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The Adjustment of the Yule-Walker Relations in VAR Modelling: The Impact of the Euro on the Hong Kong Stock Market

Penm, Jack H.W; Brailsford, Tim; Terrell, R.D

Description

VAR models are increasingly being used in the analysis of relationships between financial markets. In such models, there are circumstances that require zero entries in the coefficient matrices. Such circumstances can be particularly relevant in the context of emerging markets given their characteristics. We show that a direct extension of the use of the Yule-Walker relations for fitting VAR models with zero-non-zero patterned coefficient matrices is inconsistent with statistical procedures as...[Show more]

dc.contributor.authorPenm, Jack H.W
dc.contributor.authorBrailsford, Tim
dc.contributor.authorTerrell, R.D
dc.date.accessioned2002-05-28
dc.date.accessioned2004-05-19T11:45:41Z
dc.date.accessioned2011-01-05T08:43:30Z
dc.date.available2004-05-19T11:45:41Z
dc.date.available2011-01-05T08:43:30Z
dc.date.created2000
dc.identifier.issn1096-1879
dc.identifier.urihttp://hdl.handle.net/1885/40680
dc.identifier.urihttp://digitalcollections.anu.edu.au/handle/1885/40680
dc.description.abstractVAR models are increasingly being used in the analysis of relationships between financial markets. In such models, there are circumstances that require zero entries in the coefficient matrices. Such circumstances can be particularly relevant in the context of emerging markets given their characteristics. We show that a direct extension of the use of the Yule-Walker relations for fitting VAR models with zero-non-zero patterned coefficient matrices is inconsistent with statistical procedures as the resultant estimated variance-covariance matrix of the white noise process becomes non-symmetric. This inconsistency has biased consequences for financial theory. The paper provides a theoretically consistent adjustment which fits with theory. The paper applies the procedure to a vector system comprising variables from the Hong Kong stock market and foreign exchange markets. The results indicate that the euro exchange rate contains leading information for the other components in the system.
dc.format.extent99339 bytes
dc.format.mimetypeapplication/pdf
dc.language.isoen_AU
dc.publisherMultinational Finance Society
dc.sourceMultinational Finance Journal
dc.subjectVAR models
dc.subjectYule-Walker relations
dc.subjectforeign exchange market
dc.subjectfinancial time series
dc.titleThe Adjustment of the Yule-Walker Relations in VAR Modelling: The Impact of the Euro on the Hong Kong Stock Market
dc.typeWorking/Technical Paper
local.description.refereedno
local.identifier.citationmonthmay
local.identifier.citationvolume5
local.identifier.citationyear2000
local.identifier.eprintid385
local.rights.ispublishedyes
local.identifier.absfor140303 - Economic Models and Forecasting
local.identifier.ariespublicationMigratedxPub607
local.type.statusPublished Version
local.contributor.affiliationANU
local.contributor.affiliationSchool of Finance and Applied Statistcs
local.citationWorking Paper Series in Finnace 00-02
local.bibliographicCitation.issue1
local.bibliographicCitation.startpage35
local.bibliographicCitation.lastpage58
dc.date.updated2015-12-10T08:20:34Z
CollectionsANU Research Publications

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