Engel and West (2004a) provide an explanation to reconcile the random walk behavior of exchange rate and linear present value asset pricing models. In this paper, we study the long horizon property of exchange rate under Engel-West explanation. It is found that the long horizon data can not...

We study the volatility of the MIB30–stock–index high–frequency data from November 28, 1994 through September 15, 1995. Our aim is to empirically characterize the volatility random walk in the framework of continuous–time finance. To this end, we compute the index volatility by means of...

The behaviour of an emerging market, the Athens Stock Exchange (ASE), after the introduction of the euro is investigated. The underlying assumption is that stock prices would be more transparent; their performance easier to compare; the exchange rate risk eliminated and as a result we expect the...

This study examines the forecastability of ASEAN-5 stock market returns using linear and non-linear time series models. Time series models with GARCH errors are also considered. Based on formal econometrics tests, this study shows that the behaviour of these returns do not follow random walk...

In this paper we present a rather general phenomenological theory of tick-by-tick dynamics in financial markets. Many well-known aspects, such as the Lévy scaling form, follow as particular cases of the theory. The theory fully takes into account the non-Markovian and non-local character of...

We analyze the time series of overnight returns for the bund and btp futures exchanged at liffe (London). The overnight returns of both assets are mapped onto a one–dimensional symbolic–dynamics random walk: The “bond walk”. During the considered period (October 1991—January 1994) the...

The Relative Value Theory predicts equilibrium prices in a world in which time value of money is unique, and investors are risk-indifferent and only care about maximizing cumulative returns. This paper shows that RVT’s equilibrium prices determine intrinsic expected returns that satisfy the...