This paper tests the response of bond yield spreads and equity prices to credit rating changes in the Australian financial market. Unlike some earlier studies for foreign markets, we find evidence that both yield spreads and equity prices move in the ‘expected’ direction following rating...

This paper attempts to discern from financial market data the impact of greater monetary policy transparency over the period since the late 1980s. We examine whether interest rate variability has changed, the degree to which financial markets anticipate policy moves and movements in the yield...

This paper uses intraday data to estimate the effect of changes in monetary policy on the exchange rate. We use an event study with carefully selected sample periods for four countries (Australia, Canada, New Zealand and the United Kingdom) to ensure that the change in monetary policy is...

Links between central counterparties (CCPs) enable participants to clear positions in any linked CCP without needing to maintain multiple CCP memberships. While links enable exposure to be reduced by allowing netting across CCPs, CCPs become exposed to one another through the possibility of a...

In this paper we analyse the effect of news relating to the expected path of monetary policy on interest rate futures. Central banks’ transparency is in most respects much greater than it was a decade ago, and so central bank communication needs to be included as a potential source of news. We...

In this paper we examine two related propositions: the efficiency of pricing of Australian shares and the influences of share prices on business investment. In line with similar studies overseas, we find that the Australian share market may deviate from efficient pricing over short time horizons...

The efficient market hypothesis states that asset prices in financial markets should reflect all available information; as a consequence, prices should always be consistent with ‘fundamentals’. In this paper, we discuss the main ideas behind the efficient market hypothesis, and provide a...

In this paper, we measure how the fixed-interest market in Australia assesses and responds to new economic information. We use high-frequency data, precise announcement times and market-based forecasts to measure the reaction of bill and bond yields to news. The period covered is from January...

Qualitative literature on equity price bubbles has often emphasised the effects of mispriced equity on economic decisions. This paper investigates this issue quantitatively using two ideas. The first is that equity mispricing is transitory, and has no long-run effects on economic outcomes. The...

We estimate inflation expectations and inflation risk premia using inflation forecasts from Consensus Economics and Australian inflation-indexed bond price data. Inflation-indexed bond prices are assumed to be non-linear functions of latent factors, which we model via an affine term structure...