Asymmetry In U.S. State Unemployment Rates

This paper examines the nature of asymmetry of U.S. state unemployment rates using the time reversibility test developed by Ramsey and Rothman (1996). These authors and others have found asymmetry in aggregate unemployment rates in this study we examine whether or not these results extend to state level unemployment series.  Alaska, District of Columbia, Hawaii, Louisiana, Missouri, Montana, and Puerto Rico, exhibit changes in unemployment rates that are symmetric.  California, Georgia, Kansas, and North Carolina, show evidence of asymmetry of the change in unemployment rates due to non-linearity in the model.  Unemployment rate asymmetry documented in other states is attributable to non-Gaussian errors.  Asymmetric patterns documented in most states are consistent with the fast-up and slow-down dynamics observed in aggregate unemployment data

Asymmetry In U.S. State Unemployment Rates

This paper examines the nature of asymmetry of U.S. state unemployment rates using the time reversibility test developed by Ramsey and Rothman (1996). These authors and others have found asymmetry in aggregate unemployment rates in this study we examine whether or not these results extend to state level unemployment series.  Alaska, District of Columbia, Hawaii, Louisiana, Missouri, Montana, and Puerto Rico, exhibit changes in unemployment rates that are symmetric.  California, Georgia, Kansas, and North Carolina, show evidence of asymmetry of the change in unemployment rates due to non-linearity in the model.  Unemployment rate asymmetry documented in other states is attributable to non-Gaussian errors.  Asymmetric patterns documented in most states are consistent with the fast-up and slow-down dynamics observed in aggregate unemployment data

The Effect Of Government Debt Quantity Shocks On The Term Structure Of Interest Rates

In this paper, the effect of the maturity composition of marketable public debt on the term structure of interest rate is explored.  The research has shown that this effect is relatively small.  Unlike previous research, the yield changes around the quantity shocks are analyzed in relation to these shocks.  Our results show that yields respond significantly to the auctioning of new bonds.  The announcements of auctions do not have any impact on yields.  A two-factor affine yield model is used to explain the relationship between quantity shocks in public debt and term structure of interest rates.  The parameters are estimated using Generalized Method of Moments.  While the relationship between quantities and yields is weak, yields can be related to the event of the auctioning process

Financial disclosure and speculative bubbles: An international comparison

This dissertation examines whether the quality of a country\u27s financial disclosure system affects the likelihood of speculative bubbles. Stock returns of eight countries that differ in the quality of their financial disclosure systems are compared. The countries, ranked in order of disclosure levels, are the United States, Canada, the United Kingdom, the Netherlands, France, Japan, Germany, and Switzerland (Saudagaran and Biddle (1992)). Specifically, this research hypothesizes that a lack of disclosure makes speculative bubbles more likely. Several techniques are employed to test for the predictability of returns and the presence of bubbles in each country. The random walk hypothesis is tested using the serial correlation test, non-parametric runs test, unit root test, and variance ratio tests. The serial correlation test indicates the presence of serial dependence for the United Kingdom and Japan (dollar-denominated currency), the Netherlands and Switzerland (local currencies); whereas the runs test shows evidence of serial dependence in France and Germany (local currencies). Contrary results are found using the unit root test which suggests no presence of bubbles in any country. Furthermore, the variance ratio test indicates some form of predictability in the real returns of Japan in both dollar-denominated and local currencies. The research question is also examined by using three additional non-parametric tests: duration dependence, Markov chain, and time reversibility, to test for the presence of bubbles or asymmetric return patterns. The dollar-denominated real returns of Japan exhibit positive duration dependence, suggesting the presence of bubbles. Using a third-order Markov chain test, the dollar-denominated real returns of Japan exhibit asymmetric patterns. Evidence of slow-up and fast-down asymmetric patterns is also found in both dollar-denominated and local currency real returns of Germany using the time reversibility test. Japan and Germany have low financial disclosure levels. The evidence found suggests that financial reporting and its regulations may affect the likelihood of bubbles. The findings provide rationale for more stringent reporting requirements and standardization of international accounting standard across countries

Financial disclosure and speculative bubbles: An international comparison

This dissertation examines whether the quality of a country\u27s financial disclosure system affects the likelihood of speculative bubbles. Stock returns of eight countries that differ in the quality of their financial disclosure systems are compared. The countries, ranked in order of disclosure levels, are the United States, Canada, the United Kingdom, the Netherlands, France, Japan, Germany, and Switzerland (Saudagaran and Biddle (1992)). Specifically, this research hypothesizes that a lack of disclosure makes speculative bubbles more likely. Several techniques are employed to test for the predictability of returns and the presence of bubbles in each country. The random walk hypothesis is tested using the serial correlation test, non-parametric runs test, unit root test, and variance ratio tests. The serial correlation test indicates the presence of serial dependence for the United Kingdom and Japan (dollar-denominated currency), the Netherlands and Switzerland (local currencies); whereas the runs test shows evidence of serial dependence in France and Germany (local currencies). Contrary results are found using the unit root test which suggests no presence of bubbles in any country. Furthermore, the variance ratio test indicates some form of predictability in the real returns of Japan in both dollar-denominated and local currencies. The research question is also examined by using three additional non-parametric tests: duration dependence, Markov chain, and time reversibility, to test for the presence of bubbles or asymmetric return patterns. The dollar-denominated real returns of Japan exhibit positive duration dependence, suggesting the presence of bubbles. Using a third-order Markov chain test, the dollar-denominated real returns of Japan exhibit asymmetric patterns. Evidence of slow-up and fast-down asymmetric patterns is also found in both dollar-denominated and local currency real returns of Germany using the time reversibility test. Japan and Germany have low financial disclosure levels. The evidence found suggests that financial reporting and its regulations may affect the likelihood of bubbles. The findings provide rationale for more stringent reporting requirements and standardization of international accounting standard across countries

Financial Disclosure and Speculative Bubbles: An International Comparison

This paper examines if a country’s financial disclosure system affects the likelihood of speculative bubbles. We compare stock returns of eight countries that differ in the quality of their disclosure systems as ranked by Saudagaran and Biddle (1992). We examine the hypothesis that stock prices of firms in countries with a low level of financial disclosure are more prone to speculative bubbles. We employ the duration dependence model developed by McQueen and Thorley (1994) to test for the presence of bubbles. We found that the returns in Japan, a country with a relatively low level of disclosure, shows evidence of a bubble

Financial Disclosure and Speculative Bubbles: An International Test of Asymmetry

This paper applies two tests of asymmetry to examine if the quality of a country’s financial disclosure system affects the likelihood of speculative bubbles. We examine the hypothesis that stock prices of firms in countries with a low level of financial disclosure are more likely to experience bubbles. The countries, ranked in order of disclosure levels, are the United States, Canada, the United Kingdom, the Netherlands, France, Japan, Germany, and Switzerland (Saudagaran and Biddle (1992)). The findings based on the third-order Markov chain test suggest the presence of asymmetry in dollar-denominated quarterly real returns of Japan, a country with a relatively low level of disclosure. The asymmetric pattern indicates the non-random walk return pattern of Japan. The results based on the time reversibility test indicate that monthly real returns in both dollar-denominated and local currencies of Germany increase slower than they decrease. Such “slow-up and fast-down” dynamic is consistent with the presence of a bubble

Business conditions and nonrandom walk behaviour of US stocks and bonds returns

If security returns are predictable due to rational variations in expected returns, as been argued by Fama and French (1989), then abnormal returns should follow a random walk process. This article investigates whether monthly abnormal returns on four US securities - high-grade corporate bonds, low-grade corporate bonds, large-cap stocks and small-cap stocks - exhibit a random walk pattern. Abnormal returns on these securities are derived from regressing excess security returns on three proxies of business condition (term premium (TRISK), default premium (DRISK) and dividend yield (DIVYLD)) and federal funds rate (FedFund). Four alternative test procedures - variance ratio test, nonparametric runs test, Markov chain test and time reversibility tests - are employed. This study finds that abnormal returns on all securities, with the exception of high-grade corporate bonds, exhibit nonrandom pattern between 1973 and 2002, suggesting that these four common risk factors cannot capture the time-varying returns of both stocks and bonds