How Liquidity Is Linked With Price Momentum

Capital markets provide a function which facilitates the buying and selling of long-term financial securities to increase liquidity and their value, Watson & Head (2013). Hence, the Efficient Market Hypothesis (EMH) explains the relationship that exists with the prices of the capital market securities, where no individual can beat the market by regularly buying securities at a lower price than it should be. This means that in order to be an efficient market prices of securities will have to fairly and fully reflect all available information, Fama (1970). Consequently, Watson & Head (2013) believe that market efficiency refers to the speed and quality of how share price adjusts to new information. Nevertheless, the testing of the efficient markets has led to the recognition of three different forms of efficiency in which explains how information available is used within the market. In this essay, the EMH will be analysed; testing of EMH will show that the model does provide strong evidence to explain share behaviour but also anomalies will be discussed that refutes the EMH. Therefore, a judgment will be made to see which structure explains the efficient market and whether there are some implications with the EMH, as a whole.

GM can examine the sensitivity of its stock return to fluctuations in the Yen-US Dollar exchange rate (and adjusting for market returns), assuming that market efficiency will account for Dollar-Yen fluctuations.

The exchange rates risk that is associated with economic, transaction, and translation exposure in Indian market. From the analysis, anticipate the fluctuations that seem to occur in the next 24 months

The extracted data used includes monthly returns from January 1972 to July 2011. The assets are selected so that the portfolio contains the largest, most liquid, and most tradable assets. The choice of such a variety of assets across several markets was used in order to generate a large cross sectional dispersion in average return. It helped to reveal new factor exposure and define a general framework of the correlated value and momentum effects in various asset classes.

In February 1995, Adam Bain, investment advisor in the London, Ontario branch of RBC Dominion Securities Inc. (RBC DS), was considering whether or not to implement a price momentum strategy for his clients. Trend and Cycle, DS’s technical research department, had recently circulated a copy of a study which described a simple price momentum model and referred to its “startling results” based on back testing the strategy over a 15 year period. The Trend and Cycle group had long promoted the importance of price momentum and relative strength to potential clients. Bain needs to determine whether the proposed model was “too good to be true” or, if it did not look promising, how he would go about

The five events are correlated and occurring over approximate five months from 18th August 2010 to 13th December 2010.

MC: With regard to estimates of "world beta," measures of the sensitivity of a national market to world market movements…

This document is authorized for use only by Yen Ting Chen in FInancial Markets and Institutions taught by Nawal Ahmed Boston University from September 2014 to December 2014.

Since the great depression, the global economy has been facing a number of ups and downs. With the markets being built rapidly and crashing down in the other instant, elements that actually make up the skeleton of the international economy seems to have correlated variables. These variables seems to have been correlated with each other in numerous combinations and their correlation is what makes the market fluctuate. The volatility of the global market becomes more apparent in times of recession when the correlation between variables like stocks, bonds, US dollar, Euro, gold and oil becomes more apparent. Therefore, it is of paramount importance that these correlated variables should be studied with a very keen eye. Since the link between currencies, commodities, stocks an bonds runs very deep, change in any one of them seems to have a profound impact on the rest hence changing the face of the market.

To justify whether it works, we first ran a regression on the Three-Factor Fama French Model (Market Excess Return, SMB and HML) from Jan 1972 to Dec 2012 respectively for the High-, 5-, Low-, and High-Minus-Low Portfolio. Then, we added momentum into the model to create a four-factor model (Momentum, Market Excess Return, SMB and HML) for the same period on a monthly basis. (See Exhibit 2).

In order to analyze the momentum effect of different specifications, stocks were divided into ‘winner’ stocks and ‘loser’ stocks according to their rankings.

This paper will Identify and explain the major factors driving the market during this week. It will also identify and explain causes of changes in the market and the index. As well as developed investment objectives and defined risk tolerance levels. I will also include a snap shot of my investments and an explanation of why I choose those particular companies.

According to our results, the policymakers in emerging market economies should closely monitor the movements of the U.S policy rates, growth rates, and government bond yield in relation to their own. Also, they can limit their exposure to capital flow volatility by developing their domestic financial markets and macro-prudential policies.

Since the profits of relative strength strategies have been considered to be behavioral phenomena and arbitrage is the last and the strongest defender of market efficiency, it is possible to be dubious that limit to arbitrage leads to abnormal returns generated by momentum strategies. This paper fill the gap in literature because of two reasons : firstly, as original purpose, it provides a view on relative strength profitability ; secondly , I do not see many papers looking at relationship between market anomalies although momentum profits and limit to arbitrage have been strongly debated among studies.

Investing in emerging markets offer tempting advantages to investors. The volatile economies of countries considered to be in this category have a potential for extraordinary returns. A caveat to investors considering opportunities in emerging markets are the presence of unstable governments, the chance of nationalization, poor property rights protection, and large swings in prices. Emerging markets are far from a sure thing. But, despite high individual risk, emerging markets can reduce portfolio risk. The volatile economies of these countries have such low correlations compared to the domestic market that they actually provide the greatest degree of diversification.