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Forthcoming Articles
Volume 5, Number 1 / March 2001 , Pages 1-86
Multinational Finance Journal, 2001, vol. 5, no. 1, pp. 1-33 | https://doi.org/10.17578/5-1-1
Amalia Di Iorio , RMIT University, Australia    Corresponding Author
Robert Faff , RMIT University, Australia

Abstract:
This article analyzes the impact of movements in the Australian dollar/Japanese yen (AUDJPY) and the Australian dollar/US dollar (AUDUSD) exchange rates on the returns of the Australian equities market. Specifically, this paper investigates the nature of exchange rate exposure across increasing return measurement intervals, enabling an examination of both its short-term and its long-term effect on stock returns. Consistent with previous literature, considerable evidence of long-term exchange rate exposure is found. Further, it is found that in the long-term the Australian equities market in general is exposed to fluctuations in the AUDJPY, while only some Australian industries are exposed to movements in the AUDUSD. Finally, convincing evidence in terms of the determinants of foreign exchange exposure is not found

Keywords : Australian stock market; exchange rate risk; intervaling
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Multinational Finance Journal, 2001, vol. 5, no. 1, pp. 35-58 | https://doi.org/10.17578/5-1-2
Tim Brailsford , Australian National University, Australia    Corresponding Author
Jack H.W. Penm , The Australian National University, Australia
R. Deane Terrell , The Australian National University, Australia

Abstract:
Vector autoregressive models are increasingly being used in the analysis of relationships within and between financial markets. In such models, there are circumstances that require zero entries in the coefficient matrices. Such circumstances can be particularly relevant in the context of markets with special characteristics, such as emerging economies. This paper shows that a direct extension of the use of the Yule-Walker relations for fitting vector autoregressive models with zero-non-zero patterned coefficient matrices is inconsistent with statistical procedures as the resultant estimated variance-covariance matrix of the white noise disturbance process becomes non-symmetric. This inconsistency can cause a breakdown when testing financial theory. The paper provides a consistent adjustment which fits with the theory. The practical use of the adjustment is demonstrated in a vector system comprising variables from the Hong Kong stock market and foreign exchange markets

Keywords : foreign exchange market; time series; VAR models; Yule-Walker relations
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Multinational Finance Journal, 2001, vol. 5, no. 1, pp. 59-86 | https://doi.org/10.17578/5-1-3
Wing-Keung Wong , Hong Kong Baptist University    Corresponding Author
Boon-Kiat Chew , Independent Economic Analysis (Holdings) Limited
Douglas Sikorsk , National University of Singapore, Singapore

Abstract:
This paper tests the performance of stock market forecasts derived from technical analysis by means of a specific indicator. The indicator is computed from E/P ratios and bond yields. Several stock markets are studied over a 20-year period. Two test statistics are introduced to utilize the indicator. The results show that the forecasts generated from the indicator would enable investors to escape most of the crashes and catch most of the bull runs. The trading signals provided by the indicator can generate profits that are significantly better than the buy-and-hold strategy

Keywords : bond yield; E/P ratio; interest rate; standardized yield differential; yield differential
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