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This study is relevant to investors who wish to diversify their investment portfolio by investing in U.S.-based investment companies that invest in specific Pacific Basin countries to better understand the diversification benefits of such investments. The purpose is to examine the daily returns of selected U.S.-based, country-focused (Pacific Basin) investment companies to see if those returns accurately reflect the changes of the equity indices of the corresponding Pacific Basin market on the following trading day. The method used is that the reactions of daily investment company returns compared to U.S. market daily returns are examined for Japan, South Korea, and Australia for the period 2006–2010. These return reactions are compared to the home-country returns. Next, for the period from 2011 to 2015, the examination is broadened to include U.S.-based investment companies that invest in Taiwan, Singapore, China, and Indonesia. The results show that investment company share prices on “day t” tend to overreact to changes in the S&P 500 on “day t”, relative to “day t+1” changes in the corresponding Pacific Basin market index – often by more than 100%. Finally, the study shows that on “day t+1” these investment company share prices exhibit a reversal. These findings indicate that the diversification benefits of investing in these Pacific Basin investment companies are reduced due to this increased volatility. S&P 500 returns are accompanied by significantly larger returns on the Pacific Basin investment company shares than are actually realized in the home country on the following day, suggesting that the diversification benefits are not being fully realized.

The Editor commissioned this replication of Ball and Brown (1968) for a special issue of the Pacific-Basin Finance Journal commemorating the 50th anniversary of its publication. We also describe the background to the original paper and its research design, and offer observations on its interpretation, its impact on the literature and practice, some negative consequences, and its relation to papers published around the same time. One of the pleasing attributes of our original paper is that its results consistently replicate, the implication being that the research design and its implementation uncovered a universal relation between accounting earnings and changes in firm values. The current replication is in two dimensions: time; and geography, with an emphasis on Pacific Basin countries. In the USA and in a selection of 16 other countries, annual accounting earnings continue to contain a large proportion of the information that investors trade into share prices over the year, though not in a timely fashion. Post earnings announcement drift, the first acknowledged share market anomaly, continues today despite being reported five decades ago. One change is that reporting lags internationally have shortened on average and their range has narrowed. A notable change in USA data is that the proportion of the information incorporated in share prices that is contemporaneously incorporated in annual accounting earnings has declined, though the conclusions we draw from this decline are more cautious than in Lev and Gu (2016).

In this paper, we show that pairwise similarities of a set of macroeconomic variables among major countries in the Pacific Basin region can account for the stock market comovements in the region. We first suggest a simple theoretical argument why pairwise similarities of macroeconomic variables can derive stock market comovements. We then apply the conditional nonlinear quantile regression on the pairwise realized stock return correlations for the stock markets in the Pacific Basin region from 1990 to 2012 to empirically justify the argument. As a result, we find evidence that smaller pairwise differences or larger pairwise similarities of a set of macroeconomic variables significantly drive the stock market comovements in the region in a nonlinear way.

This study examines how firm- and country-level governance mechanisms affect the role of industry competition in influencing managerial incentives. Specifically, we examine how concentrated ownership structures and legal institutions affect the positive association between industry competition and pay-performance sensitivity. By using samples from four East Asian markets (China, Hong Kong, Singapore and Taiwan) for the 2001-2006 periods, we find that: (1) Industry competition leads to strong pay-performance sensitivity for widely-held firms but not for family- or state-controlled firms, suggesting that the governance role of industry competition is weaken when firms are controlled by family or state; (2) in weak (strong) legal environment, the positive association between industry competition and pay-performance sensitivity is less (more) pronounced, indicating that without strong country-level institutions, industry-level governance mechanisms cannot function well. Overall, our results suggest the importance of firm-level and country-level governance in ensuring the effectiveness of industry-level governance mechanisms.

This paper explores whether a simple fundamental analysis strategy, FSCORE by Piotroski (2000), can discriminate between firms with strong financial strength and those with weak financial strength over the period of 2000 to 2015 in seven Pacific-Basin markets: Hong Kong, Australia, Singapore, South Korea, Malaysia, Thailand and Indonesia. Similar to Piotroski and So (2012), FSCORE can screen winners from losers in all book-to-market portfolios in most of the markets; the returns of portfolios with high FSCORE are significantly more than the returns of portfolios in the same category with low FSCORE. The portfolios that long value stocks (high book-to-market) with high FSCORE yield significantly positive risk-adjusted return. We find that FSCORE can also be applied to size portfolios. The portfolios of small cap stocks with high FSCORE give monthly risk-adjusted returns of 2.5289%, 3.3552%, 1.1081%, 1.0744%, 0.5762%, 0.9263%, and 1.7802% in Hong Kong, Australia, Singapore, South Korea, Malaysia, Thailand and Indonesia. The predictive ability of FSCORE in screening winners from losers is stronger in small cap stocks than value stocks.

En la actualidad, los inversionistas, y en especial los de la industria manufacturera, carecen de suficiente información que les permita evaluar cuál es la ciudad del Pacífico latinoamericano que ofrece las mejores condiciones para localizar su empresa. Para tal efecto, se ha desarrollado en este documento el escalafón global de ciudades para la atracción de inversión industrial en la cuenca del Pacífico latinoamericano, con fundamento en 6 pilares para atraer la inversión extranjera, estimado mediante la metodología de análisis de componentes principales de los rangos. Los resultados indican que las ciudades más atractivas para la inversión industrial fueron aquellas localizadas en países con economías sólidas, acompa˜nadas de una infraestructura portuaria eficiente y considerables niveles de innovación, ciencia y tecnología. En la actualidad, los inversionistas, y en especial los de la industria manufacturera, carecen de suficiente información que les permita evaluar cuál es la ciudad del Pacífico latinoamericano que ofrece las mejores condiciones para localizar su empresa. Para tal efecto, se ha desarrollado en este documento el escalafón global de ciudades para la atracción de inversión industrial en la cuenca del Pacífico latinoamericano, con fundamento en 6 pilares para atraer la inversión extranjera, estimado mediante la metodología de análisis de componentes principales de los rangos. Los resultados indican que las ciudades más atractivas para la inversión industrial fueron aquellas localizadas en países con economías sólidas, acompa˜nadas de una infraestructura portuaria eficiente y considerables niveles de innovación, ciencia y tecnología.

This paper proposes a method that uses volatility index of US and six other markets of Pacific Basin, namely Hong Kong, Australia, India, Japan, Korea, and China, to provide value-at-risk (VaR) and expected shortfall (ES) forecasts. Empirical constants that are used to multiply the levels of volatility indexes for estimating VaR and ES of various significance levels for 1–22 days ahead, one by one, for seven market indexes have been statistically determined using daily data spanning from 4.75 to 16 years. It is because it would be inappropriate to simply scale up the one-day volatility by multiplying the square root of time (or the number of days) ahead to determine the risk over a longer horizon of [Formula: see text] days. Results show that the shift to ES approach generally increases the regulatory capital requirements from 2.09% of India market to 8.56% of Korea market except for the China market where ES approach yields an unexpected decrease of 3.21% of capital requirement.

This study examines the extent to which a firm’s short-term debt affects its default probability in five Pacific Basin countries (Australia, South Korea, Malaysia, Singapore, and Taiwan) during 2002–2015. We alleviate concerns about the endogeneity of short-term debt by using long-term debt obligations that matured in the next year. One standard deviation in this measure leads to a significant increase in the default probability within one year by 10%–34%, depending on country. The effect of the rollover risk increasing default probability is stronger in a crisis, for firms experiencing declines in profitability, and under poor credit conditions. Reserving liquidity (i.e., more cash holdings or less financial constraints) acts as a buffer against the rollover risk effect. Overall, our findings support the view that firms that face more difficulty with debt turnover have a higher likelihood of default.

We analyse the causality between past trading volume and index returns in the Pacific Basin countries. OLS results indicate no causal link between volume and returns. However, the quantile regression method reveals strong nonlinear causality: positive for high return quantiles and negative for low ones. Causality in quantiles is not a statistical artefact of causality in periods of high volatility, i.e., causality does not occur in a clustered manner. Causality in quantiles helps to explain the lack of causality between volume and raw returns on the one hand and a strong causal relationship between volume and return volatility on the other.

Hong and Kacperczyk (2009) argue that social norms against sin stocks influence investor behavior and corporate financial policies. This paper examines “sin” stocks in seven Pacific-Basin markets that exhibit a variety of social norms: Australia, India, Japan, South Korea, Malaysia, New Zealand and Singapore. In doing so, we provide further evidence on the pricing of sin stocks. Consideration of measurable cultural differences between the markets suggests the price of sin is a manifestation of groupthink.

No abstract received.

Pettengill, Sundaram, and Mathur (1995) respond to the prima facie failure of the standard CAPM and propose a conditional beta model by segmenting the market into two states – up markets (where the market excess return r m –r f is positive) and down markets (where r m –r f is negative). We examine this model in eleven Pacific Basin emerging markets using a range of variants: a model where betas are calculated using local excess returns, a model where betas are calculated using world excess returns, a model using both local and world excess returns and a model using both local and world excess returns where local returns are orthogonal to world returns. Only in the last of these formulations is there some evidence supporting the conditional beta model.

The UK's defined benefit pensions industry makes widespread use of pooled investment vehicles which are provided by a large number of fund management groups. In this paper, we provide the first comprehensive performance analysis of these funds. Using data on 734 actively managed pooled funds that had a combined value of just over £400bn at the end of 2007, ranging from UK equity to funds specialising in Pacific Basin equities, our results indicate that the performance of these institutional funds is generally better than those reported in the literature for managers of mutual funds. Nevertheless, with increasing numbers of UK fund managers purporting to be able to provide high alpha products to the UK's beleaguered pensions industry our results do not give us great confidence that the solution to the widespread deficits of the UK's pension fund industry lies in the hands of these active fund managers.

No abstract received.

The stock prices of Asian emerging markets have been at tandem with sharp moves of the US market since the 1997 financial crisis. This study investigates how the 1997 crisis has changed Asian emerging markets by focusing on price and volatility spillovers from the US market to five Pacific-Basin emerging markets, Hong Kong, Singapore, South Korea, Malaysia, and Taiwan. We have used daily stock prices from 3, January 1995 to 24, April 2001 and compared the spillover effects between the prior- and post-crisis periods employing an EGARCH model. The influence of US innovations on stock prices in the region increased after the 1997 financial crisis (only with the exception of the Malaysian market), but the influence of US shocks on market volatility decreased substantially after the crisis (only with the exception of the Korean market). South Korea and Malaysia pursued different approaches to coping with the financial crisis, and their different programs led to opposite shifts in price and volatility spillover...

Using 33 years of data this article considers linkages between New Zealand, Australia and various other Pacific-Basin equity markets. Using time-varying parameter modelling techniques we show that the New Zealand stock market returns have become increasingly sensitive to perturbations in the Australian market relative to those in other Pacific-Basin markets. This has implications for a stock market merger between these two countries as well as a possible monetary union.

No abstract received.

This study examines the perception of non-accounting business major students about the managerial accounting course. The knowledge of these perceptions will help determine whether educators need to be concerned about inspiring certain groups of students to be more aggressive in learning the material. We found that all non-accounting majors, regardless of their major field of study think the managerial accounting course is interesting and has real-world application. The finance and management major students think that the course is related to their field of study and it should be made a required course, but not the MIS and marketing major students. The higher the academic skills and the more the work experience, the greater is the student's perception that managerial accounting should be a required course and has real-world application. Based on the results, we suggest that development of teaching materials aimed at reinforcing the importance of managerial accounting topics to all business majors, particularly MIS and marketing majors may overcome some barriers to learning the subject. This research also has implications for Pacific Basin business schools as our findings indicate that Pacific Basin business schools that do not require non-accounting majors to take managerial accounting course should make it a required course for all undergraduate non-accounting majors.

We examine the size, profitability and delisting experience during 1980–1999 of new lists in the Pacific Basin countries. We also examine the impact of the legal environment on post-listing behavior. We find that new lists are more numerous in common law countries. They are smaller than seasoned firms, regardless of legal regime. New lists are more profitable in civil law countries, but this is due to the high profitability of Japanese new lists. Asian new lists have lower rates of delisting compared to U.S. firms. The delisting frequency of seasoned firms exceeds that of new lists for our sample countries.

No abstract received.

This paper constructs a small open economy version of the Kiyotaki and Moore [1997. Credit cycles. Journal of Political Economy 105 (2), 211–248] model along the line developed by Kasa [1998. Borrowing constraints and asset market dynamics: evidence from Pacific Basin. Federal Reserve Bank of San Francisco Economic Review (3), 17–28] and derives a closed-form solution of the current account dynamics. Using the solution, a null hypothesis of no credit constraints is tested for the Japanese economy. The empirical results show that the null hypothesis is strongly rejected and that the estimated signs of the parameters are consistent with the model. The Kiyotaki and Moore model would give an adequate description of the Japanese economy.

We study the long-run and short-run dynamics between stock prices and exchange rates and the channels through which exogenous shocks impact on these markets by using cointegration methodology and multivariate Granger causality tests. We apply the analysis to a group of Pacific Basin countries over the period 1980–1998. The evidence suggests that stock and foreign exchange markets are positively related and that the US stock market acts as a conduit for these links. Furthermore, these links are not found to be determined by foreign exchange restrictions. Finally, through the application of recursive estimation the evidence shows that the financial crisis had a temporary effect on the long-run comovement of these markets.

We analyse the relative importance of country-, industry-, and firm-specific factors in explaining the source of variation in the forecast errors made by financial analysts with respect to Pacific Basin emerging markets. Following [Heston, S. L., Rouwenhorst, K.G., 1994. Does industrial structure explain the benefits of international diversification? Journal of Financial Economics 36, 3–27], we first estimate each factor, and then decompose the variance of forecast errors into different effects. We document that the differences among countries, industrial sectors, or analyst following offer a weak explanation for the differences in forecast errors and forecast biases on eight Asian emerging markets examined over the 1990–2001 period. The type of earnings – profits or losses – and the variation of earnings – growth or fall – appear to be the two main explanation sources for the performance of financial analysts.

The paper develops an international capital asset-pricing model (ICAPM), which includes foreign currency risk, and examines the impact of capital market liberalisation on the pricing of risks. It applies the model to data from Pacific Basin financial markets and finds substantial evidence that not only currency risk is priced in both pre- and post-liberalisation periods, but the model is superior to one which does not include currency risk. This evidence suggests that an international capital asset-pricing model, which omits currency risk, will be misspecified. Furthermore, the results imply that since currency risk is priced and investors are compensated for bearing such risk they should not be discouraged by more flexible exchange rate regimes from investing in emerging markets.

This paper takes into account a one-time structural change in panel data unit-root tests and then re-examines the unit-root hypothesis of real exchange rates among countries in the Pacific Rim. We find that real exchange rates among Pacific Basin countries are stationary, but subject to a one-time structural break, which is in sharp contrast to the findings in existing literature. Our empirical evidence supports long-run purchasing power parity (PPP) for Pacific Basin countries.

This paper investigates the hedging effectiveness of Australian, Hong Kong, and Japanese stock futures markets. The traditional hedge and the minimum variance hedge ratios are all constant whereas the bivariate GARCH hedge ratio is time varying. The effectiveness of the hedge ratio is compared by investigating the out-of-sample performance of the three ratios. The whole sample consists of weekly returns from January 1990 to December 2000. Two 1-year, out-of-sample periods are used: January 1999 to December 1999 and January 2000 to December 2000. Results show that the time-varying GARCH hedge ratio outperforms the constant ratios in most of the cases. This is true using both out-of-sample periods.

This paper applies asymmetric nonlinear smooth transition generalized autoregressive conditional heteroskedasticity (ANST-GARCH) models to the analysis of mean-reversion and time-varying volatility in weekly index returns of the stock markets of nine countries in the Pacific-basin. It finds that the returns exhibit an asymmetric pattern of return reversals, viz., on average, a negative return reverts more quickly, with a greater magnitude, to a positive return than a positive return reverting to a negative one. The asymmetric pattern of return reversals is directly associated with the unequal pricing behavior on the part of investors. Following a negative return shock, investors do not appear to require any additional premium to the leverage effect; instead they actually neutralize the risk in the form of a reduced premium! The reduction in risk premium causes not only the current stock price to rise but also the realized negative return to revert faster with a greater magnitude.

This study celebrates the tenth anniversary of the Pacific-Basin Finance Journal with a retrospective evaluation. We review the mission of the journal and survey the editorial and review policies of the journal, including special issues as well as those associated with the annual conference of the Pacific-Basin Financial Management Society. We discuss the main subject areas in which the journal has published articles over the 10 years, and measure the impact that the research has had on the authorship, readership, and academic research in finance.

The widely straightforward opening of the Mexican economy to the international market, has provided a group of transformations and has generated more economic expectations; however, from a distance of 15 years that the procces has been brought into life, it is important to verify not only the benefits in terms of the trade increasing, but also the changes in the population’s well-being. Therefore, we have selected a region: the Northwestern of Mexico (NWR), defined as the geographic space which resembles the states of Baja California, Baja California Sur, Nayarit, Sinaloa, and Sonora, with 21% of the national territory, 8.7% Mexico´s total population, and 9.09% of the gross domestic product (GDP).In this paper, we observed changes upon 1988, firstly on the economic structure: GDP, employment, and external sector. Secondly, we found that, for the last decade, the well-being level worsened-off. In this way, the open trading policy from Mexico to the world has not produced, until now, the required expected benefits to the households and the Northwestern region of Mexico, inserted in an active way in the internationalized world, not only with North America, but also with the Pacific Basin region.

There is substantial argument that political risk is an important and increasing influence on international portfolio allocation decisions. The purpose of this paper is to investigate the relation between political risk and stock returns within the context of emerging markets. The issue is examined using a framework that controls for global and local return influences. Consistent with the paper's predictions, the findings reveal that political risk is important in explaining return variation in individual emerging markets, particularly in the Pacific Basin, but not in developed markets. At an aggregate portfolio level, supportive evidence is found of a positive relation between political risk and ex-post returns in emerging markets that is robust to alternative risk measures, and more prevalent during the 1990s.

This is the 22nd Annual Conference on Pacific Basin Finance, Economics, Accounting, and Management which was held in Aichi University, Nagoya, Japan on September 4 to September 5, 2014. The first conference was held at Rutgers University in 1993. Since then, the conference has been held in Hong Kong (1994, 1998), Taipei (1995, 1999, 2003, 2006, 2011), Bangkok (2000, 2004, 2009), Rutgers (1996, 2001, 2005, 2012), Singapore (1997, 2002), Vietnam (2007), Australia (2008, 2013) and China (2010). The program co-directors of the conference was Cheng-Few Lee, Rutgers University, USA, Yasuo Hoshino, Aichi University and the University of Tsukuba, Japan and Mohd Fazli Mohd Sam, Aichi University, Japan and University of Technical Malaysia, Melaka, Malaysia.

In this paper, we follow Harvey (1991) to investigate whether rates of return on Pacific Basin stock markets can be explained by conditional version of International Capital Asset Pricing Model (ICAPM), which allows for time-varying expected returns, variances, and covariances. The results show that most individual Pacific Basin markets can be described by the conditional ICAPM. However, the multiple markets' tests do not support the conditional ICAPM formulation, and the estimates of world reward to risk ratio are not the same across these markets. Furthermore, the Ghysels and Hall test (Ghysels & Hall, 1990a, 1990b) shows that the estimates of parameter are also unstable in the conditional ICAPM formulation. This implies that it is difficult to use world return to describe the relationship between expected return and risk for the Pacific Basin stock markets.

Using a trivariate vector autoregression (VAR) model with a proper control for heteroscedasticity, this paper investigates the relationships between the two largest equity markets in the world—the U.S. and Japan—and the four Asian emerging equity markets: Hong Kong, Korea, Singapore, and Taiwan. Evidence indicates that the links between the developed markets and the Asian emerging markets (AEMs) began to increase after the stock market crash in October 1987, and have significantly intensified since the outbreak of the Asian financial crisis in July 1997.

Black and official foreign exchange rates have co-existed for many years in a number of major Pacific Basin countries. In this paper, a framework is developed for examining the relationship between the two types of exchange rates in the cointegration and error correction context for both the short and long run. This is applied to the data over the period January 1974 to June 1992. Evidence against the standard portfolio theory of black market behaviour is found.

Recent trends in globalization of Pacific Basin commodity markets raises important questions concerning the nature of market integration and price linkages. This paper examines this issue by testing for price linkages between the United States and Japan for two species whose exports from the U.S. to Japan have risen considerably over the past decade. Empirical results indicate segmentation of price linkages for sablefish but probable price linkages for some thornyhead markets. Findings suggest that markets for these species may be less sensitive to price changes in Japan than would be expected based on commodity flows.

Recently, there have been many studies that apply the panel unit-root test of Levin and Lin (1992) to support the validity of long-run purchasing power parity (PPP) for industrial countries. This paper applies two recently developed panel unit-root tests, provided by Im et al. (1995) and Maddala and Wu (1998), respectively, to re-examine the PPP hypothesis for eight Pacific Basin countries. The empirical evidence fails to support PPP for Pacific Basin countries. This finding is robust to different base countries and to different subsets of the panel. Copyright @ 1999 by John Wiley & Sons, Ltd. All rights reserved.

This paper investigates the relationship between expected stock returns and market beta, book-to-market equity, and size in five Pacific-Basin emerging markets: Hong Kong, Korea, Malaysia, Taiwan, and Thailand. In all the markets examined, the relationship between average stock return and market beta is weak. On the other hand, the book-to-market equity can explain the cross-sectional variation of expected stock returns in Hong Kong, Korea, and Malaysia, while the size effect is significant in all markets except Taiwan. Interestingly, the degree of the relation between average return and book-to-market equity coincides with the magnitude of the average book-to-market ratio in a country. We also find that large firms in Hong Kong and small firms in Korea have experienced higher returns in January. We argue that the different pattern of the `turn-of-the-year' effect between Hong Kong and Korea may be attributed to a different composition of investors. The majority of investors in Hong Kong are foreign institutional investors, while investors in Korea are mainly individuals.

This paper examines the linkages between the stock markets in the Pacific-Basin region during 1988–96 using a vector autoregression model. Our results show that during 1988–96 the US market influences all other Australasian markets, except Indonesia, and none of these markets exert a significant influence on the US market. An analysis excluding the US market reveals persistent linkages between these markets which are traced to the indirect influences of the US market. Finally, markets that are geographically and economically close and/or with large numbers of cross-border listings exert significant influence over each other, with markets closing earlier in the day exerting greater influence over markets closing later in the day.

The purpose of this paper is to analyze the relationship between bank capital and earnings. However, because banks and other financial service firms are increasingly operating in a global marketplace, it is important to examine bank relationships beyond the borders of a single country. This paper, therefore, analyzes the relationship between bank capital and earnings employing a sample of 231 banks in ten Pacific basin countries and the United States. More specifically, following the lead of earlier research, the study examines the relationship between the capital-to-asset ratio and return-on-equity. The empirical results indicate that, contrary to the case of U.S. banks during the 1980s, a significant negative relationship exists between these two variables for the sample banks in the eleven countries in 1994. This relationship generally holds when various control variables, including both firm- and country-specific variables, are included.

This paper investigates the extent to which financial markets in the Pacific-Basin Region have become more integrated, by analysing the comovements of real interest rates. The paper uses cointegration and error correction models and draws inferences on the degree of capital market integration by looking at the speed of adjustment of real interest rates following a shock. The results show that there has been an increase in capital market integration with both U.S. and Japan during the 1980s. Japan has not, however, overtaken U.S. in dominating the financial markets of these countries, except possibly in the case of Malaysia. Capital market integration is found to be greater in Singapore, Hong Kong and Taiwan. On the other hand, Japan is the least integrated country with U.S.

This paper investigates the efficiency of the black exchange markets in Indonesia, Malaysia, the Philippines, South Korea, Taiwan, and Thailand. The study applies unit root and cointegration tests to examine black exchange market efficiency of Pacific-Basin countries. The generating process of black exchange rates appears to be a random walk. This is consistent with Gupta (1981) and other foreign exchange rate unit root test studies. Johansen cointegration tests are performed for these black exchange markets together with Japan and Singapore. The results suggest that there is at least one unit root among the black market exchange rates. Hence, black exchange markets are not collectively efficient.

This paper examines the analysts' earnings forecasts in Pacific-Basin capital markets vis-a-vis those of the U.S. We first compare forecast errors across countries and then perform regression analyses to identify the factors that explain differences in forecast errors. The results suggest that there are substantial differences in forecast errors between most of the Pacific-Basin capital markets and the more established capital markets such as the U.S. and Japan. These differences significantly decrease as the forecast horizon approaches the earnings reporting month. The regression results identify some macroeconomic and firm specific factors that explain the differences in forecast errors.

Autoregressive conditionally heteroscedastic (ARCH) and generalized ARCH (GARCH) models are applied to foreign currencies that are traded in both official and black markets using monthly rates in a group of Pacific Basin countries. It is shown that (i) in contrast to the observation of other studies using monthly rates, ARCH/GARCH processes characterize all exchange rate series in both markets; (ii) the relaxation of foreign exchange controls increased the volatility of exchange rates in official markets as implied by theoretical analysis; and (iii) the persistence of volatility is reduced when account is taken of the discrete change in policy on foreign exchange controls.

Recent methodological advances in testing the random walk hypothesis (RWH) in exchange rates have been applied only to currencies of industrial economies. This paper employs one of such advances, the variance ratio tests first proposed by Cochrane (1988), to examine the RWH for the currencies of eight economies of the Pacific Basin. The results show that, in general, the random walk model is not consistent with the dynamics of daily or weekly exchange rate innovations in the majority of these markets.

This study uses a modified rescaled range analysis to test for long-term dependence in foreign exchange rates. The test is performed on black market exchange rates of eight Pacific-Basin countries over the period of January 1974 to December 1988. Our results show that both monthly nominal and real exchange rates exhibit similar pattern; that is, they do not exhibit long-term dependence. Significant short-term serial correlations, however, are documented for most currencies. The results imply an exchange rate overshooting, and that purchasing power parity holds in the short run in these Pacific-Basin countries.

In this paper, we investigate the long run relationship among five major Pacific-Basin stock markets. We focus on the common long run behaviour of their stock price indices over a sample period of 20 years. Using cointegration theory, we find that while there exists a rather integrated Pacific Basin financial area, the regional aspects (Asian versus Pacific) play important roles.

In this paper we present evidence that dispels the view that PPP has broken down during the 1970s and 1980s. Evidence from unit root tests of the real exchange rate indicate that PPP held as a long-run equilibrium condition for eight Pacific Basin countries over the period 1974 to 1987. In contrast, we find the nominal exchange rates to be non-stationary. Additional evidence, however, shows that strong trend components bind the nominal exchange rates of that set of countries together. (JEL F31).