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Book part
Publication date: 24 March 2005

T.J. Brailsford, J.H.W. Penm and R.D. Terrell

Conventional methods to test for long-term PPP based on the theory of cointegration are typically undertaken in the framework of vector error correction models (VECM). The…

Abstract

Conventional methods to test for long-term PPP based on the theory of cointegration are typically undertaken in the framework of vector error correction models (VECM). The standard approach in the use of VECMs is to employ a model of full-order, which assumes nonzero entries in all the coefficient matrices. But, the use of full-order VECM models may lead to incorrect inferences if zero entries are required in the coefficient matrices. Specifically, if we wish to test for indirect causality, instantaneous causality, or Granger non-causality, and employ “overparameterised” full-order VECM models that ignore entries assigned a priori to be zero, then the power of statistical inference is weakened and the resultant specifications can produce different conclusions concerning the cointegrating relationships among the variables. In this paper, an approach is presented that incorporates zero entries in the VECM analysis. This approach is a more straightforward and effective means of testing for causality and cointegrating relations. The paper extends prior work on PPP through an investigation of causality between the U.S. Dollar and the Japanese Yen. The results demonstrate the inconsistencies that can arise in the area and show that bi-directional feedback exists between prices, interest rates and the exchange rate such that adjustment mechanisms are complete within the context of PPP.

Details

Research in Finance
Type: Book
ISBN: 978-0-76231-161-3

Article
Publication date: 26 November 2021

Vijay Kumar Vishwakarma

This paper aims to examine the integration of housing markets in Canada by examining housing price data (1999–2016) of six metropolitan areas in different provinces, namely…

Abstract

Purpose

This paper aims to examine the integration of housing markets in Canada by examining housing price data (1999–2016) of six metropolitan areas in different provinces, namely, Calgary, Vancouver, Winnipeg, Toronto, Montreal and Halifax. The authors test for cointegration, driver cities of long-run relationships, long-run Granger causality and instantaneous causality in light of the global financial crisis (GFC) (2007–2008).

Design/methodology/approach

The authors use Johansen’s system cointegration approach with structural breaks. Moving average representation is used for common stochastic trend(s) analysis. Finally, the authors apply vector error correction model-based Granger causality and instantaneous causality.

Findings

Cities’ housing prices are in long-run equilibrium. Post-crisis Canadian housing markets became more integrated. The Calgary, Vancouver, Toronto and Montreal markets drive the Canadian housing market, leading all cities toward long-run equilibrium. Strong long-run Granger causality exists, but the authors observe no instantaneous causality. Price information takes time to disseminate, and long-run price adjustments play a significant role in causation.

Practical implications

The findings of cointegration increasing after the GFC and strong lead–lag can be used by investors to arbitrage and optimize portfolios. This can also help national and local policymakers in mitigating risk. Incorporating these findings can lead to better price forecasting.

Originality/value

This study presents many novelties for the Canadian housing market: it is the first to use repeat-sales regional pricing indices to test long-run behaviors, conduct common stochastic trend analyzes and present causality relations.

Details

International Journal of Housing Markets and Analysis, vol. 16 no. 1
Type: Research Article
ISSN: 1753-8270

Keywords

Book part
Publication date: 17 December 2003

Edward J.Y. Lin, J.H.W. Penm, R.D. Terrell and Soushan Wu

In this paper the techniques of zero-non-zero (ZNZ) patterned vector autoregressive modelling are utilized to examine two issues associated with the European single currency – the…

Abstract

In this paper the techniques of zero-non-zero (ZNZ) patterned vector autoregressive modelling are utilized to examine two issues associated with the European single currency – the euro. First, “Granger causality” is employed to examine the causal linkages between the euro exchange rate, the euro area money supply and the gross domestic product (GDP) growth in the euro area. Second, we examine the hypothesis that the euro has become a major influence on international stock markets by testing for the causal relationships between movements in the euro exchange rate, the U.K. pound exchange rate and the London stock market index.

Details

Research in Finance
Type: Book
ISBN: 978-1-84950-251-1

Article
Publication date: 5 November 2018

Seth W. Norton

The purpose of this paper is to examine the link between Joseph Schumpeter’s economics and the rise of General Motors (GM).

Abstract

Purpose

The purpose of this paper is to examine the link between Joseph Schumpeter’s economics and the rise of General Motors (GM).

Design/methodology/approach

The paper uses regression analysis and time series analysis of market synchronization.

Findings

There is a strong link between GM rise to dominance of the domestic automobile industry and nuanced features of Schumpeterian economics.

Research limitations/implications

The paper furthers the examination of the role of information economics on marketing channel performance.

Practical implications

Information helps in production decisions by synchronizing production with consumer demand.

Social implications

Economic efficiency enhances the human welfare for better forecasting, lower inventories and greater profits.

Originality/value

This topic has been explored before but methodology used in this paper is innovative. The paper uses Granger causality.

Details

Journal of Entrepreneurship and Public Policy, vol. 7 no. 4
Type: Research Article
ISSN: 2045-2101

Keywords

Article
Publication date: 28 March 2022

Khakan Najaf, Abdul Rashid, Young Kyung Ko and Susela Devi K. Suppiah

This study aims to understand how the COVID-19 pandemic dramatically impacts the maturity of all industrial sectors globally. This paper analyses the general patterns of managing…

Abstract

Purpose

This study aims to understand how the COVID-19 pandemic dramatically impacts the maturity of all industrial sectors globally. This paper analyses the general patterns of managing maturity in terms of performance and risk-taking of S&P 500 industrial sectors while determining their association with COVID-19.

Design/methodology/approach

To analyse the immediate response of COVID-19 on maturity management, the authors gather time-series daily index data of S&P sectors from October 2019 until June 2020 from Bloomberg. The authors select this study period to show the immediate effect of COVID-19 on industrial sector maturity management. The performance and volatility of stock are proxies for managing the maturity of each sector. The authors use vector auto-regression (VAR) methodology to determine the impact of global coronavirus.

Findings

This study’s findings suggest that the information technology sectors outperform the other sectors; in contrast, the utility sector exhibits the worst performance during a pandemic. Furthermore, the real estate sector depicts a higher level of systematic risk pattern than other sectors. Interestingly, the empirical result of VAR shows that almost every sector is significantly negatively affected by this pandemic; however, the consumer discretionary sector is immune to it.

Research limitations/implications

Overall, this study’s findings for individual economic sectors demonstrate that the managing maturity of each sector acts differently to the coronavirus outbreak. This study offers insights to researchers, policymakers, regulators, financial report users, investors, employees, clients and society.

Originality/value

This paper contributes to the existing literature on managing the maturity of industry sectors in terms of observing their trends during the financial crisis.

Details

Journal of Global Operations and Strategic Sourcing, vol. 15 no. 4
Type: Research Article
ISSN: 2398-5364

Keywords

Content available
Article
Publication date: 2 January 2023

Richard Reed

212

Abstract

Details

International Journal of Housing Markets and Analysis, vol. 16 no. 1
Type: Research Article
ISSN: 1753-8270

Article
Publication date: 19 June 2019

Josine Uwilingiye, Esin Cakan, Riza Demirer and Rangan Gupta

The purpose of this paper is to examine intentional herding among institutional investors with a particular focus on the technology sector that was the driver of the “New Economy”…

Abstract

Purpose

The purpose of this paper is to examine intentional herding among institutional investors with a particular focus on the technology sector that was the driver of the “New Economy” in the USA during the dot-com bubble of the 1990s.

Design/methodology/approach

Using data on technology stockholdings of 115 large institutional investors, the authors test the presence of herding by examining linear dependence and feedback between individual investors’ technology stockholdings and that of the aggregate market. Unlike other models to detect herding, the authors use Geweke (1982) type causality tests that allow authors to disentangle spurious herding from intentional herding via tests of bidirectional and instantaneous causality across portfolio positions in technology stocks.

Findings

After controlling information-based (spurious) herding, the tests show that 38 percent of large institutional investors tend to intentionally herd in technology stocks.

Originality/value

The findings support the existing literature that investment decisions by large institutional investors are not only driven by fundamental information, but also by cognitive bias that is characterized by intentional herding.

Details

Review of Behavioral Finance, vol. 11 no. 3
Type: Research Article
ISSN: 1940-5979

Keywords

Article
Publication date: 15 May 2020

Panos Fousekis

The relationship between returns and trading volume is central in financial economics because it has both a theoretical interest and important practical implications with regard…

Abstract

Purpose

The relationship between returns and trading volume is central in financial economics because it has both a theoretical interest and important practical implications with regard to the structure of financial markets and the level of speculation activity. The aim of this study is to provide new insights into the association between returns and trading volume by investigating their kernel (instantaneous) causality. The empirical analysis relies on time series data from 22 commodities futures markets (agricultural, energy and metals) in the USA.

Design/methodology/approach

Non-parametric (local linear) regressions are applied to daily data on returns and on trading activity; generalized correlation measures are computed and their differences are subjected to formal statistical testing.

Findings

The results suggest that raw returns are likely to kernel-cause volume and volume is likely to kernel-cause price volatility. The patterns of causal order are generally in line with what is stipulated by the relevant theory, they provide guidance for model specification and they appear to explain the empirical evidence on temporal (lag-lead) causality between the same pairs of variables obtained in earlier works.

Originality/value

The concept of kernel causality has very recently become a part of the toolkit for econometric/statistical analysis. To the best of the author’s knowledge, this is the first study that relies on the notion of kernel (instantaneous) causality to provide new evidence on a relationship that is of keen interest to investors, professional economists and policymakers.

Details

Studies in Economics and Finance, vol. 37 no. 3
Type: Research Article
ISSN: 1086-7376

Keywords

Open Access
Article
Publication date: 2 April 2020

Sheereen Fauzel

Based on a panel vector error correction model (PVECM), this study aims to investigate the impact of foreign direct investment (FDI) on tourism development in a selected group of…

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Abstract

Purpose

Based on a panel vector error correction model (PVECM), this study aims to investigate the impact of foreign direct investment (FDI) on tourism development in a selected group of 17 small island economies during 1995-2018. In the long run, a positive and direct relationship was found between foreign investment and tourists’ arrival. Moreover, economic performance and tourists’ income were also found to be key determinants of tourism development. It is further observed that there is bidirectional causality between the two variables. Hence, one can argue that FDI is a key element for tourism development. So, if the countries can attract more FDI and grow economically, these elements will contribute positively to the sector in the future.

Design/methodology/approach

This work uses rigorous dynamic time series analysis, namely, a dynamic PVECM, which takes into account dynamism and endogeneity issues in tourism modelling. Furthermore, the PVECM is also appropriately suited for integrating short- and long-run analysis.

Findings

The results confirm that FDI has been an important ingredient in the tourism development of the island economies in the long run. Interestingly, a bidirectional causality between FDI and tourism development is validated. Moreover, growth will as well be important. So, if the country can attract more FDI and grow economically, these elements will attract the tourists of the future.

Originality/value

Relatively few studies have rigorously studied the relationships between FDI and tourism development, particularly with respect to developing countries and small island states which rely heavily on tourism as well as FDI. As such existing research has neglected dynamic and reverse causality analysis in their respective FDI-tourism modelling. This study thus attempts to address the above and supplement the literature by investigating the direct and indirect relationship between FDI and tourism development for the case of small island economies over the period 1995-2018. Moreover, the implication of foreign capital inflows on tourism futures will as well be developed.

Details

Journal of Tourism Futures, vol. 7 no. 1
Type: Research Article
ISSN: 2055-5911

Keywords

Abstract

Details

The Theory of Monetary Aggregation
Type: Book
ISBN: 978-0-44450-119-6

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