Wharton-SMU Research Center

In-House Seminar

Guest Speaker:
Francis X. DIEBOLD
W.P. Carey Professor of Economics, Finance, and Statistics, The Wharton School, University of Pennsylvania

Date & Venue:
Date: 16 July 2004, Friday
Time: 3.30pm-5.00pm
Venue: Federal Building, Level 1, Seminar Room 3,
Singapore Management University
469 Bukit Timah Road, Singapore 259756
(Location Map)

Topic:
Financial Asset Returns, Direction-of-Change Forecasting, and Volatility Dynamics

About the Seminar:
We consider three sets of phenomena that feature prominently - and separately - in the financial economics literature: conditional mean dependence (or lack thereof) in asset returns, dependence (and hence forecastability) in asset return signs, and dependence (and hence forecastability) in asset return volatilities. We show that they are very much interrelated, and we explore the relationships in detail. Among other things, we show that: (a) Volatility dependence produces sign dependence, so long as expected returns are nonzero, so that one should expect sign dependence, given the overwhelming evidence of volatility dependence; (b) The standard finding of little or no conditional mean dependence in entirely consistent with a significant degree of sign dependence and volatility dependence; (c) Sign dependence is not likely to be found via analysis of sign autocorrelations, runs tests, or traditional market timing tests, because of the special nonlinear nature of sign dependence; (d) Sign dependence is not likely to be found in very high-frequency (e.g., daily) or very low-frequency (e.g., annual) returns; instead, it is more likely to be found at intermediate return horizons; (e) Sign dependence is very much present in actual U.S. equity returns, and its properties match closely our theoretical predictions; (f) The link between volatility forecastability and sign forecastability remains intact in conditionally non-Gaussian environments, as for example with time-varying conditional skewness and/or kurtosis.

Chairperson:
Tse Yiu Kuen
Professor of Economics, School of Economics & Social Sciences, Singapore Management University

Registration:
This seminar is free. Please register early. (Admission on a first-come-first-served basis.)
For registration, please click here (Registration closes on 15 July 2004, Thursday)

Enquiries:
Ms. Lim Lih Yeng
Email: lylim@smu.edu.sg, Tel: 6822-0197
Ms. Priscilla Cheng
Email: priscillacheng@smu.edu.sg, Tel: 6822-0383