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Forthcoming Articles
Volume 1, Number 3 / September 1997 , Pages 169-254
Multinational Finance Journal, 1997, vol. 1, no. 3, pp. 169-197 | https://doi.org/10.17578/1-3-1
Mandeep S. Chahal , Enron Capital and Trade Resources, U.S.A    Corresponding Author
Jun Wang , SAS Institute Inc., U.S.A

Abstract:
The underlying stochastic processes that drive returns in several emerging bond and stock markets are investigated using the pure diffusion, the jump diffusion, the ARCH pure diffusion, and the ARCH jump diffusion models. The results indicate that jump diffusion models fit the data better than pure diffusion models. Possible sources and linkages of information surprises in emerging stock and bond markets are also investigated. Bond and stock returns of the same country exhibit simultaneous jumps, indicating a possible linkage of the two markets. U.S. equity returns respond to jumps in emerging bond markets but not to jumps in emerging stock markets

Keywords : emerging markets; ARCH; jump diffusion; information surprises; distribution characteristics
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Multinational Finance Journal, 1997, vol.1, no. 3, pp. 199-227 | https://doi.org/10.17578/1-3-2
Li Jiang , Hong Kong Baptist University, Hong Kong    Corresponding Author
Lawrence Kryzanowski , Concordia University, Canada

Abstract:
In this article, we examine dynamic relationships between volatility and various microstructure measures of trade activity and quoted liquidity for each component stock in the Toronto Stock Exchange 35 Index and for the Toronto 35 Index Participation Shares. When volatility is conditioned on number of trades and quoted liquidity, trading volume provides no incremental explanatory power. Thus, the number of trades appears to be a better proxy for information flow. Furthermore, investigation into partitioned volume suggests that the number of trades is more effective than the unexpected volume in explaining volatility. Measures of quoted liquidity also play a significant role in explaining intra day volatility. Bid-ask spreads and quote depth are positively and negatively related to volatility, respectively. Consistent with the lack of information signal, no trade outcomes are negatively related to volatility

Keywords : volatility; volatility determinants; and market microstructure
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Multinational Finance Journal, 1997, vol. 1, no. 3, pp. 229-254 | https://doi.org/10.17578/1-3-3
George Athanassakos , Wilfrid Laurier University, Canada    Corresponding Author

Abstract:
This article proposes an alternative approach to estimating the required rate of return on equity, combining the bond-plus risk-premium approach and the Capital Asset Pricing Model, and tests it using Canadian data. Individual stock risk-premia are classified into groups according to the point in the business cycle, risk based on each company’s bond rating, and industry groups as defined by industry classification. Group averages are calculated. We find equity risk-premia are negatively related to interest rates and bond ratings. Moreover, the higher the risk of an industry group, the higher are the equity risk-premia. However, findings regarding the risk-premia’s sensitivity to the business cycle and stability across business cycles are not very conclusive

Keywords : equity risk-premia; cost of equity; CAPM; bond-plus riskpremium
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