Introduction
(Władysław Milo, Grzegorz Szafrański and Piotr Wdowiński) ....... 7
Part One: Issues in Modelling Exchange Rates and Stock Prices
1 Microstructure of the EUR/PLN Market: Implications for
Investors' Behavior (Radosław Cholewiński, Stanisław Kluza
and Andrzej Slawiński) ...................................... 13
1.1 Introduction ........................................... 13
1.2 A Brief Review of Order Flow Modelling ................. 14
1.3 Preliminary Data Analysis .............................. 17
1.4 Model .................................................. 20
1.5 Testing for Significance of Market Inefficiencies ...... 23
1.6 Alternative Forecast Evaluation ........................ 23
1.7 Conclusions ............................................ 25
References .................................................. 25
2 Does the Weakening of the US Dollar Change the Pattern of
the Currency Co-Movement? (Małgorzata Doman) ................ 27
2.1 Introduction ........................................... 27
2.2 Co-Movement of Currencies .............................. 28
2.3 Currency Betas ......................................... 30
2.4 The Data ............................................... 31
2.5 Analysis of the Betas Dynamics ......................... 33
2.6 Conclusions ............................................ 40
References .................................................. 41
3 Bayesian Comparison of Hedging Strategies for EUR/PLN Data
(Jacek Kwiatkowski) ......................................... 43
3.1 Introduction ........................................... 43
3.2 Hedging of Currency Risk ............................... 44
3.3 Bayesian Analysis of Currency Models ................... 49
3.4 Bayesian Comparison of Hedging Strategies .............. 51
3.5 Conclusions ............................................ 55
References .................................................. 55
4 Macroeconomic Announcements and Volatility of Intraday WIG
and DAX Returns (Barbara Będowska-Sójka) .................... 57
4.1 Introduction ........................................... 57
4.2 Data ................................................... 58
4.2.1 Returns and Seasonality Removal ................. 58
4.2.2 The Macroeconomic Announcements Data ............ 60
4.3 Basic Results .......................................... 61
4.4 Models and Empirical Results - Impact of
Announcements on Volatility ............................ 63
4.5 Conclusions ............................................ 67
References .................................................. 67
5 Automated Stock Price Forecasting System (Piotr
Wdowiński) .................................................. 69
5.1. Introduction ........................................... 69
5.2 The System ............................................. 70
5.3 The Model .............................................. 72
5.4 Forecasting Round ...................................... 74
5.5 Conclusions ............................................ 77
References .................................................. 78
Part Two: New Estimation and Testing Methods in
Financial Markets
6 Modelling the Dependencies between the Returns on the
Warsaw Stock Indices Using Time Varying Copulas
(Ryszard Doman) ............................................. 83
6.1 Introduction ........................................... 83
6.2 Dependence and Copulas ................................. 84
6.3 Dependence Measures .................................... 86
6.4 Markov-Switching Dynamic Copula Model .................. 88
6 5 Data Description ........................................ 90
6.6 Empirical Results ...................................... 91
6.7 Conclusions ............................................ 96
References .................................................. 96
7 A Coordinate Free Conditional Distributions in
Multivariate GARCH Models (Mateusz Pipień) .................. 99
7.1 Introduction ........................................... 99
7.2 A Novel Class of Multivariate Skewed Distributions .... 100
7.3 Competing Bivariate GARCH Specifications .............. 104
7.4 Empirical Analysis .................................... 106
7.5 Concluding Remarks .................................... 108
References ................................................. 1ll
8 Using High Frequency Data to Testing for Jumps in
Processes that Model Series from the Polish Financial
Market (Piotr Płuciennik) .................................. 113
8.1 Introduction .......................................... 113
8.2 Two Alternative Approaches to Testing Jumps in
Logarithmic Prices Processes .......................... 114
8.3 Microstructure Noise .................................. 118
8.4 The Studies of Power and Size of Tests for Jumps ...... 119
8.5 Data .................................................. 123
8.6 Empirical Research .................................... 124
8.7 Conclusions ........................................... 127
References ................................................. 127
9 Deepest Regression in Robust Estimation of AR and VAR
Models (Daniel Kosiorowski) ................................ 129
9.1 Introduction .......................................... 129
9.2 Classical Estimators of AR Model Parameter ............ 131
9.3 Regression Depth ...................................... 133
9.4 Simulation Studies .................................... 135
9.5 Conclusions and Further Work Perspectives ............. 136
References ................................................. 137
Part Three: Univariate Time-Series Analysis
10 Pricing the WIG20 Index Options Using GARCH Models (Piotr
Fiszeder) .................................................. 141
10.1 Introduction .......................................... 141
10.2 Option Pricing for the GARCH Processes ................ 142
10.3 Option Pricing Written on the WIG20 Stock Index ....... 143
10.4 Conclusions ........................................... 156
References ................................................. 156
11 Detection of Nonlinear Autodependencies Using the
Hiemstra-Jones Test (Witold Orzeszko) ...................... 157
11.1 Introduction .......................................... 157
11.2 Testing for Nonlinear Granger Causality ............... 157
11.3 Detection of Nonlinear Autodependencies Using the
Hiemstra and Jones Test ............................... 160
11.4 Simulations ........................................... 161
11.4.1 Investigated Data .............................. 161
11.4.2 Testing for Stationarity ....................... 162
11.4.3 Removing Linear Dependencies ................... 163
11.4.4 Testing for Nonlinear Dependencies ............. 164
11.4.5 Evaluation of the Method ....................... 167
11.4.6 Conclusions and Remarks ........................ 169
References ................................................. 170
12 The Possibility of Using the m Smallest k-Simplexes
Method for Forecasting Long and Intermediate Memory Time
Series (Jacek Szanduła) .................................... 171
12.1 Introduction .......................................... 171
12.2 Models and Methods .................................... 172
12.3 The Description of the Forecasting Experiment ......... 174
12.4 Evaluation of Generated Forecasts ..................... 176
12.5 Conclusions ........................................... 183
References ................................................. 183
13 The Warsaw Stock Exchange Indices Analysis: Trend or
Difference Stationary in Medium and Small Samples
(Aleksandra Matuszewska-Janica and Dorota Witkowska) ....... 185
13.1 Introduction .......................................... 185
13.2 Methodology ........................................... 186
13.3 Data .................................................. 188
13.4 Results ............................................... 189
13.5 Conclusion ............................................ 192
References ................................................. 193
Part Four: Issues in Monetary Policy and the Interbank Sector
14 The Term Structure of Interest Rates at the Polish
Interbank Market. A VAR Approach (Pawel Miłobędzki and
Maria Blangiewicz) ......................................... 197
14.1 Introduction .......................................... 197
14.2 VAR Approach in Testing for the EH .................... 198
14.3 Empirical Results ..................................... 202
14.4 Conclusions ........................................... 204
References ................................................. 204
Appendix ................................................... 206
15 Heterogenous Interest Rate Pass-Through for Thailand
(Grzegorz Szafrański) ...................................... 209
15.1 Introduction .......................................... 209
15.2 Interest Rate Pass-Through and Its Heterogeneity ...... 210
15.3 Data Description and Nonstationarity .................. 212
15.4 Inference Methods under Heterogeneity ................. 216
15.5 Consistent Estimation and Aggregation Bias ............ 219
15.6 Conclusions ........................................... 222
References ................................................. 223
16 Analysis and Evaluation of Mutual Funds Effectiveness
Using ELECTRE Method (Nina Łapińska-Sobczak and Marta
Ostapowicz) ................................................ 225
16.1. Introduction ......................................... 225
16.2 Criteria of Mutual Funds Effectiveness ................ 226
16.3 ELECTRE III Method .................................... 228
16.4 Comparative Development Level Measure - Without
Pattern ............................................... 232
16.5 The Measure of Fund Dynamism Attractiveness - (ADF) ... 233
16.6 Conclusions ........................................... 236
References ................................................. 236
17 On Performance of Immunization Strategies in Setting of
US Treasury Term Structure Data (Alina Kondratiuk-Janyska
and Marek Kałuszka) ........................................ 237
17.1 Introduction .......................................... 237
17.2 Immunization Strategies ............................... 238
17.3 Data, Methodology and Specification ................... 239
17.4 Alternative Models .................................... 240
17.5 Empirical Results ..................................... 241
17.6 Conclusions ........................................... 250
References ................................................. 251
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