The channels of monetary policy triggered by central bank actions and statements in the Australian equity market

Owing to the discrete disclosure practices of the Reserve Bank of Australia, this paper provides new evidence on the channels of monetary policy triggered by central bank actions (monetary policy announcements) and statements (explanatory minutes releases), in the Australian equity market. Both monetary policy announcements and explanatory minutes releases are shown to have a significant and comparable impact on the returns and volatility of the Australian equity market. Further, distinct from US and European studies that find strong evidence of the interest rate, bank loan and balance sheet channels and no evidence of the exchange rate channel following central bank actions, this paper finds that monetary policy impacts the Australian equity market via the exchange rate, interest rate and bank loan channels of monetary policy, with only weak evidence of the balance sheet channel of monetary policy. These channels are found to be operating irrespective of the trigger (monetary policy announcements or explanatory minutes releases), though results are somewhat weaker when examining the explanatory minutes releases. These results have important implications for central bank officials and financial market participants alike: by confirming a comparable avenue to affect monetary policy; and providing an explication of its impact on the Australian equity market.

What lies beneath? : The pattern and abundance of the subterranean tuber bank of the invasive liana cat’s claw creeper, Macfadyena unguis-cati (Bignoniaceae)

Cat’s claw creeper, Macfadyena unguis-cati (L.) Gentry (Bignoniaceae) is a major environmental weed of riparian areas, rainforest communities and remnant natural vegetation in coastal Queensland and New South Wales, Australia. In densely infested areas, it smothers standing vegetation, including large trees, and causes canopy collapse. Quantitative data on the ecology of this invasive vine are generally lacking. The present study examines the underground tuber traits of M. unguis-cati and explores their links with aboveground parameters at five infested sites spanning both riparian and inland vegetation. Tubers were abundant in terms of density (~1000 per m2), although small in size and low in level of interconnectivity. M. unguis-cati also exhibits multiple stems per plant. Of all traits screened, the link between stand (stem density) and tuber density was the most significant and yielded a promising bivariate relationship for the purposes of estimation, prediction and management of what lies beneath the soil surface of a given M. unguis-cati infestation site. The study also suggests that new recruitment is primarily from seeds, not from vegetative propagation as previously thought. The results highlight the need for future biological-control efforts to focus on introducing specialist seed- and pod-feeding insects to reduce seed-output.

A comparison of farmland returns in Australia, Canada, New Zealand and United States

Rural land is still a major property asset class and rural commodity production is an important domestic and export market in all economies. This paper carries out a comprehensive analysis of both rural production and land prices in four major rural production countries. The study compares rural property values in Unites States, Canada, Australia and New Zealand over a period 1990 to 2005 and analyzes and compares the capital return and total return performance for rural land in these four countries. The analysis allows a comparison of farm land returns for both a subsidised and non-subsidised farming policy to determine if levels of farm support result in variations in farm profitability and therefore farm land values.

CSI Lincoln : an investigation into a declining housing market

The residential property market in New Zealand has been experiencing a boom and bubble period from 2001 through to mid 2007. Following a number of increases in the Official Cash Rate by the Reserve Bank and a decline in net migration numbers the housing market was perceived to be over inflated and due for a major correction. Numerous media, Government Departments, property experts and economists have been predicting significant reductions in the median price of residential property throughout New Zealand. This paper will analyse house prices in specific socio-economic locations within Christchurch over the past 12 months to determine how significant the current housing decline is. This study will review the change in residential property prices, variations in property listings since April 2008, sale volumes and days on the market across a range of housing sectors to determine the extent and range of any residential property downturn in the NZ recession.

The impact of property title type on residential property returns

Residential property in New Zealand comprises both freestanding residential properties and medium to high density residential properties. Medium to high density residential property comprises the typical units, townhouses and semi-detached houses common in most residential property markets. However, in many of the larger cities of New Zealand the free standing residential property market has evolved into two separate markets being freehold residential property and cross lease residential property. Cross leases have developed as a form of infill housing to reduce the urban sprawl in major canters, while reducing the time and cost for residential property developers. A cross lease is created when an existing freestanding residential property subdivides a portion of the existing land for the erection of another house on the original title, basically dividing one larger residential section into two smaller residential blocks. This paper will analyse house prices in Christchurch over the period 1992 to 2006 to determine if the various housing markets have shown similar capital returns or if there is a specific preference for a particular residential property title.

The Influence of Farm Management on NSW Rural Property Income and Total Average Annual Returns

The importance of agriculture in many countries has tended to reduce as their economies move from a resource base to a manufacturing industry base. Although the level of agricultural production in first world countries has increased over the past two decades, this increase has generally been at a less significant rate compared to other sectors of the economies. Despite this increase in secondary and high technology industries, developed countries have continued to encourage and support their agricultural industries. This support has been through both tariffs and price support. Following pressure from developing economies, particularly through the World Trade Organisation (WTO), GATT Uruguay round and the Cairns Group developed countries are now in various stages of winding back or de-coupling agricultural support within their economies. A major concern of farmers in protected agricultural markets is the impact of a free market trade in agricultural commodities on farm incomes, profitability and land values. This paper will analyse both the capital and income performance of the NSW rural land market over the period 1990-1999. This analysis will be based on several rural land use classifications and will compare the total return from rural properties based on the farm income generated by both the average farmer and those farmers considered to be in the top 20% of the various land use areas. The analysis will provide a comprehensive overview of rural production in a free trade economy.

Why common factors in international bond returns are not so common

This paper analyzes the common factor structure of US, German, and Japanese Government bond returns. Unlike previous studies, we formally take into account the presence of country-specific factors when estimating common factors. We show that the classical approach of running a principal component analysis on a multi-country dataset of bond returns captures both local and common influences and therefore tends to pick too many factors. We conclude that US bond returns share only one common factor with German and Japanese bond returns. This single common factor is associated most notably with changes in the level of domestic term structures. We show that accounting for country-specific factors improves the performance of domestic and international hedging strategies.

Residential property market performance in a declining market : Christchurch case study

The residential property market in New Zealand has been experiencing a boom and bubble period from 2001 through to mid 2007. Following a number of increases in the Official Cash Rate by the Reserve Bank and a decline in net migration numbers the housing market was perceived to be over-inflated and due for major correction.

Forecasting time-varying value-at-risk

In this thesis we are interested in financial risk and the instrument we want to use is Value-at-Risk (VaR). VaR is the maximum loss over a given period of time at a given confidence level. Many definitions of VaR exist and some will be introduced throughout this thesis. There two main ways to measure risk and VaR: through volatility and through percentiles. Large volatility in financial returns implies greater probability of large losses, but also larger probability of large profits. Percentiles describe tail behaviour. The estimation of VaR is a complex task. It is important to know the main characteristics of financial data to choose the best model. The existing literature is very wide, maybe controversial, but helpful in drawing a picture of the problem. It is commonly recognised that financial data are characterised by heavy tails, time-varying volatility, asymmetric response to bad and good news, and skewness. Ignoring any of these features can lead to underestimating VaR with a possible ultimate consequence being the default of the protagonist (firm, bank or investor). In recent years, skewness has attracted special attention. An open problem is the detection and modelling of time-varying skewness. Is skewness constant or there is some significant variability which in turn can affect the estimation of VaR? This thesis aims to answer this question and to open the way to a new approach to model simultaneously time-varying volatility (conditional variance) and skewness. The new tools are modifications of the Generalised Lambda Distributions (GLDs). They are four-parameter distributions, which allow the first four moments to be modelled nearly independently: in particular we are interested in what we will call para-moments, i.e., mean, variance, skewness and kurtosis. The GLDs will be used in two different ways. Firstly, semi-parametrically, we consider a moving window to estimate the parameters and calculate the percentiles of the GLDs. Secondly, parametrically, we attempt to extend the GLDs to include time-varying dependence in the parameters. We used the local linear regression to estimate semi-parametrically conditional mean and conditional variance. The method is not efficient enough to capture all the dependence structure in the three indices —ASX 200, S&P 500 and FT 30—, however it provides an idea of the DGP underlying the process and helps choosing a good technique to model the data. We find that GLDs suggest that moments up to the fourth order do not always exist, there existence appears to vary over time. This is a very important finding, considering that past papers (see for example Bali et al., 2008; Hashmi and Tay, 2007; Lanne and Pentti, 2007) modelled time-varying skewness, implicitly assuming the existence of the third moment. However, the GLDs suggest that mean, variance, skewness and in general the conditional distribution vary over time, as already suggested by the existing literature. The GLDs give good results in estimating VaR on three real indices, ASX 200, S&P 500 and FT 30, with results very similar to the results provided by historical simulation.

Housing supply in Australia : the impact of the availability of development finance

Before the Global Financial Crisis many providers of finance had growth mandates and actively pursued development finance deals as a way of gaining higher returns on funds with regular capital turnover and re-investment possible. This was able to be achieved through high gearing and low presales in a strong market. As asset prices fell, loan covenants breached and memories of the 1990’s returned, banks rapidly adjusted their risk appetite via retraction of gearing and expansion of presale requirements. Early signs of loosening in bank credit policy are emerging, however parties seeking development finance are faced with a severely reduced number of institutions from which to source funding. The few institutions that are lending are filtering out only the best credit risks by way of constrictive credit conditions including: low loan to value ratios, the corresponding requirement to contribute high levels of equity, lack of support in non-prime locations and the requirement for only borrowers with well established track records. In this risk averse and capital constrained environment, the ability of developers to proceed with real estate developments is still being constrained by their inability to obtain project finance. This paper will examine the pre and post GFC development finance environment. It will identify the key lending criteria relevant to real estate development finance and will detail the related changes to credit policies over this period. The associated impact to real estate development projects will be presented, highlighting the significant constraint to supply that the inability to obtain finance poses.