Centre for Financial Econometrics

The centre recognises, develops and promotes research activities in our key strength areas. We also attract and retain high performing researchers and research teams in areas of strategic importance.

Events

The 4th Applied Financial Modelling Conference 2018

The centre hosted the 4th Applied Financial Modelling Conference from Thursday 1 to Friday 2 February 2018. Keynote addresses were delivered by Professor Russell Smyth, Monash University and Professor Joakim Westerlund, Deakin University.

Economic Modelling Special Issue Conference 2017

The centre hosted a successful Economic Modelling Special Issue Conference from Thursday 15 June to Friday 16 June 2017. Keynote addresses were delivered by Professor Sushanta Mallick, Co-editor-in-Chief of Elsevier Journal, Economic Modelling journal, Professor Joakim Westerlund, Deakin University, and Professor Russell Smyth, Monash University.


Our current projects

The Centre for Financial Econometrics has four broad research themes:

  • applied financial econometrics
  • econometric theory with respect to time series and panel data, asset pricing (forecasting and price discovery analysis)
  • capital structure decision making with improved models
  • energy markets research.

Technology factor and stock returns: a long-term perspective

This study uses historical data on firm technological innovation from the 1870s to the current day, as measured through patents, productivity and profits, to examine how technological innovations drive economic growth and thus how measures of technological innovation can be used to predict stock market returns.

Higher moments and exchange rate behaviour

In this project, we examine the role of high-order moments in influencing exchange rate behaviour. There are several economic channels and mechanisms through which higher moments can impact exchange rate behaviour and the precise implications of these higher moments on exchange rates have not been studied. The goal of this project is to fill this research gap and explore the economic importance of the inclusion of these higher moments on the profitability of exchange rate trading.

Ability of oil returns to predict stock returns in the G7 area – panel evidence

It is well known that oil returns are an important predictor of economic growth. But if a firm's earnings are affected, the its returns are likely to be affected too. Many studies note that the results depend heavily not only on the data set employed, but also on the method used in the analysis. This project proposed a new proper panel data approach that circumvents the problems of the country-by-country approach, leading to more reliable evidence on the predictive ability of oil returns in a panel of G7 countries.

Can economic policy uncertainty predict stock returns

This project examines the role that economic policy uncertainty (EPU) plays in predicting stock excess returns. There is a growing literature that investigates the link between EPU and financial markets with the main evidence suggesting that EPU has a negative effect on stock returns. The primary focus of this project is to test if EPU predicts international stock returns.


Our team

Selected publications

2017

Narayan P, 2017 'Profitability of technology-investing Islamic and non-Islamic stock markets', Pacific-Basin Finance Journal, https://doi.org/10.1016/j.pacfin.2017.08.007.

Narayan, P, Narayan, S, Phan, D, Thuraisamy, K & Tran, V 2017, 'Credit quality implied momentum profits for Islamic stocks', Pacific-Basin Finance Journal, vol. 42, pp. 11–23.

Westerlund, J, Karabiyik, H, Narayan, P 2017, 'Testing for predictability in panels with general predictors', Journal of Applied Econometrics, vol. 32, pp. 554–574.

Narayan, P & Phan, D 2017, 'Momentum strategies for Islamic stocks', Pacific-Basin Finance Journal, vol. 42, pp. 96–112.

Narayan, P, Thuraisamy, K & Wagner, N 2017, 'How do bond, equity and commodity cycles interact?', Finance Research Letters, vol. 21, pp. 151–156.

Narayan, S & Narayan, P 2017, 'Estimating the speed of adjustment to target levels: the case of energy prices', Energy Economics, vol. 62, pp. 419–427.

Narayan, P, Ali Ahmed, H &Narayan, S 2017, 'Can investors gain from investing in certain sectors?', Journal of International Financial Markets, Institutions and Money,  vol. 48, pp. 160–177.

Narayan, P, Phan, D & Bannigidadmath, D 2017, 'Is the profitability of Indian stocks compensation for risks?', Emerging Markets Review, vol. 31, pp. 47–64.

Narayan, P, Phan, D, Narayan, S & Bannigidadmath, D 2017, 'Is there a financial news risk premium in Islamic stocks?', Pacific-Basin Finance Journal, vol. 42, pp. 158–170.

Karabiyik, H, Narayan, P, Phan, D & Westerlund, J 2017, 'Islamic spot and index futures markets: where is the price discovery?', Pacific-Basin Finance Journal, (2017), pp. 1–11.

Narayan, S & Narayan, P 2017, 'Are oil price news headlines statistically and economically significant for investors?', Journal of Behavioral Finance, vol. 18, pp. 258–270.

Narayan, P, Narayan, S, Khademalomoom, S & Phan, D 2017, 'Do terrorist attacks impact exchange rate behavior? New international evidence', Economic Inquiry, pp. 1–15.

Narayan, P & Phan, D 2017, 'A survey of Islamic banking and finance literature: issues, challenges and future directions', Pacific-Basin Finance Journal, pp. 1–13.

Narayan, P 2017, 'Profitability of technology-investing Islamic and non-Islamic stock markets', Pacific-Basin Finance Journal, pp. 1–12.

Narayan, P, Ranjeeni, K & Bannigidadmath, D 2017, 'New evidence of psychological barrier from the oil market', Journal of Behavioral Finance, pp. 1–13.

Dolatabadi, S, Narayan, P, Nielsen, MØ & Xu, K 2017, 'Economic significance of commodity return forecasts from the fractionally cointegrated VAR model', Journal of Futures Markets, pp. 1–24.

Narayan, P, Sharma, S Thuraisamy, K & Westerlund, J 2017, 'Some preliminary evidence of price discovery in Islamic banks', Pacific-Basin Finance Journal, pp. 1–16.

Narayan, PK & Bannigidadmath, D 2017, 'Does financial news predict stock returns? New evidence from Islamic and non-Islamic stocks', Pacific-Basin Finance Journal, vol. 42, pp. 24–45.

Narayan, PK 2017, 'Energy Finance: An Overview', Energy Economics, vol. 66, pp. 53.

Narayan, S & Narayan, PK 2017, 'Estimating the speed of adjustment to target levels: The case of energy prices', Energy Economics, vol. 62, pp. 419–427.

Narayan, PK & Sharma, SS 2017, 'Is stock return predictability time-varying?' Elsevier

Narayan, PK 2017, 'Profitability of technology-investing Islamic and non-Islamic stock markets', Pacific-Basin Finance Journal, https://doi.org/10.1016/j.pacfin.2017.08.007.

Batten, J, Gannon, G & Thuraisamy, K 2017, 'Sovereign risk and the impact of crisis: evidence from Latin America', Journal of banking & finance, vol. 77, pp. 328–350.

Westerlund, J & Thuraisamy, K 2017, 'Panel multi-predictor test procedures with an application to emerging market sovereign risk', Emerging Markets Review, vol. 28, pp. 44–60.

Westerlund, J & Petrova, Y 2017, 'Asymptotic collinearity in CCE estimation of interactive effects models', Economic Modelling, pp. 1–6.

Robertson, D, Sarafidis, V & Westerlund, J 2017, 'Unit root inference in generally trending and cross-correlated fixed-T panels', Journal of Business and Economic Statistics, pp. 1–12.

Aylar, E, Smeekes, S & Westerlund, J 2017, 'Lag truncation and the local asymptotic distribution of the ADF test for a unit root', Statistical Papers, pp. 1–10.

Westerlund, J, 2017, 'On the use of GLS demeaning in panel unit root testing', Journal of Business and Economic Statistics, pp. 1–12.

Karabiyik, H, Reese, S & Westerlund, J 2017, 'On the role of the rank condition in CCE estimation of factor-augmented panel regressions', Journal of Econometrics, vol. 197, pp. 60–64.

Mahdavi, S & Westerlund, J 2017, 'Are state-local government expenditures converging? New evidence based on sequential unit root tests', Empirical Economics, vol. 53, pp. 373–403.

Larsson, R, Lyhagen, J & Westerlund, J 2017, 'Likelihood ratio tests for a unit root in panels with random effects', Statistics, vol. 51, pp. 627–654.

Westerlund, J & Mishra, S 2017, 'On the determination of the number of factors using information criteria with data-driven penalty', Statistical Papers, vol. 58, pp. 161–184.

2016

Bannigidadmath, D & Narayan, PK 2016, 'Stock return predictability and determinants of predictability and profits', Emerging Markets Review, vol. 26, pp. 153–173.

Karabiyik, H & Westerlund, J 2016, 'On the estimation and testing of predictive panel regressions' Journal of International Financial Markets, Institutions and Money, vol. 45, pp. 1–11.

Narayan, PK, Liu, R, & Westerlund, J,2016, 'A GARCH model for testing market efficiency', Journal of International Financial Markets, Institutions and Money, vol. 41, pp. 121–138.

Narayan, PK, Sharma, SS, & Phan, DHB 2016, 'Asset price bubbles and economic welfare', International Review of Financial Analysis, vol. 44, pp. 139-148.

Narayan, PK, Saboori, B & Soleymani, A 2016, 'Economic growth and carbon emissions', Economic Modelling, vol. 53, pp. 388–397.

Narayan, PK,  Rath BN, & Prabheesh, KP 2016, 'What is the value of corporate sponsorship in sports?', Emerging Markets Review, vol. 26, pp. 20–33.

Narayan, PK, Phan, DHB, Sharma, SS, & Westerlund, J 2016, 'Are Islamic stock returns predictable? A global perspective', Pacific-Basin Finance Journal, vol. 40 (Part A), pp. 210–223.

Narayan, PK, & Sharma, SS 2016, 'Intraday return predictability, portfolio maximisation, and hedging', Emerging Markets Review, vol. 28, pp. 105–116.

Narayan, PK, Phan, DHB, Thuraisamy, K, & Westerlund, J 2016, 'Price discovery and asset pricing', Pacific-Basin Finance Journal, vol. 40 (Part A), pp. 224–235.

Phan, DHB, Sharma SS, Narayan, PK 2016, 'Intraday volatility interaction between the crude oil and equity markets', Journal of International Financial Markets, Institutions and Money, vol. 40, Pages 1–13.

Phan, DHB, Sharma, SS, & Narayan, PK 2016, 'Intraday volatility interaction between the crude oil and equity markets', Journal of International Financial Markets, Institutions and Money, vol. 40, pp. 1–13.

Reese, S & Westerlund, J 2016, 'Estimation of factor-augmented panel regressions with weakly influential factors', Econometric Reviews, 10.1080/07474938.2015.1106758.

Westerlund, J, & Narayan, PK 2016, 'Testing for predictability in panels of any time series dimension', International Journal of Forecasting, vol. 32, no. 4, pp. 1162–1177.

Westerlund, J 2016, 'A simple test for nonstationarity in mixed panels: a further investigation', Journal of Statistical Planning and Inference, vol. 173, pp.1–30

2015

Bannigidadmath, D & Narayan, PK 2015, 'Stock return predictability and determinants of predictability and profits', Emerging Markets Review.

Bhattacharya, M & Narayan, PK 2015, 'Output and labor productivity in organized manufacturing: a panel cointegration analysis for India', International Journal of Production Economics, vol. 170, pp. 171–177.

Blomquist, J & Westerlund, J 2015, 'Panel bootstrap tests of slope homogeneity', Empirical Economics, pp. 1–23.

Mishra, S & Narayan, PK 2015, 'A nonparametric model of financial system and economic growth', International Review of Economics And Finance, vol. 39, pp. 175–191.

Narayan, PK & Bannigidadmath, D 2015, 'Are Indian stock returns predictable?', Journal of Banking And Finance, vol. 58, pp. 506–531.

Narayan, PK & Gupta, R 2015, 'Has oil price predicted stock returns for over a century?', Energy Economics, vol. 48, pp. 18–23.

Narayan, PK & Sharma, SS 2015, 'Does data frequency matter for the impact of forward premium on spot exchange rate?', International Review of Financial Analysis, vol. 39, pp. 45–53.

Narayan, PK & Sharma, SS 2015, 'Is carbon emissions trading profitable?', Economic Modelling, vol. 47, pp. 84–92.

Narayan, PK & Liu, R 2015, 'A unit root model for trending time-series energy variables', Energy Economics, vol. 50, pp. 391–402.

Narayan, PK 2015, 'An analysis of sectoral equity and CDS spreads', Journal of International Financial Markets, Institutions and Money, vol. 34, pp. 80–93.

Narayan, PK 2015, 'Econometrics of energy markets', Energy Economics, vol. 50, pp. 349–350.

Narayan, PK, Mishra, S & Narayan, S 2015, 'New empirical evidence on the bid-ask spread', Applied Economics, vol. 47, no. 42, pp. 4484–4500.

Narayan, PK, Mishra, S, Narayan, S & Thuraisamy, K 2015, 'Is exchange rate trading profitable?', Journal of International Financial Markets, Institutions and Money, vol. 38, pp. 217–229.

Narayan, PK, Narayan, S & Westerlund, J 2015, 'Do order imbalances predict Chinese stock returns? New evidence from intraday data', Pacific-Basin Finance Journal, vol. 34, pp. 136–151.

Narayan, PK, Narayan, S, Popp, S & Ali Ahmed, H 2015, 'Is the efficient market hypothesis day-of-the-week dependent? Evidence from the banking sector', Applied Economics, vol. 47, no. 23, pp. 2359–2378.

Narayan, PK, Sharma, SS & Thuraisamy, KS 2015, 'Can governance quality predict stock market returns? New global evidence', Pacific-Basin Finance Journal, vol. 35(A), pp. 367–380.

Pedroni, PL, Vogelsang, TJ, Wagner, M, Westerlund, J 2015, 'Nonparametric rank tests for non-stationary panels', Journal of Econometrics, vol. 185, pp. 378–391.

Phan, DHB, Sharma, SS & Narayan, PK 2015, 'Oil price and stock returns of consumers and producers of crude oil', Journal of International Financial Markets, Institutions and Money, vol. 34, pp. 245–262.

Phan, DHB, Sharma, SS & Narayan, PK 2015, 'Intraday volatility interaction between the crude oil and equity markets', Journal of International Financial Markets, Institutions and Money, vol. 40, pp. 1–13.

Phan, DHB, Sharma, SS & Narayan, PK 2015, 'Stock return forecasting: some new evidence', International Review of Financial Analysis, vol. 40, pp. 38–51.

Reese, S & Westerlund, J 2015, 'Panicca: panic on cross-section averages', Journal of Applied Econometrics, pp. 1–21.

Smyth, R & Narayan, PK 2015, 'Applied econometrics and implications for energy economics research', Energy Economics, vol. 50, pp. 351–358.

Westerlund, J & Narayan, PK 2015, 'A random coefficient approach to the predictability of stock returns in panels', Journal of Financial Econometrics, vol. 13, no. 3, pp. 605–664.

Westerlund, J & Urbain, J-P 2015, 'Cross-sectional averages versus principal components', Journal of Econometrics, vol. 185, pp. 372–377.

Westerlund, J 2015, 'On the importance of the first observation in GLS detrending in unit root testing', Oxford Bulletin of Economics and Statistics, vol. 77, pp. 152–161.

Westerlund, J 2015, 'The power of PANIC', Journal of Econometrics, vol. 185, pp. 495–509.

Westerlund, J, Hosseinkouchack, M & Solberger, M 2015, 'The local power of the CADF and CIPS panel unit root tests', Econometrics Reviews, pp. 1–26.

Westerlund, J, Narayan, PK & Zheng, X 2015, 'Testing for stock return predictability in a large Chinese panel', Emerging Markets Review, vol. 24, pp. 81–100.

Westerlund, J, Thuraisamy, K, & Sharma, SS 2015, 'On the use of panel cointegration tests', Energy Economics, vol. 50, pp. 359–363.

Westerlund, J & Larsson, R 2015, 'New tools for understanding the local asymptotic power of panel unit root tests', Journal of Econometrics, vol. 188, pp. 59–93.

Westerlund, J 2015, 'Rethinking the univariate approach to panel unit root testing: using covariates to resolve the incidental trend problem', Journal of Business and Economic Statistics, vol. 33, pp. 430–443.

Westerlund, J 2015, 'The effect of recursive detrending on panel unit root tests', Journal of Econometrics, vol. 185, pp. 453–467.

Westerlund, J & Narayan, PK 2015, 'Testing for predictability in conditionally heteroskedastic stock returns', Journal of Financial Econometrics, vol 13(2), pp. 342–375.

2014

Makin, A, Narayan, PK, & Narayan, S 2014, 'What expenditure does Anglosphere foreign borrowing fund?', Journal of International Money, vol. 40, pp. 63–78.

Narayan, PK, Ahmed, HA, Sharma, SS & Prabheesh, KP 2014, 'How profitable is the Indian stock market?', Pacific-Basin Finance Journal, vol. 30, pp. 44–61.

Narayan, PK & Westerlund, J 2014, 'Does cash flow predict returns?', International Review of Financial Analysis, vol. 35, pp. 230–236.

Narayan, PK, Narayan, S & Prabheesh, K 2014, 'Stock returns, mutual fund flows and spillover shocks', Pacific-Basin Finance Journal, vol. 29, pp. 146–162.

Narayan, PK, Narayan, S & Thuraisamy, K 2014, 'Can institutions and macroeconomic factors predict stock returns in emerging markets?', Emerging Markets Review, vol. 19, pp. 77–95.

Narayan, PK, Sharma, S & Thuraisamy, K 2014, 'An analysis of price discovery from panel data models of CDS and equity returns', Journal of Banking and Finance, vol. 41, pp. 167–177.

Narayan, PK, Sharma, SS, Poon, W & Westerlund, J 2014, 'Do oil prices predict economic growth? New global evidence', Energy Economics, vol. 41, pp. 137–146.

Narayan, PK & Sharma, SS 2014, 'Firm return volatility and economic gains: the role of oil prices', Economic Modelling, vol. 38, pp. 142–151.

Narayan, PK & Narayan, S 2014, 'Psychological oil price barrier and firm returns', Journal of Behavioral Finance, vol. 15, no. 4, pp. 318–333.

Narayan, PK 2014, 'Response of inflation to shocks: new evidence from Sub-Saharan African countries', Economic Modelling, vol. 36, pp. 378–382.

Sharma, SS & Narayan, PK 2014, 'New evidence on turn-of-the-month effects', Journal of International Financial Markets, Institutions and Money, vol. 29, no. 1, pp. 92–108.

Westerlund, J 2014, 'On the choice of test for a unit root when the errors are conditionally heteroskedastic', Computational Statistics & Data Analysis, vol. 69, pp. 40–53.

Westerlund, J 2014, 'Heteroscedasticity robust panel unit root tests', Journal of Business and Economic Statistics, vol. 32, pp. 112–135.

Westerlund, J & Hjertstrand, P 2014, 'Indirect estimation of semiparametric binary choice models', Oxford Bulletin Of Economics and Statistics, vol. 76, pp. 298–314.

Westerlund, J 2014, 'Pooled panel unit root tests and the effect of past initialization', pp.1–32, Forthcoming.

Westerlund, J 2014, 'A simple test for nonstationarity in mixed panels with incidental trends', Economics Letters, vol. 125, pp.160–163.

Westerlund, J & Narayan, PK 2014, 'Panel versus GARCH information in unit root testing with an application to financial markets', Economic Modelling, vol. 41, pp. 173–176.

Contact us

Centre for Financial Econometrics Director
Professor Paresh Narayan
+61 3 9244 6180
Email Prof Narayan

Faculty of Business and Law
Deakin University
Melbourne Burwood Campus 
221 Burwood Highway
Burwood Victoria 3125