Efficiency, cointegration and contagion in equity markets : evidence from China, Japan and South Korea

This paper empirically examines whether three East Asian stock markets, namely, those of China, Japan and South Korea, are individually and/or jointly efficient, and whether contagion exists between the cointegrated markets. While individual market efficiency is examined through testing for the random walk hypothesis, joint market efficiency is examined through testing for cointegration and contagion. The present study finds that the hypothesis of individual market efficiency is strongly rejected for the Chinese stock market, but not for the Japanese and the South Korean stock markets. However, when testing for cointegration, market efficiency is strongly rejected for all these markets. We take a simple case of contagion and find that although there is a long-term relationship among the three markets, the contagion hypothesis cannot be rejected only between Japanese and South Korean stock markets, indicating short-run portfolio diversification benefits from these two markets.

Equity market price interactions between China and the other markets within the Chinese states equity markets

This study examines the cointegrating and long-term causal relationships of equity market prices in equity markets of Chinese states namely, Shanghai, Shenzhen, Hong Kong, Taiwan and Singapore. I cover the period between October 5, 1992 and March 20, 2006, taking into account both the Asian financial crisis and the opening-up of China’s equity markets in recent years. First, I analysis the cointegration by utilizing Johansen’s (1988) cointegration tests. I find that a long-term equilibrium relationship measured by cointegration has been established among Shanghai, Shenzhen, Hong Kong and Taiwanese markets and, to a lesser degree, between these markets and the Singapore market since 1998. Secondly, this study examines causality by exploring the bootstrapped Toda-Yamamoto non-causality tests. I find that there is strong evidence of a bi-directional causality between Shanghai and Shenzhen markets after 1998. Furthermore, I also find that there are more causal linkages between the Chinese states equity markets: two mainland Chinese markets, Hong Kong, Taiwan, and Singapore became more dependent on each other. The robustness of the above findings is confirmed by the use of a bootstrap test employed to test the validity of my results.

Intraday volatility interaction between the crude oil and equity markets

This paper investigates the price volatility interaction between the crude oil and equity markets in the US using 5-min data over the period 2009-2012. Our main findings can be summarised as follows. First, we find strong evidence to demonstrate that the integration of the bid-ask spread and trading volume factors leads to a better performance in predicting price volatility. Second, trading information, such as bid-ask spread, trading volume, and the price volatility from cross-markets, improves the price volatility predictability for both in-sample and out-of-sample analyses. Third, the trading strategy based on the predictive regression model that includes trading information from both markets provides significant utility gains to mean-variance investors.

Modelling the linkages between the Australian and G7 stock markets : common stochastic trends and regime shifts

This paper examines whether the Australian equity market is integrated with the equity markets of the G7 economies by applying both the Johansen (Statistical analysis of conintegrating vectors, Journal of Economic Dynamics and Control, 12, 231-54, 1988) and Gregory and Hansen (Residual-based tests for cointegration in models with regime shifts, Journal of Econometrics, 70, 99-126, 1996) approaches to cointegration. Some evidence of a pairwise long-run relationship between the Australian stock market and the stock markets of Canada, Italy, Japan and the United Kingdom is found, but the Australian equity market is not pairwise cointegrated with the equity markets of France, Germany or the USA.

Cointegration of stock markets between New Zealand, Australia and the G7 Economies :searching for common trends under structural change

This paper examines whether the New Zealand equity market is integrated with the equity markets of Australia and the G7 economies by applying both the Johansen (1988) and Gregory and Hansen (1996) approaches to cointegration. The Johansen (1988) test suggests that there is no long-run relationship between the New Zealand stock market and any of the other stock markets considered in the study. The Gregory and Hansen (1996) test finds that the New Zealand and United States stock market is cointegrated, but the New Zealand stock market is not cointegrated with the other stock markets in the study. This suggests that in order to avoid some of the risk through international portfolio diversification there is potential for investors to purchase shares in the New Zealand market and either the Australian market or most of the world’s leading equity markets.

Volatility linkages and spillovers in stock and bond markets : some international evidence

This study investigates the transmission of market-wide volatility between the equity markets and bond markets of Japan, Germany, the U. K., and the U. S. To measure the volatility transmission, the BEKK- a decomposition approach to the multivariate GARCH (1,1) model, is used to examine the cross-market contemporaneous effect of information arrival. Our results suggest that within the domestic cross markets, the volatility transmission is undirectional from the stock market to the bond market. Evidence from international cross-market analysis is mixed, with strong evidence on volatility spillover among these international stock markets, but weak evidence between international stock and bond markets. In addition, there are significant bi-directional volatility transmissions between stock markets in Germany and the U. K., and between Germany and the U. S. The volatility transmissions among these markets suggest that the international diversification of bonds is not prevalent.

Volatility transmissions between stock and bond markets : evidence from Japan and the U.S.

This study attempts to investigate the transmission of market-wide volatility between the equity markets and bond markets of Japan and the U.S. To measure the volatility transmission, the BEKK (Baba, Engle, Kraft and Kroner, 1990) method, a decomposition approach of the multivariate GARCH (1,1) model, is used to examine the cross-market contemporaneous effect of information arrival. The time series analysis provides evidence to the long-run phenomena of causality in conditional variances of paired assets within the local and international markets. Within various pairings, some evidence of bi-directional volatility transmissions such as informational linkages have been observed. Our empirical results suggest that within the domestic cross markets, the volatility transmission is unidirectional from the stock market to the bond market. Evidence from international cross-market analysis is mixed, with strong evidence on volatility spillover among these international stock markets, but weak evidence between international stock and bond markets. In addition, there are significant directional volatility transmissions between DJI index and FTSE100 index, and between DJI index and DAX200 index. The volatility transmission between these two markets indicates that the international diversification of bonds is not prevalent.

Equity and marketisation: emerging policies and practices in Australian education

The conjunction of equity and market logics in contemporary education has created new and different conditions of possibility for equity, both as conceived in policy discourses and as a related set of educational practices. In this editorial introduction, we examine how equity is being drawn into new policy assemblages and how, in the context of marketisation, equity is evolving and being enacted in new ways across education sectors. Different conceptions of equity are considered, including the increasingly influential human capital perspective promoted by the Organisation for Economic Cooperation and Development (OECD). We argue that, separate from critiques of neoliberalism and its deleterious effects on equity in education, it is necessary to analyse carefully the increasing rationalisation of equity agendas in economic terms, the associated effects on education governance and policy-making, as well as on the work of educational institutions and educators. Providing an overview of the contributions to this Special Issue, we direct particular attention to the multiple, complex and often contradictory effects of the current education reform agenda in Australia, which has prioritised equity objectives and intensified performance measurement, comparison and accountability as means to drive educational improvement and reduce disadvantage.

Economic linkages across commodity futures : hedging and trading implications

We investigate cross-market trading dynamics in futures contracts written on seemingly unrelated commodities that are consumed by a common industry. On the Tokyo Commodity Exchange, we find such evidence in natural rubber (NR), palladium (PA) and gasoline (GA) futures markets. The automobile industry is responsible for more than 50% of global demand for each of these commodities. VAR estimation reveals short-run cross-market interaction between NR and GA, and from NR to PA. Cross-market influence exerted by PA is felt in longer dynamics, with PA volatility (volume) affecting NR (GA) volume (volatility). Our findings are robust to lag-specification, volatility measure, and consistent with full BEKK-GARCH estimation results. Further analysis, which benchmarks against silver futures market, TOCOM index and TOPIX transportation index, confirms that our results are driven by a common industry exposure, and not a commodity market factor. A simple trading rule that incorporates short-run GA and long-run PA dynamics to predict NR return yields positive economic profit. Our study offers new insights into how commodity and equity markets relate at an industry level, and implications for multi-commodity hedging.

Common industry exposure in seemingly unrelated commodities

We propose and document robust evidence of cross-market return, volatility, and volume interactions among futures contracts written seemingly unrelated commodities exposed to a common industry. On the Tokyo Commodity Exchange, we find such evidence in natural rubber (NR), aluminum (AL) and gasoline (GA) futures markets, which are complementary commodities heavily consumed by Japan's automobile industry. Our VAR results indicate that (i) for shorter dynamics, NR and GA volatility both influence AL volatility; GA volume affects NR volatility and volume; the GA market is immune to both NR and AL trading activities; (ii) for longer dynamics, AL volume affects both NR volume and GA volatility; NR volume influences GA volume. These results are robust to lag-specifications, volatility measures and are consistent with full BEKK-GARCH estimates. Further analysis using the silver contract, TOCOM and TOPIX transportation indices, shows that a commodity market factor cannot explain our result. Our results offer insights into how commodity and equity markets relate at an industry level.