There are two key observations in international macroeconomics which pertain to output and real exchange rate dynamics. First, fluctuations in national output around its long-run growth path are very persistent. Second, fluctuations in real exchange rates are very persistent. The sticky price framework offers an explanation for both phenomena. The first and second essay of this thesis take an empirical approach to test the predictions of this framework. In the first essay I test the prediction of the sticky price model for output dynamics using annual IFS data on 51 countries over the period 1950 -1996. The model predicts that price stickiness should be less important in high inflation countries and therefore output fluctuations less persistent. I find that, this inverse relationship is statistically insignificant in the international data. A similar result holds for OECD countries. In the empirical implementation I explicitly control for the within-country time variation in inflation by first characterizing the inflationary environment using the long-run movements in inflation (trend inflation), and secondly, by excluding episodes of hyperinflation. The analysis shows that when the within-country time variation in inflation is ignored, there is support for the prediction. For instance, the inverse relationship between persistence in deviations of output from its long-run growth path and average inflation is statistically significant in the full sample. However, the exclusion of a few episodes of hyperinflation renders this relationship statistically insignificant. In the second essay I investigate the prediction of the sticky price model for real exchange rate dynamics using annual IFS data on 49 countries over the period 1972-1996. The model predicts that deviations of real exchange rates from purchasing power parity should be less persistent, in high inflation countries. The empirical analysis reveals that the support for such an inverse relationship is extremely fragile. In particular, eliminating episodes of hyperinflation renders this relationship statistically insignificant. The lack of evidence in favour of the two predictions of the sticky price model is problematic since this model is extensively used as a microfoundation for understanding output and real exchange rate fluctuations. In the third essay I take a structural approach to qualitatively explore the role of slow diffusion of new products in propagating the effect of technology shocks on output. I present a multi-sector dynamic general equilibrium model in which the creation of new products requires real resources. These products are beneficial for the economy but only upon complete diffusion. However, this diffusion is not instantaneous. I find that relative to a model in which there is instantaneous diffusion of new products, the qualitative output dynamics are similar to what is observed in the U.S. data. This warrants further quantitative investigation. / Arts, Faculty of / Vancouver School of Economics / Graduate

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A small open economy model which incorporated. the rational expectations - natural rate hypothesis was constructed. The resulting model indicated that to the extent that foreign monetary policies may affect the relative price of domestic to foreign goods, the domestic unemployment rate was not neutral with respect to foreign monetary policies. Using Canada as the small open economy and the United States as the rest of the world, the weak open economy version of the natural rate hypothesis was empirically tested for both the flexible and the fixed exchange rate periods. The empirical methodology employed was the Granger causality test. The results based on the goodness of fit test indicated that for all the exchange rate regimes, the Canadian unemployment rate was rtot Granger caused by any causal variables considered. However, the results based on a comparison of the postsample forecasting performance were different. For the first flexible exchange rate. period, 1953-1962, we found that the Canadian unemployment rate was Granger caused by the foreign price level. However, this result was consistent with the weak open economy version of the natural rate hypothesis. We also found that the foreign unemployment rate Granger caused theCanadianunemployment rate in the second flexible rate period, 1970-1979. But, this did not damage the natural rate hypothesis since the natural rate hypothesis does not preclude real variables from having a systematic effect on the Canadian unemployment rate. The tests for rationality with the Canadian price level equations for both the flexible and the fixed exchange rate periods were inconclusive. First, we were not able to detect a breakpoint in the foreign and domestic money rules. The alternate tests of rationality which examined whether the relevant variables were included in the Canadian price level equations were also inconclusive because of a high degree of multicollinearity between the variables. / Ph. D.

The valuation of many types of financial contracts and contingent claim agreements is complicated by the possibility that one party will default on their contractual obligations. This dissertation develops a general model that prices Black-Scholes options subject to intertemporal default risk using stochastic barrier option pricing theory. The explicit closed-form solution is obtained by generalizing the reflection principle to k-space to determine the appropriate transition density function. The European analytical valuation formula has a straightforward economic interpretation and preserves much of the intuitive appeal of the traditional Black-Scholes model. The hedging properties of this model are compared and contrasted with the default-free model. The model is extended to include partial recoveries. In one situation, the option holder is assumed to recover α (a constant) percent of the value of the writer’s assets at the time of default. This version of the partial recovery option leads to an analytical valuation formula for a first passage option - an option with a random payoff at a random time. / Ph. D.

This thesis is a technical inquiry into remedies for high inflation. In its center there is the usual tradeoff between inflation aversion on the one hand and some benefit from inflation via Phillips curve effects on the other hand. Most remarkable and pioneering work for us is the famous Barro-Gordon model - see (Barro & Gordon 1983a) respectively (Barro & Gordon 1983b). Parts of this model form the basis of our work here. Though being well known the discretionary equilibrium is suboptimal the question arises how to overcome this. We will introduce four different models, each of them giving a different perspective and way of thinking. Each model shows a (sometimes slightly) different way a central banker might deliver lower inflation than the one shot Barro-Gordon game at a first glance would suggest. To cut a long story short we provide a number of reasons for believing that the purely discretionary equilibrium may be rarely observed in real life. Further the thesis provides new insights for derivative pricing theories. In particular, the potential role of financial markets and instruments will be a major focus. We investigate how such instruments can be used for monetary policy. On the contrary these financial securities have strong influence on the behavior of the central bank. Taking this into account in chapters 3 and 4 we come up with a new method of pricing inflation linked derivatives. The latter to the best of our knowledge has never been done before - (Persson, Persson & Svenson 2006), as one of very view economic works taking into account financial markets, is purely focused on the social planer's problem. A purely game theoretic approach is done in chapter 2 to change the original Barro-Gordon. Here we deviate from a purely rational and purely one period wise thinking. Finally in chapter 5 we model an asymmetric information situation where the central banker faces a trade off between his current objective on the one hand and benefit arising from not perfectly informed agents on the other hand. In that sense the central bank is also concerned about its reputation.

The development and introduction of financial derivatives have great impact on modern finance. Option pricing theory has become a powerful tool to value and to understand these innovations. It is also an indispensable tool to calculate hedge ratios for risk measurement and management. On the one hand, the introduction of new financial derivatives has been blamed for making financial market more volatile and risky as evidenced in the financial markets of the USA and Japan, especially during the expiration of index futures and index options, On the other hand, the applicability of new pricing models to hedging strategies is essential in monitoring and managing option positions. This study tries to give some answers on first: whether the expiration of financial derivatives increases the volatility of the Hong Kong stock market; second: whether we can better hedge by straightly applying more elaborated option valuation models replacing the standard Black-Scholes model, which market participants commonly employed for hedging option positions. Part I of this article addresses the first question while Part II studies the second question. / Yung Hei Ming. / Source: Dissertation Abstracts International, Volume: 62-09, Section: A, page: 3138. / Supervisor: Zhang Hua. / Thesis (Ph.D.)--Chinese University of Hong Kong, 2001. / Includes bibliographical references. / Electronic reproduction. Hong Kong : Chinese University of Hong Kong, [2012] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Electronic reproduction. Ann Arbor, MI : ProQuest dissertations and theses, [200-] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Electronic reproduction. Ann Arbor, MI : ProQuest Information and Learning Company, [200-] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Abstracts in English and Chinese. / School code: 1307.

by Kam Ka Yan, Karen, Tan Wai Hon. / Thesis (M.B.A.)--Chinese University of Hong Kong, 2000. / Includes bibliographical references (leaf 50). / ABSTRACT --- p.ii / TABLE OF CONTENTS --- p.iii / LIST OF ILLUSTRATIONS --- p.iv / LIST OF TABLES --- p.v / Chapter / Chapter I --- INTRODUCTION --- p.1 / Red Wine from the French Bordeaux --- p.1 / Top five Bordeaux wine --- p.2 / Chapter II --- ABOUT WINE AUCTION --- p.4 / Wine auction --- p.4 / Factors affecting the hammer price in wine auction --- p.5 / Chapter III --- METHODOLOGY --- p.7 / Objective and hypothesis --- p.7 / Data collection and translation --- p.12 / Chapter IV --- FINDINGS --- p.15 / Regression analysis of model1 --- p.15 / Chateau Lafite --- p.15 / Chateau Latour --- p.17 / Chateau Haut Brion --- p.19 / Chateau Margaux --- p.21 / Chateau Mouton Rothschild --- p.23 / Combined Data --- p.25 / Regression analysis of Model2 --- p.27 / Chateau Haut Brion --- p.27 / Chateau Latour --- p.29 / Chateau Margaux --- p.31 / Chapter V --- CONCLUSION AND IMPLICATIONS --- p.33 / APPENDIX --- p.35 / BIBILIOGRAPHY --- p.50

Chu Chun-fai, Carlin. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2001. / Includes bibliographical references (leaves 69-73). / Abstracts in English and Chinese. / Chapter Part I: --- INTRODUCTION --- p.1 / Chapter Part II: --- LITERATURE REVIEW --- p.4 / Chapter - --- Financial option-pricing theory / Chapter - --- Real option-pricing theory / Chapter - --- Real option-pricing theory in Management Information System Area / Chapter Part III: --- CASE BACKGROUND --- p.14 / Chapter - --- Case Background / Chapter - --- Availability of online banking services in Hong Kong / Chapter - --- Online banking investment in the Hong Kong Chinese Bank / Chapter Part IV: --- RESEARCH MODEL --- p.19 / Chapter - --- Research model / Chapter - --- Modelling of the optimal timing problem of HKCB / Chapter - --- Justification of geometric Brownian motion assumption for using Black-Scholes formula / Chapter Part V : --- DATA COLLECTION --- p.30 / Chapter Part VI: --- ANALYSIS RESULT --- p.35 / Chapter - --- Analysis result / Chapter - --- Sensitivity analysis on the selected parameters / Chapter - --- Suggested investment timing / Chapter Part VII: --- DISCUSSIONS AND IMPLICATIONS --- p.44 / Chapter - --- Result discussion / Chapter - --- Implications for researchers / Chapter - --- Implications for practitioners / Chapter Part VIII: --- LIMITATIONS AND CONTRIBUTIONS --- p.48 / Chapter - --- Limitation on data collection process / Chapter - --- Limitations on Black-Scholes model / Chapter - --- Contributions / APPENDIX / Appendix A -Limitation of traditional Discounted Cash Flow analysis --- p.51 / Appendix B -Banks services available to the customers --- p.54 / Appendix C -Sample path of a Geometric Brownian Motion --- p.56 / Appendix D -Discounted Cash Flows analysis of immediate entry of online banking investment --- p.57 / Appendix E -Black-Scholes formula and its interpretation for non-traded --- p.61 / Appendix F -Questionnaire for Online banking investment --- p.64 / Appendix G -Availability of online banking services in May 2001 --- p.67 / Appendix H -Sensitivity analysis on the number of initial usage --- p.68 / Appendix I -Reference List --- p.69

All these results indicate that the hypothesis of weak-form market efficiency has limited applicability in the Hong Kong stock market and that recognised inefficiencies are strongly associated with the information of trend-chasing technical analysts. The results are also consistent with the findings of a theoretical model proposed in this dissertation. In particular, the model suggests that trend-chasing behaviour, together with uncertainty about intrinsic values, contributes to market inefficiency. / This dissertation studies the relationship between the use of trend-chasing technical analysis and inefficiency in the Hong Kong stock market. To answer how widespread use of technical analysis can influence stock prices, a simple equilibrium model is developed. It is shown that trend-chasing behaviour, together with uncertainty about intrinsic values, leads to market inefficiencies in the form of overshooting, positive autocorrelation of short-horizon returns, mean reversion and excess volatility. / To empirically test whether market inefficiency is associated with the information of trend-chasing technical analysts, this dissertation focuses on the Hong Kong stock market, in which technical analysis is widely used. The data covers daily closing values of the Hang Seng Index (HSI) in Hong Kong from 1969 to 1992. The results show that the buy and sell signals obtained from MA rules, which are commonly used indicators of technical analysis in the market, are strongly associated with abnormal price behaviour. For instance, when changes in these MA signals are observed, short-run abnormal price behaviour is noted. That is, stock prices tend to rise when the MA rules change to buy signals and tend to fall when they change to sell signals. Also, autocorrelation in daily returns appears to differ for periods following buy and sell signals. Daily returns tend to be more autocorrelated when the MA rules provide buy signals and less autocorrelated when they provide sell signals. Moreover, when most MA rules show buy signals, mean reversion is more pronounced in subsequent dates. Furthermore, fund managers in Hong Kong can benefit from using the buy and sell signals because they consistently provide information allowing for superior market timing. / by Wong Chak-sham Michael. / Source: Dissertation Abstracts International, Volume: 59-09, Section: A, page: 3579. / Thesis (Ph.D.)--Chinese University of Hong Kong, 1997. / Includes bibliographical references (p. 134-145). / Electronic reproduction. Hong Kong : Chinese University of Hong Kong, [2012] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Electronic reproduction. Ann Arbor, MI : ProQuest dissertations and theses, [200-] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Electronic reproduction. Ann Arbor, MI : ProQuest Information and Learning Company, [200-] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / School code: 1307.