Has the Structural Break Slowed Down Growth Rates of Stock Markets?

In this paper, we use the common structural break test suggested by Bai et al. (1998) to test for a common structural break in the stock prices of the US, the UK, and Japan. On the basis of the structural break, we divide each countries stock price series into sub-samples and investigate whether or not the structural break had slowed down the growth of stock markets. Our main findings are that when stock markets are modeled in a trivariate sense the common structural break turns out to be 1990:02, with the confidence interval including several episodes, such as the asset price bubble when housing prices and stock prices in Japan reached a peak in 1988/1989, the early 1990s recession in the UK, the business cycle peak of July 1990, the August 1990 Iraqi invasion of Kuwait and the March 1991 business cycle trough. Annual average growth rates suggest that the structural break has slowed down the growth rate of the UK and Japanese stock markets, while it has boosted the growth of the US stock market.Common Structural Break Test, Stock Markets

Asymmetric Information and Market Collapse

In this paper, using data for the period January 1995 to May 2009 for the Shanghai stock exchange (SHSE), we show that aggregate illiquidity is a priced risk factor. We develop the relationship between the illiquidity factor, asymmetric information, and market collapse. Our empirical results show that while the illiquidity factor is a source of asymmetric information on the SHSE, asymmetric information does not trigger a market collapse.Illiquidity Factor; Asymmetric Information; Market Collapse.

Has the structural break slowed down growth rates of stock markets?

In this paper, we use the common structural break test suggested by Bai et al. (1998) to test for a common structural break in the stock prices of the US, the UK, and Japan. On the basis of the structural break, we divide each country‟s stock price series into sub-samples and investigate whether or not the structural break had slowed down the growth of stock markets. Our main findings are that when stock markets are modeled in a trivariate sense the common structural break turns out to be 1990:02, with the confidence interval including several episodes, such as the asset price bubble when housing prices and stock prices in Japan reached a peak in 1988/1989, the early 1990s recession in the UK, the business cycle peak of July 1990, the August 1990 Iraqi invasion of Kuwait and the March 1991 business cycle trough. Annual average growth rates suggest that the structural break has slowed down the growth rate of the US, UK and Japanese stock markets.Common Structural Break Test, Stock Markets

Dead Man Walking: An Empirical Reassessment of the Deterrent Effect of Capital Punishment Using the Bounds Testing Approach to Cointegration

This paper empirically estimates a murder supply equation for the United States from 1965 to 2001 within a cointegration and error correction framework. Our findings suggest that any support for the deterrence hypothesis is sensitive to the inclusion of variables for the effect of guns and other crimes. In the long-run we find that real income and the conditional probability of receiving the death sentence are the main factors explaining variations in the homicide rate. In the short-run the aggravated assault rate and robbery rate are the most important determinants of the homicide raCapital Punishment, Deterrent Effect, Cointegration

Did the US macroeconomic conditions affect Asian stock markets?

The aim of this paper is to examine the impact of US macroeconomic conditions—namely, exchange rate and short-term interest rate—on the stocks of seven Asian countries (China,India, the Philippines, Malaysia, Singapore, Thailand, and South Korea). Using daily data for the period 2000 to 2010, we divide the sample into pre-crisis period (pre-August 2007) and crisis period (post-August 2007) we find that in the short-run interest rate has a statistically insignificant effect on returns for all countries except the Philippines in the crisis period,while except for China, regardless of the crisis, depreciation had a statistically significant negative effect on returns. When the long-run relationship among the variables is considered,for four of the seven countries (India, Malaysia, Philippines, Singapore, and Thailand) while there was cointegration in the pre-crisis period, in the crisis period there was no such relationship, implying that the financial crisis has actually weakened the link between stock prices and economic fundamentals.Interest Rate; Exchange Rate; Financial Crisis; Depreciation

ARE SHOCKS TO ENERGY CONSUMPTION PERMANENT OR TEMPORARY? EVIDENCE FROM 182 COUNTRIES

This paper applies univariate and panel data unit root tests to annual panel data for 182 countries over the period 1979-2000 to examine the stationarity properties of per capita energy consumption. The univariate unit root test can only reject the unit root null for 29 per cent of the countries at the 10 per cent level or better without a trend and 37 per cent of the countries at the 10 per cent level or better with a trend. However, it is often argued that unit root tests have low power with short spans of data and therefore failure to reject the unit root null should be treated with caution. When we apply the panel data unit root test we find overwhelming evidence that energy consumption is stationary. We discuss the implications of these findings for econometric modeling and policy formulation.Energy consumption, Unit roots, Panel data

Are Shocks to Commodity Prices Persistent?

This paper considers the issue of whether shocks to ten commodity prices (gold, silver, platinum, copper, aluminum, iron ore, lead, nickel, tin, and zinc) are persistent or transitory. We use two recently developed unit root tests, namely the Narayan and Popp (NP, 2010) test and the Liu and Narayan (LN, 2010) test that allow for two structural breaks in the data series. Using the NP test, we are able to reject the unit root null for iron ore and tin, while, using the GARCH-based unit root test of LN, we are able to reject the unit root null for five commodity prices; namely, iron ore, nickel, zinc, lead, and tin. Our findings, thus, suggest that only shocks to gold, silver, platinum, aluminum, and copper are persistent.Commodity Prices; Unit Root Test; GARCH.

Do Market Capitalisation and Stocks Traded Converge? New Global Evidence

In this paper, we examine convergence of stocks markets. Our empirical exercise is based on 12 different panels, including a full panel consisting of 120 countries and disaggregated panels, such as high income, middle income, low income, OECD, CSI, and developing countries. In addition, we used regional panels, such as those representing the Arab States, East Asia and the Pacific, South Asia, Latin America and the Caribbean, and Sub-Saharan Africa. Our main finding is that, based on the conditional convergence model, convergence of stock market capitalization and stocks traded is found for five panels, namely the all country panel, the high and low income panels, the OECD panel, and the Sub-Saharan African panel. The speed of convergence is high, in most cases between 20-30 per cent.G15.

Has political instability contributed to price clustering on Fiji's stock market?

The goal of this paper is to examine evidence of stock price clustering on the South Pacific Stock Exchange, located in Fiji, and explore its determinants. We find that stock prices cluster at the decimal of 0 and 5, with almost half of prices settling on these two decimals. Upon investigating the determinants of price clustering on the South Pacific Stock Exchange we find that price level and volume of trade have a statistically significant positive effect on price clustering. We also propose and test a âpanic trading‟ hypothesis which states political instability induces price clustering. We find evidence that political instability in Fiji induces price clustering behavior.Political instability, price clustering, Fiji

THE MILITARY EXPENDITURE-EXTERNAL DEBT NEXUS: NEW EVIDENCE FROM A PANEL OF MIDDLE EASTERN COUNTRIES

This paper examines the impact of military expenditure and income on external debt for a panel of six Middle Eastern countries; namely, Oman, Syria, Yemen, Bahrain, Iran, and Jordan, over the period 1988 to 2002. Using Pedroni's (2004) test for panel cointegration, we find that there is a long-run relationship between external debt, military expenditure and income. The estimated long-run elasticities suggest that an increase in military expenditure contributes to a rise in external debt, while an increase in income helps the Middle Eastern countries to pay off their external debt.