A modelling study of transient, buoyancy-driven exchange flow over a descending barrier

Results are presented from a series of model studies of the transient exchange flow resulting from the steady descent of an impermeable barrier separating initially-quiescent fresh and saline water bodies having density ρ0 and ρ0 + (Δρ)0, respectively. A set of parametric laboratory experiments has been carried out (i) to determine the characteristic features of the time-dependent exchange flow over the barrier crest and (ii) to quantify the temporal increase in the thickness and spatial extent of the brackish water reservoir formed behind the barrier by the outflowing, partly-mixed saline water. The results of the laboratory experiments have been compared with the predictions of a theoretical model adapted from the steady, so-called maximal exchange flow case and good qualitative agreement between theory and experiment has been demonstrated. The comparisons indicate that head losses of between 7% and 3% are applicable to the flow over the ridge crest in the early and late stages, respectively, of the barrier descent phase, with these losses being attributed to mixing processes associated with the counterflowing layers of fresh and saline water in the vicinity of the ridge crest. The experimental data show (and the theoretical model predictions confirm) that (i) the dimensionless time of detection tdet (g′/Hb)1/2 of the brackish water pool fed by the dense outflow increases (at a given distance from the barrier) with increasing values of the descent rate parameter g'Hb/(dhb/dt)2 and (ii) the normalised thickness δ(x,t)/Hb of the pool at a given reference station increases monotonically with increasing values of the modified time (t - tdet)/(Hb/g′) 1/2, with the rate of thickening decreasing with increasing values of the descent rate parameter g'Hb (dhb/dt)2. Here, g′ = (g/ρ0) (Δρ)0 is the modified gravitational acceleration, Hb is the mean depth of the water and dhb/dt denotes the rate of descent of the barrier height hb with elapsed time t after the two water bodies are first brought into contact. © 2004 Kluwer Academic Publishers.

Can panel data really improve the predictability of the monetary exchange rate model?

A common explanation for the inability of the monetary model to beat the random walk in forecasting future exchange rates is that conventional time series tests may have low power, and that panel data should generate more powerful tests. This paper provides an extensive evaluation of this power argument to the use of panel data in the forecasting context. In particular, by using simulations it is shown that although pooling of the individual prediction tests can lead to substantial power gains, pooling only the parameters of the forecasting equation, as has been suggested in the previous literature, does not seem to generate more powerful tests. The simulation results are illustrated through an empirical application. Copyright © 2007 John Wiley & Sons, Ltd.

No news is not good news: evidence from the intra-day return volatility–volume relationship in Shanghai Stock Exchange

Through this research, we find that the asymmetric volatility phenomenon is reversed in the Shanghai Stock Exchange during bull markets. That is, volatility increases more with good news than with bad news. This evidence is inconsistent with the US markets. Further examination of this phenomenon reveals that the positive impact of good news on volatility is driven by the return-chasing behaviour of investors during bull markets. We also find that volatility increases after stock price declines in bear markets. After controlling for liquidity shifts, we observe similar patterns in volatility in both bull and bear markets. We posit that institutional and behavioural factors are the major driving forces of observed volatility patterns in the Chinese stock market.

Corporate governance and corporate finance practices in a Kuwait Stock Exchange market listed firm: a survey to confront theory with practice

Purpose– This paper aims to explore the issue of corporate governance mechanisms by including the importance of stakeholders, primary objectives of the firm and the ownership of top financial managers of listed firms in Kuwait in the survey tool. It attempts to investigate whether theory aligns with the behaviour of financial managers in practice in an emerging market case.Design/methodology/approach– A survey was developed to focus primarily on the current corporate finance practices implemented by CFOs in listed companies in Kuwait. The target respondents are listed firms in the Kuwaiti Stock Exchange (KSE). The survey includes questions on topics that are closely related to capital budgeting, capital structure, cost of capital and dividend policy. For example, the survey asks the managers how they estimate their cost of equity (CAPM or other methods) and whether the impact of the weighted average cost of equity is taken into consideration in their capital structure choices.Findings– A surprising number of firms are now widely using IRR for decision making. CAPM is also in use, whereas WACC remains the most popular method used. There is some support for the “bird‐in‐hand” dividend theory in the tax‐free environment. Firms in Kuwait do not have any particular source of capital structure choices when it comes to how best to finance their projects as is the case in the US market. Firms in Kuwait are consciously striving for maximizing profits and those managers are regarded as their most important stakeholders. This may indicate the existence of agency problems.Research limitations/implications– The limitation of this study lies in the absence of empirical investigation on how corporate finance decisions may affect firms' performance in Kuwait. Hence, empirical validation will be performed by the authors in the next stage of this research, which will form the basis for further research. Empirical validation for the impact of corporate governance on performance is needed.Practical implications– This research may benefit managers and decision makers in many aspects, including having an understanding of applying popular and the most suitable corporate finance and corporate governance techniques in the management of their companies. In this research, the authors have identified the gap between practice and academia.Originality/value– To the best of the authors' knowledge, this is the first study to examine comprehensively major areas of financial policies and practices and corporate governance in an emerging market case, especially in the Middle East. Kuwait provides a unique institutional setting in its taxation system. Therefore, this study will make a contribution to the general literature in this field.

Interday and intraday volatility: additional evidence from the Shanghai Stock Exchange

After examining both the interday and intraday return volatility of the Shanghai Composite Stock Index, it was found that the open-to-open return variance is consistently greater than the close-to-close variance. Examining the volatility of interday returns and variance ratio tests with five-minute intervals reveals an L-shaped pattern, or more precisely, two L-shaped patterns, starting with a small hump during both the morning and the afternoon sessions, with the morning session having a much higher interday volatility than the afternoon session. This L -shaped interday volatility is supported by the similarly shaped intraday volatility pattern. This result suggests that the high volatility of intraday returns for the market open is not entirely due to the trading mechanisms (call auction in the market opening) but also due to both the accumulated overnight information and the trading halt effect. The five-minute breaks after the auction and blind auction procedures are the two major driving forces which exaggerate the high intraday volatility observed at the market open.

Is exchange rate trading profitable?

We Test whether exchange rate trading is profitable in the emerging markets of Brazil, China, India, And South Africa. Using Momentum trading strategies applied to high frequency data, we discover that: (a) momentum-based trading strategies lead to statistically significant profits from the currencies of all four emerging markets; (b) The South African Rand Is generally the most profitable, followed by the Brazilian Real And the Indian Rupee; (c) Profits are persistent during the day and are trading frequency dependent; and (d) During the period of the global financial crisis currency profits were maximised.

Panel cointegration and the monetary exchange rate model

This paper re-examines the validity of the monetary exchange rate model during the post-Bretton Woods era for 18 OECD countries. Our analysis simultaneously considers the presence of both cross-sectional dependence and multiple structural breaks, which have not received much attention in previous studies of the monetary model. The empirical results indicate that the monetary model emerges only when the presence of structural breaks and cross-country dependence has been taken into account. Evidence is also provided suggesting that the breaks in the monetary model can be derived from the underlying purchasing power parity relation. © 2008 Elsevier B.V. All rights reserved.

Asymmetric risk and return: evidence from the Australian Stock Exchange

This paper examines volatility asymmetry in a financial market using a stochastic volatility framework. We use the MCMC method for model estimations. There is evidence of volatility asymmetry in the data. Our asymmetric stochastic volatility in mean model, which nests both asymmetric stochastic volatility (ASV) and stochastic volatility in mean models (SVM), indicates ASV sufficiently captures the risk-return relationship; therefore, augmenting it with volatility in mean does not improve its performance. ASV fits the data better and yields more accurate out-of-sample forecasts than alternatives. We also demonstrate that asymmetry mainly emanates from the systematic parts of returns. As a result, it is more pronounced at the market level and the volatility feedback effect dominates the leverage effect.

Latency reduction and market quality: the case of the Australian Stock Exchange

This study investigates the role of latency in market quality in the Australia Securities Exchange following the introduction of the Integrated Trading Platform (ITS) and ASXTrade. We find that the reduction in system latency from 70. ms to 30. ms (ITS) improved liquidity. However, the lower latency has not had a long-lasting downward effect on spreads, as there was no discernible reduction in trading costs when institutional traders already had access to lower-latency co-locations. We contribute to the literature by reporting that low latency improves market liquidity, but privileged participants that have access to trading information prior to others may induce greater information asymmetry and adverse selection.

Actual intervention and verbal intervention in the Chinese RMB exchange rate

Central bank communication has become a more and more important instrument for the monetary authorization to intervene its exchange rate. This paper investigates the impact of both verbal and actual intervention on the exchange rate of China's currency, which has become the second-used currency in international trade settlement. The empirical evidence indicates that the central bank communication can influence the exchange rate, but the efficient is quite weak. Moreover, the effect of verbal intervention on the exchange rate of the RMB is weaker than that of actual intervention. One possible explanation is that most of the statements made by the governor of central bank on the RMB exchange rate are neutral in China. Overall, this study identifies the difference between the actual and verbal intervention in exchange rate in China, the largest emerging economy in the world.

Evaluation of a knowledge translation and exchange platform to advance non-communicable disease prevention

Coordinated systems are required to ensure evidence-informed practice and evaluation of community-based interventions (CBIs). Knowledge translation and exchange (KTE) strategies show promise, but these require evaluation. This paper describes implementation and evaluation of COOPS, a national KTE platform to support best practice in obesity prevention CBIs. A logic model guides KTE activities including knowledge brokering, networking, tailored communications, training, and needs assessments. A mixed-methods evaluation includes communications data, knowledge brokering database, annual survey of CBIs, pre- and post-event questionnaires, interviews, social network analysis, and case studies. This evaluation will contribute to understanding the process of implementing a KTE platform with CBIs and its reach, quality and effectiveness.

Are price limits on futures markets that cool? evidence from the brazilian merchantile & futures exchange

This paper investigates the impact of price limits on the Brazil- ian future markets using high frequency data. The aim is to identify whether there is a cool-off or a magnet effect. For that purpose, we examine a tick-by-tick data set that includes all contracts on the São Paulo stock index futures traded on the Brazilian Mercantile and Futures Exchange from January 1997 to December 1999. Our main finding is that price limits drive back prices as they approach the lower limit. There is a strong cool-off effect of the lower limit on the conditional mean, whereas the upper limit seems to entail a weak magnet effect on the conditional variance. We then build a trading strategy that accounts for the cool-off effect so as to demonstrate that the latter has not only statistical, but also economic signifi- cance. The resulting Sharpe ratio indeed is way superior to the buy-and-hold benchmarks we consider.

The trasition from fixed to floating exchange rate regimes: the case of Brazil

This dissertation evaluates macroeconomic management in Brazil from 1994 to the present, with particular focus on exchange rate policy. It points out that while Brazil's Real Plan succeeded in halting the hyperinflation that had reached more than 2000 percent in 1993, it also caused significant real appreciation of the exchange rate situation that was only made worse by the extremely high interest rates and ensuing bout of severe financial crises in the intemational arena. By the end of 1998, the accumulation of internai and externai imbalances led the authorities to drop foreign exchange controls and allow the currency to float. In spite of some initial scepticism, the flexible rate regime cum inflation target proved to work well. Inflation was kept under control; the current account position improved significantly, real interest rates fell and GDP growth resumed. Thus, while great challenges still lie ahead, the recent successes bestow some optimism on the well functioning of this exchange rate regime. The Brazilian case suggests that successful transition from one foreign exchange system to another, particularly during financial crisis, does not depend only on one variable be it fiscal or monetary. In reality, it depends on whole set of co-ordinated policies aimed at resuming price stability with as little exchange rate and output volatility as possible.

Debt composition and exchange rate balance sheet effects in Brazil: A firm level analysis

In this paper we study the interaction between macroeconomic environment and firms’ balance sheet effects in Brazil during the 1990’s. We start by assessing the influence of macroeconomic conditions on firms’ debt composition in Brazil. We found that larger firms tend to change debt currency composition more in response to a change in the exchange rate risk than small firms. We then proceed to investigate if and how exchange rate balance sheet effects affected the firms’ investment decisions. We test directly the exchange rate balance sheet effect on investment. Contrary to earlier findings (Bleakley and Cowan, 2002), we found that firms more indebted in foreign currency tend to invest less when there is an exchange rate devaluation. We tried different controls for the competitiveness effect. First, we control directly for the effect of the exchange rate on exports and imported inputs. We then pursue an alternative investigation strategy, inspired by the credit channel literature. According to this perspective, Tobin’s q can provide an adequate control for the competitiveness effect on investment. Our results provide supporting evidence for imperfect capital markets, and for a negative exchange rate balance sheet effect in Brazil. The results concerning the exchange rate balance sheet effect on investment are statistically significant and robust across the different specifications. We tested the results across different periods, classified according to the macroeconomic environment. Our findings suggest that the negative exchange rate balance sheet effect we found in the whole sample is due to the floating exchange rate period. We also found that exchange rate devaluations have important negative impact on both cash flows and sales of indebted firms. Furthermore, the impact of exchange rate variations is asymmetric, and the significant effect detected when no asymmetry is imposed is engendered by exchange rate devaluations.

Unbounded exchange economies with satiation: how far can we go?

We unify and generalize the existence results in Werner (1987), Dana, Le Van and Magnien (1999), Allouch, Le Van and Page (2006) and Allouch and Le Van (2008). We also show that, in terms of weakening the set of assumptions, we cannot go too far.