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Introductory Econometrics for Finance

A complete resource for finance students, this textbook presents the most common empirical approaches in finance in a comprehensive and well-illustrated manner that shows how econometrics is used in practice, and includes detailed case studies to explain how the techniques are used in relevant financial contexts. Maintaining the accessible prose and clear examples of previous editions, the new edition of this best-selling textbook provides support for the main industry-standard software packages, expands the coverage of introductory mathematical and statistical techniques into two chapters for students without prior econometrics knowledge, and includes a new chapter on advanced methods. Learning outcomes, key concepts and end-of-chapter review questions (with full solutions online) highlight the main chapter takeaways and allow students to self-assess their understanding. Online resources include extensive teacher and student support materials, including EViews, Stata, R, and Python software guides.

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This paper provides a systematic review of the weak-form market efficiency literature that examines return predictability from past price changes, with an exclusive focus on the stock markets. Our survey shows that the bulk of the empirical studies examine whether the stock market under study is or is not weak-form efficient in the absolute sense, assuming that the level of market efficiency remains unchanged throughout the estimation period. However, the possibility of time-varying weak-form market efficiency has received increasing attention in recent years. We categorize these emerging studies based on the research framework adopted, namely non-overlapping sub-period analysis, time-varying parameter model and rolling estimation window. An encouraging development is that the documented empirical evidence of evolving stock return predictability can be rationalized within the framework of the adaptive markets hypothesis.

The evolution of stock market efficiency over time: A survey of the empirical literature

Financial crisis and stock market efficiency: Empirical evidence from Asian countries

The asymmetric response of volatility to news has been attributed to leverage effects, but the authors show that noise trading is an important contributor to asymmetric effects. Contrary to the traditional view, introducing futures trading has no detrimental impact on the underlying markets. Futures trading improves market dynamics in processing news by transferring noise trading from spot to futures markets.

The effects of stock index futures trading on stock index volatility: An analysis of the asymmetric response of volatility to news

Emerging markets efficiency has been widely investigated, with mixed results. However such evidence is only reliable if the methodology adopted accounts for the institutional features of the market. Unlike previous studies this paper corrects for thin trading and incorporates possible non-linear behaviour and regulatory changes. Using Istanbul Stock Exchange data we show that in its early years the exchange was characterised by non-linear behaviour and inefficient pricing. However, regulatory changes encouraged participation, improved information quality and led to prices impounding information more rapidly, suggesting markets become efficient with high trading volume, reliable information and an appropriate institutional framework.

Market Efficiency, Thin Trading and Non‐linear Behaviour: Evidence from an Emerging Market

Macroeconomic variables as common pervasive risk factors and the empirical content of the arbitrage pricing theory

Although there is a widespread belief that stock markets are weak-form efficient, technical analysis is a pervasive activity. The extent is examined to which this apparent paradox can be explained by conditioning the past sequence of prices on the past sequence of volume. A unique data set from an emerging market reveals that, for a number of companies in the sample, returns appear to conform to the weak-form version of the efficient markets hypothesis. However, when returns are conditioned on past levels of volume, current returns on over half of these companies exhibit predictability. This is particularly true from companies with low trading volumes.

Technical analysis, trading volume and market efficiency: evidence from an emerging market

The October I987 worldwide stock market crash has been labelled variously a panic, a debacle, a long overdue price correction and the burst of a speculative bubble to name but a few. As noted in the Presidential Task Force Report (I988) establishing the cause(s) of the crash is important given the profound effect it had on confidence (see Roll (i 988) for one explanation of the cause of the crash). Of at least equal, if not greater, importance, however, is why the initial downward pressure on prices was converted into the rather bewildering collapse that followed. This issue has received quite a substantial amount of attention in the United States (see inter alia Blume et al. (i 989), Furbush (i 989) and especially Harris (I989)). A number of these studies of the crash in the United States have focused on various aspects of the relationship between stock index futures and the underlying stock index (see especially Harris (I989)) to determine whether there was a breakdown between the two markets, although none have examined the crash in quite the same way as we do here. The issue of market breakdown was also considered quite extensively in the Presidential Task Force Report. Essentially the argument is that the two markets, that is, the underlying spot market and the derivative futures market, should effectively function as one market if futures are to serve their designated role as, amongst other things, a means for hedging stock market risk and a vehicle for price discovery. During the crash, however, the question arises as to whether the two markets functioned as one or whether the link between the two markets broke such that they effectively functioned as two separate entities. The point here is that if a cascade effect is observed, the two markets did not operate as one and futures could not effectively perform their prescribed role. The evidence in Harris (i 989) suggests that this was the case in the United States. Unfortunately there has, to our knowledge, been little systematic empirical investigation of the crash in the United Kingdom. We aim to rectify this here. Using minute by minute values of the FTSE ioo Index and minute by minute transaction prices for the December I 987 stock index futures contract, we investigate the pricing

Antonios Antoniou

Papers

The effects of stock index futures trading on stock index volatility: An analysis of the asymmetric response of volatility to news

Market Efficiency, Thin Trading and Non‐linear Behaviour: Evidence from an Emerging Market

Macroeconomic variables as common pervasive risk factors and the empirical content of the arbitrage pricing theory

Technical analysis, trading volume and market efficiency: evidence from an emerging market

Futures contribute to the october 1987 stock market crash