This thesis is the first study that provides comprehensive empirical evidence on both the impacts of the target interest rate news from the Reserve Bank of Australia (RBA) on the Australian financial markets, and the spillover effects of the target interest rate news from the US Federal Reserves (Fed) and the European Central Bank (ECB) on the Asia Pacific's equity and currency markets. This thesis contributes to the current literature in several ways. First, while there is ample evidence in the literature suggesting that the markets would not react to what is already expected but will react to the news, the current literature on the RBA's target rate effects is still limited to the investigation of the overall announcement impact on the first moment of the Australian market return only. Therefore, this thesis firstly comprehensively investigates the impacts of the unexpected components of the RBA's target rate announcements (or news) on the first two moments of various segments of the Australian financial markets including interest rate changes, the Australian dollar and stock market returns. In so doing, this thesis contributes to the current literature on the impacts of domestic target interest rate news. Second, while the established literature seems to be missing a thorough investigation of the spillover effects of the Fed's and the ECB's news on the Asia Pacific markets, this thesis provides comprehensive evidence on the spillover effects of the Fed's and the ECB's target rate news on both the mean and volatility of the Asia Pacific's stock and currency returns. Furthermore, we not only document the presence of the news spillover effects but also highlight the incremental explanatory power of the target interest rate news in the presence of the indirect effects from the US's and euro area's markets to the Asia-Pacific markets. To this end, this thesis contributes to the literature on spillover effects of foreign target interest rate news. Third, while the literature is silent on how quickly the target interest rate news is absorbed in foreign markets, this thesis takes a step forward and breaks down the daily horizon into the overnight and the intraday horizons. In so doing, the thesis examines the absorption speed of target rate news in the Asia-Pacific markets. This is an important issue because there might be potential for a diverse array of response dynamics across countries due to heterogeneous market developments, nature of monetary policy synchronization, and financial and real integration with the U.S. and the euro area. Specifically, this thesis presents three independent empirical inquiries that contribute to the literature on domestic and spillover effects of the target interest rate news. Chapter 4 provides comprehensive empirical evidence for the impacts of the RBA's target rate news on various segments of the Australian financial markets during the period from 1998 to 2006. We also investigate the spillover effects of the US Fed's news on the Australian financial markets. We show that the RBA's and the Fed's news significantly affect the Australian financial markets in line with a priori expectations. However, while the RBA's news raises volatility in the Australian financial markets, the volatility was significantly lower in all market segments following the Fed's news. The spillover effects of the US Fed's and the ECB's target interest rate news on the mean and the volatility of twelve Asia Pacific's stock markets' returns are examined in Chapter 5, and seven Asia Pacific exchange rates against the US dollar and the euro over the period 1999-2006 are carried out in Chapter 6. The spillover effects on the conditional mean are generally consistent with the literature where a majority of Asia Pacific stock markets shows significant negative returns and a majority of currencies depreciates against the US dollar and the euro in response to the Fed's and the ECB's unexpected rate rises. Furthermore, in response to the two target rate news, the conditional volatility of the Asia Pacific stock markets was higher while the market calming effects have been observed for the currency markets and both the Fed and the ECB news elicit persisting volatility responses. We conjecture that as the ECB's news tends to confirm the Fed's earlier decision, this relationship might help reduce uncertainties in the Asia Pacific currency markets upon the future path of target interest rates from both the Central Banks, which ultimately results in into a lower volatility level. These findings are important not only to the Asia Pacific’s policy makers to help them improve the conduct of monetary policy but also to market participants in designing trading mechanisms as well as risk management strategies in response to both domestic and external interest rate shocks. Furthermore, these findings also shed light on the lead-lag relationship between the Fed and the ECB in making policy decisions. The notion that the ECB follows the Fed in setting its policy is so strong amongst market participants that empirical evidence seems to be crucial. Despite the fact that the ECB's news arrives after the Fed's news, this study provides evidence that the ECB's news has its own merits in the Asia Pacific markets and helps resolve differences in beliefs among market participants.

This research contains three essays that explore the speed of adjustment, volatility and noise in the Indonesia Stock Exchange. The first essay explores the speed of adjustment in the Indonesia Stock Exchange at daily interval from 2000 to 2004. The model employed is the speed of adjustment with noise. Firstly, I work on the estimation of the speed of adjustment. The estimated speed of adjustment coefficient concludes that the large size leads the smaller size group to adjust to new information. Secondly, I analyse the component in the noise that contributes significantly to the speed of adjustment level. It is confirmed that the factor determining the noise is bid-ask fluctuations. Therefore, it is reasonable to infer the component in the noise from bid-ask component. The decomposition of bid-ask spread into transaction cost and asymmetric information reveals that the latter is found to be a significant component determining the speed of adjustment level. The second essay analyses the fine grain dynamics of the speed of price adjustment to new information from 2000 to 2007. The exact time of adjustment is estimated at intraday frequency instead of at daily frequency. In this work, as an alternative of first moment estimation, second moment model-free estimation using volatility signature plot to estimate of the speed of adjustment is proposed. Both first and second moment estimation of the speed of adjustment provide consistent result of 30 minute adjustment period. Negative relation after 5-minute return interval between speed of adjustment estimate and realized variance is found implying lower noise leads to smaller deviation between observed and equilibrium price. In the third essay, I concentrate the work on the second moment of continuously compounded returns from 2000 to 2007 in the Indonesia Stock Exchange. The main purpose of the last essay is to estimate the noise and efficient variance in the Indonesia Stock Exchange. The realized variance based estimator is employed in the third essay. During the period of the study, noise variance decreases indicating smaller deviation between the observed and equilibrium price, hence improving market quality in the Indonesia Stock Exchange. The optimal frequency to estimate the efficient variance, on average, is nine minutes. The variance ratio of daily efficient variance to daily open-to-close reveals significant private information underlying price process in the Indonesia Stock Exchange.

In this thesis we search for optimal hedging strategy in stock index futures markets by providing a comprehensive comparison of variety types of models in the related literature. We concentrate on the strategy that minimizes portfolio risk, i.e., minimum variance hedge ratio (MVHR) estimated from a range of time series models with different assumptions of market volatility. There are linear regression models assuming time-invariant volatility; GARCH-type models capturing time-varying volatility, Markov regime switching (MRS) regression models assuming state-varying volatility, and MRS-GARCH models capturing both time-varying and state-varying volatility. We use both Maximum Likelihood Estimation (MLE) and Bayesian Gibbs-Sampling approach to estimate the models with four commonly used index futures contracts: S&P 500, FTSE 100, Nikkei 225 and Hang Seng index futures. We apply risk reduction and utility maximization criterions to evaluate hedging performance of MVHRs estimated from these models. The in-sample results show that the optimal hedging strategy for the S&P 500 and the Hang Seng index futures contracts is the MVHR estimated using the MRS-OLS model, while the optimal hedging strategy for the Nikkei 225 and the FTSE 100 futures contracts is the MVHR estimated using the Asymmetric-Diagonal-BEKK-GARCH and the Asymmetric-DCC-GARCH model, respectively. As in the out-of sample investigation, the time-varying models such as the BEKK-GARCH models especially the Scalar-BEKK model outperform those state-varying MRS models in majority of futures contracts in both one-step- and multiple-step-ahead forecast cases. Overall the evidence suggests that there is no single model that can consistently produce the best strategy across different index futures contracts. Moreover, using more sophisticated models such as MRS-GARCH models provide some benefits compared with their corresponding single-state GARCH models in the in-sample case but not in the out-of-sample case. While comparing with other types of models MRS-GARCH models do not necessarily improve hedging efficiency. Furthermore, there is evidence that using Bayesian Gibbs-sampling approach to estimate the MRS models provides investors more efficient hedging strategy compared with the MLE method.

This thesis examines the empirical performance of four Affine Jump Diffusion models in pricing and hedging S&P 500 Index options: the Black Scholes (BS) model, Heston???s Stochastic Volatility (SV) model, a Stochastic Volatility Price Jump (SVJ) model and a Stochastic Volatility Price-Volatility Jump (SVJJ) model. The SVJJ model structure allows for simultaneous jumps in price and volatility processes, with correlated jump size distributions. To the best of our knowledge this is the first empirical study to test the hedging performance of the SVJJ model. As part of our research we derive the SVJJ model minimum variance hedge ratio. We find the SVJ model displays the best price prediction. The SV model lacks the structural complexity to eliminate Black Scholes pricing biases, whereas our results indicate the SVJJ model suffers from overfitting. Despite significant evidence from in and out-of-sample pricing that the SV and SVJ models were better specified than the BS model, this did not result in an improvement in dynamic hedging performance. Overall the BS delta hedge and SV minimum variance hedge produced the lowest errors, although their performance across moneyness-maturity categories differed greatly. The SVJ model???s results were surprisingly poor given its superior performance in out-of-sample pricing. We attribute the inadequate performance of the jump models to the lower hedging ratios these models provided, which may be a result of the negative expected jump sizes.

This dissertation consists of 3 essays that examine the impact of electronic screen trading in futures markets. The research provides empirical evidence on increasingly significant issues given the rapid global advances in technology used in securities markets. Each essay addresses the scarcity of conclusive research in order to aid researchers, regulators, exchange policy makers and systems builders as they confront issues related to electronic trading systems.

The objective of the thesis is to examine the trading behaviour and characteristics of retail and institutional traders on the Australian Stock Exchange. There are three aspects of these traders that are of particular interest to this study: (1) the information content of their trades, (2) their order placement strategies, and (3) the impact of their trading on share price volatility. Trades made on the basis of private information such as those by institutional traders are found to be associated with larger permanent price changes while trades by uninformed traders such as retail traders are found to be associated with smaller changes. In addition, institutional trades are found to have smaller total price effect compared to retail trades suggesting retail traders incur higher market impact costs. In order to profit from potentially short-lived information advantage, informed traders are expected to place more aggressive orders. The analysis of the order price aggressiveness showed institutions are more aggressive than other traders. In addition, retail traders are found to be less aware of the state of the market when placing aggressive orders. The analysis of the limit order book found significant differences between the contributions of institutional and retail traders to the depth of the limit-order book, with retail standing limit orders further from the market. This is consistent with the conjecture that uninformed traders such as retail traders have greater expected adverse selection costs. The effect of trading by retail and institutional traders on price volatility are also investigated. There is some evidence that retail traders are more active and institutional traders are proportionally less active after periods of high volatility. Also, the effect of the order activity from different trader types on volatility differs depending on the measure of order activity used.

Diss. Stockholm : Handelshögskolan, 2003.

Diss. (sammanfattning) Uppsala : Sveriges lantbruksuniversitet, 2005. / Härtill 6 uppsatser.

Diss. (sammanfattning). Alnarp : Sveriges lantbruksuniversitet, 2005. / Härtill 7 uppsatser.

Στην παρούσα εργασία παρουσιάζονται οι έλεγχοι για διαρθρωτικές μεταβολές στις αποδόσεις χρηματοοικονομικών χρονοσειρών που διερευνώνται στην διεθνή βιβλιογραφία. Έλεγχοι τύπου σωρευτικών αθροισμάτων (CUSUM) όπως των Kokoszka και Leipus, ο LM και ο LR έλεγχος του Andrews και των Bai και Perron αντίστοιχα και ο έλεγχος τύπου ελαχίστων τετραγώνων των Lavielle και Moullines. Τέλος εφαρμόζουμε τον έλεγχο των Kokoszka και Leipus για την εύρεση διαρθρωτικών μεταβολών στους δείκτες NASDAQ και S&P500. / --