Ginette M. McManus

International portfolio diversification: US and Central European equity markets

Abstract This paper examines the short- and long-term relationships between the US stock market and three Central European markets. Low short-term correlations between these markets and the US are found. Application of the Johansen cointegration procedure indicates that there is no long-term relationship. The Granger-causality test does reveal a causality running from the Hungarian to the Polish market, but none with the US. Overall, the results suggest that US investors can obtain benefits from international diversification into these markets.

Random-Walk and Efficiency Tests of Central European Equity Markets

The existence of weak-form efficiency in the equity markets of the three main Central European transition economies (the Czech Republic, Hungary, and Poland) is examined for the period July 1995 through September 2000, using weekly Investable and Comprehensive indexes developed by the International Finance Corporation. Several different approaches are used. Univariate and multivariate tests provide some evidence that stock prices in these exchanges exhibit a random walk, which would support weak-form efficiency. This differs in some cases from studies using data for the initial years of these markets. The variance ratio test of Lo and MacKinlay (1988) yields somewhat mixed results concerning the random walk properties of the indexes. A model-comparison test compares forecasts from a NAIVE model with ARIMA and GARCH alternatives. Results from the model-comparison approach are consistent in rejecting the random-walk hypothesis for the three Central European equity markets.

The Dynamics of Central European Equity Market Integration

This paper examines bilateral and multilateral cointegration properties of the German stock market and those of the three major Central European countries which recently attained membership in the European Union. Cointegration tests cover the time period of July 6, 1995 to February 10, 2005. Additional techniques are also applied to provide further information concerning the dynamic evolution of the integration process during this period. Application of the Johansen (1988) cointegration procedure indicates that, contrary to results for an earlier time period there is evidence of an emerging long-term relationship between the German and UK markets and the Czech market, as well as cointegration within the group of Central European markets. We also apply the Haldane and Hall convergence analysis, in an effort to determine the extent to which these markets are converging to London or Frankfurt. Overall, the results suggest that the process of integration of the Central European countries into the EU is leading to a closer integration of their equity markets with those of major EU countries.

The Impact of NAFTA on the Integration of the Canadian, Mexican, and U.S. Equity Markets

This paper tests for the existence of a long-run co-movement between the three North American stock markets of Canada, Mexico, and the U.S. and examines whether or not the implementation of the North American Free Trade Agreement (NAFTA) has led to more integrated equity markets. Application of the Johansen and Juselius (1990) cointegration procedure indicates a long-term relationship. A vector error-correction (VEC) model establishes that all three markets are involved in the long-run adjustment toward equilibrium. Overall, the results suggest that the implementation of NAFTA has promoted greater economic integration between the three North American countries.

Evaluating a Stock Market Timing Strategy: The Case of RTE Asset Management

Abstract Market timing is a popular active investment strategy that promises to beat the market. However, the evidence on the ability of timers to outperform the market is mixed. This paper provides strong supporting evidence of the timing ability of RTE Asset Management by investigating the implemented buy and sell recommendations derived from its proprietary computerized model over the 1979–1999 period and several subperiods. We use various performance-evaluation methodologies that investors can easily implement. The evidence obtained on market timing skills is essentially invariant to the evaluation method used if the analysis is performed over a long time period.

Formal strategic planning, informedness and firm performance: An empirical investigation

Formal strategic planning (hereafter FSP) is the most sophisticated form of planning. It implies that a firm’s strategic planning process involves explicit systematic procedures used to gain the involvement and commitment of the stakeholders most affected by the plan. There is a significant strategic dimension to the planning at both corporate and lower levels. In this context, the corporate plan is a document that takes a corporate perspective and is not just an agglomeration of lower level p1ans.l A recurring theme in management literature is that firms should engage in such systematic or formal strategic planning. Advocates of planning such as Ansoff (1984), Hax and Majluf (1984), and Thompson and Strickland (1978) argue that FSP contributes to managerial effectiveness and, thus, to corporate success. A logical extension of this assertion is that firms engaged in FSP should outperform firms not engaged in such planning and/or that firms’ post-planning performance should be superior to their performance prior to launching formal strategic planning processes. No clear empirical evidence, however, has emerged to support a positive relationship between FSP and organization performance. Studies of the performance-planning relationship for American firms are inconclusive with respect to the benefits of corporate planning, and little direct evidence on this topic is available on Canadian firms.2

Revisiting the declining price anomaly in wine auctions

This paper investigates the declining price anomaly in wine auctions. The anomaly refers to the observation that when identical lots of wine are sold sequentially in a single auction, prices are more likely to decrease with later lots. Using The Chicago Wine Companys auction data, we find no evidence of declining prices in sequential wine auctions. The results are robust and consistent across wine price ranges.