Volume 2, Issue 1, 2008

An Analysis of Long Memory in the SSE’s Component Index
Shu Quan Lu, Takao Ito and Kevin Voges

Abstract
Stock returns can reflect the behavior of investors in the securities and financial markets. We test for the presence of long memory in the Shenzhen Stock Exchange (SSE) using the R/s and KPSS tests. In addition, the parameter of long memory is estimated by the LP regression method. This analysis provides significant evidence to show that returns recorded by the SSE’s Component Index exhibit long memory processes. This evidence suggests that the SSE stock market is not efficient, contradicting the martingale model. Full Article

The Composition of Capital Flows to Malaysia: Forecasting the Effects of Removing the Ringgit Peg  Goh Soo Khoon
 

Abstract
This paper examines the effects of the ringgit peg on the composition of Malaysian capital flows. Using a multivariate system framework, the impact of removing the controls on capital flows is  simulated. The results suggest that private short- and long-term capital may decline, regardless of whether the controls are lifted or remain in place. However, official capital flows may increase,
suggesting that Malaysia may become more dependent on official flows than private capital flows following the removal of controls on the ringgit.  Full Article
 

Can You Beat A Fictitious Player At Matching Pennies?
Bryan C. McCannon

Abstract
Fictitious Play is an adaptive play in games that does not require sophisticated players. A fictitious player selects a stationary best response to the historical play of its opponent. While the question of whether games between fictitious players result in convergence to Nash equilibrium has been addressed this work considers the interaction between a fictitious player and a sophisticated player. In the Matching Pennies game optimal play of the sophisticated player is solved for and it is shown that she does better competing against a fictitious player than another sophisticated player. Additionally, the sophisticated player need not act too sophisticatedly. In fact, the sophisticated player can select a simple one-step-ahead plan that brings the empirical frequency of her play closer to the 50-50 threshold in the next stage. Thus, a sophisticated player need not be any more forward-looking than one stage farther than the fictitious player. Full Article

A taxonomy of product classes
John J. Dall and Laurence M. McCarthy
 

Abstract
A scan of the process of globalization isolated a zone of exclusion. This zone provided a useful link to the Institute‟s on-going research on product development theory. While the taxonomy of product classes applies to both developed and aspiring nations, its focus was restricted to the zone of exclusion. We conclude with a potentially fruitful next phase of research – a tool for micro-finance efforts. Our closing fusion composition is offered as a time saving opening to micro-finance. Full Article



Solving the Current Account Puzzle: Capital Flows and the contagion effect of financial  Cinzia Balit-Moussalli

Abstract
This paper is a follow up on an earlier study “Financial Crises, Panic and Contagion” (Balit Moussalli, 2007).The study was done under two time frames that enabled the analysis of the Russian and Brazilian crises in addition to the Asian crisis. The research however ended with a puzzling result: The change in sign of the Current Account variable from positive in time frame 1 (Asian crisis), to negative in time frame 2 (Russian and Brazilian crises). After an analysis of the main differences that occurred in Eastern Europe and Latin America between the two time periods, this study finds that the capital account is a key factor in solving the current account puzzle. In addition, this study provides evidence of the contagious effect of the Asian crisis on what will later be known as the Russian crisis, and the Brazilian crisis. Full Article