Maosen Zhong

Intraday trading volume and return volatility of the DJIA stocks: A note

We examine the contemporaneous correlation as well as the lead-lag relation between trading volume and return volatility in all stocks comprising the Dow Jones Industrial Average (DJIA). We use 5-minute intraday data and measure return volatility by the EGARCH method. Contrary to the mixture of distribution hypothesis, the vast majority of the DJIA stock shows no contemporaneous correlation between volume and volatility. However, we find evidence of significant lead-lag relations between the two variables in a large number of the DJIA stocks in accordance with the sequential information arrival hypothesis.

On the Role of Futures Trading in Spot Market Fluctuations: Perpetrator of Volatility or Victim of Regret?

We examine the role of index futures trading in spot market volatility. We use the exponential generalized autoregressive conditional heteroskedasticity (EGARCH) approach to measure volatility, analyze causality and feedback relations between volatilities in the spot and futures markets, and test various hypotheses in the context of a multivariate model that incorporates other macrostate variables. Our empirical results suggest index futures trading may not be blamed for the observed volatility in the spot market. Rather, we find stronger and more consistent support for the alternative posture that volatility in the futures market is an outgrowth of a turbulent cash market. We use the regret (cognitive dissonance) theory to explain our results. The Southern Finance Association and the Southwestern Finance Association.

Permanent and Transitory Driving Forces in the Asian-Pacific Stock Markets

This paper uses weekly data from November 1987 through May 1999 to examine whether U.S. or the Japan stock market (or both) is the main driving force behind major movements in eleven emerging Asian-Pacific stock markets. We find a robust cointegrating relation linking each of the emerging market with the two matured markets of the U.S. and Japan. The results also show that the U.S., rather than Japan, is the main permanent force driving the equilibrium relations across all Asian-Pacific markets. In contrast, the effect of the Japanese market on the Asian-Pacific region is only transitory. Therefore, strategic asset portfolios in the Asian-Pacific region should include Japanese stocks to diversify any country specific risks. As to U.S. investors, the persistent influence of the U.S. market may limit long-run diversification gains from Asian-Pacific stocks. Copyright 2002 by the Eastern Finance Association.

Testing export exogeneity in Taiwan: further evidence

Export-promotion policies have been widely credited for fostering economic growth in the four `Asian Tigers’ of Hong Kong, South Korea, Singapore, and Taiwan. In their well-known comparative study of economic growth and public policy in East Asia, the World Bank (1993) argued that other developing countries can (and perhaps should) emulate East Asia’s success. The World Bank remarked, `The export-push strategy appears to hold great promise for other developing economies, ’ (p. 25). In an interesting recent paper, Kwan, Cotsomitis and Kwok (1996) ± thereafter, KCK ± have subjected the above contention to empirical testing in the case of Taiwan using the exogeneity procedures proposed by Engle and Hendry (1993). For the annual sample period 1953± 1988, KCK reported results supportive of the implication of the export-led growth (ELG) hypothesis that exports in Taiwan are weakly exogenous which justi® es the use of single equation models for studying the impact of exports of economic growth. However, KCK also claimed that their results are at odds with the ELG hypothesis since they reject super-exogeneity of exports. If valid, these results cast some doubts on the ability of export promotion policies to spur economic growth in Taiwan. The purpose of this paper is to address two major problems in KCK’s work. Correcting for these ̄ aws, the empirical results obtained reject KCK’s notion and show that exports in Taiwan are both weakly and superexogenous to output. II . SOME MODELLING ISSUES

Does advertising stimulate sales or mainly deliver signals? A multivariate analysis

The main purpose of this article is to empirically examine the Galbraithian hypothesis that advertising adjusts aggregate demand to the changing industrial development and consequently stimulates sales. The causal relations between sales and advertising are tested in the context of a vector autoregressive system using the US aggregate data over the post-Second World War period. Our empirical results fail to support the Galbraithian thesis, and suggest instead the presence of a potent reverse causality running from aggregate sales to advertising. We use the signalling theory to interpret our results.