In this paper we motivate, specify and estimate a model in which the intra-day volatilty process affects the inter-transaction duration process and vice versa. In order to solve the estimation problems implied by this interdependent formulation, we first propose a GMM estimation procedure for...

For the Euro 2000 Soccer Championships an experimental asset market was condueted, with traders buying and selling contracts on the winners of individual matches. Market-generated probabilities are compared to professional bet quotas, and factors that are responsible for the quality of the...

This paper tests the validity of Present Value (PV) models of stock prices by employing a two-step strategy for testing the null hypothesis of no cointegration against alternatives which are fractionally cointegrated. Monte Carlo simulations are conducted to evaluate the power and size...

Political stock markets (PSM) are sometimes seen as substitutes for opinion polls. On the bases of a behavioral model, specific preconditions were drawn out under which manipulation in PSM can weaken this argument. Evidence for manipulation is reported from the data of two separate PSM during...

In a meta study of 25 political stock markets conducted in Germany in the last decade we analyze their predictive success. Although the predictions of political stock markets are highly correlated with the corresponding polls, the markets are able to aggregate additional information. One...

The efficient market hypothesis implies that asset prices cannot be cointegrated. On the other hand, arbitrage processes prevent prices of fundamentally related assets from drifting far away. An attractive model that reconciles these two conflicting facts is the nonlinear error correction...

In a complete financial market every contingent claim can be hedged perfectly. In an incomplete market it is possible to stay on the safe side by superhedging. But such strategies may require a large amount of initial capital. Here we study the question what an investor can do who is unwilling...

In this note the unobserved component approach underlying the software package SEATS is compared with the Beveridge-Nelson type of decomposition for seasonal time series. The main strength of the SEATS approach lies in the appealing model formulation and the careful specification and adjustment...