The stationarity of OECD real exchange rates over the period 1972-2008 is tested using a panel of twenty six member countries. The methodology followed stems from the need to meet several key concerns: (i) the identification of which panel members are stationary; (ii) the presence of...

Existing panel data studies of real interest parity are either unable to identify which panel members are characterised by stationary real interest differentials, or are subject to size distortion resulting from the presence of structural breaks and cross-sectional dependencies. Using a panel...

Davidson and Duclos (DD, 2000) develop the stochastic dominance statistics, T_j(x)(j=1,2,3), to test the hypothesis on statistically significant differences between any two cumulative density functions F and G for assets Y and Z, respectively. The DD test compares distributions at only a finite...

This article compares portfolio selection based on the downside risk sensitivity with portfolio selection based on Sharpe or Treynor ratios. Downside risk sensitivity (DRS) is given by an asset pricing model in which the downside and upside market returns are separated variables relative to...

Since the mid-1970's, the unbiased forward rate hypothesis (UFRH) of forward and spot exchange rates has been intensively studied and tested with inconclusive and contradictory results. On the basis of the hypothesis, this paper provides variable mean response (VMR) random coefficients models to...

In this paper, time-varying market and currency risks among a selected set of developed and emerging economies are compared in terms of stochastic dominance. For this purpose, time-varying exchange rate exposure and market betas are obtained through a multivariate model that explicitly allows...

This paper propose a new panel stochastic dominance (SD) test-PDD test, the asymptotic properties are derived, which extends Davidson and Duclos (DD) SD test to a panel context. The PDD test also contributes to settle one of the demerits while working with financial derivatives time series: that...

We employ the stochastic dominance (SD) approach that utilizes the entire return distribution to rank the performance of exchange-traded funds as traditional mean-variance and CAPM approaches may be inappropriate given the nature of non-normal returns. We find second and third-order stochastic...

Stochastic processes is one of the key operations research tools for analysis of complex phenomenon. This paper has a unique application to the study of mean changing models in stock markets. The idea is to enter and exit stock markets like Apple Computer and the broad S&P500 index at good times...

Just as Geometry could not help Euler solve the “Seven Bridges of Königsberg” problem, Econometric analysis or Linear Algebra alone are not able to answer many key questions about how financial markets coordinate. Statistical tables are detailed in terms of reporting estimated values,...