Home About us Contact
|
Home About us Contact | ||
|
|
||
Longer Horizons (longer + horizon)
Selected AbstractsOpen-Economy Inflation-Forecast TargetingGERMAN ECONOMIC REVIEW, Issue 1 2006Kai Leitemo Inflation targeting; forecast targeting; monetary policy; small open economy Abstract. We study simple inflation-forecast targeting in an open-economy setting. Simple inflation-forecast targeting implies setting an interest rate which, if kept unchanged throughout the forecast-targeting horizon, produces a conditional inflation forecast equal to the inflation target at the end of the horizon. We find that the optimal forecast-targeting horizon is relatively short (one year). A longer horizon does not consistently contribute to improved output stability, indeed it increases exchange rate variability and traded sector variability. The targeting procedure is substantially inferior to the optimal pre-commitment policy. Moreover, the targeting procedure does not necessarily determine the rational-expectations equilibrium and is subject to time inconsistency. [source] Evidence That Management Earnings Forecasts Do Not Fully Incorporate Information in Prior Forecast ErrorsJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 7-8 2009Weihong Xu Abstract:, This paper investigates whether managers fully incorporate the implications of their prior earnings forecast errors into their future earnings forecasts and, if not, whether this behavior is related to the post-earnings announcement drift. I find a positive association in consecutive management forecast errors, suggesting that managers underestimate the future implications of past earnings information when forecasting earnings. I also find that managers underestimate the information in their prior forecast errors to a greater extent when they make earnings forecasts with a longer horizon. Finally, I find that, similar to managers, the market also underreacts to earnings information in management forecast errors, which leads to predictable stock returns following earnings announcements. [source] Survival of commodity trading advisors: 1990,2003THE JOURNAL OF FUTURES MARKETS, Issue 8 2005Greg N. Gregoriou This article investigates the mortality of Commodity Trading Advisors (CTAs) over the 1990,2003 period, a longer horizon than any encompassed in the literature. A detailed survival analysis over the full range of CTA classifications is provided, and it is found that the median lifetime of CTAs in this sample is different than previously documented. Through the implementation of nonparametric, parametric, and semiparametric statistical techniques, it is emphasized that CTA survivorship is heavily contingent on the strategy followed by the fund. Furthermore, a significant positive size effect on survival is shown, whereas poor returns, and to a lesser extent, high-risk exposure, appear to hasten mortality. © 2005 Wiley Periodicals, Inc. Jrl Fut Mark 25:795,815, 2005 [source] Chartism and exchange rate volatility,INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 3 2007Mikael Bask Abstract The purpose of this paper is to implement theoretically, the observation that the relative importance of fundamental versus technical analysis in the foreign exchange market depends on the time horizon in currency trade. For shorter time horizons, more weight is placed on technical analysis, while more weight is placed on fundamental analysis for longer horizons. The theoretical framework is the Dornbusch overshooting model, where moving averages is the technical trading technique used by the chartists. The perfect foresight path near long-run equilibrium is derived, and it is shown that the magnitude of exchange rate overshooting is larger than in the Dornbusch model. Specifically, the extent of overshooting depends inversely on the time horizon in currency trade. How changes in the model's structural parameters endogenously affect this time horizon and the magnitude of overshooting along the perfect foresight path are also derived. Copyright © 2007 John Wiley & Sons, Ltd. [source] Extended evidence on the use of technical analysis in foreign exchangeINTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 4 2006Thomas Gehrig Abstract This work extends earlier survey studies on the use of technical analysis by considering flow analysis as a third form of information production. Moreover, the survey covers FX dealers and also the rising fund managers. Technical analysis has gained importance over time and is now the most equally spread kind of analysis. It has by far the greatest importance in FX dealing and is second in fund management. Charts are used for shorter-term forecasting horizons while flows dominate at the shortest-term and fundamentals at longer horizons. Preferred users of each kind of analysis exhibit different views about market frictions. Copyright © 2006 John Wiley & Sons, Ltd. [source] The real exchange rate and real interest differentials: the role of nonlinearitiesINTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 4 2005Nelson C. Mark Abstract Recent empirical work has shown the importance of nonlinear adjustment in the dynamics of real exchange rates and real interest differentials. This work suggests that the tenuous empirical linkage between the real exchange rate and the real interest differential might be strengthened by explicitly accounting for these nonlinearities. We pursue this strategy by pricing the real exchange rate by real interest parity. The resulting first-order stochastic difference equation gives the real exchange rate as the expected present value of future real interest differentials which we compute numerically for three candidate nonlinear processes. Regressions of the log real US dollar prices of the Canadian dollar, deutschemark, yen and pound on the fundamental values implied by these nonlinear models are used to evaluate the linkage. The evidence for linkage is stronger when these present values are computed over shorter horizons than for longer horizons. Copyright © 2005 John Wiley & Sons, Ltd. [source] Forecasting the recent behavior of US business fixed investment spending: an analysis of competing models,JOURNAL OF FORECASTING, Issue 1 2007David E. Rapach Abstract We evaluate forecasting models of US business fixed investment spending growth over the recent 1995:1,2004:2 out-of-sample period. The forecasting models are based on the conventional Accelerator, Neoclassical, Average Q, and Cash-Flow models of investment spending, as well as real stock prices and excess stock return predictors. The real stock price model typically generates the most accurate forecasts, and forecast-encompassing tests indicate that this model contains most of the information useful for forecasting investment spending growth relative to the other models at longer horizons. In a robustness check, we also evaluate the forecasting performance of the models over two alternative out-of-sample periods: 1975:1,1984:4 and 1985:1,1994:4. A number of different models produce the most accurate forecasts over these alternative out-of-sample periods, indicating that while the real stock price model appears particularly useful for forecasting the recent behavior of investment spending growth, it may not continue to perform well in future periods.,,Copyright © 2007 John Wiley & Sons, Ltd. [source] Forecasting high-frequency financial data with the ARFIMA,ARCH modelJOURNAL OF FORECASTING, Issue 7 2001Michael A. Hauser Abstract Financial data series are often described as exhibiting two non-standard time series features. First, variance often changes over time, with alternating phases of high and low volatility. Such behaviour is well captured by ARCH models. Second, long memory may cause a slower decay of the autocorrelation function than would be implied by ARMA models. Fractionally integrated models have been offered as explanations. Recently, the ARFIMA,ARCH model class has been suggested as a way of coping with both phenomena simultaneously. For estimation we implement the bias correction of Cox and Reid (1987). For daily data on the Swiss 1-month Euromarket interest rate during the period 1986,1989, the ARFIMA,ARCH (5,d,2/4) model with non-integer d is selected by AIC. Model-based out-of-sample forecasts for the mean are better than predictions based on conditionally homoscedastic white noise only for longer horizons (, > 40). Regarding volatility forecasts, however, the selected ARFIMA,ARCH models dominate. Copyright © 2001 John Wiley & Sons, Ltd. [source] The quality of volatility traded on the over-the-counter currency market: A multiple horizons studyTHE JOURNAL OF FUTURES MARKETS, Issue 3 2003Vicentiu Covrig Previous studies of the quality of market-forecasted volatility have used the volatility that is implied by exchange-traded option prices. The use of implied volatility in estimating the market view of future volatility has suffered from variable measurement errors, such as the non-synchronization of option and underlying asset prices, the expiration-day effect, and the volatility smile effect. This study circumvents these problems by using the quoted implied volatility from the over-the-counter (OTC) currency option market, in which traders quote prices in terms of volatility. Furthermore, the OTC currency options have daily quotes for standard maturities, which allows the study to look at the market's ability to forecast future volatility for different horizons. The study finds that quoted implied volatility subsumes the information content of historically based forecasts at shorter horizons, and the former is as good as the latter at longer horizons. These results are consistent with the argument that measurement errors have a substantial effect on the implied volatility estimator and the quality of the inferences that are based on it. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark 23:261,285, 2003 [source] The Effect of Investment Horizons on Risk, Return and End-of-Period Wealth for Major Asset Classes in CanadaCANADIAN JOURNAL OF ADMINISTRATIVE SCIENCES, Issue 2 2006Lakshman Alles Abstract The objective of this paper is to investigate whether the current practice among financial planners of recommending stocks at an early age and progressively moving into cash or bonds as retirement approaches would be appropriate. We computed returns, risks and end-of-period wealth distributions of various Canadian asset classes at increasing horizons between 1957 and 2003, based on the bootstrapping technique. Results show that investment outcomes at short horizons can be quite different from outcomes at longer horizons. Evidence is provided in favour of time diversification, while the current market practice of life cycle investing is not fully supported as stocks continue to exhibit more favourable risk-return payoffs than other asset classes, even at shorter time intervals. Résumé Cet article se propose d'étudier le bien-fondé de la pratique actuelle qui consiste à recommander des actions aux investisseurs dans leur jeunesse et l'argent liquide ou les obligations lorsqu'ils approchent l'âge de la retraite. Grâce à la technique de bootstrapping, nous calculons les retours sur investissement, les risques et la distribution de richesse en fin de période pour plusieurs types d'actifs canadiens à horizons divers entre 1957 et 2003. Les résultats présentent des différences importantes entre les investissements à court terme et les investissements à long terme. Les données disponibles soutiennent l'idée de la diversification temporelle et réfutent partiellement la pratique actuelle du cycle de vie d'investissement. De fait, les actions comportent toujours un profil risques-bénéfices plus favorable que les autres types d'actifs, même pour des intervalles de temps réduits. [source] | ||||||||||||||||||||||