Kalman filter estimation for valuing nontrading securities, with applications to the MMI cash-future spread on October 19 and 20, 1987

Bassett, Gilbert W.; Pliska, Stanley R.

doi:10.1007/bf02409668

Cited by 16 publications

(8 citation statements)

References 18 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Stoll and Whaley (1990) suggested the residuals from an ARMA (p,q) regressions as a proxy for the true index. Bassett, France and Pliska (1991) used the Kalman filter to estimate a distribution of the true index. Miller, Muthuswamy and Whaley (1994) proposed to remove the effects of thin trading by using moving averages, which reflects the number of nontrading days, and then returns are adjusted accordingly.…”

Section: Introductionmentioning

confidence: 99%

Testing for Market Efficiency in Emerging Markets: A Case Study of the Karachi Stock Market

Mustafav¹,

Nishat²

2007

LJE

View full text Add to dashboard Cite

This paper investigates the efficiency of the Karachi stock exchange (KSE) with corrections for thin trading and non-linearity as suggested by Miller, Muthuswamy and Whaley (1994). Daily, weekly, and monthly data on stock prices from December 1991 to May 2003 have been used, with three non-overlapping periods (December 1991 to May 1998; May 1998 to September 2001; and September 2001 to May 2003) and one combined period (May 1998 to May 2003). The results indicate that the Karachi Stock Market is efficient for the overall period, the three sub-periods, and the combined period in linear and non-linear behavior after making adjustments for thin trading. The same result is observed when the efficiency test is conducted on weekly and monthly data after adjusting for thin trading during the overall study period.

show abstract

Section: Introductionmentioning

confidence: 99%

Testing for Market Efficiency in Emerging Markets: A Case Study of the Karachi Stock Market

Mustafav¹,

Nishat²

2007

LJE

View full text Add to dashboard Cite

show abstract

“…A number of different approaches have been suggested to correct for infrequent trading. Stoll and Whaley (1990) use the residuals from an ARMA( p, q) regression as a proxy for the true index, whereas Bassett, France, and Pliska (1991) propose the use of a Kalman filter to estimate the distribution of the true index. In this paper, we employ a modified version of the Stoll and Whaley approach suggested by Jokivuolle (1995) to estimate the true unobservable index from the history of the observed index.…”

Section: Introductionmentioning

confidence: 99%

Testing the Random Walk Behavior and Efficiency of the Gulf Stock Markets

Abraham

Seyyed

Al‐Sakran

2002

The Financial Review

155

100

View full text Add to dashboard Cite

Inferences drawn from tests of market efficiency are rendered imprecise in the presence of infrequent trading. As the observed index in thinly traded markets may not represent the true underlying index value, there is a systematic bias toward rejecting the efficient market hypothesis. For the three emerging Gulf markets examined in this paper, correction for infrequent trading significantly alters the results of market efficiency and random walk tests. The BeveridgeNelson (1981) decomposition of index returns is done to estimate the underlying index.

show abstract

“…At this time, the filter was used to forecast the real rate of interest and the risk premia in forward and futures markets (Fama and Gibbons, 1982;Hsieh and Kulatilaka, 1982). Bassett et al (1991) used the Kalman filter to forecast forward prices of nontraded securities. There are also extensive applications in the fields of exchange rates and term structure of interest rates where the Kalman filter is used to forecast volatility and other key variables (Pennacchi, 1991).…”

Section: Resultsmentioning

confidence: 99%

The procyclicality of hedge fund alpha and beta

Racicot

Théoret²

2013

J Deriv Hedge Funds

View full text Add to dashboard Cite

François-Éric Racicotis Associate Professor of Finance at the Telfer School of Management, University of Ottawa. His research interests focus on the problems of measurement errors, specification errors and endogeneity in financial models of returns. He is also interested in developing new methods used for forecasting financial time series − especially hedge fund risk. He has published several books and many articles in quantitative finance and financial econometrics. Raymond Théoretis Full Professor of Finance at École des sciences de la Gestion, University of Quebec − Montreal (UQAM). His research focuses on banking systemic risk and hedge fund risk. He has published many books in asset pricing and many articles in the banking and hedge fund areas in well-known journals.Correspondence: François-Éric Racicot, Telfer School of Management, CGA-Canada Accounting and Governance Research Centre, University of Ottawa, 55 Laurier Avenue East, Ottawa, ON, K1N 6N5 Canada E-mail: Racicot@telfer.uottawa.ca ABSTRACT Traditional financial institutions as banks follow procyclical risk strategies, that is, they increase their leverage in economic expansions and reduce it in contractions, which leads to a procyclical behaviour for their betas and other risk and financial performance measures. We study the cyclical aspects of hedge fund strategies, an issue quite overlooked in the literature. We rely on two procedures: conditional modelling and Kalman filtering of hedge funds' alpha and beta. We find that hedge fund betas are usually procyclical. Our results also show that the alpha is often high at the beginning of a market upside cycle but, as the demand pressure increases, it progressively shrinks, which suggests that the alpha puzzle ought to be analysed in a dynamic setting.

show abstract

Kalman filter estimation for valuing nontrading securities, with applications to the MMI cash-future spread on October 19 and 20, 1987

Cited by 16 publications

References 18 publications

Testing for Market Efficiency in Emerging Markets: A Case Study of the Karachi Stock Market

Testing for Market Efficiency in Emerging Markets: A Case Study of the Karachi Stock Market

Testing the Random Walk Behavior and Efficiency of the Gulf Stock Markets

The procyclicality of hedge fund alpha and beta

Contact Info

Product

Resources

About