“Amoateng Gut Check” approach to forecasting exchange rate using standard parity relationships

This pedagogical paper demonstrates how “the Gut check approach” uses a made-simple technique for international corporate finance and economics students to forecast exchange rates using parity relationships. The “Gut-check approach” uses two simple steps. First, check out if the spot exchange rate is either direct or indirect. Second, review the parity relationships (purchasing power parity or interest rate parity) for the two currencies in question to find out which currency appreciate or depreciates. To this end, the paper provides historical review of the standard technique by many textbook authors. The “Amoateng Gut-check technique” yields similar but more precise foreign exchange rate forecasting results than the standard approach. Moreover, it provides international corporate finance and economics students who may not recognize foreign and home countries an easy way of exchange rate forecast

An Empirical Examination Of U.S. Pension Funds, Social Security, And Individual Savings

This article has used cointegration and Vector Error-Correction Models(VECM) to examine empirically the causation and/or relationships among pension funds, Social Security, and individual  savings from 1980 to 1999. It finds that pension funds, Social Security, and individual savings tend to move together in the ling run. Pension funds influence individual savings in the short-run. In addition, individual savings seem to bear the brunt of adjustments in restoring long-term equilibrium to the retirement system. Finally, the interactive process of short-run (causality) and long-run equilibrium relationship shows that pension funds explain individual savings. Since individual savings bear the brunt of adjustment in restoring to long-run equilibrium it is the most important component in retirement planning

An empirical note of global shocks on African and Middle Eastern equity markets 1997–2004

Empirical evidence shows that South Africa's equity market is the safest and better global shock absorber than equity markets in Morocco, Nigeria, Egypt and Ghana. Global shocks to Zimbabwe's market are neither short-lived nor long-lived. On one hand, variance decomposition analysis identifies Bahraini, Israeli and Saudi markets as better global shock absorbers and on the other hand, the impulse response function shows that Israeli, Lebanese and Saudi markets are the better ones. Therefore, Israeli and Saudi equity markets are movers and shakers in Middle Eastern equity markets.cointegration; innovation accounting analysis; emerging equity markets; Africa; Middle East; African stock markets; global shock absorbers.

Innovation accounting analysis on cross-border mergers and acquisitions between Europe and the USA since the late 1990s

Purpose – The aim of this research is to find out which mergers and acquisitions (M&A) market is better able to absorb all the shocks from legislations in securities and banking in Europe and the USA, 11 September 2001 terrorist attacks in the USA, and other global events. The most exogenous or self-dependent market may be the mover and shaker in the M&A deals in the world. The sample period spans from October 1998 to September 2004. Design/methodology/approach – This research uses cointegration and innovation accounting techniques (variance decomposition analysis and impulse response functions) to find out: if the two M&A markets are linked and explained each other in the long-run; which of the two markets can able to withstand all the list shocks in the observed period; how long each of the market is about to deal with the shocks (are the shocks long-lasting or short-lasting?). Findings – The major findings are: The cointegration results indicate that the M&A markets in Europe and the USA tend to move together in the long-run, particularly, the European M&A deals (EUMA) and US cross-border M&A deals in Europe (USCROSS). On one hand, the most consistent result from the variance decomposition analysis and impulse response functions is that the European M&A market is the most exogenous or self-dependent market in the observed period. On the other hand, the most interactive market (less able to deal with the shocks) is the US M&A market (USMA) because it is significantly impacted by the legislations in securities and banking, 9/11 and other global events. US cross-border M&A deals in Europe (USCROSS) and European cross-border M&A deals in the USA (EUCROSS) are able to deal with the shocks when the order of VAR is 6. However, when the order of VAR is extended to 12 they are less able to absorb the shocks. Research limitations/implications – The limitation of the data at that time did not allow examination of US M&A deals with individual European countries, particularly, United Kingdom that has historically invested in the US more than any country in Europe. Practical implications – The pivotal conclusion of this study suggests that EUMA and USCROOS move together in the long-run and EUMA is the strongest market in dealing with shocks, the world business may be gradually shifting to Europe. Practically, most of the multinational corporations (MNCs), especially the US MNCs are craving for market niches in Europe. Originality/value – The real value of this paper is that the changing financial landscape is the US implies that all the shake-up may lead to Europe. Philosophically, “all roads lead to Rome” New trends in world business is that the center of gravity in business may be pointing to Europe.Accounting, Acquisitions and mergers, Europe, United States of America