Browsing by Subject "Heterogeneous expectations"

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Open Access
Essays in empirical finance
(2019-12) Serdengeçti, Süleyman
This thesis comprise three essays that investigate foreign exchange market volatility and its dynamics using high frequency exchange rate data. In the first essay, we decompose the jump component of USDTRY exchange rate volatility and investigate association of jump frequencies and sizes with portfolio ows, carry trade activity and proxies for heterogeneous expectations derived from foreign exchange rate forecasts, currency options and forecasts for key macro-economic variables. The findings of the essay show that portfolio ows, particularly bond ows significantly reduce size and frequency of jumps. Moreover, we observe significant increases in jump size and frequencies with increasing dispersion in beliefs in future exchange rate level and CPI. In the second essay, we study the dynamics of return and liquidity jumps for USDMXN, USDTRY and USDZAR exchange rates. The findings of the essay show that the duration between consecutive return jump arrivals are significantly reduced by average liquidity level in the same period. Furthermore, arrival rates of both liquidity and return jumps are significantly affected by market-wide risk and liquidity factors and key macroeconomic news releases. In the third essay, we investigate the trading volume and volatility nexus for USDTRY exchange rate by using local banks' foreign exchange transaction volume data. In this context, foreign currency denominated spot, forward and swap transactions in with local and foreign customers and between each other for intraday realized volatility of different trading sessions. The findings of this study reveal that positive contemporaneous relationship between trading volume and volatility is evident for local customers and in local trading sessions. Moreover, dispersion in expectations for future foreign exchange rate strengthens this relationship.
Open Access
Inflation targeting: an indirect approach to assess the direct impact
(Pergamon Press, 2010) Yigit, T. M.
It is quite difficult to assess the benefits of inflation targeting (IT) since its immediate effect will be on inflation expectations, an unobserved variable. Due to lack of comprehensive data on inflation expectations, most studies so far concentrated on the impact of IT either on observable variables like output, unemployment, and inflation or compared post-IT surveys of IT countries with non-IT countries. In our study, we focus on a yet unanswered question, i.e., how the expectations change with the adoption of IT. We suggest that heterogeneous inflation expectations lead to long memory in actual inflation, and IT, if successful, should decrease this persistence by concentrating the public's expectations toward the announced target. Empirical results confirm our hypothesis with a reduction in inflation memory after the adoption of IT in almost all eight developed countries in our sample. © 2010 Elsevier Ltd.
Open Access
A note on price-volume dynamics in an emerging stock market
(Elsevier BV, 1996) Başcı, E.; Özyıldırım, S.; Aydoǧan, K.
We present a continuum economy with risk neutral agents having heterogeneous expectations and restricted short sales. A stochastic version of the model is also formulated and the resulting time series behavior of the price and volume series under a specific money supply process derived. The implications of the model are tested in the emerging Turkish stock market where institutional arrangements comply with the restrictions of the model. The results indicate that, as predicted by the model, price levels and trading volume are cointegrated. The error correction models are also estimated and found to be significant in most cases.