We ask whether stock returns in France, Germany, Japan, the UK and the US are predictable by three instruments: the dividend yield, the earnings yield and the short rate. The predictability regression is suggested by a present value model with earnings growth, payout ratios and the short rate as...

We investigate the Expectations Hypotheses of the term structure of interest rates and of the foreign exchange market using vector autoregressive methods for the U.S. dollar, Deutsche mark, and British pound interest rates and exchange rates. In addition to standard Wald tests, we formulate...

How will countries handle idiosyncratic national macroeconomic shocks under the European single currency? The ways in which European countries now react to internally asymmetric shocks provide a better forecast than do the regional response pattern of the United States. In this paper we compare...

It is widely believed that correlations between international equity markets tend to increase in highly volatile bear markets. This has led some to doubt the benefits of international diversification. This article solves the dynamic portfolio choice problem of a US investor faced with a...

Regime-switching models are well suited to capture the non-linearities in interest rates. This paper examines the econometric performance of regime-switching models for interest rate data from the US, Germany and the UK. There is strong evidence supporting the presence of regime switches but...

We examine the empirical evidence on the expectations hypothesis of the term structure of interest rates in the United States, the United Kingdom, and Germany using the Campbell-Shiller (1991) regressions and a vector-autoregressive" methodology. We argue that anomalies in the U.S. term...

Since the September 1985 Plaza Hotel announcement by the Group of Five industrial countries, a substantial realignment of exchange rates has been achieved. At the same time, foreign exchange market intervention, much of it concerted and much of it sterilized, has been undertaken on a scale not...

When the goals of internal and external macroeconomic equilibrium are in conflict, sterilized intervention in the foreign exchange market may provide an independent policy instrument through which the central bank can resolve its dilemma in the short run. This paper is concerned with the West...

The purpose of this paper is two fold. First, to estimate, using structural methods, the extent to which capital flows undermined West German monetary policy during the Bretton Woods years 1960 to 1970 and second, to show that earlier reduced form estimates of the capital-account offset...

The paper characterizes predictable components in excess rates of returns on major equity and foreign exchange markets using lagged excess returns, dividend yields, and forward premiums as instruments. Vector autoregressive techniques demonstrate one-step-ahead predictability and provide implied...