Knowledge that Transforms

Recent empirical studies suggest that nominal interest rates and expected inflation do not move together one-for-one in the long run, a finding at odds with many theoretical models. This article shows that these results can be deceptive when the process followed by inflation shifts infrequently. The authors characterize the shifts in inflation by a Markov switching model. Based upon this model's forecasts, they reexamine the long-run relationship between nominal interest rates and inflation. Interestingly, the authors are unable to reject the hypothesis that, in the long run, nominal interest rates reflect expected inflation one-for-one. Copyright 1995 by American Finance Association.

Intraday interest rates are zero.Consequently, a foreign exchange dealer can short a vulnerable currency in the morning, close this position in the afternoon, and never face an interest cost.This tactic might seem especially attractive in times of crisis, since it suggests an immunity to the central bank's interest rate defense.In equilibrium, however, buyers of the vulnerable currency must be compensated on average with an intraday capital gain as long as no devaluation occurs.That is, currencies under attack should typically appreciate intraday.Using data on intraday exchange rate changes within the EMS, we find this prediction is borne out.

ABSTRACT The relationship between asset demand and information quality in rational expectations economies is analyzed. First we derive a number of new summary descriptive statistics that measure four basic characteristics of investment style: asset selection, market timing, aggressiveness, and specialization. Then we relate these statistics to the divergence between a given investor's information structure and the market average information structure. Finally, we demonstrate that informational differentials can be identified, and consistently estimated, using ordinary least squares, from the time‐series of observed asset demand.

THE THEORY OF DAY TRADING. Time, Price, and the Day Trader. Strategies for Profitable Day Trading. Day Trading Approaches Defined by Market Action. Chaos Theory and the Day Trader. THE SCIENCE OF DAY TRADING. Tape-Reading Techniques. Spread Trading. Trading Market Profile. Using Chart Patterns. Mathematical Approaches to Day Trading. Sequential Patterns in Day Trading. Elliott Wave Theory and Day Trading. THE ART OF DAY TRADING. Cases. Appendix. Bibliography. Index.