Previous studies have reported mixed results regarding the success of technical trading rules in currency markets. Abnormal returns were observed in many studies using data up to the mid 1980s, while more recent studies generally report less success for technical trading rules. This paper tests whether moving average trading rule profits have declined over the period from 1971 to 2000. If so, previous profits may represent a temporary inefficiency that has since been eliminated in the currency markets. The hypothesis is tested using 18 exchange rate series over a longer time period than in previous studies. Rules are optimized for successive 5-year in-sample periods from 1971 to 1995 and tested over subsequent 5-year out-of-sample periods. Results show that risk-adjusted trading rule profits have declined over time-from an average of over 3% in the late 1970s and early 1980s to about zero in the 1990s. Thus, market inefficiencies reported in previous studies may have been only temporary inefficiencies.

This study examines novel momentum strategies in commodities futures markets that incorporate term-structure information. We show that momentum strategies that invest in contracts on the futures curve with the largest expected roll-yield or the strongest momentum earn significantly higher risk-adjusted returns than a traditional momentum strategy, which only invests in the nearest contracts. Moreover, when incorporating conservative transaction costs we observe that our low-turnover momentum strategy more than doubles the net return compared to a traditional momentum strategy.

This paper provides novel empirical evidence on the relationship between ambiguity, ambiguity aversion and foreign bias in equities. We show that, after an increase in the level of domestic ambiguity relative to the level of foreign ambiguity, more ambiguity averse investors see a larger fall in foreign bias than less ambiguity investors. This finding is consistent with ambiguity operating through an information quality channel but at odds with interpretations based on familiarity. We proxy for the level of ambiguity using the prediction errors around variance forecasts based on state-of-the-art volatility models for 23 developing and emerging markets. Our measure of ambiguity aversion comes from an international survey and is based on an Ellsberg-type urn experiment. Cross-sectional regressions show that home country ambiguity aversion correlates positively with foreign bias. The results are robust to the inclusion of a broad set of control variables, changes in sample size and different ways of computing variance forecasts and the level of ambiguity. However, the results suggest that this fall in foreign bias is not associated with an improvement of international diversification.

Share repurchases help alleviate agency costs of surplus cash by restricting management’s scope to waste corporate resources. But why do self-interested managers agree to disgorge surplus cash in the first place? This study examines the intervening effect of managerial monitoring and incentive alignment mechanisms on the decision to distribute excess cash through a share repurchase. Findings indicate that repurchases substitute for cash retention decisions that would otherwise prove costly for shareholders, and that better managerial incentive alignment and closer monitoring by external shareholders are important factors stimulating such payouts.

The standard view of the monetary transmission mechanism rests on the central bank's ability to manipulate the overnight interest rate by controlling reserve supply. In the 1990s, there was a significant decline in the level of reserve balances in the US accompanied at first by an increase in federal funds rate volatility. However, following this initial rise, volatility declined. In this paper, we find evidence of structural breaks in volatility. We estimate a Tobit model of temporary open market operations and conclude that there have been changes in the Desk's reaction function that played a major role in controlling volatility.

This study empirically examines volatility in US and Japanese commodity futures markets. The US futures market, COMEX, is double auction with continuous trading, whereas the Japanese futures market, TOCOM, was Walrasian with discrete trading until April 1991. We find intraday volatility for gold futures contracts to be significantly higher on COMEX than TOCOM throughout the sample period and is attributable to differences in information flows and market micro-structures. Evidence is also provided that exchange volume conveys information both within and across markets, which is consistent with the French and Roll, 1986 (French, K.R., Roll, R., 1986. Stock return variances: The arrival of information and the reaction of traders. Journal of Financial Economics 17, 5–26) private-information based rational trading model. Finally, daily variance and autocorrelation estimates within COMEX are consistent with the extant literature on equity markets.