Showing papers in "Applied Economics Letters in 2004"
TL;DR: In this article, the authors investigated the international transmission mechanism of stock market movements via wavelet analysis and found strong evidence for price and volatility spillover effects from the developed stock market to the emerging market, but not vice versa.
Abstract: This study investigates the international transmission mechanism of stock market movements via wavelet analysis. While GARCH-type models have mainly been used in most recent research in this area, the discrete wavelet decomposition is used in this study to propose a new methodology for investigating the dynamics and the potential interaction in international stock markets. Using the data on daily stock indices from the USA and Korea, strong evidence is found for price as well as volatility spillover effects from the developed stock market to the emerging market, but not vice versa.
134 citations
TL;DR: In this paper, a telephone presurvey is used in conjunction with mail and Internet follow-up surveys to assess self-selection and item nonresponse bias, and the results suggest that selfselection is present, but item non-response bias is limited.
Abstract: A telephone presurvey is used in conjunction with mail and Internet follow-up surveys to assess self-selection and item nonresponse bias. Findings suggest that self-selection is present, but item nonresponse bias is limited. The Internet version exhibited no item nonresponse bias.
127 citations
TL;DR: This article used variance ratio tests, robust to heteroskedasticity and employing a recently developed bootstrap technique to customize percentiles for inference purposes, found that Class A shares for Chinese stock exchanges and the Hong Kong equity markets are weak form efficient.
Abstract: This study tests the random walk hypothesis for China, Hong Kong and Singapore. Using variance ratio tests, robust to heteroskedasticity and employing a recently developed bootstrap technique to customize percentiles for inference purposes it is found that Class A shares for Chinese stock exchanges and the Hong Kong equity markets are weak form efficient. However, Singapore and Class B shares for Chinese stock exchanges do not follow the random walk hypothesis, which suggests that liquidity and market capitalization may play a role in explaining results of weak form efficiency tests.
120 citations
TL;DR: In this paper, the authors used the hedonic price method to determine the main explanatory factors of price differences in Bordeaux wine prices for the 1996 and 1999 vintages.
Abstract: The aim of this article is to explain Bordeaux wine prices for the 1996–1999 vintages. The hedonic price method is applied to determine the main explanatory factors of price differences. It shows that reputation remains an important determinant of the price. However sensory characteristics have greater explanatory power compared to previous studies. Increasing competition and reductions in information asymmetries on the wine market are two important factors explaining this result.
107 citations
TL;DR: In this article, the authors examined the day-of-the-week effect in the world's largest developed equity markets over the last 22 years and found that during the 1980s, this anomaly was clearly evident in the vast majority of developed markets, but it appears to have faded away in the 1990s.
Abstract: The well-documented day-of-the-week effect has shown that stock returns on some days of the week are often significantly higher than on other days. To investigate whether improvements in market efficiency may have caused this anomaly to disappear over time, this study examines the day-of-the-week effect in the world's largest developed equity markets over the last 22 years. The results indicate that, during the 1980s, this anomaly was clearly evident in the vast majority of developed markets, but it appears to have faded away in the 1990s. The implications of these findings are that long-run improvements in market efficiency may have diminished the effects of certain anomalies in recent periods.
106 citations
TL;DR: In this paper, a common methodology based on social time preference is employed and the information required is taken from the same OECD database, and the main policy implications of applying consistently measured discount rates in the context of social project appraisal are discussed.
Abstract: Social discount rates are estimated for six major economies: Australia, France, Germany, Japan, the UK and the USA. A common methodology based on social time preference is employed and the information required is taken from the same OECD database. The main policy implications of applying consistently measured discount rates in the context of social project appraisal are then discussed. This is an important matter because, up to now, these countries have set their official discount rates using strikingly different methods and such disparities may have resulted in inconsistent decision-making in relation to the allocation of funds to long-term social projects.
100 citations
TL;DR: In this paper, the authors investigated the behaviour of Indian aggregate imports during the period 1971-1995 and found that import demand is largely explained by real GDP, and is generally less sensitive to import price changes.
Abstract: This paper investigates the behaviour of Indian aggregate imports during the period 1971–1995. In the empirical analysis of the aggregate import demand function for India, cointegration and error correction modelling approaches have been used. In the aggregate import demand function for India, import volume is found to be cointegrated with relative import price and real GDP. The econometric estimates of the import-demand function for India suggest that import-demand is largely explained by real GDP, and is generally less sensitive to import price changes. Import liberalization is found to have had little impact on import demand.
94 citations
TL;DR: This paper showed that trade openness was associated with less variable inflation during the 1990s and had a stronger disinflation effect in economies with floating exchange rates, both among high income OECD and developing countries.
Abstract: Dynamic panel estimates show the negative relation between trade openness and inflation found by Romer (Quarterly Journal of Economics, (VIII, 869–903, 1993) but questioned by Terra (Quarterly Journal of Economics, (XIII, 641–48, 1998) became more robust in the 1990s, both among high income OECD and developing countries. Trade openness was also associated with less variable inflation during the 1990s and had a stronger disinflation effect in economies with floating exchange rates.
87 citations
TL;DR: In this article, the authors examined the effect of the nomination of Athens as the hosting city for the Olympics of 2004 on the stock exchanges of Greece (winner) and Italy (loser), the two primary candidates for the Games is examined.
Abstract: Through an event study methodology, the effect of the nomination of Athens as the hosting city for the Olympics of 2004 on the stock exchanges of Greece (winner) and Italy (loser), the two primary candidates for the Games is examined. Academic literature suggests that sporting mega events have a positive contribution to the host area economy. This implies that the stock exchange should react positively to the announcement of such events. Berman et al. (2000), in a similar study on the announcement of the Sydney 2000 Olympics, found no significant effect on the overall market and only limited effect on infrastructure-related companies based in the specific area hosting the Games. This study reveals a significantly positive effect on the Athens Stock Exchange (ASE) as a whole, as well as on infrastructure-related industries. No significant effect was identified on the Milan Stock Exchange (MSE). The differences in the impact of the announcement to economy size differences between the two countries and to the assessment is attributed to the fact that due to the highly competitive nature of the bidding process the financial markets assign higher probability to losing instead of winning.
87 citations
TL;DR: In this article, the authors investigated whether there is a systematic relationship between water use and income, and particularly whether an inverted U-shaped relationship exists, as has been found for other resources and pollutants.
Abstract: In recent years the issue of global water scarcity has attracted increasing attention within academia, non-governmental organizations and the media. The aim of this short note is to ascertain whether there is a systematic relationship between water use and income, and particularly whether an inverted U-shaped relationship exists, as has been found for other resources and pollutants. Using a new data set of water use, evidence of such a relationship is provided, suggesting that water use may benefit from composition and technique effects. While this finding appears optimistic, regional forecasts are made that suggest that levels of water use in developing regions will continue to increase for many years to come. The implications of these findings are discussed.
84 citations
TL;DR: In this paper, the authors empirically investigate the export-led growth hypothesis in Jordan over the period 1976-1997 and find that there is a unidirectional causation from exports to output.
Abstract: The purpose of this study is to empirically investigate the export-led growth hypothesis in Jordan over the period 1976–1997 The empirical results from three bivariate models of VAR-L, VAR-D and ECM indicate a unidirectional causation from exports to output These findings lend support to the export-oriented growth strategy pursued by Jordan In promoting faster economic growth, such government institutions as Free Zones Corporations, Jordan Investment Board and Jordan Export Development Corporation should continue pursuing their mission in attracting foreign investments and boosting exports
TL;DR: The authors found that only about 20% of the aggregate effects of public investment in highways in the US are captured by the direct effects on each state output of public investments in the state itself.
Abstract: The empirical results reported in this paper suggest that only about 20% of the aggregate effects of public investment in highways in the US are captured by the direct effects on each state output of public investment in the state itself. The remaining 80% correspond to the spillover effects from public investment in highways in other states. This result may provide an answer to the paradox in the literature that the findings of large effects at the aggregate level have not been matched at the regional level. This is because regional analysis has typically ignored the possible existence of spillover effects.
TL;DR: In this paper, the authors apply the Zivot and Andrews (Journal of Business and Economic Statistics, 10, 251-70) 1992) one break and the Lumsdaine and Papell (Review of Economic and Statistics, 79, 212-8, 1997) two break unit root tests to examine the random walk hypothesis for stock prices in South Korea.
Abstract: This letter applies the Zivot and Andrews (Journal of Business and Economic Statistics, 10, 251-70, 1992) one break and the Lumsdaine and Papell (Review of Economic and Statistics, 79, 212-8, 1997) two break unit root tests to examine the random walk hypothesis for stock prices in South Korea The results provide strong evidence that stock prices in South Korea are characterized by a unit root, which is consistent with the efficient market hypothesis
TL;DR: In this article, the authors investigated the determinants of growth among new start-up firms and found that younger and small-sized firms are more likely to grow among the start-ups.
Abstract: This paper investigates firm growth as the post-entry performance of new start-up firms. Using data on Japanese manufacturing firms founded during 1992–1996, the determinants of growth among new start-up firms are identified. The effect not only of firm-specific characteristics, but also of entrepreneur-specific, industry-specific and local characteristics on firm growth are examined. It is found that younger and small-sized firms are more likely to grow among the start-ups. It is also found that entrepreneur's age and educational background affect the growth of start-ups. It is not shown, however, that industry specialization induces the growth of start-ups.
TL;DR: In this article, six versions of Wagner's Law were empirically tested employing aggregate annual time-series data on nine Caribbean countries and the results indicate that a long-run equilibrium relationship between income and government expenditure does not exist for the countries studied.
Abstract: In this paper, six versions of Wagner's Law were empirically tested employing aggregate annual time-series data on nine Caribbean countries. The results indicate that a long-run equilibrium relationship between income and government expenditure does not exist for the countries studied, with the exceptions of Grenada, Guyana and Jamaica for a particular formulation of Wagner's Law. However, the direction of causality runs from income to government expenditure only for Guyana, while for the other two, the causality runs in the other direction. Results for short-run causality are mixed, but the predominant causal relationship appears to run from income to government expenditure. In light of the empirical results in this paper, one may tentatively conclude that Wagner's Law finds broad support in these islands. These results run counter to what has been previously reported for a subset of the islands studied in this paper.
TL;DR: This article found a significant positive relationship between innovation and employment at the firm's level in the 1990s and applied GMM-SYS on a unique Italian panel dataset, finding that there was a small but statistically significant relationship between the two.
Abstract: Consistently with previous evidence of the microeconomic literature on the subject and applying GMM-SYS on a unique Italian panel dataset, this study finds a significant – although small in size – positive relationship between innovation and employment at the firm's level in the 1990s.
TL;DR: In this paper, the authors found evidence that cross-country variation in software piracy is a combination of both traditional economic influences and institutional social mores, and that increased power distance or the further individuals feel from their superiors, for example law enforcement officials, the greater the propensity to pirate software.
Abstract: This study offers evidence that cross-country variation in software piracy is a combination of both traditional economic influences and institutional social mores. Software piracy rates are related to various economic variables and two measures of social construct. The study includes an individualism score, which measures horizontal social relationships, and a measure of power distance, measuring vertical social relationships. It is found that economic variables do play a role in the decision to pirate software and that increased power-distance, or the further individuals feel from their superiors, for example law enforcement officials, the greater the propensity to pirate software.
TL;DR: In this paper, the authors investigated whether the added worker effect is an important determinant of the increased labour force participation by women and whether the magnitude of the added workers effect differs between the peak and trough of the business cycle.
Abstract: This paper investigates whether the added worker effect is an important determinant of the increased labour force participation by women and whether the magnitude of the added worker effect differs between the peak and trough of the business cycle. Use is made of repeated observations from spouses in urban Mexico, collected during the Peso crisis (1994:4–1995:4) and during the period of economic prosperity (1998:4–1999:4). Significant added worker effects are found in both periods. The magnitude of the added worker effect during the crisis period is found to be twice as large as that observed during the period of economic prosperity.
TL;DR: In this article, an alternative empirical model to that of Groot was proposed to estimate the rate of depreciation of human capital, in which the post-schooling investment and the difference between the potential and the observed earnings of the individuals were taken into account.
Abstract: This study formulates an alternative empirical model to that of Groot (Applied Economics Letters, 5, 535–8, 1998) to estimate the rate of depreciation of human capital, in which the post-schooling investment and the difference between the potential and the observed earnings of the individuals are taken into account. As an illustration, the model has been estimated for a sample of Spanish men and women. The results show depreciation rates of human capital of around 1–1.5% per year.
TL;DR: The authors examined the relationship between college football success and SAT scores using an updated data series on football winning percentages and found that a positive and significant relationship supports the idea that collegiate athletics namely football, serves the institution's admissions process.
Abstract: This article examines the relationship between college football success and SAT scores using an updated data series on football winning percentages. The finding here of a positive and significant relationship supports the idea that collegiate athletics, namely football, serves the institution's admissions process. Selective institutions are able to enhance the quality of their student populations. 1 Some studies (e.g. Tucker, 1992; Tucker and Amato, 1993; Bremmer and Kesselring, 1995; Shulman and Bowen, 2001) and surveys (e.g. Art & Science Group of Baltimore, 1991; American Council on Education, 1991) indicate that there is little, or no, relationship between athletic success and the university's educational mission (see Marklein, 2001). The spinoff benefit of winning teams is such a well-known phenomenon among university administrators that they even have a name for it – ‘the Flutie factor,’ for the 33 percent increase in applications that Doug Flutie helped bring Boston College when he was a football s...
TL;DR: In this paper, the authors test for the existence of any cointegration relationship between trade balance and real effective exchange rate (REER), foreign income and domestic income for New Zealand during the period 1970-2000.
Abstract: This article tests for the existence of any cointegration relationship between trade balance and real effective exchange rate (REER), foreign income and domestic income for New Zealand during the period 1970-2000. It also examines the direction of the casual relationship between the above variables, and applies the impulse response analysis to determine whether shocks to the REER induce the trade balance to follow a J-curve pattern. The results indicate that there is no cointegration relationship between the above variables; there is a casual connection in both directions between trade balance and foreign income; and New Zealand's trade balance exhibits a J-curve pattern when there is a depreciation of the New Zealand dollar.
TL;DR: In this article, the relative version of purchasing power parity (PPP) for a set of ten Asian developing countries using a panel cointegration framework was tested and the test results overwhelmingly reject the PPP hypothesis.
Abstract: This study tests the relative version of purchasing power parity (PPP) for a set of ten Asian developing countries using a panel cointegration framework. A ‘between-dimension’ dynamic OLS estimator as proposed by Pedroni is employed. The test results overwhelmingly reject the PPP hypothesis.
TL;DR: In this article, specific preconditions were drawn out under which manipulation in PSM can weaken this argument and evidence for manipulation is reported from the data of two separate PSM during the Berlin 1999 state elections.
Abstract: Political stock markets (PSM) are sometimes seen as substitutes for opinion polls On the bases of a behavioural model, specific preconditions were drawn out under which manipulation in PSM can weaken this argument Evidence for manipulation is reported from the data of two separate PSM during the Berlin 1999 state elections
TL;DR: In this paper, an aggregate data panel is constructed for the GCC's six countries and the cointegration hypothesis among the variables of the money demand function is verified using Pedroni's heterogeneous panel co-integration tests.
Abstract: An aggregate data panel is constructed for the GCC's six countries and the cointegration hypothesis among the variables of the money demand function is verified using Pedroni's heterogeneous panel cointegration tests. The idiosyncratic, panel and group-mean cointegrating vectors are then estimated using FMOLS and a modified version of FMOLS developed by Pedroni. The idiosyncratic elasticities have the expected signs in general but are significant only in the case of the scale variable. However, when the power of the test is increased, and allowance made for heterogeneous cointegrating vectors, the group-mean estimator shows a significant negative semi-elasticity of money demand with respect to interest rate.
TL;DR: The authors examined the relationship between the renminbi real exchange rate and China's foreign exchange reserves using cointegration and Granger causality testing and found that in the long run foreign exchange reserve Granger causes the real exchange rates.
Abstract: This article examines the relationship between the renminbi real exchange rate and China's foreign exchange reserves using cointegration and Granger causality testing. The main findings are that in the long run foreign exchange reserves Granger cause the real exchange rate. Meanwhile, in the short run there is unidirectional Granger causality running from foreign exchange reserves to the real exchange rate.
TL;DR: In this paper, the existence of a Fisher relation via Johansen cointegration tests was found using annual data over a long time horizon from 1900 to 2000 for the UK, and the cointegrating relationship between the two variables suggests a significant long-run equilibrium with a positive coefficient of more than one during the stated period.
Abstract: Using annual data over a long time horizon from 1900 to 2000 for the UK, this study finds the existence of a Fisher relation via Johansen cointegration tests. The cointegrating relationship between the two variables suggests a significant long-run equilibrium with a positive coefficient of more than one during the stated period.
TL;DR: In this paper, the authors derived an analytical expression that allows empirical quantification of the welfare loss associated with imperfect competition among banking firms, and applied it to the specific case of the European banking system, showing that market power increased during the 1990s in 10 out of 15 countries of the EU.
Abstract: From a model of imperfect competition among banking firms, this study derives an analytical expression that allows empirical quantification of the welfare loss associated with imperfect competition. Its application to the specific case of the European banking system shows that in spite of the process of deregulation, market power increased during the 1990s in 10 out of the 15 countries of the EU. The welfare loss associated with market power represents close to 2.5% of EU GDP.
TL;DR: In this paper, the determinants of university dropout in Italy using a bivariate probit model with sample selection were analyzed using an univariate decision framework and the empirical findings provide some support for the appropriateness of this technique and hence suggest that the estimates obtained from a univariate framework are likely to be inefficient.
Abstract: This study analyses the determinants of university dropouts in Italy using a bivariate probit model with sample selection. The empirical findings provide some support for the appropriateness of this technique and hence suggest that the estimates obtained from a univariate decision framework are likely to be inefficient.
TL;DR: In this article, the authors investigated the relationship between stock prices and house prices by comparing different segments of the Dutch housing market and found that the relationship is strongest for the most expensive segment, and also related to homeowners' stock market exposure.
Abstract: The relationship between stock prices and house prices is investigated by comparing different segments of the Dutch housing market. This connection is strongest for the most expensive segment, and is also related to homeowners’ stock market exposure. These findings support the idea that equity is a determinant of house prices.
TL;DR: In this article, the authors used Markov Switching ARCH (SWARCH) models to estimate the value at risk (VaR) on returns of stock market indexes including Dow Jones, Nikkei, Frankfurt Commerzbank index, and FTSE via Markov switching ARCH.
Abstract: This paper estimates the Value-at-Risk (VaR) on returns of stock market indexes including Dow Jones, Nikkei, Frankfurt Commerzbank index, and FTSE via Markov Switching ARCH (SWARCH) models. It is conjectured that structural changes contribute to non-normality in stock return distributions. SWARCH models, which admit parameters based on various states to control structural changes in the estimating periods, may thus help mitigate kurtosis, tail-fatness and skewness problems in estimating VaR. Significant kurtosis and skewness in return distributions of Dow Jones, Nikkei, FCI and FTSE and significant tail-fatness (tail-thinness) in the 1% (5%) region critical probability are documented. Moreover, it is shown that the more generalized SWARCH outshines both ARCH and GARCH in capturing non-normalities with respect to both in- and out-sample VaR violation rate tests.