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We examine the effects of quantitative easing (QE) on the volatility of and correlation between stocks, short-term bonds and long-term bonds in the UK. Using a multivariate dynamic conditional correlation generalised autoregressive conditional heteroscedasticity model, we find that volatility in each of the markets experiences a significant increase during the financial crisis that is reversed during the first phase of QE. We find limited effects of the specific occurrence or intensity of QE activity on either the volatility or correlations for these asset classes, but some evidence that volatility persistence experienced temporary shifts during the sample period. We find short-term variability in the correlations between the markets during the crisis and QE periods, but cannot reject the hypothesis that correlations were constant throughout the sample period. [ABSTRACT FROM AUTHOR]

The appealing feature of the arbitrage-free Nelson–Siegel model of the yield curve is the ability to capture movements in the yield curve through readily interpretable shifts in its level, slope or curvature, all within a dynamic arbitrage-free framework. To ensure that the level, slope and curvature factors evolve so as not to admit arbitrage, the model introduces a yield-adjustment term. This paper shows how the yield-adjustment term can also be decomposed into the familiar level, slope and curvature elements plus some additional readily interpretable shape adjustments. This means that, even in an arbitrage-free setting, it continues to be possible to interpret movements in the yield curve in terms of level, slope and curvature influences. [ABSTRACT FROM AUTHOR]

Using an event study approach, this article reports evidence that the UK Treasury bond market displayed anomalous pricing behaviour in the secondary market both immediately before and after auctions of seasoned bonds. Using a benchmark return derived from the behaviour of the underlying yield curve, the market offered statistically and economically significant excess returns, around the auctions held between 1992 and 2004. A cross-sectional analysis of the cumulative excess returns shows that the excess demand at the auctions is a key determinant of this excess return. [ABSTRACT FROM AUTHOR]

This study seeks to explain the leverage effect in UK stock returns byreference to the return volatility, leverage and size characteristics ofUK companies. A leverage effect is found that is stronger for smallercompanies and has greater explanatory power over the returns ofsmaller companies. The properties of a theoretical model that predictsthat companies with higher leverage ratios will experience greater leverageeffects are explored. On examining leverage ratio data, it is found thatthere is a propensity for smaller companies to have higher leverage ratios.The transmission of volatility shocks between the companies is also examinedand it is found that the volatility of larger firm returns is importantin determining both the volatility and returns of smaller firms, but notthe reverse. Moreover, it is found that where volatility spillovers areimportant, they improve out-of-sample volatility forecasts. [ABSTRACT FROM AUTHOR]

This paper complements earlier work by the author that shows that the pattern of information arrivals into the UK stock market may explain the behaviour of returns. It is argued that delays or other systematic behaviour in the processing of this information could compound the impact of information arrival patterns. It is found, however, that this does not happen, and so it is the arrival and not the processing of news that is most important. [ABSTRACT FROM AUTHOR]

Simple models of time-varying risk premia are used to measure the risk premia in long-term UK government bonds. The parameters of the models can be estimated using nonlinear seemingly unrelated regression (NL-SUR), which permits efficient use of information across the entire yield curve and facilitates the testing of various cross-sectional restrictions. The estimated time-varying premia are found to be substantially different to those estimated using models that assume constant risk premia. [ABSTRACT FROM AUTHOR]

Previously, it has been shown that the profits from a simple market timing trading rule applied to a portfolio of shares can be affected by the inter-relationships between the returns of the component securities. In this short letter, the results from applying a more sophisticated 'filter' rule to the same data are reported. Unlike the simple trading rule, the filter rule does produce some evidence of economic profits. [ABSTRACT FROM AUTHOR]

We provide evidence of the nature of the transmission of volatility within the UK stock market. We find a distinct asymmetry in that shocks to the return volatility of a portfolio of relatively large firms influence the future volatility of a portfolio of relatively small firms, but find that the reverse is not the case. The characteristics of the volatility process suggest that this result is not caused by think trading. [ABSTRACT FROM AUTHOR]

The impact of the 1986 deregulation of the British Government bond market on the level of informational efficiency in that market is examined. An analysis of bond price time-series and cross-sectional term-structure fitting suggests that the symptoms of inefficiency are fewer in number, smaller in magnitude and less systematic than those before deregulation. [ABSTRACT FROM AUTHOR]

The techniques and insights from two distinct areas of financial economic modelling are combined to provide evidence of the influence of firm size on the volatility of stock portfolio returns. Portfolio returns are characterized by positive serial correlation induced by the varying levels of non-synchronous trading among the component stocks. This serial correlation is greatest for portfolios of small firms. The conditional volatility of stock returns has been shown to be well represented by the GARCH family of statistical processes. Using a GARCH model of the variance of capitalization- based portfolio returns, conditioned on the autocorrelation structure in the conditional mean, striking differences related to firm size are uncovered. [ABSTRACT FROM AUTHOR]

This paper examines the impact on stock price predictability that the removal of exchange controls had on major European countries during the late 1970s and 1980s. It is found that for Germany, Switzerland and France, the removal of exchange controls led to an increase in the interdependence between these and other markets. In contrast, there is little evidence of an increase in interdependence for the UK and Italy. [ABSTRACT FROM AUTHOR]

Asserts that economist P. Wang's characterization of inefficient securities market is inconsistent with financial economic theory. Presentation of a theoretically consistent alternative; Non-cointegration of component securities under this alternative definition of an efficient market.