Exchange Rate Regimes, Globalisation, and the Cost of Capital in Emerging Markets

This paper presents a multifactor asset pricing model for currency, bond, and stock returns for ten emerging markets to investigate the effect of the exchange rate regime on the cost of capital and the integration of emerging financial markets. Since there is evidence that a fixed exchange rate regime reduces the currency risk premia demanded by foreign investors, the tentative conclusion is that a fixed exchange rate regime system can help reduce the cost of capital in emerging markets.Exchange rate regimes; Development economics

Testing Uncovered Interest Parity: A Continuous-Time Approach

Nowadays researchers can choose the sampling frequency of exchange rates and interest rates. If the number of observations per contract period is large relative to the sample size, standard GMM asymptotic theory provides unreliable inferences in UIP regression tests. We specify a bivariate continuous-time model for exchange rates and forward premia robust to temporal aggregation, unlike the discrete time models in the literature. We obtain the UIP restrictions on the continuous-time model parameters, which we estimate efficiently, and propose a novel specification test that compares estimators at different frequencies. Our empirical results based on correctly specified models reject UIP.Exchange rates; Econometric and statistical methods

Assessing and Valuing the Non-Linear Structure of Hedge Fund Returns

Several studies have put forward the non-linear structure and option-like features of returns associated with hedge fund strategies. The authors provide a statistical methodology to test for such non-linear features with the returns on any benchmark portfolio. They estimate the portfolio of options that best approximates the returns of a given hedge fund, account for this search in the statistical testing of the contingent claim features, and test whether the identified non-linear features have a positive value. The authors find that not all categories of funds exhibit significant non-linearities, and that only a few strategies as a group provide significant value to investors. Individual funds may still provide value in an otherwise poorly performing category.Econometric and statistical methods; Financial institutions

CONTAGION AND PORTFOLIO SHIFT IN EMERGING COUNTRIES´ SOVEREIGN BONDS

The paper tests whether there were events of contagion, and portfolio shift, in the sovereign bond markets of eleven emerging countries' between January 1995 and November 2001. From existing definitions, we narrow down the concept of contagion by focusing on pricing errors, after general market movements have been taken into account with a three-factor asset pricing model. We measure contagion (and portfolio shift) in terms of a causal positive (negative) dynamic co-movement between sovereign bond pricing errors. Downgrades of sovereign ratings are used as proxies for a shock. We find empirical support for contagion and portfolio shift for a number of countries on the basis of our definition.Financial linkages, financial crisis, Granger causality, international

An International Dynamic Term Structure Model with Economic Restrictions and Unspanned Risks

We construct a multi-country affine term structure model that contains unspanned macroeconomic and foreign exchange risks. The canonical version of the model is derived and is shown to be easy to estimate. We show that it is important to impose restrictions (including global asset pricing, carry trade fundamentals and maximal Sharpe ratios) on the prices of risk to obtain plausible decompositions of forward curves. The forecasts of interest rates and exchange rates from the restricted model match those from international survey data. Unspanned macroeconomic variables are important drivers of international term and foreign exchange risk premia as well as expected exchange rate changes.Asset Pricing; Exchange rates; Interest rates

McCallum Rules, Exchange Rates, and the Term Structure of Interest Rates

McCallum (1994a) proposes a monetary rule where policymakers have some tendency to resist rapid changes in exchange rates to explain the forward premium puzzle. We estimate this monetary policy reaction function within the framework of an affine term structure model to find that, contrary to previous estimates of this rule, the monetary authorities in Canada, Germany and the U.K. respond to nominal exchange rate movements. Our model is also able to replicate the forward premium puzzle.Exchange rates; Interest rates; Transmission of monetary policy

Can Affine Term Structure Models Help Us Predict Exchange Rates?

The author proposes an arbitrage-free model of the joint behaviour of interest and exchange rates whose exchange rate forecasts outperform those produced by a random-walk model, a vector autoregression on the forward premiums and the rate of depreciation, and the standard forward premium regression. In addition, the model is able to reproduce the forward premium puzzle.Exchange rates; Interest rates; Econometric and statistical methods

Cancer nurses, are we really contributing to reduce burden via cancer prevention?

From the wisdom of experience and years, our grandparents used to say: 'Prevention is better than cure'. Nurses also want to prevent rather than cure cancer and follow that old said. Cancer is one of the leading causes of mortality in the world and the incidence is expected to keep increasing every year[1]. And while there is an improvement in cancer survival due to developments on treatments; the diagnosis, treatment and survivorship entails a high burden for patients, for communities and for health systems