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This study uses a two‐step GARCH‐M procedure to observe mean‐return and volatility transmissions between Latin American markets and to Latin America from external markets during the period 1993–2000. The results indicate that mean‐return transmissions are common both within region and from external markets. The volatility transmission results are consistent with contagion theory and indicate that traders use both domestic news events as well as information contained by volatility in other markets in their information set.

This paper investigates the possibility that futures markets attract noise traders who engage in positive feedback trading, an especially destabilizing form of noise trading. The hypothesis is tested using data from four major national index futures markets. The empirical evidence is consistent across all index futures markets under examination. Specifically, there is significant evidence of positive feedback trading. More importantly, the feedback trading pattern exhibits significant long memory in the sense that it depends on longer lags of past prices. Because volatility is asymmetric, the implication is that feedback trading is also asymmetric, being more prevalent during down markets so that mispricing is more likely during those periods that feedback traders are more active.

This paper seeks to test the hypothesis that stock returns in the Athens Stock Exchange (ASE) adjust asymmetrically to past information due to differential adjustment costs.

The methodological approach is based on the asymmetric price adjustment model suggested by Koutmos. The model is estimated using daily sector stock return data for the ASE over the period 2 January 1992‐1 March 1999.

The empirical evidence suggests that prices respond asymmetrically to past information. Specifically, positive past returns are more persistent than negative past returns of an equal magnitude. This behavior is consistent with an asymmetric partial adjustment price model where news suggesting overpricing (negative returns) are incorporated faster into current market prices than news suggesting underpricing (positive returns).

This paper does not investigate the possibility that the asymmetric price adjustment is related to conditional heteroscedasticity in stock return. Further research in this area should prove very useful.

The findings in this paper have important theoretical and practical implications. On the theoretical level the findings suggest that violations of the efficient markets hypothesis could be due to market frictions and costly adjustments. On the practical level, the asymmetric adjustment process could improve trading profits, especially those based on momentum strategies.

This paper presents new findings on the stock price dynamics of the ASE. These findings should be of interest to researchers, regulators and market participants.

The literature on positive feedback trading has grown considerably in recent years. The purpose of this paper is to provide a review of the theoretical and empirical literature on positive feedback trading and especially the literature related to the Sentana and Wadhwani (1992) model.

This literature review covers theoretical and empirical work in this area and it points out shortcomings and potential extensions of the basic feedback model.

The evidence so far points in the direction of positive feedback trading being present in aggregate stock market indices, index futures, bond markets, foreign exchange markets and individual stocks. There are some important issues that require further investigation. For example, it is likely that feedback trading is a function of longer lags of past return. Likewise, asymmetric behavior during up and down markets appears to be the rule rather than the exception. More importantly, the models should allow for positive as well as negative feedback and be general enough to investigate feedback trading behavior in individual assets and not just the aggregate market.

The discussion points out theoretical and empirical limitations and shortcomings of the extant literature.

This is the first paper to review positive feedback trading, implications, limitations and need for future research.

This paper investigates the behavior of exchange rate volatility during appreciations and depreciations. Six US dollar exchange rates are investigated. In all instances the response of volatility to exchange rate changes is asymmetric. For dollar exchange rates with respect to EMS currencies, volatility is higher during dollar depreciations, whereas, for non‐EMS dollar exchange rates, volatility is higher during dollar appreciations. In addition, there is evidence that exchange rate changes are related to volatility.

Compares stock market returns behaviour for six stock markets in order to find out whether nonlinearities are a result of conditional heteroscedasticity or of previous performance. Uses LeBaron’s exponential generalized autoregressive conditional heteroscedasticity model to link conditional variance with first order correlation. Applies it to daily stock market indexes from 1986 to 1991 in Canada, France, Germany, Italy, Japan and the United Kingdom. Finds that the links exist in all the markets, with high autocorrelation during stable periods, and none under high volatility, for daily but not weekly returns. Concludes that nonsynchronous trading leads to an inverse relationship between volatility and autocorrelation.

This paper aims to propose a general, yet simple model to estimate interest rate volatility.

The methodology is based on an extended Exponential Generalized ARCH (EGARCH) model that incorporates both interest rate levels as well as past information shocks in the volatility function. More importantly, the model is log‐linear thus eliminating collinearity problems and it can be easily estimated using standard maximum likelihood techniques.

The empirical evidence suggests that the elasticity of volatility to the level of interest rates, although statistically significant, is not as high numerically as previously thought. In fact innovations in the interest rate process are more significant than the level of interest rates. The most important feature of interest rates, however, is the high volatility persistence.

A limitation of the model is that it does not allow for structural shifts in its current form. Extending the model to accommodate possible shifts would probably improve the performance as well the forecasting accuracy.

The findings in this paper have important implications for the accurate pricing of fixed income derivative securities as well as the efficient risk management of fixed income portfolios.

The paper provides a convenient and unifying methodological framework for assessing the importance and forecasting ability of the various volatility components.

Several authors have raised the issue of non‐stationarity of security returns in empirical tests of the Arbitrage Pricing Theory (APT). This paper tests for one form of non‐stationarity, namely, conditional heteroskedasticity, in the empirical APT with observed factors. Using monthly stock returns for the period 1970 to 1988, this paper shows that conditional heteroskedasticity is a pervasive phenomenon leading to inefficient estimates of factor betas. Ignoring the problem may produce erroneous conclusions as to which risk factors require a premium. Furthermore, grouping individual securities into portfolios does not appear to diminish the presence of conditional heteroskedasticity.

The purpose of this paper is to econometrically investigate the level of financial co-integration of the least developed countries (LDCs) of Asia and Pacific region. In addition, the paper also tested the co-integration of LDCs with the world’s second largest economy “China.” For this, the paper employed the foreign exchange data sets of respective LDCs. It also aimed to assess the dynamic conditional correlation (DCC) between the foreign exchange rates of LDCs and China, and further, examined the past and current level of their co-relational dependence.

The authors created data sets namely LDCs of Asia and Pacific, LDCs of SAARC, LDCs of ASEAN, LDCs of Pacific, LDCs of SAARC and ASEAN, LDCs of ASEAN and Pacific, and LDCs of SAARC and Pacific. In addition, the authors tested the co-integration of these seven groups with China, and thus, making a total of 14 data sets. The analysis was carried out using the Johansen and Gregory-Hansen multivariate co-integration econometric techniques. To assess the DCC, multivariate DCC GARCH model was employed.

It was found that at the intra-regional level, exchange rates of LDCs of SAARC, ASEAN and Pacific were co-integrated and showed the existence of 1-3 co-integrating equations. At inter-regional level SAARC-ASEAN, ASEAN-Pacific and SAARC-Pacific were also co-integrated and showed 1-3 co-integrated equations. However, on the inclusion of China in the study, the degree of co-integration of exchange rate of China with LDCs of SAARC and ASEAN increased, while with Pacific, the result was mixed. Conditional correlation estimated of multivariate DCC GARCH model suggested that except for Afghanistan, there was an upward shift in the correlation dynamics of exchange rates of LDCs with China, post global financial crisis.

Asia and Pacific region constituted of 53 countries, of which 13 were LDCs. Enhanced financial integration among LDCs of Asia-Pacific region and also between LDCs and major economies of the region like China will strengthen economic and financial integration efforts in the region.

The present paper attempted a comparative assessment of the co-movements of the foreign exchange markets of LDCs, the countries which have remained largely neglected in academic discourses on financial integration.