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.”...

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...

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...

This paper investigates the relevance of the stationary, conditional, parametric ARCH modeling paradigm as embodied by the GARCH(1,1) process to describing and forecasting the dynamics of returns of the Standard & Poors 500 (S&P 500) stock market index. A detailed analysis of the series of S&P...

Implications of nonlinearity, nonstationarity and misspecification are considered from a forecasting perspective. My model allows for small departures from the martingale difference sequence hypothesis by including a nonlinear component, formulated as a general, integrable transformation of the...

This paper investigates whether monetary policy has asymmetric effects on stock returns using Markov-switching models. Different measures of the stance of monetary policy are adopted. Empirical evidence from monthly returns on the standard & Poor 500 (S&P 500) price index suggests that monetary...

Extensive research on the linkages between monetary conditions and stock returns has been conducted in developed countries. This is in sharp contrast to the situation in developing countries. This paper therefore aims to study the long believed asymmetrical relationship between changes in...

The question of long-run predictability in the aggregate US stock market is still unsettled. This is due to the lack of a robust method to judge the statistical significance of long-run regressions under the maintained hypothesis. By developing a spectral theory of long-run regressions with both...

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...