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Market Expectations (market + expectation)
Selected AbstractsMarket-Based Measures of Monetary Policy Expectations and Their Evolution Since the Introduction of the EuroECONOMIC NOTES, Issue 3 2009Fabio Filipozzi The paper considers the relation between monetary policy expectations and financial markets in the case of Europe. A number of money market instruments are compared, with the result that the 1-month forward interest rates extracted from the Libor yield curve has the best prediction power of the future monetary policy path. These forward rates have been used to study the evolution of market expectations regarding the monetary policy of the European Central Bank (ECB). The sharp increases and the following decreases in interest rates during 2000,2001 have reduced the predictive power of money market instruments, but smoother management of interest rates and better communication from the ECB has helped to improve the forecasting power of money market instruments. [source] Using Markets to Inform Policy: The Case of the Iraq WarECONOMICA, Issue 302 2009JUSTIN WOLFERS Financial market-based analysis of the expected effects of policy changes has traditionally been exclusively retrospective. In this paper, we demonstrate by example how prediction markets make it possible to use markets to prospectively estimate policy effects. We exploit data from a market trading in contracts tied to the ouster of Saddam Hussein as leader of Iraq to learn about financial market participants' expectations of the consequences of the 2003 Iraq war. We conducted an ex-ante analysis, which we disseminated before the war, finding that a 10% increase in the probability of war was accompanied by a $1 increase in spot oil prices that futures markets suggested was expected to dissipate quickly. Equity price movements implied that the same shock led to a 1.5% decline in the S&P 500. Further, the existence of widely-traded equity index options allows us to back out the entire distribution of market expectations of the war's near-term effects, finding that these large effects reflected a negatively skewed distribution, with a substantial probability of an extremely adverse outcome. The flow of war-related news through our sample explains a large proportion of daily oil and equity price movements. Subsequent analysis suggests that these relationships continued to hold out of sample. Our analysis also allows us to characterize which industries and countries were most sensitive to war news and when the immediate consequences of the war were better than ex-ante expectations, these sectors recovered, confirming these cross-sectional implications. We highlight the features of this case study that make it particularly amenable to this style of policy analysis and discuss some of the issues in applying this method to other policy contexts. [source] Confirming Management Earnings Forecasts, Earnings Uncertainty, and Stock ReturnsJOURNAL OF ACCOUNTING RESEARCH, Issue 4 2003Michael Clement In this study we examine the association among confirming management forecasts, stock prices, and analyst expectations. Confirming management forecasts are voluntary disclosures by management that corroborate existing market expectations about future earnings. This study provides evidence that these voluntary disclosures affect stock prices and the dispersion of analyst expectations. Specifically, we find that the market's reaction to confirming forecasts is significantly positive, indicating that benefits accrue to firms that disclose such forecasts. In addition, although we find no significant change in the mean consensus forecasts (a proxy for earnings expectations) around the confirming forecast date, evidence indicates a significant reduction in the mean and median consensus analyst dispersion (a proxy for earnings uncertainty). Finally, we document a positive association between the reduction of dispersion of analysts' forecasts and the magnitude of the stock market response. Overall, the evidence suggests that confirming forecasts reduce uncertainty about future earnings and that investors price this reduction of uncertainty. [source] Value at risk from econometric models and implied from currency optionsJOURNAL OF FORECASTING, Issue 8 2004James ChongArticle first published online: 3 DEC 200 Abstract This paper compares daily exchange rate value at risk estimates derived from econometric models with those implied by the prices of traded options. Univariate and multivariate GARCH models are employed in parallel with the simple historical and exponentially weighted moving average methods. Overall, we find that during periods of stability, the implied model tends to overestimate value at risk, hence over-allocating capital. However, during turbulent periods, it is less responsive than the GARCH-type models, resulting in an under-allocation of capital and a greater number of failures. Hence our main conclusion, which has important implications for risk management, is that market expectations of future volatility and correlation, as determined from the prices of traded options, may not be optimal tools for determining value at risk. Therefore, alternative models for estimating volatility should be sought. Copyright © 2004 John Wiley & Sons, Ltd. [source] Price relations among hog, corn, and soybean meal futuresTHE JOURNAL OF FUTURES MARKETS, Issue 5 2005Qingfeng "Wilson" Liu This paper examines the relations among hog, corn, and soybean meal futures price series using the Perron (1997) unit root test and autoregressive multivariate cointegration models. Accounting for the significant seasonal factors and time trends, we find the three series are cointegrated with one single cointegrating vector, whose coefficients are comparable to the ratios used by the United States Department of Agriculture (USDA). Ex-post trading simulations that utilize the cointegration results generate significant profits, suggesting that market expectations may not fully incorporate the mean-reverting tendencies as indicated by the cointegration relations, and that inefficiency exists in these three commodity futures markets. Results from our ex-ante trading simulations that employ the USDA ratios also provide some evidence in this regard. © 2005 Wiley Periodicals, Inc. Jrl Fut Mark 25:491,514, 2005 [source] Effectiveness of China's Monetary Policy and Reform of Its Foreign Exchange SystemCHINA AND WORLD ECONOMY, Issue 5 2006Xinhua Gu E58; F31; F41 Abstract This paper examines the effectiveness of China's monetary policy in curbing the overheating and speculation problems under the current foreign exchange system. The paper stresses the necessity of capital controls in China's gradual foreign exchange reform and the importance of credible government policy in guiding market expectations. Also, the paper discusses the persistence of China's external imbalance, and provides policy recommendations for its reduction. (Edited by Zhinan Zhang) [source] | ||||||||||