Chiang Lok Man Cally. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2004. / Includes bibliographical references (leaves 29-31). / Abstracts in English and Chinese. / Chapter 1 --- Introduction --- p.1 / Chapter 2 --- Literature Review --- p.4 / Chapter 2.1 --- Studies against the trading rule profits --- p.4 / Chapter 2.2 --- Studies for the trading rule profits --- p.5 / Chapter 3 --- Data Descriptions and Methodology --- p.8 / Chapter 4 --- Empirical Results --- p.14 / Chapter 4.1 --- First trading rule --- p.14 / Chapter 4.2 --- Second trading rule --- p.19 / Chapter 4.3 --- Comparison between the two trading rules --- p.23 / Chapter 5 --- Other Related Results --- p.25 / Chapter 6 --- Conclusions --- p.27 / Reference --- p.29 / Figure 1 - 12 --- p.32 / Table 1 - 14 --- p.44

This dissertation is concerned with the examination of some widely employed nonlinear exchange rate models. In particular, its aim is to assess how well non-linear statistical models accommodate the theoretical implications contained in economic models and how well they are able to capture the empirical properties of the data. Chapter 2 gives a brief background to the concept of PPP and discusses the role of transaction costs in economic models, making it necessary to model exchange rates within a non-linear framework. Parametric as well as non-parametric statistical techniques are applied to a long time-series data set to give an indication of the empirical validity of non-linearity in real exchange rates. Wide threshold bands are found to be a common characteristic of real exchange rate data. Chapter 3 studies the fitness of the ESTAR model for real exchange rate modelling. It is shown that wide threshold bands in the empirical data necessitate a small transition function parameter in the exponential regime weighting function, leading to difficulties in the meaningful interpretation of regimes. When this occurs, it is also shown that the ESTAR model is weakly identified over the range of the sample data that one generally works with. These results are illustrated on an empirical data set by replicating the often cited study of Taylor et al. (2001). In Chapter 4 and Chapter 5 a number of non-linear models are evaluated. Simulation experiments indicate that LM style tests that are commonly employed in the literature to test for ESTAR non-linearity have a very low probability of rejecting the false null hypothesis of linearity when the true data generating process is in fact the ESTAR model of Taylor et al. (2001). It is further shown that, contrary to the claims of the recent study by Rapach and Wohar (2006), long-horizon forecasts from the ESTAR model converge to the unconditional mean of the series, so that there is no gain in utilising the ESTAR model for long-horizon forecasts. Studying the Markov switching model of Bergman and Hansson (2005) reveals that the model does not generate any non-linearity as predicted from economic models.

This dissertation is concerned with the examination of some widely employed nonlinear exchange rate models. In particular, its aim is to assess how well non-linear statistical models accommodate the theoretical implications contained in economic models and how well they are able to capture the empirical properties of the data. Chapter 2 gives a brief background to the concept of PPP and discusses the role of transaction costs in economic models, making it necessary to model exchange rates within a non-linear framework. Parametric as well as non-parametric statistical techniques are applied to a long time-series data set to give an indication of the empirical validity of non-linearity in real exchange rates. Wide threshold bands are found to be a common characteristic of real exchange rate data. Chapter 3 studies the fitness of the ESTAR model for real exchange rate modelling. It is shown that wide threshold bands in the empirical data necessitate a small transition function parameter in the exponential regime weighting function, leading to difficulties in the meaningful interpretation of regimes. When this occurs, it is also shown that the ESTAR model is weakly identified over the range of the sample data that one generally works with. These results are illustrated on an empirical data set by replicating the often cited study of Taylor et al. (2001). In Chapter 4 and Chapter 5 a number of non-linear models are evaluated. Simulation experiments indicate that LM style tests that are commonly employed in the literature to test for ESTAR non-linearity have a very low probability of rejecting the false null hypothesis of linearity when the true data generating process is in fact the ESTAR model of Taylor et al. (2001). It is further shown that, contrary to the claims of the recent study by Rapach and Wohar (2006), long-horizon forecasts from the ESTAR model converge to the unconditional mean of the series, so that there is no gain in utilising the ESTAR model for long-horizon forecasts. Studying the Markov switching model of Bergman and Hansson (2005) reveals that the model does not generate any non-linearity as predicted from economic models.

by Hou Ka Chun. / Thesis (M.Phil.)--Chinese University of Hong Kong, 1999. / Includes bibliographical references (leaves 89-95). / Abstracts in English and Chinese. / LIST OF TABLES --- p.vii / LIST OF ILLUSTRATIONS --- p.viii / CHAPTER / Chapter I --- INTRODUCTION --- p.1 / Chapter II --- REVIEW OF THE LITERATURE --- p.6 / Monetary Models / Nominal Exchange Rate Prediction / Nonparametric Estimation Techniques / Chapter III --- METHODOLOGY --- p.17 / Unit-Root Tests / Zivot-Andrews Test / Error Correction Model / Autoregressive Distributed Lag (ARDL) Approach to Cointegration / Local Polynomial Fitting / Chapter IV --- DATA --- p.36 / Chapter V --- PARAMETRIC MODELING --- p.39 / Estimation Procedure / Empirical Findings / Japan / Germany / Britain / Chapter VI --- NONPARAMETRIC MODELING --- p.50 / Estimation Procedure / Empirical Findings / Chapter VII --- CONCLUSION --- p.54 / TABLES --- p.56 / ILLUSTRATIONS --- p.77 / BIBLIOGRAPHY --- p.89

published_or_final_version / abstract / Economics and Finance / Doctoral / Doctor of Philosophy

Abstract not available

Lam, Lai Fong. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2007. / Includes bibliographical references (p. 47-50). / Abstracts in English and Chinese. / ABSTRACT --- p.ii / ACKNOWLEDGEMENTS --- p.iv / LIST OF TABLES --- p.vi / LIST OF FIGURES --- p.vi / CHAPTER / Chapter I --- INTRODUCTION --- p.1 / Chapter II --- LITERATURE REVIEW --- p.6 / Chapter III --- THE EXCHANGE RATE REGIMES OF THE FOUR NIES --- p.10 / Review of the Exchange Rate Regimes of the Four NIEs / Frankel-Wei Regression / Chapter IV --- METHODOLOGY --- p.19 / Measurement of the Monetary Independence / Specification of Model / Chapter V --- EMPIRICAL RESULTS --- p.2? / Unit Root Test / The Endogeneity Test / Cointegration Test and Error Correction Model / Chapter VI --- CONCLUSIONS --- p.37 / APPENDICES --- p.41 / BIBLIOGRAPHY --- p.47 / TABLES --- p.51 / FIGURES --- p.59

by Hok-hoi Fung. / Thesis (M.Phil.)--Chinese University of Hong Kong, 1995. / Includes bibliographical references (leaves 58-59). / LIST OF TABLES --- p.ii / LIST OF FIGURES --- p.iii / CHAPTER / Chapter 1. --- INTRODUCTION --- p.1 / Chapter 2. --- LITERATURE REVIEW --- p.3 / Chapter 3. --- METHODOLOGY --- p.6 / Formulation of the TVTP Model --- p.6 / Filtered and Smoothed Probabilities --- p.9 / Maximization of the Expected Log-likelihood --- p.13 / Chapter 4. --- EMPIRICAL RESULTS --- p.15 / The Simple 2-state Markov Switching Model --- p.15 / The TVTP Model --- p.17 / The 3-state Markov Switching Model --- p.26 / Chapter 5. --- OUT - OF- SAMPLE FORECASTING --- p.34 / Chapter 6. --- CONCLUSION --- p.40 / APPENDICES --- p.42 / BIBLIOGRAPHY --- p.58

This thesis models the Australian-US Dollar (AUD/USD) exchange rate with particular attention being paid to investor risk aversion. Accounting for investor risk aversion in AUD/USD exchange rate modelling is novel, so too is the method used to measure risk aversion in this thesis. Investor risk aversion is measured using a technique developed in Bliss and Panigirtzoglou (2004), which makes use of Probability Density Functions (PDFs) extracted from option markets. More conventional approaches use forward-market pricing or Uncovered Interest Parity. Several methods of estimating PDFs from option and spot markets are examined, with the estimations from currency spot-markets representing an original application of an arbitrage technique developed in Stutzer (1996) to the AUD/USD exchange rate. The option and spot-market PDFs are compared using their first four moments and if estimated judiciously, the spot-market PDFs are found to have similar shapes to the option-market PDFs. So in the absence of an AUD/USD exchange rate options market, spot-market PDFs can act as a reasonable substitute for option-market PDFs for the purpose of examining market sentiment. The Relative Risk Aversion (RRA) attached to the AUD/USD, the US Dollar-Japanese Yen, the US Dollar-Swiss Franc and the US-Canadian Dollar exchange rates is measured using the Bliss and Panigirtzoglou (2004) technique. Amongst these exchange rates, only the AUD/USD exchange rate demonstrates a significant level of investor RRA and only over a weekly forecast horizon. The Bliss and Panigirtzoglou (2004) technique is also used to approximate a time-varying risk premium for the AUD/USD exchange rate. This risk premium is added to the cointegrating vectors of fixed-price and asset monetary models of the AUD/USD exchange rate. An index of Australia???s export commodity prices is also added. The out-of-sample forecasting ability of these cointegrating vectors is tested relative to a random walk using an error-correction framework. While adding the time-varying risk premium improves this forecasting ability, adding export commodity prices does so by more. Further, including both the time-varying risk premium and export commodity prices in the cointegrating vectors reduces their forecasting ability. So the time-varying risk premium is important for AUD/USD exchange rate modelling, but not as important as export commodity prices.

This thesis models the Australian-US Dollar (AUD/USD) exchange rate with particular attention being paid to investor risk aversion. Accounting for investor risk aversion in AUD/USD exchange rate modelling is novel, so too is the method used to measure risk aversion in this thesis. Investor risk aversion is measured using a technique developed in Bliss and Panigirtzoglou (2004), which makes use of Probability Density Functions (PDFs) extracted from option markets. More conventional approaches use forward-market pricing or Uncovered Interest Parity. Several methods of estimating PDFs from option and spot markets are examined, with the estimations from currency spot-markets representing an original application of an arbitrage technique developed in Stutzer (1996) to the AUD/USD exchange rate. The option and spot-market PDFs are compared using their first four moments and if estimated judiciously, the spot-market PDFs are found to have similar shapes to the option-market PDFs. So in the absence of an AUD/USD exchange rate options market, spot-market PDFs can act as a reasonable substitute for option-market PDFs for the purpose of examining market sentiment. The Relative Risk Aversion (RRA) attached to the AUD/USD, the US Dollar-Japanese Yen, the US Dollar-Swiss Franc and the US-Canadian Dollar exchange rates is measured using the Bliss and Panigirtzoglou (2004) technique. Amongst these exchange rates, only the AUD/USD exchange rate demonstrates a significant level of investor RRA and only over a weekly forecast horizon. The Bliss and Panigirtzoglou (2004) technique is also used to approximate a time-varying risk premium for the AUD/USD exchange rate. This risk premium is added to the cointegrating vectors of fixed-price and asset monetary models of the AUD/USD exchange rate. An index of Australia???s export commodity prices is also added. The out-of-sample forecasting ability of these cointegrating vectors is tested relative to a random walk using an error-correction framework. While adding the time-varying risk premium improves this forecasting ability, adding export commodity prices does so by more. Further, including both the time-varying risk premium and export commodity prices in the cointegrating vectors reduces their forecasting ability. So the time-varying risk premium is important for AUD/USD exchange rate modelling, but not as important as export commodity prices.