Model specification and forecasting foreign exchange rates with vector autoregressions

This study examines the forecasting accuracy of alternative vector autoregressive models each in a seven-variable system that comprises in turn of daily, weekly and monthly foreign exchange (FX) spot rates. The vector autoregressions (VARs) are in non-stationary, stationary and error-correction forms and are estimated using OLS. The imposition of Bayesian priors in the OLS estimations also allowed us to obtain another set of results. We find that there is some tendency for the Bayesian estimation method to generate superior forecast measures relatively to the OLS method. This result holds whether or not the data sets contain outliers. Also, the best forecasts under the non-stationary specification outperformed those of the stationary and error-correction specifications, particularly at long forecast horizons, while the best forecasts under the stationary and error-correction specifications are generally similar. The findings for the OLS forecasts are consistent with recent simulation results. The predictive ability of the VARs is very weak.

Forecasting exchange rates with linear and nonlinear models

In this paper, the exchange rate forecasting performance of neural network models are evaluated against the random walk, autoregressive moving average and generalised autoregressive conditional heteroskedasticity models. There are no guidelines available that can be used to choose the parameters of neural network models and therefore, the parameters are chosen according to what the researcher considers to be the best. Such an approach, however,implies that the risk of making bad decisions is extremely high, which could explain why in many studies, neural network models do not consistently perform better than their time series counterparts. In this paper, through extensive experimentation, the level of subjectivity in building neural network models is considerably reduced and therefore giving them a better chance of Forecasting exchange rates with linear and nonlinear models 415 performing well. The results show that in general, neural network models perform better than the traditionally used time series models in forecasting exchange rates.

Monetary models of exchange rates and sweep programs

Numerous studies find that monetary models of exchange rates cannot beat a random walk model. Such a finding, however, is not surprising given that such models are built upon money demand functions and traditional money demand functions appear to have broken down in many developed countries. In this article, we investigate whether using a more stable underlying money demand function results in improvements in forecasts of monetary models of exchange rates. More specifically, we use a sweep-adjusted measure of US monetary aggregate M1 which has been shown to have a more stable money demand function than the official M1 measure. The results suggest that the monetary models of exchange rates contain information about future movements of exchange rates, but the success of such models depends on the stability of money demand functions and the specifications of the models.

Forecasting exchange rates with linear and nonlinear models

In this paper the exchange rate forecasting performance of neural network models are evaluated against random walk and a range of time series models. There are no guidelines available that can be used to choose the parameters of neural network models and therefore the parameters are chosen according to what the researcher considers to be the best. Such an approach, however, implies that the risk of making bad decisions is extremely high which could explain why in many studies neural network models do not consistently perform better than their time series counterparts. In this paper through extensive experimentation the level of subjectivity in building neural network models is considerably reduced and therefore giving them a better chance of performing well. Our results show that in general neural network models perform better than traditionally used time series models in forecasting exchange rates.

Monetary models of exchange rates and sweep programs

Numerous studies find that monetary models of exchange rates cannot beat a random walk model. Such a finding, however, is not surprising given that such models are built upon money demand functions and traditional money demand functions appear to have broken down in many developed countries. In this paper we investigate whether using a more stable underlying money demand function results in improvements in forecasts of monetary models of exchange rates. More specifically, we use a sweepadjusted measure of US monetary aggregate M1 which has been shown to have a more stable money demand function than the official M1 measure. The results suggest that the monetary models of exchange rates contain information about future movements of exchange rates but the success of such models depends on the stability of money demand functions and the specifications of the models.

Volatility changes in drachma exchange rates

In January 2001 Greece joined the eurozone. The aim of this article is to examine whether an intention to join the eurozone had any impact on exchange rate volatility. We apply the Iterated Cumulative Sum of Squares (ICSS) algorithm of Inclan and Tiao (1994) to a set of Greek drachma exchange rate changes. We find evidence to suggest that the unconditional volatility of the drachma exchange rate against the dollar, British pound, yen, German mark and ECU/Euro was nonstationary, exhibiting a large number of volatility changes prior to European Monetary Union (EMU) membership. We then use a news archive service to identify the events that might have caused exchange rate volatility to shift. We find that devaluation of the drachma increased exchange rate volatility but ERM membership and a commitment to joining the eurozone led to lower volatility. Our findings therefore suggest that a strong commitment to join the eurozone may be sufficient to reduce some exchange rate volatility which has implications for countries intending to join the eurozone in the future.

Access to medical information and the role of english language in an Algerian selected community : media and modes of exchange among the paediatricians

DUE TO COPYRIGHT RESTRICTIONS ONLY AVAILABLE FOR CONSULTATION AT ASTON UNIVERSITY LIBRARY AND INFORMATION SERVICES WITH PRIOR ARRANGEMENT

Time scale analysis for fluidized bed melt granulation I: granule-granule and granule-droplet collision rates

Fluidized bed spray granulators (FBMG) are widely used in the process industry for particle size growth; a desirable feature in many products, such as granulated food and medical tablets. In this paper, the first in a series of four discussing the rate of various microscopic events occurring in FBMG, theoretical analysis coupled with CFD simulations have been used to predict granule–granule and droplet–granule collision time scales. The granule–granule collision time scale was derived from principles of kinetic theory of granular flow (KTGF). For the droplet–granule collisions, two limiting models were derived; one is for the case of fast droplet velocity, where the granule velocity is considerable lower than that of the droplet (ballistic model) and another for the case where the droplet is traveling with a velocity similar to the velocity of the granules. The hydrodynamic parameters used in the solution of the above models were obtained from the CFD predictions for a typical spray fluidized bed system. The granule–granule collision rate within an identified spray zone was found to fall approximately within the range of 10-2–10-3 s, while the droplet–granule collision was found to be much faster, however, slowing rapidly (exponentially) when moving away from the spray nozzle tip. Such information, together with the time scale analysis of droplet solidification and spreading, discussed in part II and III of this study, are useful for probability analysis of the various event occurring during a granulation process, which then lead to be better qualitative and, in part IV, quantitative prediction of the aggregation rate.

Real and imaginary parts of the vibrational relaxation of acetonitrile in its electrolyte solutions:new results for the dynamics of solvent molecules

Isotropic scattering Raman spectra of liquid acetonitrile (AN) solutions of LiBF4 and NaI at various temperatures and concentrations have been investigated. For the first time imaginary as well as real parts of the solvent vibrational correlation functions have been extracted from the spectra. Such imaginary parts are currently an important component of modern theories of vibrational relaxation in liquids. This investigation thus provides the first experimental data on imaginary parts of a correlation function in AN solutions. Using the fitting algorithm we recently developed, statistically confident models for the Raman spectra were deduced. The parameters of the band shapes, with an additional correction, of the ν2 AN vibration (CN stretching), together with their confidence intervals are also reported for the first time. It is shown that three distinct species, with lifetimes greater than ∼10−13 s, of the AN molecules can be detected in solutions containing Li+ and Na+. These species are attributed to AN molecules directly solvating cations; the single oriented and polarised molecules interleaving the cation and anion of a Solvent Shared Ion Pair (SShIP); and molecules solvating anions. These last are considered to be equivalent to the next layer of solvent molecules, because the CN end of the molecule is distant from the anion and thus less affected by the ionic charge compared with the anion situation. Calculations showed that at the concentrations employed, 1 and 0.3 M, there were essentially no other solvent molecules remaining that could be considered as bulk solvent. Calculations also showed that the internuclear distance in these solutions supported the proposal that the ionic entity dominating in solution was the SShIP, and other evidence was adduced that confirmed the absence of Contact Ion Pairs at these concentrations. The parameters of the shape of the vibrational correlation functions of all three species are reported. The parameters of intramolecular anharmonic coupling between the potential surfaces in AN and the dynamics of the intermolecular environment fluctuations and intermolecular energy transfer are presented. These results will assist investigations made at higher and lower concentrations, when additional species and interactions with AN molecules will be present.

Practical and cost-effective high-fidelity optical carrier dissemination using coherent communication techniques

We report a unidirectional frequency dissemination scheme for high-fidelity optical carriers deployable over telecommunication networks. For the first time, a 10 Gb/s Binary Phase Shift Keying (BPSK) signal from an ultra-narrow linewidth laser was transmitted through a field-installed optical fibre with round-trip length of 124 km between Cork City and town of Clonakilty, without inline optical amplification. At the receiver, using coherent communication techniques and optical injection-locking the carrier was recovered with noise suppression. The beat signal between the original carrier at the transmitter and recovered carrier at the receiver shows a linewidth of 2.8 kHz. Long term stability measurements revealed fractional instabilities (True Allan deviation) of 3.3 × 10-14 for 1 s averaging time, prior to phase noise cancellation.

Exchange rate economic exposure and hedging:the significance of currency options

This thesis focuses on the theoretical examination of the exchange rate economic (operating) exposure within the context of the theory of the firm, and proposes some hedging solutions using currency options. The examination of economic exposure is based on such parameters as firms' objectives, industry structure and production cost efficiency. In particular, it examines an hypothetical exporting firm with costs in domestic currency, which faces competition from foreign firms in overseas markets and has a market share expansion objective. Within this framework, the hypothesis is established that economic exposure, portrayed in a diagram connecting export prices and real exchange rates, is asymmetric (i.e. the negative effects depreciation are higher than the positive effects of a currency depreciation). In this case, export business can be seen as a real option, given by exporting firms to overseas customer. Different scenarios about the asymmetry hypothesis can be derived for different assumptions about the determinants of economic exposure. Having established the asymmetry hypothesis, the hedging against this exposure is analysed. The hypothesis is established, that a currency call option should be used in hedging against asymmetric economic exposure. Further, some advanced currency options stategies are discussed, and their use in hedging several scenarios of exposure is indicated, establishing the hypothesis that, the optimal options strategy is a function of the determinants of exposure. Some extensions on the theoretical analysis are examined. These include the hedging of multicurrency exposure using options, and the exposure of a purely domestic firm facing import competition. The empirical work addresses two issues: the empirical validity of the asymmetry hypothesis and the examination of the hedging effectiveness of currency options.

Exchange rate exposure : do size and foreign operations matter?

Purpose – The purpose of this paper is to examine the effect of firm size and foreign operations on the exchange rate exposure of UK non-financial companies from January 1981 to December 2001. Design/methodology/approach – The impact of the unexpected changes in exchange rates on firms’ stock returns is examined. In addition, the movements in bilateral, equally weighted (EQW) and trade-weighted and exchange rate indices are considered. The sample is classified according to firm size and the extent of firms’ foreign operations. In addition, structural changes on the relationship between exchange rate changes and individual firms’ stock returns are examined over three sub-periods: before joining the exchange rate mechanism (pre-ERM), during joining the ERM (in-ERM), and after departure from the ERM (post-ERM). Findings – The findings indicate that a higher percentage of UK firms are exposed to contemporaneous exchange rate changes than those reported in previous studies. UK firms’ stock returns are more affected by changes in the EQW, and US$ European currency unit exchange rate, and respond less significantly to the basket of 20 countries’ currencies relative to the UK pound exchange rate. It is found that exchange rate exposure has a more significant impact on stock returns of the large firms compared with the small and medium-sized companies. The evidence is consistent across all specifications using different exchange rate. The results provide evidence that the proportion of significant foreign exchange rate exposure is higher for firms which generate a higher percentage of revenues from abroad. The sensitivities of firms’ stock returns to exchange rate fluctuations are most evident in the pre-ERM and post-ERM periods. Practical implications – This study provides important implications for public policymakers, financial managers and investors on how common stock returns of various sectors react to exchange rate fluctuations. Originality/value – The empirical evidence supports the view that UK firms’ stock returns are affected by foreign exchange rate exposure.