Proactive Structural  Financial Crisis, Recession, Recovery Impact on Emerging Markets BRIC ETF Asset Pricing, strategic ETF indexing arbitrage, portfolio asset allocation and Risks Early Warning : Dynamic Simulation, Spline-GARCH, Granger Analysis of Daily SP BRIC 40 Index


Warren Huang    OSA  Intl   Operations Analysis  San Francisco, Ca., USA website www.osawh.com  /  www.osaglobalstrategicmanagement.com
San Francisco, Ca. , USA,  wh3928@yahoo.com / osawh@sina.com
 Fenglan Zhang,  Zhejiang University, Hangzhou, Zhejiang, China  joycezhang001@yahoo.com.cn,  
                                           

                                                                                                                                     Abstract


 This paper demonstrated  Huang’s 30 years pioneering proactive, structural US and Emerging  markets BRIC ( Brazil, Russia, India, China) stocks, bond, housing , oil, commodities asset prices bubbles bursts simulation and , mortgage default crisis early warning
Thousands simulators have been developed, implemented for  tracking last 20 years  proactive strategic asset pricing, investment, markets, credit risks early warning for 30 million China, US Taiwan 15 cities 30 million institutional, private investors, Asian, European finance, capital market QFII, QDII, real estate, multinational oil CEO, seniors traders, asset managers lectures, workshops and 24 global central bank governors, risks management conferences.
These proactive structural artificial intelligence neural net based integrated macro financial, industrial economic, corporate
performance Operation Simulation Analysis (OSA) tracking, forecast years, months ahead of the causes, onset, spread, recovery, early  warning of last 20 years global and BRIC banking, financial and asset bubble burst crisis.
These dynamic deterministic OSA　tracking global, BRIC central banks monetary, economic, fiscal policy impact on macroeconomic inflation, GDP, daily interest rates, currency, BRIC components  oil, commodities, banking, finance, housing, IT industries demand, stocks prices performance, credit rating, defaults, systemic and corporate governance scandals specific risks, recovery modeling, financial futures, credit derivatives, asset allocation, pricing,  hedging risks early warnings, supporting financial, systems investment，macro-economic systemic risks , Basel II  credit, markets , operational risks control.
Huang directed Zhang to extend these OSA simulators to R. Engles Spline GARCH estimation and Granger co-integration, predicting months ahead of   SSgA BRIC 40 index (BIK) component stocks  oil (40 %) financial (28 %), IT（14 %）industrial sector and index pricing are related to China Shanghai-Shenzhen 300 index ( cover major China housing, banking, IT, materials industry), oil prices( covering China, Russia, Brazil oil companies), and Hang Sang index (cover China banking, IT, oil stocks) and Nasdaq index ( covering Indian, China IT stocks )　for global emerging markets strategic indexing ETF arbitrage  take advantage of the mispricing ( overpricing and underpricing of component stocks, maximizing risk adjusted return
This paper also cover  E-GARCH simulation of  China monetary supply growth , RMB currency, housing prices bubble, fixed investment and US Subprime default Dow Jones stock index  impact on daily Shanghai-Shenzhen 300 index futures prices These unconditional ETF and stock index prices is estimated  for US , BRIC, oil, housing, stock prices bubbles, and accurately predicted recent US sub-prime crisis drag Dow Jones 10 % correction and Hang Sang, Shanghai-Shenzhen 300 index , oil stocks PetroChina 20 % correction resulted BIK plunged 14 % from 35 to 31 over the recent US and China, housing and oil price boom and bust cycle.
    These models replacing current 30 year old probabilistic, statistical CAPM  asset pricing and Monte Carlo default modeling simulation, oversimplified macroeconomic, inflation, interest rates, currency, commodities, financial futures, real estate asset prices, avoided trillion dollars loss due to betting on the wrong side of credit derivatives, bond spread , speculation over the business, economic news resulted past , current mortgages loan default and  stock market crash.
 
 Keyword : BRIC   Proactive structural  Asset Pricing   indexing ETF  arbitrage , Shanghai Shenzhen 300 index,  portfolio mis pricing  Housing Bubbles,  Equities bubbles,  Oil bubble Operations Simulations Analysis,  proactive structural CAPM  credit risk,  market risks,  currency  interest rates   Asset pricing. allocation , risks hedging  

Submitted to 7th ANNUAL DARDEN INTERNATIONAL FINANCE CONFERENCE INVESTING IN EMERGING MARKETS, March 20, 2007

  • Comment by Dr. Warren Huang to Wall Street Journal Market Beat and Real Time Economic Blog
      • 12:03 pm May 18, 2009   Warren Huang wrote:
      According my two master hands controlling global macro-financial GDP,stock index ( right hand) and industrial sectors supply demand, pricing, corporate performance, stock prices (left hand) Today  market rebound just bargain hunting those beaten finance, banks, retail shares. Up to this moment, stimulus only work on and stay on right master hand ,the macro, banking, finance systems, while the rest of the economy, the industrial sector (left hands0 s are still in deep recession , The bull market come only when these two master hands felt the impact of stimuls impact The problem of credit, financial crisis, recession remain, not follow few day stock correction to go away. continue  soaring foreclosure ( Calif soared to 13 %, some area to 24 %, NY and others up to 8 %), due to falling housing prices ( down 26 %), despite local hosuing sale rebound., falling retail sales, despite tax rebate, soaring jobless at 8.9 % soem are over 12 %)will continue into summer, falling capicity utilization at record 67 % , due to weakening demand and prices PPI down 3.7%), with only money supply double from 5 to 11 %, stocks price up 37 %.,global recession from GDP contraction , despite ISM supply chain index improvement. Japan 12 % to EURO 4 %) poor corporate earning just hoping stimulus will help pulling out recession We are only hale way to this crisis and recession, while stock market speculators are celebrating bull markets. details on http://www.osawh.com/SP500.htm http://www.osawh.com/mortdefa.htm http://www.osawh.com/industfine.htm