China's Exchange Traded Fund: Is There a Trading Place Bias?

2008 ◽  
Vol 11 (01) ◽  
pp. 61-74 ◽  
Author(s):  
Louis T. W. Cheng ◽  
Hung-Gay Fung ◽  
Yiuman Tse
Keyword(s):  
Hong Kong ◽  
Exchange Traded Funds ◽  
Home Market ◽  
Intraday Analysis ◽  
Daily Data ◽  
The Us ◽  
Egarch Model ◽  
Causality Tests ◽  
Granger Causality Tests ◽  
Exchange Traded Fund

We use Granger causality tests and an EGARCH model to analyze the pricing relations in the US between two exchange traded funds, the iShares FTSE/Xinhua China 25 Index (FXI) and the S&P 500 Index Fund (IVV). Daily data indicates that Hong Kong home market basically drives the FXI returns in the US. In case of intraday analysis, the US-based IVV appears to dominate the pricing of the FXI. The evidence supports the speculative pricing hypothesis that the location of trading has stronger effects than the influence of domestic effects summarized by FXI's lagged returns.

scholarly journals Which global stock indices trigger stronger contagion risk in the Vietnamese stock market? Evidence using a bivariate analysis

2013 ◽  
Vol 60 (4) ◽  
pp. 473-497 ◽  
Author(s):  
Kuan-Min Wang ◽  
Hung-Cheng Lai
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Correlation Coefficients ◽  
Bivariate Analysis ◽  
Contagion Effects ◽  
Daily Data ◽  
The Us ◽  
Egarch Model ◽  
Bivariate Egarch Model ◽  
Contagion Risk

This paper extends recent investigations into risk contagion effects on stock markets to the Vietnamese stock market. Daily data spanning October 9, 2006 to May 3, 2012 are sourced to empirically validate the contagion effects between stock markets in Vietnam, and China, Japan, Singapore, and the US. To facilitate the validation of contagion effects with market-related coefficients, this paper constructs a bivariate EGARCH model of dynamic conditional correlation coefficients. Using the correlation contagion test and Dungey et al.?s (2005) contagion test, we find contagion effects between the Vietnamese and four other stock markets, namely Japan, Singapore, China, and the US. Second, we show that the Japanese stock market causes stronger contagion risk in the Vietnamese stock market compared to the stock markets of China, Singapore, and the US. Finally, we show that the Chinese and US stock markets cause weaker contagion effects in the Vietnamese stock market because of stronger interdependence effects between the former two markets.

A Replication of “Is Public Expenditure Productive?” (Journal of Monetary Economics, 1989)

2017 ◽  
Vol 47 (3) ◽  
pp. 623-629
Author(s):  
Christopher Clarke ◽  
Raymond G. Batina
Keyword(s):  
Public Expenditure ◽  
Monetary Economics ◽  
Public Capital ◽  
Data Sources ◽  
Exact Methods ◽  
Us Economy ◽  
The Us ◽  
Causality Tests ◽  
Granger Causality Tests ◽  
The Impact

We replicate the results of the landmark paper by Aschauer (1989) on the impact of public capital on the US economy. We obtained data from his stated sources and followed his exact methods and are able to replicate his main results. We also extend his data to the period 1949 to 2015, use different data sources, DOLS and VECM estimation, and Granger causality tests. We are again able to replicate his results. Please see the longer version of our article for details.

scholarly journals A Causal Analysis of the R&D Interactions between the EU and the US

2007 ◽  
Vol 7 (4) ◽  
pp. 1850121 ◽  
Author(s):  
Erdal Atukeren
Keyword(s):  
Granger Causality ◽  
Labour Productivity ◽  
Causal Analysis ◽  
The Other ◽  
Other Hand ◽  
The Us ◽  
Causality Tests ◽  
Granger Causality Tests ◽  
The Eu

This paper examines the relationships between the aggregate R&D activities of the EU and the US using multivariate Granger-causality tests. Our estimation results indicate that the EU reacts positively to increases in R&D productivity in the US. On the other hand, R&D activity in the EU is a direct Granger-cause of both R&D and labour productivity in the US, and the effects are negative. It was shown in the literature that the US reacts submissively to successful Japanese R&D. We extend the literature by demonstrating that the US also reacts submissively to increased R&D effort in the EU.

scholarly journals An Econometric Analysis of ETF and ETF Futures in Financial and Energy Markets Using Generated Regressors

2017 ◽  
Author(s):  
Chia-Lin Chang ◽  
Michael McAleer ◽  
Chien-Hsun Wang
Keyword(s):  
Futures Markets ◽  
Spillover Effects ◽  
Exchange Traded Funds ◽  
Data Set ◽  
Volatility Spillovers ◽  
Daily Data ◽  
Volatility Model ◽  
Management Perspective ◽  
The Us ◽  
Generated Regressors

It is well known that that there is an intrinsic link between the financial and energy sectors, which can be analyzed through their spillover effects, which are measures of how the shocks to returns in different assets affect each other’s subsequent volatility in both spot and futures markets. Financial derivatives, which are not only highly representative of the underlying indices, but can also be traded on both the spot and futures markets, include Exchange Traded Funds (ETFs), a tradable spot index whose aim is to replicate the return of an underlying benchmark index. When ETF futures are not available to examine spillover effects, “generated regressors” are useful for constructing both Financial ETF futures and Energy ETF futures. The purpose of the paper is to investigate the co-volatility spillovers within and across the US energy and financial sectors in both spot and futures markets, by using “generated regressors” and a multivariate conditional volatility model, namely Diagonal BEKK. The daily data used are from 1998/12/23 to 2016/4/22. The data set is analyzed in its entirety, and are also subdivided into three distinct subsets. The empirical results show there is a significant relationship between the Financial ETF and Energy ETF in the spot and futures markets. Therefore, financial and energy ETFs are suitable for constructing a financial portfolio from an optimal risk management perspective, and also for dynamic hedging purposes.

scholarly journals Arbitrage and Liquidity: Evidence from a Panel of Exchange Traded Funds

2020 ◽  
Vol 2020 (097) ◽  
pp. 1-46
Author(s):  
David E. Rappoport ◽  
◽  
Tugkan Tuzun ◽  
Keyword(s):  
Granger Causality ◽  
Important Determinant ◽  
Market Liquidity ◽  
Exchange Traded Funds ◽  
Impulse Responses ◽  
Level Data ◽  
Causality Tests ◽  
Granger Causality Tests ◽  
Unique Dataset

Market liquidity is expected to facilitate arbitrage, which in turn should affect the liquidity of the assets traded by arbitrageurs. We study this relationship using a unique dataset of equity and bond ETFs compiled from big trade-level data. We find that liquidity is an important determinant of the efficacy of the ETF arbitrage. For less liquid bond ETFs, Granger-causality tests and impulse responses suggest that this relationship is stronger and more persistent, and liquidity spillovers are observed from portfolio constituents to ETF shares. Our results inform the design of synthetic securities, especially when derived from less liquid instruments.

scholarly journals Non-linear Causality Between Stock Returns And Inflation Uncertainty: Evidence From The US And The UK

2012 ◽  
Vol 12 (1) ◽  
pp. 63
Author(s):  
Esin Cakan
Keyword(s):  
Stock Returns ◽  
Granger Causality ◽  
Predictive Power ◽  
Inflation Uncertainty ◽  
The Us ◽  
Non Linear ◽  
Causality Tests ◽  
Granger Causality Tests ◽  
The Uk ◽  
Dynamic Relationships

This study analyzes the dynamic relationships between inflation uncertainty and stock returns by employing the linear and non-linear Granger causality tests for the US and the UK. Using GARCH model to generate a measure of inflation uncertainty, it does not have a predictive power for stock returns, as predicted by Friedman, and it does not support the opportunistic central bank hypothesis suggested by Cukierman-Meltzer. However, the findings from non-linear Granger causality put forth that there is a bi-directional non-linear predictive power between these variables. Stock market is used as a hedge against inflation uncertainty.

scholarly journals The effect of financial crises on stock market liquidity across global markets

2017 ◽  
Vol 14 (2) ◽  
pp. 38-50
Author(s):  
Halil D. Kaya ◽  
Engku Ngah S. Engkuchik
Keyword(s):  
Hong Kong ◽  
Stock Market ◽  
Granger Causality ◽  
Financial Crises ◽  
Market Liquidity ◽  
Global Markets ◽  
Feedback Effects ◽  
Turnover Ratio ◽  
Causality Tests ◽  
Granger Causality Tests

In this study, using a widely available market liquidity measure, the “turnover ratio”, the authors test for market liquidity contagion during the four financial crises that occurred between 1997 and 1999: The Thai crisis, the Hong Kong crisis, the Russian crisis, and the Brazilian crisis. It is found that while the liquidity levels decreased in approximately half of the sample markets, in the remaining half, the liquidity levels actually improved. The Granger causality tests show that while there is almost no evidence of causality (in both directions) before each crisis, during each crisis, approximately half of the pairwise tests were significant. The results show that most of these causalities are reverse feedback effects from the non-crisis-origin markets to the crisis-origin market. Therefore, it is concluded that the more crucial phenomenon during these crises is the “reverse feedback effects” rather than the liquidity contagion itself.

scholarly journals The Measurement of Tracking Errors of Gold ETFS: Evidence from China

2016 ◽  
Vol 5 (1) ◽  
pp. 2 ◽  
Author(s):  
Wei-Fong Pan ◽  
Ting Li
Keyword(s):  
Hong Kong ◽  
Exchange Traded Funds ◽  
Tracking Errors ◽  
Error Measure ◽  
Wide Range ◽  
The Us ◽  
Retail Investors ◽  
Better Than

This paper presents the first study on the measurement of tracking errorsusing daily figures for gold exchange-traded funds (ETFs) in China. Threemethods are employed to measure tracking errors: 1) calculating theabsolute error measure, 2) calculating the differences between thestandard deviation of the benchmark index and the ETF, and 3) aregression analysis of empirical returns. In general, the results suggest thatthe tracking errors of these ETFs in China are lower than those of equitybasedETFs in Hong Kong, the US, and Australia. This study further appliedtwo optimised replication portfolios (50-10-10-30 and 90-2-3-5) for a totalof three types of simulation portfolio. The overall results suggest that theperformances of the optimised replication portfolios were better than theperformance of the full replication portfolio. Our results provide valuableinsight for both institutional and retail investors and the opportunity forexposure to a wide range of commodity ETFs in China.

scholarly journals Stock Prices, Consumer Sentiment, And Economic Activity: Some Robust Bilateral Causality Tests For The US And The UK

2011 ◽  
Vol 7 (1) ◽  
Author(s):  
Hassan Shirvani ◽  
Barry Wilbratte
Keyword(s):  
Granger Causality ◽  
Stock Prices ◽  
Economic Activity ◽  
Structural Breaks ◽  
Consumer Sentiment ◽  
Test Procedures ◽  
The Us ◽  
Causality Tests ◽  
Granger Causality Tests ◽  
The Uk

This paper performs robust bilateral Granger causality tests for stock prices, consumer sentiment, and economic activity for the US and the UK. The robust test procedures involve the use of recently developed time series analysis of nonstationary data with possible structural breaks. Applying a battery of such tests, the paper finds the underlying data to be generally nonstationary and noncointegrated, even after allowing for possible breaks in the data, thus implying that the standard bilateral Granger causality tests are robust. The empirical results indicate the presence of unidirectional causality from stock prices to consumer sentiment for both countries. Given that stock prices drive consumer sentiment, we perform additional causality tests to determine the effect of consumer sentiment on the economy. Our finding of a unidirectional causality from consumer sentiment to the economy in both countries is consistent with a chain of causality from stock prices to consumer sentiment to the economy.

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