scholarly journals Macroeconomic identification of the priced APT factors on the Johannesburg Stock Exchange

1996 ◽  
Vol 27 (4) ◽  
pp. 104-112 ◽  
Author(s):  
Paul Van Rensburg
Keyword(s):  
Interest Rates ◽  
Risk Premium ◽  
Significant Risk ◽  
Seemingly Unrelated Regression ◽  
Simultaneous Estimation ◽  
Inflation Expectations ◽  
Arbitrage Pricing Theory ◽  
Macroeconomic Variables ◽  
Unrelated Regression ◽  
Non Linear

Employing prespecified macroeconomic variables as potential priced factors, the Arbitrage Pricing Theory (APT) may be modelled as a non-linear seemingly unrelated regression with across equation restrictions. This portrayal allows for the simultaneous estimation of factor sensitivities and the risk premium associated with each factor. The following macroeconomic variables were tested as potential factors: unexpected movements in (rand) gold returns. (dollar) returns on the Dow-Jones Industrial Index, the term structure of interest rates and inflation expectations together with the 'residual market factor' of Burmeister Wall. Using iterated non-linear seemingly unrelated regression (ITNLSUR) estimation techniques, it was found that all of the above variables except for gold price risk are priced, that is, are associated with statistically significant risk premia.

scholarly journals Macroeconomic variables and the cross-section of Johannesburg Stock Exchange returns

2000 ◽  
Vol 31 (1) ◽  
pp. 31-43 ◽  
Author(s):  
Paul Van Rensburg
Keyword(s):  
Stock Exchange ◽  
Seemingly Unrelated Regression ◽  
Arbitrage Pricing Theory ◽  
Cross Sectional ◽  
Macroeconomic Variables ◽  
Explanatory Variables ◽  
Johannesburg Stock Exchange ◽  
Variable Approach ◽  
Unrelated Regression ◽  
Market Factors

This study adopts the Chen, Roll Ross prespecified variable approach to priced arbitrage pricing theory factor (APT) identification on the Johannesburg Stock Exchange (JSE). It is observed that the dichotomy in the return generating processes underlying South African mining and industrial shares leads to cross-sectional correlations in the residual errors of linear factor models that do not employ factor analytically extracted explanatory variables. As a result, a 'two residual market factor' approach is introduced in this study. Employing the iterated non-linear seemingly unrelated regression technique of McElroy Burmeister (1988), it is found that the rand gold price, the rate on long bonds, the Dow-Jones Industrial Index and the level of gold and foreign exchange reserves together with the Industrial and All-Gold residual market factors represent priced sources of risk within the framework of the APT over the period 1985 to 1995. The pricing relationships estimated are found to be inconsistent with those implied by the capital asset pricing model. These results are robust across the 'unconstrained intercept' and 'zero beta' cross-sectional model specifications. The findings of the study, however, imply that the influence of macroeconomic variables on the JSE is most parsimoniously expressed in the two factor APT model of Van Rensburg Slaney (1997).

scholarly journals A New Approach to Gauging Inflation Expectations

2009 ◽  
pp. 1-4
Author(s):  
Joseph G. Haubrich
Keyword(s):  
Interest Rates ◽  
Risk Premium ◽  
New Method ◽  
Inflation Expectations ◽  
Real Interest Rates ◽  
Inflation Risk ◽  
New Approach ◽  
Expected Inflation ◽  
Inflation Risk Premium

This Economic Commentary explains a relatively new method of uncovering inflation expectations, real interest rates, and an inflation-risk premium. It provides estimates of expected inflation from one month to 30 years, an estimate of the inflation-risk premium, and a measure of real interest rates, particularly a short (one-month) rate, which is not readily available from the TIPS market. Calculations using the method suggest that longer-term inflation expectations remain near historic lows. Furthermore, the inflation-risk premium is also low, which in the model means that inflation is not expected to deviate far from expectations.

The World Economy

1996 ◽  
Vol 157 ◽  
pp. 28-57
Author(s):  
Ray Barrell ◽  
Julian Morgan ◽  
Nigel Pain
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rates ◽  
Risk Premium ◽  
World Economy ◽  
Significant Risk ◽  
Short Term ◽  
Spare Capacity ◽  
The Us ◽  
The World

It is now quite clear that growth slowed in Europe around the end of 1995, and that it remained low in the first quarter of 1996. However, the most recent information suggests that the slowdown is likely to prove temporary. Early indicators for the second quarter suggest that growth has begun to accelerate, much in line with our forecast published in May. We have made no further adjustment to our forecast for EU wide growth this year, with output still expected to rise by around 1½ per cent this year and around 2¾–3 per cent next year. Recent exchange rate developments should help support demand, as the D-mark, the French franc and other currencies within the D-mark bloc have all depreciated against the dollar in the last few months. A number of economies in Europe appear to have some spare capacity, and can increase output, whilst the US is operating at or above capacity, and a reduction in demand should ease incipient inflationary pressures rather more than it reduces output. The depreciation of the D-mark has been associated with a loosening of monetary policy, with short-term interest rates in Germany being a full point lower than they were a year ago. French short-term interest rates have fallen much more, reflecting the disappearance of a significant risk premium last year. The loosening of policy was timely, and should help offset the deflationary pressures that have come from a slowdown in stock accumulation in both France and Germany and from low investment, especially in Germany.

scholarly journals Relationship Between Selected Macroeconomic Variables and the Financial Performance of Investment Banks in Kenya

2021 ◽  
Vol 13 (11) ◽  
pp. 102
Author(s):  
Mungiria James Baariu ◽  
Njuguna Peter
Keyword(s):  
Financial Performance ◽  
Interest Rates ◽  
Significant Influence ◽  
Investment Banks ◽  
Arbitrage Pricing Theory ◽  
Macroeconomic Variables ◽  
Pricing Theory ◽  
Equity Investments ◽  
Classical Economic ◽  
The Relationship

Currently, investment banks in Kenya are facing a lot of challenges due to persistence losses. However, the available studies are inadequate to aid investment banks in overcoming these challenges in Kenya due to mixed findings, resulting in rising uncertainty on equity investments’ performance, leading to massive losses among investment banks.  This study, therefore, sought to model the relationship between inflation, GDP, interest rates, exchange rates, and financial performance of investment banks. Arbitrage pricing theory, Modern portfolio theory as well as classical economic theory (flow-oriented model) was used. A causal research design was adopted. The study found that inflation has negative significant influence on financial performance of equity investments among investment banks in Kenya. Also, GDP has positive and significant influence on financial performance of equity investments among investment banks in Kenya. Interest rate was also found to have negative and significant influence on financial performance of equity investments among investment banks in Kenya. In addition, exchange rate has negative significant influence on financial performance of equity investments among investment banks in Kenya. The study therefore recommends any investor including financial investors to methodically analyze inflation trends and understand how it affects the company’s financial performance. Investors must also be in a position to predict the future concerning inflation changes.

scholarly journals U.S. Monetary Policy Spillovers to Emerging Markets: Both Shocks and Vulnerabilities Matter

2021 ◽  
Vol 2021 (1321) ◽  
pp. 1-34
Author(s):  
Shaghil Ahmed ◽  
◽  
Ozge Akinci ◽  
Albert Queralto ◽  
◽  
...  
Keyword(s):  
Interest Rates ◽  
Emerging Market ◽  
Aggregate Demand ◽  
Central Banks ◽  
New Keynesian ◽  
Inflation Expectations ◽  
Balance Sheets ◽  
Macroeconomic Variables ◽  
Keynesian Model ◽  
Monetary Policy Spillovers

Using a macroeconomic model, we explore how sources of shocks and vulnerabilities matter for the transmission of U.S. monetary changes to emerging market economies (EMEs). We utilize a calibrated two-country New Keynesian model with financial frictions, partly-dollarized balance sheets, and imperfectly anchored inflation expectations. Contrary to other recent studies that also emphasize the sources of shocks, our approach allows the quantification of effects on real macroeconomic variables as well, in addition to financial spillovers. Moreover, we model the most relevant vulnerabilities structurally. We show that higher U.S. interest rates arising from stronger U.S. aggregate demand generate modestly positive spillovers to economic activity in EMEs with stronger fundamentals, but can be adverse for vulnerable EMEs. In contrast, U.S. monetary tightenings driven by a more-hawkish policy stance cause a substantial slowdown in activity in all EMEs. Our model also captures the challenging policy tradeos that EME central banks face. We show that these tradeoffs are more favorable when inflation expectations are well anchored.

scholarly journals Speculation, Sentiment, and Interest Rates

2021 ◽  
Author(s):  
Andrea Buraschi ◽  
Paul Whelan
Keyword(s):  
Interest Rates ◽  
Risk Premium ◽  
Yield Curve ◽  
Significant Risk ◽  
Test Model ◽  
Bond Markets ◽  
Bond Risk Premia ◽  
Belief Heterogeneity ◽  
Bond Risk ◽  
Risk Free Rate

We compare the implications of speculation versus hedging channels for bond markets in heterogeneous agents’ economies. Treasuries command a significant risk premium when optimistic agents speculate by leveraging their positions using bonds. Disagreement drives a wedge between marginal agent versus econometrician beliefs (sentiment). When speculative demands dominate, the interaction between belief heterogeneity and sentiment helps rationalize several puzzling characteristics of Treasury markets. Empirically, we test model predictions and find that larger disagreement (i) lowers the risk-free rate, (ii) raises the slope of the yield curve, and (iii) with positive sentiment increases bond risk premia and makes its dynamics countercyclical. This paper was accepted by Karl Diether, finance.

scholarly journals ANALISIS PENGARUH VOLATILITAS NILAI TUKAR PADA EKSPOR KOMODITI MANUFAKTUR DI INDONESIA PENERAPAN ESTIMASI DENGAN MENGGUNAKAN DISTRIBUSI LAG POISSONS PADA PERSAMAAN NON LINEAR SEEMINGLY UNRELATED REGRESSION

2005 ◽  
Vol 7 (2) ◽  
pp. 197-236 ◽  
Author(s):  
Dr. Mahyus Ekananda MM., MSE
Keyword(s):  
International Trade ◽  
Exchange Rate ◽  
Probability Function ◽  
Exchange Rate Volatility ◽  
Simultaneous Equation ◽  
Seemingly Unrelated Regression ◽  
System Equation ◽  
Unrelated Regression ◽  
Non Linear ◽  
The Impact

The purpose of this paper is to explain the uncertainty of exchange rate volatility effect to international trade. Its effect to international trade, specially quantity of export, come from accumulation exchange rate fluctuation from several lag. For the record, some previous researches which found out the impact of exchange rates on trade did not consider some of the things. First, the existence of inconstancy on trade. Namely, depend on the change of elasticity along the time of observations. Secondly, the number of lag in independent variable which is needed in order to record the highest impact. Third, there is an accumulation of impact in some previous period. The industry with lower import content become easier to maintain the export level. Export adjustment will occure with different time. This paper found that the industry with lower import content has faster export adjusment than higner import content. The data will separate into two different import content. The industry with higher import content will reduce the export if exchange rate volatility increase.The other purpose of this paper is to explain the algorithm solution for system equation which has non linier form in its parameter, especially in system equation of seemingly unrelated regression. Particularly, this paper will discuss the model formation by inserting poissons probability function, which cause the non linier form. Inserting poissons distibution probablity to equation of trade can estimate the time of adjustment that has a best distribution. Then, this paper will explain the implementation that had been done by Ekananda (2003) about poisons probability function on system equation, the dynamics of equation and the simultaneous equation by using Hausman algorithm (1975).Keywords: exchange rate, poisson distribution, Non Linear SURJEL: C16, C32, F14, F31

scholarly journals Relationship Between Selected Macroeconomic Variables and the Financial Performance of Investment Banks in Kenya

2021 ◽  
Vol 13 (11) ◽  
pp. 98
Author(s):  
Mungiria James Baariu ◽  
Njuguna Peter
Keyword(s):  
Financial Performance ◽  
Interest Rates ◽  
Significant Influence ◽  
Investment Banks ◽  
Arbitrage Pricing Theory ◽  
Macroeconomic Variables ◽  
Pricing Theory ◽  
Equity Investments ◽  
Classical Economic ◽  
The Relationship

Currently, investment banks in Kenya are facing a lot of challenges due to persistence losses. However, the available studies are inadequate to aid investment banks in overcoming these challenges in Kenya due to mixed findings, resulting in rising uncertainty on equity investments’ performance, leading to massive losses among investment banks.  This study, therefore, sought to model the relationship between inflation, GDP, interest rates, exchange rates, and financial performance of investment banks. Arbitrage pricing theory, Modern portfolio theory as well as classical economic theory (flow-oriented model) was used. A causal research design was adopted. The study found that inflation has negative significant influence on financial performance of equity investments among investment banks in Kenya. Also, GDP has positive and significant influence on financial performance of equity investments among investment banks in Kenya. Interest rate was also found to have negative and significant influence on financial performance of equity investments among investment banks in Kenya. In addition, exchange rate has negative significant influence on financial performance of equity investments among investment banks in Kenya. The study therefore recommends any investor including financial investors to methodically analyze inflation trends and understand how it affects the company’s financial performance. Investors must also be in a position to predict the future concerning inflation changes.

scholarly journals GSTAR-X-SUR Model with Neural Network Approach on Residuals

CAUCHY ◽  
2019 ◽  
Vol 5 (4) ◽  
pp. 203
Author(s):  
Diana Rosyida ◽  
Atiek Iiriany ◽  
Nurjannah Nurjannah
Keyword(s):  
Neural Network ◽  
Estimation Method ◽  
Seemingly Unrelated Regression ◽  
Network Approach ◽  
Network Parameter ◽  
Exogenous Variables ◽  
Neural Network Approach ◽  
Unrelated Regression ◽  
Non Linear ◽  
Model Approach

<p class="Abstract">One of the models that combine time and inter-location elements is Generalized Space Time Autoregressive (GSTAR) model. GSTAR model involving exogenous variables is GSTARX model. The exogenous variables which are used in GSTAR model can be both metrical and non-metrical data. Exogenous variable that can be applied into the forecasting of precipitation is non-metrical data which is in a form of precipitation intensity of a certain location. Currently, precipitation possesses patterns and characteristics difficult to identify, and thus can be interpreted as non-linear phenomenon. Non-linear model which is much developed now is neural network. Parameter estimation method employed is Seemingly Unrelated Regression (SUR) model approach, which can solve the correlation between residual models. This current research employed GSTARX-SUR modelling with neural network approach on residuals. The data used in this research were the records of 10-day precipitations in four regions in West Java, namely Cisondari, Lembang, Cianjur, and Gunung Mas, from 2005 to 2015. The GSTARX-SUR NN modelling resulted in precipitation deviation average of the forecast and the actual data at 4.1385 mm. This means that this model can be used as an alternative in forecasting precipitation.<strong> </strong></p>

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