Academic literature on the topic 'Volatility predictability'

The objective of this thesis is to add evidence from the transition equity markets of Central Europe to the econometric modelling of financial time series by addressing the issues of volatility, predictability and international asset pricing in these markets. In Chapter Two we start from an overview of the transition stock markets by presenting their historical background, basic regulations, statistics, and stock market indices. Chapter Three focuses on the modelling of univariate and multivariate volatility in transition equity markets. Our sample has all the previously documented characteristics of the unconditional distribution of stock returns normally used to justify the use of the GARCH class of the models of conditional volatility. Strong GARCH effects are apparent in all series examined. The estimates of asymmetric models of conditional volatility show rather weak evidence of asymmetries in the markets. The results of the multivariate specifications of volatility have implication for understanding the pattern of information flow between the markets. The constant correlation specification indicates significant conditional correlation between three pairs of countries: Hungary and Poland, Hungary and Czech Republic, and Poland and Czech Republic. The BEKK model of multivariate volatility shows evidence of return volatility spillovers from Hungary to Poland, but no volatility spillover effects are found in the opposite direction. Chapter Four examines the linear and nonlinear predictability of transition equity returns with simple technical trading rules. The application of the moving average trading rules to the data reveals that technical analysis helps to predict stock price changes. Firstly buy signals consistently generate higher returns than sell signals; secondly the returns following buy signals are less volatile than returns following sell signals. The application of the bootstrap methodology to check whether three popular null models of stock returns with linear conditional mean specification replicate the trading rule profits indicates that returns obtained from trading rules signals are not likely to be generated by these models. Comparison of the out-of-sample forecast performance of linear and nonlinear (feedforward networks) conditional mean estimators with past trading signals in the conditional mean equation indicates substantial forecast improvements of the feedforward network regression. Chapter Five addresses the issue of integration of the transition equity markets into the global capital market by testing pricing restrictions of the international CAPM simultaneously for four national equity markets: two developed markets (U.S. and Germany) and two new transition markets (Hungary and Poland). Methodologically, we extend the BEKK multivariate GARCH specification to accommodate GARCH-M effects, and propose an alternative specification of the conditional CAPM, which allows return volatility transmissions between the markets in the system. The results reveal that the world price of covariance risk is positive and equal across the markets. This is consistent with the international CAPM and supports the hypothesis of integration of the transition markets into the global market. However, our further results indicate individual significance of the Hungarian idiosyncratic risk, pointing to some level of segmentation of the Hungarian market. Moreover, the introduction of world-wide information variables into the system reveals that some variation in the excess national returns is still predictable after accounting for the measure of market-wide risk.

Mestrado em Decisão Económica e Empresarial<br>Esta tese descreve como as moedas digitais se tornaram no novo fenómeno nos mercados financeiros e como a mais popular das moedas digitais - Bitcoin - originou perguntas cruciais sobre o seu valor e como ao mesmo tempo as suas séries financeiras criaram uma oportunidade para estudar várias dinâmicas sobre o preço, que tipicamente estão fortemente ligadas a movimentos especulativos e sem análise fundamental. Com a utilização de um modelo GARCH(1,1) sobre dados diários e centrando-se em dois fenómenos recentes - moedas digitais, nomeadamente Bitcoin e conteúdo web oriundo do Google Trends, Wikipedia e Twitter - verificámos que os retornos da Bitcoin são fortemente impulsionados pela sua popularidade. Assim, analisando este relacionamento e modelando a existência de variâncias condicionais heterocedásticas demonstramos que o conteúdo proveniente de motores de busca e redes sociais e a flutuação nos preços Bitcoin estão intensamente ligados e que esta relação exibe alguma previsibilidade.<br>This thesis describes how digital currencies have rose as a new interesting phenomenon in the financial markets and how the most popular of the digital currencies - BitCoin - have risen crucial questions about their exchange rates and also represents a field to study the dynamics of this market, which is strongly connected with speculative traders with no fundamentals as there is no fundamental value to the currency. Using a GARCH(1,1) model on daily data and focusing on two emerging phenomena of recent years - digital currencies, particularly Bitcoin, and web content provided by search queries on Google Trends and Wikipedia and tweets from Twitter - we discover that Bitcoin returns are driven primarily by its popularity. Thus, we analyze their relationship, the existence of volatility clustering and demonstrate that the web content and Bitcoin prices are connected and they exhibit some predictable power.

Thesis (Ph. D.)--University of California, San Diego, 2008.<br>Title from first page of PDF file (viewed Sept. 4, 2008). Available via ProQuest Digital Dissertations. Vita. Includes bibliographical references (p. 127-132).

I examine the relation between a firm's dividend policy and its strategic tax decisions. I posit that the capital market pressure associated with paying a dividend leads dividend-paying firms to seek predictable cash flows. I specifically focus on the volatility of a firm's cash effective tax rate (ETR) due to the observability, large size, variability, and periodicity of cash tax payments. Consistent with dividend payments altering a firm's strategic tax preferences, I find that firms that pay a higher dividend exhibit more predictable cash ETRs. Further, I find that the predictability of a dividend-initiating (eliminating) firm's cash ETR subsequently increases (decreases). Additionally, I find that, consistent with prior research suggesting that financially constrained firms "borrow" cash from their tax account, financial constraint moderates the positive relation between the predictability of a firm's cash ETR and its dividend payments. Importantly, my results hold for firms initiating a dividend in response to the exogenous shock of the Bush tax cuts. Finally, I also examine specific tax strategies dividend-paying firms use to help increase the predictability of their cash tax payments. My results contribute to the academic literature by examining whether, and how, dividend-paying firms alter their strategic tax decisions. Additionally, I contribute to ongoing public policy debates over the value of dividend payments by demonstrating a positive relation between dividend payments and the predictability of a firm's cash tax payments.

This thesis examines the relationship between investors' attention and movements in financial markets. Providing an explanation to the relationship between investor attention and market returns and return volatility, where attention is measured by Google search volume and two indirect price-based measures, investor attention does not contribute to return predictability however significant links to volatility are found. Furthermore, revisiting the joint volume-volatility relationship seeking to investigate the dynamic links of market volatility, trading volume, and investor attention (measured by Google search and Twitter tweet volume), investor attention provides a somewhat significant link for the rate at which investors seek market information.