Peter Yallup

Determining security speed of adjustment coefficients

Abstract Speeds of adjustment of asset prices towards their intrinsic values will provide direct measures of the degrees of over and underreactions in financial markets. The Amihud and Mendelson (J. Finance 42 (1987) 533) partial adjustment with noise model provides the framework for the analysis presented in this paper. Speed of adjustment coefficient estimators are developed which have advantages over existing estimators in that they can be adjusted for thin trading and have associated sampling distributions. The empirical properties of these estimators are found to be superior to extant estimators. Stock prices are found to be characterised by speeds of adjustment less than complete at short differencing intervals, while evidence of overreaction at longer differencing intervals is found. Large capitalisation stock speeds of adjustment coefficients are found to be higher in most cases than for small capitalisation stocks, even after adjusting for thin trading.

Measuring cash-futures temporal effects in the UK using partial adjustment factors

Abstract The nature and extent of intertemporal adjustments across stock index futures and cash markets in the UK are investigated in terms of partial adjustment factors. This approach affords the means of establishing both differential price movements in these markets and, additionally, providing a readily interpretable measure of the degree of such relative price movements. Analytic expressions are developed for jointly measuring the partial adjustment factors in cash and futures markets using a partial adjustment with noise model. The measures are adjusted for non-synchronous trading and asymptotic sampling variances derived. Adjustment factors are estimated using daily data over the period 1984–1992, with differencing intervals ranging from one to thirty days. Price adjustments were found to be fuller in futures markets, particularly over shorter differencing intervals. Corrections for non-synchronous effects in the cash market increased the magnitude of price adjustment, as did the exclusion of data from the 1987 crash period.

Settlement, tax and non-synchronous effects in the basis of U.K. stock index futures

The basis in stock index futures markets is analytically and empirically studied in this paper within a no-arbitrage/cost of carry framework.

Modelling a research portfolio using AHP — a group decision process

Abstract The problem of choosing a reseatch portfolio has been in the literature for many years. Suggested solutions have ranged from simple scoring models to complex mathematical resource allocation models, but the acceptance rate has been low. In this paper we present an application of a model based on th Analytic Hierarchy Process to a group decision situation. The results are encouraging, showing the positive nature of a model as a focal point in the process. They show that the interactive nature of the methodology encourages the development of subjective estimates and their subsequent discussion. An attempt to counter the problems of biasing was also made. The methodology presented is seen to be easy to use and adaptable, and becomes an integrating mechanism for the group.

Subjective Estimation and Its Use in MCDM

Subjective data is a major factor in all MCDM models, but there has been very little research into its validity. In this paper we present a series of experiments, using groups of people, in which they are asked to present their own estimates. The experiments are repeated in order to investigate stability. Although only simple cases, the results do point to the difficulties of using subjective estimates with confidence. More importantly they point to the problem of model specification in part of the process. Does the model have a great influence on the results, or do people have inbuilt solutions which they express whatever the methodology. It is on problems such as these that this research is focussed.

Liability-driven investment: multiple liabilities and the question of the number of moments

The selection of investments held in dedicated pension or insurance asset portfolios should be liability-driven. Techniques have been developed to hedge or immunize single liabilities from the effects of a variety of yield curve changes. In this paper, we extend these results to a more relevant practical problem, to immunize multiple liabilities occurring at different times in the future. This immunization approach can accommodate a variety of non-parallel yield curve behaviours. In a practical application, we demonstrate that our approach is effective in selecting index tracking portfolios in the UK Gilt (government bond) market.