Pub Date : 2023-03-10DOI: 10.1142/s2010495222500348
Francisca Mendonça Souza, Claudia Aline de Souza Ramser, A. Souza, C. D. da Veiga
The intention of this article is to develop an instrument to overcome the limitations caused by traditional analyses and present a combined STR — Smooth Transition Regression model (EGARCH, STRIGARCH, and STR-FIEGARCH) to analyze the contagion effects of the 2008 financial crisis. The proposed instrument will aid the analysis of contagion and the impact of changes in long-term interest rates on the returns of international stock indices and forecasting, with special emphasis on the effects caused by structural breaks, persistence, and conditioned heteroscedasticity. The methodology begins with unit root tests with one and two structural breaks. In the second step, the asymmetry will be analyzed considering the STR models, which will determine the asymmetry relationship between interest rates and the long term, so that in a later step, these asymmetries will be used in the composition of a volatility estimation model, being based on the ARCH models: (i) EGARCH and (ii) FIEGARCH. This study provides a useful instrument based on modeling techniques to make the decision-making process more efficient and objective, providing a choice of instruments that assess the effect of changes in interest rates on stock market indices when influenced by falls, with structural data and better forecasting performance. The results show that the developed mixture models obtained better performance in predicting the effect or impact of changes in interest rates on stock market indices when influenced by structural breaks. STR and the ARCH family are useful instruments that make the decision-making process clearer and more objective when choosing instruments that assess the spillover effect of long-term interest rates on the profitability of international financial indices.
{"title":"Spillover Effects in the Presence of Structural Breaks, Persistence and Conditioned Heteroscedasticity","authors":"Francisca Mendonça Souza, Claudia Aline de Souza Ramser, A. Souza, C. D. da Veiga","doi":"10.1142/s2010495222500348","DOIUrl":"https://doi.org/10.1142/s2010495222500348","url":null,"abstract":"The intention of this article is to develop an instrument to overcome the limitations caused by traditional analyses and present a combined STR — Smooth Transition Regression model (EGARCH, STRIGARCH, and STR-FIEGARCH) to analyze the contagion effects of the 2008 financial crisis. The proposed instrument will aid the analysis of contagion and the impact of changes in long-term interest rates on the returns of international stock indices and forecasting, with special emphasis on the effects caused by structural breaks, persistence, and conditioned heteroscedasticity. The methodology begins with unit root tests with one and two structural breaks. In the second step, the asymmetry will be analyzed considering the STR models, which will determine the asymmetry relationship between interest rates and the long term, so that in a later step, these asymmetries will be used in the composition of a volatility estimation model, being based on the ARCH models: (i) EGARCH and (ii) FIEGARCH. This study provides a useful instrument based on modeling techniques to make the decision-making process more efficient and objective, providing a choice of instruments that assess the effect of changes in interest rates on stock market indices when influenced by falls, with structural data and better forecasting performance. The results show that the developed mixture models obtained better performance in predicting the effect or impact of changes in interest rates on stock market indices when influenced by structural breaks. STR and the ARCH family are useful instruments that make the decision-making process clearer and more objective when choosing instruments that assess the spillover effect of long-term interest rates on the profitability of international financial indices.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2023-03-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49427730","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-03-09DOI: 10.1142/s2010495223020013
David Allen, Moawia Alghalith, Wing-Keung Wong
{"title":"Editorial: Statement for the Special Issue in Honor of Michael McAleer","authors":"David Allen, Moawia Alghalith, Wing-Keung Wong","doi":"10.1142/s2010495223020013","DOIUrl":"https://doi.org/10.1142/s2010495223020013","url":null,"abstract":"","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2023-03-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41778802","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-03-02DOI: 10.1142/s2010495222410020
Carolyn Chisadza, M. Biyase
We investigate the effects of financial development on income inequality for a global sample of countries between 1980 and 2019. The study contributes to the current literature by first, making use of a multifaceted index of financial development that captures different aspects of financial developments over time. Second, we compare the effects of financial development on income inequality across economic classifications, namely advanced, emerging and least developed countries. Last, we investigate the non-linear effects of financial development on income inequality across these economic classifications. The findings indicate that in general, financial development reduces inequality across emerging and least developed countries, but is not statistically significant for advanced countries. However, when we disaggregate the financial development index into its sub-components (financial institutions and financial markets), we find different effects on inequality, based on the levels of development. Further investigation on the dimensions under financial institutions and financial markets (depth, access and efficiency) reveals that banking sector development under financial institutions has income inequality-reducing effects in emerging and least developed countries, while stock market development under financial markets widens inequality in least developed countries. We also find heterogeneous non-linear effects between emerging and least developed countries. The findings in our paper firstly highlight the nuances in financial development depending on the level of development in countries, and secondly that policies focused on financial inclusion of the poor can mitigate inequality.
{"title":"Financial Development and Income Inequality: Evidence From Advanced, Emerging and Developing Economies","authors":"Carolyn Chisadza, M. Biyase","doi":"10.1142/s2010495222410020","DOIUrl":"https://doi.org/10.1142/s2010495222410020","url":null,"abstract":"We investigate the effects of financial development on income inequality for a global sample of countries between 1980 and 2019. The study contributes to the current literature by first, making use of a multifaceted index of financial development that captures different aspects of financial developments over time. Second, we compare the effects of financial development on income inequality across economic classifications, namely advanced, emerging and least developed countries. Last, we investigate the non-linear effects of financial development on income inequality across these economic classifications. The findings indicate that in general, financial development reduces inequality across emerging and least developed countries, but is not statistically significant for advanced countries. However, when we disaggregate the financial development index into its sub-components (financial institutions and financial markets), we find different effects on inequality, based on the levels of development. Further investigation on the dimensions under financial institutions and financial markets (depth, access and efficiency) reveals that banking sector development under financial institutions has income inequality-reducing effects in emerging and least developed countries, while stock market development under financial markets widens inequality in least developed countries. We also find heterogeneous non-linear effects between emerging and least developed countries. The findings in our paper firstly highlight the nuances in financial development depending on the level of development in countries, and secondly that policies focused on financial inclusion of the poor can mitigate inequality.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2023-03-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46257066","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-02-09DOI: 10.1142/s2010495222500336
Marc S. Paolella, Paweł Polak
The CCC-GARCH model, and its dynamic correlation extensions, form the most important model class for multivariate asset returns. For multivariate density and portfolio risk forecasting, a drawback of these models is the underlying assumption of Gaussianity. This paper considers the so-called COMFORT model class, which is the CCC-GARCH model but endowed with multivariate generalized hyperbolic innovations. The novelty of the model is that parameter estimation is conducted by joint maximum likelihood, of all model parameters, using an EM algorithm, and so is feasible for hundreds of assets. This paper demonstrates that (i) the new model is blatantly superior to its Gaussian counterpart in terms of forecasting ability, and (ii) also outperforms ad-hoc three-step procedures common in the literature to augment the CCC and DCC models with a fat-tailed distribution. An extensive empirical study confirms the COMFORT model’s superiority in terms of multivariate density and Value-at-Risk forecasting.
{"title":"Density and Risk Prediction with Non-Gaussian COMFORT Models","authors":"Marc S. Paolella, Paweł Polak","doi":"10.1142/s2010495222500336","DOIUrl":"https://doi.org/10.1142/s2010495222500336","url":null,"abstract":"The CCC-GARCH model, and its dynamic correlation extensions, form the most important model class for multivariate asset returns. For multivariate density and portfolio risk forecasting, a drawback of these models is the underlying assumption of Gaussianity. This paper considers the so-called COMFORT model class, which is the CCC-GARCH model but endowed with multivariate generalized hyperbolic innovations. The novelty of the model is that parameter estimation is conducted by joint maximum likelihood, of all model parameters, using an EM algorithm, and so is feasible for hundreds of assets. This paper demonstrates that (i) the new model is blatantly superior to its Gaussian counterpart in terms of forecasting ability, and (ii) also outperforms ad-hoc three-step procedures common in the literature to augment the CCC and DCC models with a fat-tailed distribution. An extensive empirical study confirms the COMFORT model’s superiority in terms of multivariate density and Value-at-Risk forecasting.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":"76 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-02-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136171156","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-12-15DOI: 10.1142/s2010495222500324
Abdul Hadi Sultani, U. Faisal
This study aims to empirically investigate the impact of a set of macroeconomic variables including balance of trade, FDI, exchange rate, and inflation on the balance of payments (BOP) of Afghanistan using quarterly data from the second quarter of 2004 to the fourth quarter of 2020 (2004Q2 to 2020Q4). The paper uses the Vector Error Correction Model (VECM), and Johansen co-integration test for analysis to explore the BOP of Afghanistan and provides comparable literature to other least-developed and low-income developing countries. The findings reveal that balance of trade (BOT), foreign direct investment (FDI), and exchange rate are significant determinants of Afghanistan’s BOP in the long run. More specifically, BOT and FDI positively impact the BOP, whereas the effect of the exchange rate on the BOP is found negative. Yet, inflation has an insignificant impact on the BOP. Though all variables have an insignificant impact on the BOP in the short run, the relevant policy measures ought to consider improvement in BOT, promoting FDI, and exchange rate stability to ensure synchronized improved BOP and economic growth.
{"title":"The Impact of Macroeconomic Indicators on the Balance of Payments: Empirical Evidence from Afghanistan","authors":"Abdul Hadi Sultani, U. Faisal","doi":"10.1142/s2010495222500324","DOIUrl":"https://doi.org/10.1142/s2010495222500324","url":null,"abstract":"This study aims to empirically investigate the impact of a set of macroeconomic variables including balance of trade, FDI, exchange rate, and inflation on the balance of payments (BOP) of Afghanistan using quarterly data from the second quarter of 2004 to the fourth quarter of 2020 (2004Q2 to 2020Q4). The paper uses the Vector Error Correction Model (VECM), and Johansen co-integration test for analysis to explore the BOP of Afghanistan and provides comparable literature to other least-developed and low-income developing countries. The findings reveal that balance of trade (BOT), foreign direct investment (FDI), and exchange rate are significant determinants of Afghanistan’s BOP in the long run. More specifically, BOT and FDI positively impact the BOP, whereas the effect of the exchange rate on the BOP is found negative. Yet, inflation has an insignificant impact on the BOP. Though all variables have an insignificant impact on the BOP in the short run, the relevant policy measures ought to consider improvement in BOT, promoting FDI, and exchange rate stability to ensure synchronized improved BOP and economic growth.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2022-12-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46029546","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-12-07DOI: 10.1142/s2010495222500312
Alina Maydybura, Raheel Gohar, Asma Salman, Wing-Keung Wong, B. Chang
This research has focused on examining the connection between uncertainties in economic policies and exchange rates. This research extends the literature to this field by analyzing the impact of small to large negative along with small to large positive variations in the economic policy uncertainty on the currency rates. For this purpose, this research uses the Granger causality in the quantile test and a newly constructed multiple asymmetric threshold nonlinear ARDL (MATNARDL) model. When a nonlinear ARDL model is utilized, our results confirmed the nonlinear impact in three nations only. In contrast, when the MATNARDL technique is utilized, these findings do confirm the nonlinear effect for all nations. Furthermore, when the Granger causality in the quantile test is applied, the impact differs over various quantiles. In general, the enhanced framework encourages us to analyze better how EPU affects the exchange rate in the emerging seven (E7) nations. The findings of our research may be useful for state banks to design policies to make interventions in the foreign currency market.
{"title":"The Asymmetric Effect of the Extreme Changes in the Economic Policy Uncertainty on the Exchange Rates: Evidence from Emerging Seven Countries","authors":"Alina Maydybura, Raheel Gohar, Asma Salman, Wing-Keung Wong, B. Chang","doi":"10.1142/s2010495222500312","DOIUrl":"https://doi.org/10.1142/s2010495222500312","url":null,"abstract":"This research has focused on examining the connection between uncertainties in economic policies and exchange rates. This research extends the literature to this field by analyzing the impact of small to large negative along with small to large positive variations in the economic policy uncertainty on the currency rates. For this purpose, this research uses the Granger causality in the quantile test and a newly constructed multiple asymmetric threshold nonlinear ARDL (MATNARDL) model. When a nonlinear ARDL model is utilized, our results confirmed the nonlinear impact in three nations only. In contrast, when the MATNARDL technique is utilized, these findings do confirm the nonlinear effect for all nations. Furthermore, when the Granger causality in the quantile test is applied, the impact differs over various quantiles. In general, the enhanced framework encourages us to analyze better how EPU affects the exchange rate in the emerging seven (E7) nations. The findings of our research may be useful for state banks to design policies to make interventions in the foreign currency market.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2022-12-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48296613","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-11-30DOI: 10.1142/s2010495222420015
Mustafa Sayim, Nguyen Quang My
In this research, the U.S. investor sentiment effect on cryptocurrency returns and volatility is examined by separating it into irrational and rational parts. According to the data, an unforeseen rise in the rational part of U.S. individual investor attitude influences cryptocurrency returns statistically and positively. In other words, rational sentiment can result in rising cryptocurrency returns. Additionally, a positive significant association exists between cryptocurrency volatility and the rational part of the individual U.S. investor sentiment. The findings confirm the hypothesis that the behavior of rational investors who utilize and study the impact of economic factors on asset prices reduces cryptocurrency volatility.
{"title":"An Analysis of the U.S. Individual Investor Sentiment Influence on Cryptocurrency Returns and Volatility","authors":"Mustafa Sayim, Nguyen Quang My","doi":"10.1142/s2010495222420015","DOIUrl":"https://doi.org/10.1142/s2010495222420015","url":null,"abstract":"In this research, the U.S. investor sentiment effect on cryptocurrency returns and volatility is examined by separating it into irrational and rational parts. According to the data, an unforeseen rise in the rational part of U.S. individual investor attitude influences cryptocurrency returns statistically and positively. In other words, rational sentiment can result in rising cryptocurrency returns. Additionally, a positive significant association exists between cryptocurrency volatility and the rational part of the individual U.S. investor sentiment. The findings confirm the hypothesis that the behavior of rational investors who utilize and study the impact of economic factors on asset prices reduces cryptocurrency volatility.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2022-11-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44879721","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-11-10DOI: 10.1142/s2010495222500270
Richard Lu, J. Wang, Wing-Keung Wong
Cross-sectional characteristics of stocks such as market value, market-to-book ratio and accumulated past return can be applied to formulate equity portfolios in the stock-picking process to generate good profits in some markets, which relate to the well-known size, value and momentum or contrarian strategies in the literature. Alternatively, income measures in financial statements drive investors in stock markets to buy or sell in an intuitive way that can be also used in the stock-picking process to generate good profits in some markets. This study applies these types of information in the formation period to formulate long-short strategies and investigates both the returns and risk profiles in the holding period afterward and checks whether the measures can be used to generate good profits in the Taiwan markets for the period from January 1980 to June 2020. Given different lengths of the holding period and different equity segments, our empirical analysis shows that strategies filtered by the income measure of gross profitability outperform the counterparts filtered by the operating profitability. Moreover, while the momentum or contrarian effect is not, the size and value effects are helpful to improve the performance of long-short strategies filtered by gross profitability.
{"title":"INVESTMENT BASED ON SIZE, VALUE, MOMENTUM AND INCOME MEASURES: A STUDY IN THE TAIWAN STOCK MARKET","authors":"Richard Lu, J. Wang, Wing-Keung Wong","doi":"10.1142/s2010495222500270","DOIUrl":"https://doi.org/10.1142/s2010495222500270","url":null,"abstract":"Cross-sectional characteristics of stocks such as market value, market-to-book ratio and accumulated past return can be applied to formulate equity portfolios in the stock-picking process to generate good profits in some markets, which relate to the well-known size, value and momentum or contrarian strategies in the literature. Alternatively, income measures in financial statements drive investors in stock markets to buy or sell in an intuitive way that can be also used in the stock-picking process to generate good profits in some markets. This study applies these types of information in the formation period to formulate long-short strategies and investigates both the returns and risk profiles in the holding period afterward and checks whether the measures can be used to generate good profits in the Taiwan markets for the period from January 1980 to June 2020. Given different lengths of the holding period and different equity segments, our empirical analysis shows that strategies filtered by the income measure of gross profitability outperform the counterparts filtered by the operating profitability. Moreover, while the momentum or contrarian effect is not, the size and value effects are helpful to improve the performance of long-short strategies filtered by gross profitability.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2022-11-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49204971","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-11-10DOI: 10.1142/s2010495222410019
Christian Pierdzioch, Sebastian Rohloff, Roland von Campe
We use a quasi-out-of-sample forecasting experiment to study the predictive value of a short-term real interest rate for the volatility of gold-price returns. To this end, we use monthly U.S. data for the sample period from 1990/1 to 2022/2, and we study a standard effective-federal-funds-based real interest rate as well as a shadow real interest rate, which accounts for the recent extended zero-lower-bound period. We find that the real interest rate has predictive value for the subsequent realized volatility, and this predictive value turns out to be stronger in several specifications of our forecasting experiment for the shadow real interest rate than for the standard real interest rate. We evaluate the predictive value of forecasts in terms of an asymmetric loss function. Because gold is considered as a safe-haven asset, our results provide some important implications for portfolio decisions of investors.
{"title":"ON THE PREDICTIVE VALUE OF THE (SHADOW) REAL INTEREST RATE FOR THE REALIZED VOLATILITY OF GOLD-PRICE RETURNS","authors":"Christian Pierdzioch, Sebastian Rohloff, Roland von Campe","doi":"10.1142/s2010495222410019","DOIUrl":"https://doi.org/10.1142/s2010495222410019","url":null,"abstract":"We use a quasi-out-of-sample forecasting experiment to study the predictive value of a short-term real interest rate for the volatility of gold-price returns. To this end, we use monthly U.S. data for the sample period from 1990/1 to 2022/2, and we study a standard effective-federal-funds-based real interest rate as well as a shadow real interest rate, which accounts for the recent extended zero-lower-bound period. We find that the real interest rate has predictive value for the subsequent realized volatility, and this predictive value turns out to be stronger in several specifications of our forecasting experiment for the shadow real interest rate than for the standard real interest rate. We evaluate the predictive value of forecasts in terms of an asymmetric loss function. Because gold is considered as a safe-haven asset, our results provide some important implications for portfolio decisions of investors.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2022-11-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42979649","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-10-27DOI: 10.1142/s2010495222500269
Shoaib Ali, Muhammad Naveed, Aisha Saleem, Muhammad Wajahat Nasir
Purpose: This paper aims to analyze the impact of COVID-19 on Pakistan’s traditional (KSE-100) and Islamic (KMI-30) stock market returns. Methodology: This study uses daily data of total cases and deaths of COVID-19 from February 25, 2020 to May 26, 2021. We utilize continuous wavelet transform (CWT), partial wavelet transforms and wavelet coherence transform (WCT) approaches to inspect the impact of COVID-19 on the stock return of KSE-100 and KMI-30 from March 13, 2020 to May 26, 2021. Findings: Contrary to European and several Asian stock markets, these both indexes behave the opposite during COVID-19. This study indicates that COVID-19 influences both these indexes and has a significant impact on both KSE-100 and KMI-30 index in the longer time frame. This study also discloses that with the increasing number of total cases, total death stock market daily return. Practical implications: Investors diversify their portfolio in the desire to achieve maximum return on minimum risk so they diversify across different countries and certain emerging market indexes might provide them a big edge to maximize their return. This diversified strategy can financially support different well-performing emerging markets and save emerging economies. This study enhances the investors trust and confidence to invest in both KSE-100 and KMI-30 due to favorable return of stocks. Originality/value: This examines the co-movement between COVID-19 and the traditional and Islamic stock index of Pakistan whereas, the previous paper only examined the volatility of these indexes during COVID-19. This study also extends the literature that examines how COVID-19 affected the traditional and Islamic stock market indexes.
{"title":"TIME-FREQUENCY CO-MOVEMENT BETWEEN COVID-19 AND PAKISTAN’S STOCK MARKET: EMPIRICAL EVIDENCE FROM WAVELET COHERENCE ANALYSIS","authors":"Shoaib Ali, Muhammad Naveed, Aisha Saleem, Muhammad Wajahat Nasir","doi":"10.1142/s2010495222500269","DOIUrl":"https://doi.org/10.1142/s2010495222500269","url":null,"abstract":"Purpose: This paper aims to analyze the impact of COVID-19 on Pakistan’s traditional (KSE-100) and Islamic (KMI-30) stock market returns. Methodology: This study uses daily data of total cases and deaths of COVID-19 from February 25, 2020 to May 26, 2021. We utilize continuous wavelet transform (CWT), partial wavelet transforms and wavelet coherence transform (WCT) approaches to inspect the impact of COVID-19 on the stock return of KSE-100 and KMI-30 from March 13, 2020 to May 26, 2021. Findings: Contrary to European and several Asian stock markets, these both indexes behave the opposite during COVID-19. This study indicates that COVID-19 influences both these indexes and has a significant impact on both KSE-100 and KMI-30 index in the longer time frame. This study also discloses that with the increasing number of total cases, total death stock market daily return. Practical implications: Investors diversify their portfolio in the desire to achieve maximum return on minimum risk so they diversify across different countries and certain emerging market indexes might provide them a big edge to maximize their return. This diversified strategy can financially support different well-performing emerging markets and save emerging economies. This study enhances the investors trust and confidence to invest in both KSE-100 and KMI-30 due to favorable return of stocks. Originality/value: This examines the co-movement between COVID-19 and the traditional and Islamic stock index of Pakistan whereas, the previous paper only examined the volatility of these indexes during COVID-19. This study also extends the literature that examines how COVID-19 affected the traditional and Islamic stock market indexes.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2022-10-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47510101","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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