The aim of this research is to investigate the long-run co-integrating relationships in the Asian markets. Our research focuses on 4 areas; pair trading, out-of-sample forecasting, testing the unbiased forward exchange rate hypothesis and testing the expectation hypothesis of the term structure of interest rates. The introduction is provided in chapter one. In chapter two, we develop a pairs trading strategy using individual stocks listed in the Stock Exchange of Thailand. Engle and Granger approach is used to identify the potential pairs that are cointegrated. The results show that pairs trading strategy is profitable in this market. Chapter three examines the forecasting performance of the error correction model on daily share price series from the Stock Exchange of Thailand. The disequilibrium term is classified into “correct” and “mix” sign based on Alexander (2008)’s criterion; the results indicate that the error correction component can help to improve the predictability in the long run. Chapter four tests the unbiased forward rate hypothesis of 11 Asian exchange rates using linear conventional regression, ECM and logistic smooth transition regression with the forward premium as the transition variable. Out-of-sample forecasting results also suggest that inferior forecasting performance could be obtained as a result of using linear models. In chapter five, we investigate the expectation hypothesis of the term structure of interest rate for four Asian countries. We employ linear models and nonlinear approaches that allow to capture asymmetric and symmetric adjustments. The result also indicates that the term structure can be better modeled by means of LSTR models. The forecasting exercise also confirms these findings.
| Identifer | oai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:569689 |
| Date | January 2013 |
| Creators | Tanonklin, Tippawan |
| Contributors | Spagnolo, F. |
| Publisher | Brunel University |
| Source Sets | Ethos UK |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
| Source | http://bura.brunel.ac.uk/handle/2438/7364 |
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