Essays in market efficiency
Item
-
Title
-
Essays in market efficiency
-
Identifier
-
d_2009_2013:9d9f81a3399f:10150
-
identifier
-
10332
-
Creator
-
Cabrera, Juan F.,
-
Contributor
-
Tao Wang
-
Date
-
2009
-
Language
-
English
-
Publisher
-
City University of New York.
-
Subject
-
Finance | Arbitrage | Forex and equity markets | Market efficiency | Nonlinear models | Price discovery | Return predicatbility
-
Abstract
-
This dissertation investigates the market inefficiencies of both foreign exchange and equity markets. On the one hand, the efficiency of foreign exchange markets is explored through the measurement of the contribution to price discovery of the spot and futures market, and the its effect on intermarket mispricing. On the other hand, the efficiency of equity markets is tested by examining the martingale behavior of recently popular international stock index ETFs.;The first chapter provides a comprehensive analysis of the dynamic intraday price discovery process of the Euro and Japanese Yen exchange rates in three foreign exchange markets based on electronic trading systems: the Chicago Mercantile Exchange (CME) GLOBEX regular futures, E-mini futures, and the EBS interdealer spot market. Contrary to evidence in equity markets and more recent evidence in foreign exchange markets, the spot market is found to consistently lead the price discovery process for both currencies during the sample period. Furthermore, E-mini futures do not contribute more to the price discovery than the electronically traded regular futures.;In the second chapter, we examine the daily return predictability for eighteen international stock index ETFs. Out-of-sample tests are conducted, based on linear and various popular nonlinear models and both statistical and economic criteria for model comparison. The main results show evidence of predictability for six of eighteen ETFs. A simple linear autoregression model, and a nonlinear-in-variance GARCH model, but not several popular nonlinear-in-mean models help outperform the martingale model. The allowance of data-snooping bias also substantially weakens otherwise apparently strong predictability.;The final chapter investigates the relationship between the deviations of prices from their no-arbitrage value and the differences in informational efficiency across foreign exchange markets trading the same underlying asset. This relationship is examined by jointly modeling the dynamics of the futures-cash basis and information share differential across futures and cash markets. Evidence of two-way Granger causality between the no-arbitrage futures-cash basis and the relative speed of adjustment measure is found. Shocks to the no-arbitrage basis predict future differences in the speed of adjustment, and vice versa. The evidence is robust to different currency markets and different degrees of liquidity.
-
Type
-
dissertation
-
Source
-
2009_2013.csv
-
degree
-
Ph.D.
-
Program
-
Economics
