Sinclair Davidson

The Sydney Olympic Games announcement and Australian stock market reaction

On 23 September 1993 the International Olympic Committee announced that Sydney would host the 2000 Olympic Games. Given the keen competition between rival cities bidding for the Olympics it could be argued that the winning city anticipates economic benefits to accrue from hosting the games. To the extent that this is valid, some stock market reaction may be found to the Olympic announcement. Testing the hypothesis for Australia the following results are found. First no overall impact on the stock market is found. Second, only a limited number of industries portfolios show a significant positive impact to the Olympic games announcement. Specifically the industry portfolios are: building materials, developers and contracts, engineering and miscellaneous services. This is consistent with the economic boost for the Olympics being in infrastructure and development and thus in the general building and construction sector. Third the results clearly demonstrate that for the industries where there was a significant positive stock market reaction to the Olympic Games announcement, that significant positive stock market reaction is confined to stocks based in the state which will host the games, New South Wales.

Gold factor exposures in international asset pricing

The purpose of this paper is to examine the role of gold in modern international asset pricing. We find that although the real premium on gold has been negative since the beginning of the 1980s, many industries still have a significant exposure to the commodity. Moreover, this exposure is stable and consistent over the 20 years of the study. Asset pricing tests reject the null hypothesis that the market and gold factor exposure of the worlds industries are jointly equal to 0, providing fresh evidence that gold still retains its importance in todays economy.

An Examination of the Effects of Major Political Change on Stock Market Volatility : The South African Experience

Prior to President de Klerks historic announcement on 2 February 1990, South Africa was the subject of extreme economic and political isolation. As a result of this announcement, it would be expected that South Africas financial markets transformed from a state of segmentation to a degree of integration in world markets. One means of assessing the possible effects of this major political change is by investigating stock market volatility. Specifically, we would expect that the post-announcement volatility would behave more like that observed in other developed markets. Accordingly, in this paper, we investigate the applicability of the ARCH family of models to South African stock return data, over the period 20 March 1986 to 23 February 1996. Our results support the applicability of ARCH models. Furthermore, more complex volatility models can be supported in the post-announcement period, suggesting greater international integration of the Johannesburg Stock Exchange in the post-1990s period.

Some additional Australian evidence on the day-of-the-week effect

This paper re-investigates the day-of-the-week effect in Australia. This issue has been previously investigated using an Australian dataset over the period 1974-95 by Easton and Faff (Applied Financial Economics, 4, 1994). They find that the robust techniques suggested by Connolly (Journal of Financial and Quantitative Analysis, 24, 1989) do not alter results of standard OLS techniques. This paper shows that the day of the week effect has disappeared in recent years and that given an adjustment, for large sample size may not have been evident in the data over the period 1983-96.

Economics of Blockchain

Claims blockchain is more than just ICT innovation, but facilitates new types of economic organization and governance. Suggests two approaches to economics of blockchain: innovation-centred and governance-centred. Argues that the governance approach — based in new institutional economics and public choice economics — is most promising, because it models blockchain as a new technology for creating spontaneous organizations, i.e. new types of economies. Illustrates this with a case study of the Ethereum-based infrastructure protocol and platform Backfeed.

Positive Externalities and R&D: Two Conflicting Traditions in Economic Theory

This paper explores the early discussion of external economies in the work of Alfred Marshall and Arthur Pigou. Marshall emphasized external economies as a positive aspect of the market process. Pigou’s interpretation of externalities has become the standard public finance argument on the existence of market failure, and provides the rationale for proposed policy solutions. An examination of the differences between the two perspectives is subsequently used as the base for a discussion of the modern analysis of research and development, and of the difficulties inherent in the standard Pigovian view. A final substantive section of the paper reconsiders the Marshallian perspective, identifying recent contributions to economic theory that have begun a return to Marshall’s original interpretation. The conclusion considers the significance of this Marshallian tradition for industrial policy.

Information-Adjusted Noise Model: Evidence of Inefficiency on the Australian Stock Market

We describe the interaction between noise traders and information traders. We do not assume that information traders are error-free. Instead information traders make mistakes leading to under-reaction and over-reaction. Information traders may even add to pricing errors in the market. These interactions are captured in our information-adjusted noise model. We test our model using data from the Australian Stock Exchange. This market has a continuous information disclosure regime that allows us to determine when information is released to the market. We present evidence consistent with the notion that the market is often informationlly inefficient.

Sudden changes in property rights: the case of Australian native title

Recent High Court decisions in Australia relating to Aboriginal native title have the potential to provide insights to the origins of property rights and the possible costs of changes to those rights. This paper investigates these issues by analyzing the court judgements and by means of a stock market event study. It seems that neither the naive view nor the legal centralist view of property rights can adequately explain Australian native title. Further we do not find significant costs resulting from the change in property rights.

Announcements and revisions of Australian macroeconomic data and their news content for Australian financial markets

Abstract This paper investigates the responsiveness of nine Australian financial markets to announcements and revisions of balance on current account and GDP data. We find that current account announcements have a significant effect. Globally, the whole set of revisions are not significant but some individual revisions are statistically significant. When we partition announcements and revisions into good news and bad news we find that with respect to announcements only bad news about the current account has a significant impact. While the global set of revisions are not significant, an increased number of isolated revisions are significant. However, our general conclusion as to the overall lack of significance of the revisions data still holds true.

The nature and extent of revisions to Australian macroeconomic data

This paper explores the nature and extent of revisions to Australian macroeconomic data. Specifically, we analyse quarterly GDP and monthly balance on current account data. We find some impact of revisions. In addition, we also find that indirect measures of data quality, such as, statistical discrepancy in the case of GDP and the balancing item in the case of the balance on current account are still large after the revisions are completed.