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Article: A Vulnerability Index for Predicting Extreme Market Events in Hong Kong

TitleA Vulnerability Index for Predicting Extreme Market Events in Hong Kong
Authors
Issue Date2005
PublisherInstitute of International Economic Studies. The Journal's web site is located at http://www2.southeastern.edu/orgs/ijae/
Citation
International Journal of Applied Economics, 2005, v. 2 n. 2, p. 130-160 How to Cite?
AbstractIn this paper, we explore the possibility of developing a “vulnerability” indicator for gauging the health of the economy of Hong Kong. An important measure of “health” to be considered is the popular maximum Lyapunov exponent in the dynamical system literature which measures the sensitivity to initial conditions of a deterministic function. Other key economic and financial indicators that have impact on the Hong Kong financial market such as yield spreads & forward rates are also considered. Lyapunov exponent is often used to indicate the presence of nonlinearity and has not been used as an explanatory variable in the literature, when in fact the Lyapunov exponent also contains useful information about a dynamical system and such information can be usefully exploited. Using stepwise probit regression an indicator of the vulnerability of the financial sector is obtained which is able to indicate empirically observed crisis. An interesting feature of this indicator function is that the local maximum Lyapunov exponent plays a non-negligible role in predicting the status of the economy.
Persistent Identifierhttp://hdl.handle.net/10722/82819
ISSN

 

DC FieldValueLanguage
dc.contributor.authorLi, WKen_HK
dc.contributor.authorYu, PLHen_HK
dc.contributor.authorTse, KSen_HK
dc.date.accessioned2010-09-06T08:33:46Z-
dc.date.available2010-09-06T08:33:46Z-
dc.date.issued2005en_HK
dc.identifier.citationInternational Journal of Applied Economics, 2005, v. 2 n. 2, p. 130-160en_HK
dc.identifier.issn1548-0003-
dc.identifier.urihttp://hdl.handle.net/10722/82819-
dc.description.abstractIn this paper, we explore the possibility of developing a “vulnerability” indicator for gauging the health of the economy of Hong Kong. An important measure of “health” to be considered is the popular maximum Lyapunov exponent in the dynamical system literature which measures the sensitivity to initial conditions of a deterministic function. Other key economic and financial indicators that have impact on the Hong Kong financial market such as yield spreads & forward rates are also considered. Lyapunov exponent is often used to indicate the presence of nonlinearity and has not been used as an explanatory variable in the literature, when in fact the Lyapunov exponent also contains useful information about a dynamical system and such information can be usefully exploited. Using stepwise probit regression an indicator of the vulnerability of the financial sector is obtained which is able to indicate empirically observed crisis. An interesting feature of this indicator function is that the local maximum Lyapunov exponent plays a non-negligible role in predicting the status of the economy.-
dc.languageengen_HK
dc.publisherInstitute of International Economic Studies. The Journal's web site is located at http://www2.southeastern.edu/orgs/ijae/-
dc.relation.ispartofInternational Journal of Applied Economicsen_HK
dc.titleA Vulnerability Index for Predicting Extreme Market Events in Hong Kongen_HK
dc.typeArticleen_HK
dc.identifier.emailLi, WK: hrntlwk@hkucc.hku.hken_HK
dc.identifier.emailYu, PLH: plhyu@hkucc.hku.hken_HK
dc.identifier.emailTse, KS: ktse@econ.hku.hken_HK
dc.identifier.authorityLi, WK=rp00741en_HK
dc.identifier.authorityYu, PLH=rp00835en_HK
dc.identifier.authorityTse, KS=rp01101en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.hkuros112699en_HK
dc.identifier.volume2-
dc.identifier.issue2-
dc.identifier.spage130-
dc.identifier.epage160-
dc.publisher.placeUnited States-

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