dampening aggregate volatility and improving welfare

Essays on stop-loss rules : a thesis presented in fulfilment of the requirements for the degree of Doctor of Philosophy in Finance at Massey University, Palmerston North, New Zealand

Stop-loss rules are trading rules that involve selling a security when its price drops by a certain amount and buying the security back when its price rises above a pre-specified level. They are popularly used by practitioners. These rules are designed to protect gained profits as their sale trigger the price to be adjusted higher as prices increase. This thesis contributes to the literature on stop-loss rules in financial markets. The first essay investigates the time-series and cross-sectional determinants of stop-loss rules for risk reduction in the U.S. stock market. It finds that, even though stop-loss rules have poorer mean returns to a mean-variance optimal benchmark, they are effective at stopping losses. These rules reduce overall and downside risk, especially during declining market states. The transaction costs analysis shows that the significant effectiveness of risk reduction holds for these rules with larger stop-loss thresholds. Essay two examines the performance of stop-loss rules from the perspective of international equity market allocation. International diversification provides potential for larger returns but often induces higher risks. Thus, it is a natural setting to consider stop-loss rules from a global point-of-view. This essay finds that stop-loss rules are an important factor of international equity allocation in a parametric portfolio policy setting. These rules generate portfolios with larger mean and risk-adjusted returns. This result is economically stronger in declining markets. The outperformance is robust once the transaction costs are accounted for. Essay three shows that stop-loss rules enhance the returns to stocks with lottery features. Individual investors have a strong preference for lottery stocks that typically have irregular enormous gains and frequent small losses. Stop-loss rules are useful at reducing losses and protecting gains from large price rises. This essay highlights that the sell signals of popular technical rules and time-series momentum rules are consistent with stop-loss rules, thereby effectively increasing the risk-adjusted returns of lottery stocks. These rules would have helped investors avoid instances of major historical drawdowns and are particularly beneficial in recessionary markets. Some rules are robust to the inclusion of transaction costs

Financial structures and economic development

The author constructs a model that captures the two-way nature of the relationship between financial and economic development - and allows societies at different levels of economic development and with different policies to choose different financial services. In this model, various types of financial contracts and institutions arise in response to the economic environment. Incentives for financial structures to emerge are generated by liquidity and productivity risk, the costs of gathering information and mobilizing resources, and the costs of financial transactions. The emergence and development of financial arrangements in response to the economic environment can alter investment decisions and per capita growth rates - while the level of per capita income helps determine the types of financial services a particular society chooses to develop and use. The author not only reconciles more empirical regularities than past theoretical studies have done, but highlights the role of public policies on financial activities. Policy has important implications for the rate of economic growth, the level of financial development, and the types of institutions providing financial services. The model also predicts that per capita growth rates should be related to the types of financial services provided by the financial sector. Thus, the most common empirical measure of financial development may not appropriately capture fundamental features of financial development.Economic Theory&Research,Environmental Economics&Policies,Banks&Banking Reform,Financial Intermediation,Governance Indicators

Next best action – a data-driven marketing approach

Project Work presented as the partial requirement for obtaining a Master's degree in Data Science and Advanced AnalyticsThe Next Best Action (NBA) is a framework that is built in order to assign to each client three (or more) actions that are considered to be the best actions to perform with the client. These actions can range from product offering to pro-active retention actions and upselling recommendations. It can be a useful tool to generate leads for ongoing campaigns but also an excellent tool for analysis and a driver for the creation of new campaigns, being a key element in Customer Relationship Management (CRM) as a Data-Driven Marketing approach. Initially planned as a joint collaboration between a Bank and an Insurance Company to improve the Bancassurance business model, three versions of the NBA were built with the first two being tested on a campaign setting showing promising results. The last version, NBA 3.0, later became a sole project of the Insurance Company due to GPDR compliance policies and due to time constraints could not be evaluated