André Farber

Policy impacts on Vietnam stock markets: a case of anomalies and disequilibria 2000-2006

Vietnam launched its first-ever stock market, named as Ho Chi Minh City Securities Trading Center (HSTC) on July 20, 2000. This is one of pioneering works on HSTC, which finds empirical evidences for the following: Anomalies of the HSTC stock returns through clusters of limit-hits, limit-hit sequences; Strong herd effect toward extreme positive returns of the market portfolio;The specification of ARMA-GARCH helps capture fairly well issues such as serial correlations and fat-tailed for the stabilized period. By using further information and policy dummy variables, it is justifiable that policy decisions on technicalities of trading can have influential impacts on the move of risk level, through conditional variance behaviors of HSTC stock returns. Policies on trading and disclosure practices have had profound impacts on Vietnam Stock Market (VSM). The over-using of policy tools can harm the market and investing mentality. Price limits become increasingly irrelevant and prevent the market from self-adjusting to equilibrium. These results on VSM have not been reported before in the literature on Vietnam’s financial markets. Given the policy implications, we suggest that the Vietnamese authorities re-think the use of price limit and give more freedom to market participants.

A model for the achievement of accuracy in biology and economics

High levels of accuracy are difficult to achieve, yet they are critically important for the correct function of living systems. In molecular biology, where the problem is mostly one of accurate transfer of information, various systems have been developed to reach the required level of accuracy. An interesting case is provided by the mechanism of DNA replication. It appears that in bacteria, the enzyme which polymerizes the nucleotides into a new chain of DNA also presents an exonuclease activity which selectively excises mismatched nucleotides (Brutlag and Romberg, 1972). In eukaryotes, where the purified DNA polymerases have no nuclease activity, the “proofreading” seems to be done by a separate exonuclease which is responsible for the removal of incorrect nucleotides (Spadari, Villani and Radman, in prep.). This suggests that the replication of DNA is a two-step process : first the DNA polymerase catalyzes the addition of a new nucleotide on the growing DNA chain ; then a nuclease checks the fidelity of the process, thereby increasing the initial level of accuracy. A “proofreading” mechanism also seems to operate during the synthesis of proteins (Ninio, 1974).

Interest Rates and Inflation: European v. US Evidence 1960–1984

The evolution of interest rates during the 1970s and the early 1980s posed considerable challenges to both market practitioners and academic researchers. While the high and variable interest rates that emerged following the breakdown of the Bretton Woods system seemed hardly avoidable in a world of sharp exchange rate readjustments and unprecedented levels of world inflation, the record of sustained volatility they exhibit more than a decade later attests to the radical transformation of the financial environment.