Search icone
Search and publish your papers

Financial market

Or download with : a doc exchange

About the author

Research Associate
Level
General public
Study
finance
School/University
Warwick...

About the document

Published date
Language
documents in English
Format
Word
Type
case study
Pages
12 pages
Level
General public
Accessed
1 times
Validated by
Committee Oboolo.com
0 Comment
Rate this document
  1. Introduction
  2. Trend in Financial Markets
  3. Stock and Bond Market
  4. Bonds Market and Foreign Exchange
  5. Discussion on Market Efficiency
  6. Conclusion

Recently, there are more and more financial analysts have dedicated their studies to the relationship and emerged trends between different financial markets such as studies of Dalkir (2009) and Savva (2009) on stock markets inner relationship, or relationship between bond markets and stock markets by Lim et al (1998), Shiller and Beltrani (1992) or Solnik et al.(1996) on those trend between both domestic and international market. Most of the findings suggested that bonds, stock and foreign exchange markets are closely related. Some other researches such as Connolly et al.(2005), Boyd et al. (2005), Kim et al. (2006) and Yang et al.(2009) also incorporate macroeconomics indicators into examining the correlation between stocks and bonds by considering business cycles and monetary policy. Assets price are believed to react sensitively to market information, macroeconomics policy and unanticipated events.

This paper aims to analyze the interactions between financial markets, the relationships between stock and bond markets, bonds yield and foreign exchange market as well as market efficiency. Those relationships will be investigated based on the elementary rules of economic theory with empirical evidence from Canadian financial markets. In this paper, the sample consists of data of close price of Bank of Canada, Methanex Corporation, Manulife Financial and TSX Index stock and Canada Government Bond yield for the period from 26th August to 25th October 2013. All of the data are collected from reliable financial source such asYahoo Finance and Bank of Canada and Federal Reserve on a daily basis.

[...] All of the data are collected from reliable financial source such asYahoo Finance and Bank of Canada and Federal Reserve on a daily basis. Discussion 1. Trend in Financial Markets Stock Market Figure 1. Toronto Stock Market Performance ( adapted from Yahoo Finance, 2013) Overall, in the last two months, Canadian stock markets performed much better than expected. The TSX Composite Index raised by in two months, while stocks from large corporations such as Bank of Canada and Methanex Corporation increased significantly by 13% and 20% respectively. [...]


[...] According to Table.1, there was statistically significant correlation between TSX, Bank of Canada, Methanex Corporation Stock price with Bond yield years) and T-bill yields months). The result indicates a negative relationship between stock market and bond yield, and strong positive relationship between t-bill and stock price. However, Manulife's stock value does not follow any pattern of other players in the financial markets. There was no significant relationship between Manulife's stock price and any short-term or long-term interest rates during the analysed period. Table 1. [...]


[...] Solnik B., Boucrelle C. and Le Fur Y. (1996), International market correlation and volatility, Financial Analysts Journal p. 17-34. Wilder, J. W. (1978). New concepts in technical trading systems (p. 70). McLeansville, NC: Trend Research. Yahoo Finance Market Data, Bank of Canada. Retrieved from: http://ca.finance.yahoo.com/q/hp?s=NA.TO Yahoo Finance Market Data, Manulife Financial Corporation. Retrieved from http://ca.finance.yahoo.com/q/hp?s=MFC.TO Yahoo Finance Market Data, Methanex Corporation. Retrieved from http://ca.finance.yahoo.com/q/hp?s=MX.TO Yahoo Finance Market Data, Toronto Stock Exchange Composite Index. [...]


[...] Both Bank of Canada and Methanex Corporation Stock was overvalued and outperformed the market. This can be explained by overreaction or excessive volatility theory, which is against the efficient market theory. In fact, there are lots of volatility in stock markets, and there can be stock market appears to display excessive volatility. There are smaller fluctuations in stock prices when stock markets are closed shows that stock market prices appear to be driven by other factors. Besides that,efficient market hypothesis indicates that no investment can outperform the market, however some of the anomalies to the efficient market hypothesis suggests that an extremely intelligent investor can still exercise the buy-and-hold strategy. [...]


[...] Retrieved from http://ca.finance.yahoo.com/q/hp?s=%5EGSPTSE Yang J., Zhou Y. and Wang Z. (2009), The stock-bond correlation and economic conditions: One and a half centuries of evidence", Journal of Banking and Finance 33, p. 670-680. [...]

Similar documents you may be interested in reading.

Financial markets in Emerging Economies: Comparison with developed economies

 Economics & finance   |  Economics   |  Presentation   |  01/15/2009   |   .doc   |   12 pages

Financial markets of India

 Economics & finance   |  Finance   |  Thesis   |  04/13/2009   |   .doc   |   33 pages

Top sold for finance

Yale University Investments Office: August 2006 case analysis

 Economics & finance   |  Finance   |  Case study   |  08/17/2009   |   .doc   |   8 pages

International finance distribution of currency of AUD and USD

 Economics & finance   |  Finance   |  Worksheets   |  08/05/2017   |   .doc   |   4 pages