The US Financial Crisis and the Behavior of the Foreign Exchange Market

Foreign exchange market is the most active market in today’s global financial domains. While the consensus on several aspects of this market is fairly established, the informational efficiency in this market is still unsettled, particularly during unexpected interruptions and unusual or unstable periods. The financial crisis of 2008 is the most recent example of such a period. This dissertation focuses on the efficiency of the foreign exchange market during a unique, turbulent period using the six most actively traded currencies: the Australian dollar, Canadian dollar, Swiss franc, Euro, British pound, and Japanese yen. Considering nine months before the peak of the financial crisis to nine months thereafter, the entire sample is divided into three sub-samples: full-, non-crisis-, and crisis-periods. Both daily and minute-by-minute data are used. A variety of instruments are analyzed, including spot, forward, and exchange traded funds on the currencies. The methodologies that are employed range from standard econometric tests of efficiency to estimation of vector error correction models to identify price discovery, or leadership positions, in each of the currency markets. The findings indicate behavioral similarities and differences. The patterns of the volatility of the currencies are mixed: two-humped for the AUD, CAD, and EUR; W-shaped for the CHF; three-humped for the GBP, and flat U-shaped for the JPY. The daily results from several methodologies provide mixed evidence on market efficiency. Over the entire sample period, the estimated forward premium coefficients from the GARCH (1, 1) model are not significant for all currencies, while the null hypotheses of zero and one cointegrating vectors cannot be rejected for all currencies, except for the AUD. These findings are consistent with some of the previous studies, concluding that the efficiency tests in the foreign exchange market would depend on the methodology and the time period of the study. The high frequency data results show different degrees of price discovery between pair-wise instruments. Specifically, the spot exchange market shows a greater contribution to price discovery than the corresponding exchange traded funds. A possible explanation is the current size of the market and its increased transparency through the use of electronic trading

STOCK MARKET REACTION TO MONEY SUPPLY: A DYNAMIC APPROACH (การตอบสนองของตลาดหลักทรัพย์ต่อปริมาณเงิน: วิธีพลวัต)

Abstract In this paper we revisit dynamic relationships between the money supply and stock market performance in Thailand. Due to new definitions of the money supply, we provide new empirical evidence, which has not been investigated in the past. The results show that the correlations are time-varying, showing different patterns in different time periods. However, the results show both positive and negative money supply-stock return relationships. We conclude that different results are driven from differences in variables definitions, in econometric models, and in time period of study. Keywords: Money supply, Stock market index, Dynamic conditional correlation บทคัดย่อ งานวิจัยนี้ เป็นการศึกษาความสัมพันธ์ระหว่างปริมาณเงินและผลการดำเนินงานของตลาดหลักทรัพย์ในประเทศไทย เนื่องจากคำนิยามใหม่ของปริมาณเงิน นักวิจัยนี้ได้แสดงหลักฐานใหม่เชิงประจักษ์ที่มิได้มีการศึกษาในอดีตที่ผ่านมา ผลการศึกษาแสดงถึงค่าสัมประสิทธิ์สหสัมพันธ์ในเชิงพลวัต ซึ่งมีรูปแบบที่แตกต่างกันในช่วงระยะเวลาต่างๆ อย่างไรก็ตาม ผลการศึกษานี้ แสดงความสัมพันธ์ของปริมาณเงินและอัตราผลตอบแทนของตลาดหลักทรัพย์ ที่เป็นทั้งค่าบวกและค่าลบ นักวิจัยสรุปว่า ผลการศึกษาที่แตกต่างกันนั้น มาจากความแตกต่างในคำนิยามที่ใช้ในตัวแปรต่างๆ ความแตกต่างในแบบจำลองเศรษฐมิติ และความแตกต่างในช่วงระยะเวลาในการศึกษา คำสำคัญ: ปริมาณเงิน ดัชนีตลาดหลักทรัพย์ Dynamic conditional correlatio

AN ANALYSIS OF CREDIT DEFAULT SWAPS: 2002-2009 PERIOD

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Investor attention and stock market activities:new evidence from panel data

Using the panel vector autoregression (VAR) method, this paper documents relationships between investor attention and stock market activities; i.e., return, volatility, and trading volume, respectively. In sum, bidirectional dynamic interdependence of the SVI–stock market activities relationship exists, in which the SVI–trading volume relationship shows the strongest evidence. This is consistent with prior literature using trading volume as a proxy of investor attention. However, the relationships in the developed and developing markets are statistically significantly different. The stock markets in the developed markets over-react more to the search volume than those in the developing markets. We postulate that investor attention is one of the key elements in asset pricing in stock markets