An Empirical Model of Daily Highs and Lows

We construct an empirical model for daily highs and daily lows of US stock indexes based on the intuition that highs and lows do not drift apart over time. Our empirical results show that daily highs and lows of three main US stock price indexes are cointegrated. Data on openings, closings, and trading volume are found to offer incremental explanatory power for variations in highs and lows within the VECM framework. With all these variables, the augmented VECM models explain 40% to 50% of variations in daily highs and lows. The generalized impulse response analysis shows that the responses of daily highs and daily lows to the shocks depend on whether data on openings, closings, and trading volume are included in the analysis.high, low open, close, trading volume, VECM model

Equity Price Dynamics Before and After the Introduction of the Euro

Daily data from the German and U.S. equity markets before and after the introduction of the Euro are used to study the effect of exchange rate regime choices on equity markets. It is found that, since the introduction of the Euro, the volatility and the persistence of the German stock index have fallen significantly relative to those of the U.S. index. However, the switch in exchange rate arrangement appears to have no significant implication for the causal relationships - both the mean and varianc causalities - between the two equity markets

Relocating empowerment as a management concept for Asia

Management theories, especially those in the area of human resource management, are predominantly Western-centric in origin and in the empirical testing that underpins them. The purpose of this paper is to explore perceptions of one such theory, employee empowerment, in an Asian context. Information gathered from an open ended questionnaire and focus groups provide an in-depth examination of hotel managers' perceptions and practice of empowerment in the workplace. This study provides tentative indicators of significant culturally-driven differences in the understanding and application of employee empowerment (in terms of both research and practice) between Western and Asian contexts. The results of this study indicate that empowerment in Asian cultures relates much more to the individual and his/her merits, in contrast to organizationally-driven empowerment in Western countries. The findings also indicate that empowerment by hotel managers is related to the level of personal trust the manager has in an employee

Deviations from the Law of One Price in Japan

Using 25 years of monthly data on individual Japanese retail prices, we study the behavior of product-specific Law of One Price (LOP) deviations. Individual tradable products, compared with nontradables, are more likely to have different distributions of LOP deviations across cities. Their distributions are also more likely to change over time. Individual LOP deviation series are found to display considerable persistence and there is limited evidence that tradability enhances price convergence. In addition, deviations from the LOP are found to display nonlinear trends, and these trends are not linearly related to a product’s tradability. For individual products, LOP deviations are affected by their own inflation rates and, to a lesser extent, by aggregate inflation, output variations, and monetary variability. Interestingly, the trend behavior remains significant in the presence of these economic variables.price dispersion, tradability, asymmetric inflation effects, market integration

A High-Low Model of Daily Stock Price Ranges

We observe that daily highs and lows of stock prices do not diverge over time and, hence, adopt the cointegration concept and the related vector error correction model (VECM) to model the daily high, the daily low, and the associated daily range data. The in-sample results attest the importance of incorporating high-low interactions in modeling the range variable. In evaluating the out-of-sample forecast performance using both mean-squared forecast error and direction of change criteria, it is found that the VECM-based low and high forecasts offer some advantages over some alternative forecasts. The VECM-based range forecasts, on the other hand, do not always dominate –the forecast rankings depend on the choice of evaluation criterion and the variables being forecasted.daily high, daily low, VECM model, forecast performance, implied volatility

An Output Perspective on a Northeast Asia Currency Union

The prospect of creating a currency union consisting of China, Japan, and Korea is evaluated using output data. After a brief discussion on the interactions between the three countries, the study investigates whether these three countries have common synchronous business cycles, which are perceived as one of the preconditions of a currency union. Then, we assess the potential costs of giving up monetary policy autonomy to form a currency union. It is found that the three national output series tend to move together in the long run and share common business cycles. While the output loss estimates depend on assumptions used to generate shocks, they tend to be small. However, there are potential conflicts between these countries on the choice of the policy target of the common monetary authorities.common stochastic trend, business cycles, output losses, exchange rate regime, Asian economies

Exchange Rate Misalingment Estimates - Sources of Differences

We study the differences of currency misalignment estimates obtained from alternative datasets derived from two International Comparison Program (ICP) surveys. A decomposition exercise reveals that the year 2005 misalignment estimates are substantially affected by the ICP price revision. Further, we find that differences in misalignment estimates are systematically affected by a country’s participation status in the ICP survey and its data quality – a finding that casts doubt on the economic and policy relevance of these misalignment estimates. The patterns of changes in the estimated degree of misalignment across individual countries, as illustrated by the BRIC economies, are quite variable.Penn Effect Regression, data revision, PPP-based data, measurement factors, economic factors

Speculative Attacks: A Laboratory Study in Continuous Time

We examine speculative attacks in a controlled laboratory environment featuring continuous time, size asymmetries, and varying amounts of public information. Attacks succeeded in 233 of 344 possible cases. When speculators have symmetric size and access to information: (a) weaker fundamentals increase the likelihood of successful speculative attacks and hasten their onset, and (b) contrary to some theory, success is enhanced by public access to information about either the net speculative position or the fundamentals. The presence of a larger speculator further enhances success, and experience with large speculators increases small speculators’ response to the public information. However, giving the large speculator increased size or better information does not significantly strengthen his impact.currency crisis, speculative attack, laboratory experiment, coordination game, pre-emption, large player