Central bank independence is a multifaceted institutional design. The financial component has been seldom analysed. This paper intends to set a comprehensive conceptual background for central bank financial independence. Quite often central banks are modelled as robot like maximizers of some...

Sports and war metaphors abound in business today. For example, one management book, Thunder in the Sky, by Thomas Cleary, opens with a Chinese saying that translates: “The marketplace is a battlefield. The Asian people view success in the business world as tantamount to victory in battle.”...

The paper investigates from an empirical perspective aspects related to the occurrence of the IGARCH effect and to its impact on volatility forecasting. It reports the results of a detailed analysis of twelve samples of returns on financial indexes from major economies (Australia, Austria,...

The paper outlines a methodology for analyzing daily stock returns that relinquishes the assumption of global stationarity. Giving up this common working hypothesis reflects our belief that fundamental features of the financial markets are continuously and significantly changing. Our approach...

When a k period future return is regressed on a current variable such as the log dividend yield, the marginal significance level of the t-test that the return is un- predictable typically increases over some range of future return horizons, k. Local asymptotic power analysis shows that the power...

Standard predictive regressions produce biased coefficient estimates in small samples when the regressors are Gaussian first-order autoregressive with errors that are correlated with the error series of the dependent variable; see Stambaugh (1999) for the single-regressor model. This paper...

In this paper, Markov chain Monte Carlo sampling methods are exploited to provide a unified, practical likelihood-based framework for the analysis of stochastic volatility models. A highly effective method is developed that samples all the unobserved volatilities at once using an approximating...

In line with the financial theory, any change in an exchange rate should affect the value of a firm or an industry. However, earlier research did not fully support this theory, which is surprising in view of the considerable exchange rate fluctuations over the last three decades. This study...

Distributions for returns are used to compute the capital charge for portfolios in investment banks. The mainstream definition of returns is based on closing prices and neglects the important effects of intraday trading activity on the losses . In this paper we introduce ''minimal returns'', a...