Martin T. Bohl

German monetary unification and the stability of the German M3 money demand function

Abstract This paper employs quarterly data from the whole of Germany to test the stability of M3 demand for money. The methodology is based on an application of the CUSUM and CUSUMSQ in the context of error-correction modeling and cointegration. The results reveal some instability in M3 money demand function.

Trading volume and stock market volatility: The Polish case

Relying on the mixture of distributions hypothesis, this paper investigates the relationship between daily returns and trading volume for 20 Polish stocks. Our empirical results show that in the majority of cases volatility persistence tends to disappear when trading volume is included in the conditional variance equation, which is in agreement with the findings of studies on developed stock markets. However, we cannot confirm the testable implications of the mixture of distributions hypothesis in all cases which indicates that future research on the causes and modeling of Polish stock market volatility is necessary.

Periodically Collapsing Bubbles in the US Stock Market

The existence of periodically collapsing bubbles in stock markets, applying the Enders-Siklos momentum threshold autoregressive model, is empirically investigated in this paper. Using this non-linear time series technique, we are now able to analyse bubble driven run-ups in stock prices followed by a crash in a cointegration framework with asymmetric adjustment. Therefore, applying this technique makes possible a deeper insight into the behavior of stock prices than was previously possible using conventional cointegration tests. Although the results from the subsample 1871 - 1995 cannot be interpreted in favor of the existence of periodically collapsing bubbles in the US stock market, the findings from the 1871 - 2001 sample period indicate their presence.

The Present Value Model of US Stock Prices Redux: A New Testing Strategy and Some Evidence

Relying on a present value model with time-varying expected returns, and incorporating a quite general class of processes to model bubble-like stock price deviations from the long-run equilibrium, we provide empirical evidence on the U.S. log dividend–price ratio over the 1871:1–2001:9 period, as well as for several sub-periods. The application of a momentum threshold autoregressive technique designed to detect asymmetric short-run adjustments to the long-run equilibrium provides empirical support in favor of the long-run validity of the present value model. Nevertheless, in the short-run, U.S. stock prices exhibit large and persistent bubble-like departures from present value prices followed by a crash.

Spatial Market Efficiency and Policy Regime Change: Seemingly Unrelated Error Correction Model Estimation

Now published as a Journal Article in American Journal of Agricultural Economics Volume 84 Issue 4 Page 1042 - November 2002 doi:10.1111/1467-8276.00366

From hero to zero: Evidence of performance reversal and speculative bubbles in German renewable energy stocks

Stocks of German renewable energy companies have commonly been regarded as lucrative investment opportunities. Their innovative line of business initially seemed to promise considerable future earnings. As shown by two powerful bubble tests, the positive sentiment for renewable energy stocks even led to explosive price behavior in the mid-2000s. However, intense sector competition and the economic downturn following the global financial crisis erased profit margins to a large extent. As a result, the former fad stocks have recently turned into losers, loading negatively on price momentum and delivering significantly negative Carhart four-factor alphas. The radical shift in Germany’s energy policy following the 2011 Fukushima nuclear disaster in Japan could thus only temporarily halt the continuing decline in alternative energy stock prices.

Empirical Evidence on Feedback Trading in Mature and Emerging Stock Markets

We investigate the hypothesis that some participants in mature and emerging stock markets engage in feedback trading. The analysis is based on the Shiller–Sentana–Wadhwani model, which has the attractive property that it yields testable implications about the presence of positive and negative feedback traders in stock markets. In addition, the Shiller–Sentana–Wadhwani model is particularly well-suited to investigate whether momentum type behaviour might be present during periods of large stock market downturns. This theoretical framework, together with asymmetric GARCH-type models, allows us to draw conclusions whether differences exist between mature and emerging stock markets in terms of the degree of feedback trading as well as the behaviour of traders during stock market crashes.

Does Futures Speculation Destabilize Spot Prices? New Evidence for Commodity Markets

Motivated by repeated price spikes and crashes over the last decade, we investigate whether the growing market shares of futures speculators destabilize commodity spot prices. We approximate conditional volatility and analyze how it is affected by speculative open interest. In this context, we split our sample into two equally long subperiods and document whether the speculative impact on conditional volatility increases. With respect to six heavily traded agricultural and energy commodities, we do not find robust evidence that this is the case. We thus conclude that the financialization of raw material markets does not make them more volatile.

The Other January Effect: international evidence

This paper investigates the predictive power of stock market returns in January for the subsequent 11 months’ returns across 19 countries, thereby contributing to the literature on stock market seasonalities. Only 2 out of 19 countries’ stock markets exhibit a robust Other January Effect. In the light of this evidence, we conclude that the Other January Effect is not an international phenomenon.

Real-Time Forecasting and Political Stock Market Anomalies: Evidence for the United States

Using monthly data from 1953 to 2003, we apply a real-time modeling approach to investigate the implications of U.S. political stock market anomalies for forecasting excess stock returns in real-time. Our empirical findings show that political variables, chosen on the basis of widely used model-selection criteria, are often included in real-time forecasting models. However, political variables do not contribute systematically to improving the performance of simple trading rules. For this reason, political stock market anomalies are not necessarily an indication of market inefficiency.