Pub Date : 2022-10-21DOI: 10.1142/s2010495222500282
Raheel Gohar, Asma Salman, E. Uche, O. F. Derindag, B. Chang
During the COVID-19 pandemic, Baker et al. (2020) [The unprecedented stock market reaction to COVID-19. The Review of Asset Pricing Studies, 10, 742–758.] proposed the infectious disease equity market volatility (ID-EMV) index, which tracks US equity market volatility caused by infectious diseases. We extended the literature by using this newly developed ID-EMV index to examine its asymmetric effect on the share market returns of the G7 countries, which include the United Kingdom, Italy, Japan, Germany, France, Canada, and the United States of America. Moreover, we used novel techniques like the quantile-on-quantile regression test, quantile cointegration test, and quantile unit root test. The quantile cointegration test indicates that the infectious disease EMV index is cointegrated with G7 stock returns. Moreover, the quantile-on-quantile regression technique reveals that the infectious disease index positively affects stock returns during bullish states of the stock markets. In contrast, it negatively affects stock returns during bearish states of the stock market returns. The negative effect of the bearish states implies that investors may discourage investments during the downturns of the economy, whereas they need to boost their investments during economic booms.
{"title":"DOES US INFECTIOUS DISEASE EQUITY MARKET VOLATILITY INDEX PREDICT G7 STOCK RETURNS? EVIDENCE BEYOND SYMMETRY","authors":"Raheel Gohar, Asma Salman, E. Uche, O. F. Derindag, B. Chang","doi":"10.1142/s2010495222500282","DOIUrl":"https://doi.org/10.1142/s2010495222500282","url":null,"abstract":"During the COVID-19 pandemic, Baker et al. (2020) [The unprecedented stock market reaction to COVID-19. The Review of Asset Pricing Studies, 10, 742–758.] proposed the infectious disease equity market volatility (ID-EMV) index, which tracks US equity market volatility caused by infectious diseases. We extended the literature by using this newly developed ID-EMV index to examine its asymmetric effect on the share market returns of the G7 countries, which include the United Kingdom, Italy, Japan, Germany, France, Canada, and the United States of America. Moreover, we used novel techniques like the quantile-on-quantile regression test, quantile cointegration test, and quantile unit root test. The quantile cointegration test indicates that the infectious disease EMV index is cointegrated with G7 stock returns. Moreover, the quantile-on-quantile regression technique reveals that the infectious disease index positively affects stock returns during bullish states of the stock markets. In contrast, it negatively affects stock returns during bearish states of the stock market returns. The negative effect of the bearish states implies that investors may discourage investments during the downturns of the economy, whereas they need to boost their investments during economic booms.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2022-10-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47580555","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 : 2022-10-15DOI: 10.1142/s2010495222300010
Sisa Shiba, J. Cuñado, Rangan Gupta, S. Goswami
This paper examines the forecasting power of daily infectious disease-related uncertainty in predicting the realized volatility of nine foreign exchange futures and the Bitcoin futures series using the heterogeneous autoregressive realized variance model. Our results indicate that the infectious diseases-related uncertainty index plays a crucial role in predicting the future path of foreign exchange and Bitcoin futures realized volatility in all the selected time intervals. These findings have important implications for portfolio managers and investors during periods of high levels of uncertainty associated with infectious diseases.
{"title":"INFECTIOUS DISEASES-RELATED UNCERTAINTY AND THE PREDICTABILITY OF FOREIGN EXCHANGE AND BITCOIN FUTURES REALIZED VOLATILITY","authors":"Sisa Shiba, J. Cuñado, Rangan Gupta, S. Goswami","doi":"10.1142/s2010495222300010","DOIUrl":"https://doi.org/10.1142/s2010495222300010","url":null,"abstract":"This paper examines the forecasting power of daily infectious disease-related uncertainty in predicting the realized volatility of nine foreign exchange futures and the Bitcoin futures series using the heterogeneous autoregressive realized variance model. Our results indicate that the infectious diseases-related uncertainty index plays a crucial role in predicting the future path of foreign exchange and Bitcoin futures realized volatility in all the selected time intervals. These findings have important implications for portfolio managers and investors during periods of high levels of uncertainty associated with infectious diseases.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2022-10-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45321935","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 : 2022-09-23DOI: 10.1142/s2010495222500257
Rachana Jaiswal, Shashank Gupta, A. Tiwari
Blockchain technology has attracted a lot of attention due to its revolutionary potential to upend the established economic structures, leading to a deluge of literature on the topic. Academics and business leaders alike are eager to see this technology used in the financial industry, although its full potential and limitations are currently unknown. To bridge this knowledge gap, 3312 records from the Dimensions database were obtained between 2014 and 2022 and used for bibliometrics and network analysis on the subject of blockchain technology in the financial sector. This analysis articulates the various potentials of blockchain literature as well as its adoption by various countries and authors, collaboration patterns, and applications of blockchain in finance using the visual mapping technique provided by VOSviewer. The top two innovators in the field, China and the USA, have used blockchain more extensively in financial research. Furthermore, the results show that the coverage of blockchain in finance has exploded in the last three years. Although India ranks third in documentation, behind China and the USA, it is lacking in citations and networking opportunities. The results, which identify important journals and authors in this field, will aid future researchers in better understanding the literature and conducting a PRISMA-based systematic review. This research is unique because it is the first bibliometric study to use the Dimensions AI database to look into how blockchain technology can be used in the financial sector.
{"title":"DELINEATION OF BLOCKCHAIN TECHNOLOGY IN FINANCE: A SCIENTOMETRIC VIEW","authors":"Rachana Jaiswal, Shashank Gupta, A. Tiwari","doi":"10.1142/s2010495222500257","DOIUrl":"https://doi.org/10.1142/s2010495222500257","url":null,"abstract":"Blockchain technology has attracted a lot of attention due to its revolutionary potential to upend the established economic structures, leading to a deluge of literature on the topic. Academics and business leaders alike are eager to see this technology used in the financial industry, although its full potential and limitations are currently unknown. To bridge this knowledge gap, 3312 records from the Dimensions database were obtained between 2014 and 2022 and used for bibliometrics and network analysis on the subject of blockchain technology in the financial sector. This analysis articulates the various potentials of blockchain literature as well as its adoption by various countries and authors, collaboration patterns, and applications of blockchain in finance using the visual mapping technique provided by VOSviewer. The top two innovators in the field, China and the USA, have used blockchain more extensively in financial research. Furthermore, the results show that the coverage of blockchain in finance has exploded in the last three years. Although India ranks third in documentation, behind China and the USA, it is lacking in citations and networking opportunities. The results, which identify important journals and authors in this field, will aid future researchers in better understanding the literature and conducting a PRISMA-based systematic review. This research is unique because it is the first bibliometric study to use the Dimensions AI database to look into how blockchain technology can be used in the financial sector.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2022-09-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44803049","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 : 2022-09-07DOI: 10.1142/s2010495222400024
Abigail Naa Korkor Adjei, George Tweneboah, Peterson Owusu Junior
This paper sought to close the gap on the inconsistent findings on the causal relationship between uncertainty and business cycles. We investigate the causal relationship between economic policy uncertainty (EPU) and business cycles in six emerging market economies, during the period January 1999 to December 2018. We significantly contribute to the literature by adopting a robust nonlinear causality test and the maximal overlap discrete wavelet transform that transforms the series into multilevel wavelet and scaling coefficients. The empirical findings are thus presented in short-, medium-, and long-term dynamics, which correspond to investors’ different time horizons. We further introduce new variables which significantly alter our understanding of the inconsistent findings between EPU and business cycles. We record a handful of evidence to prove that EPU is both a cause and effect of business cycle fluctuations, except for India that records a one-way causality from business cycles to EPU. These findings are significant because they provide investors and policymakers with information on the causal relationship between EPU and business cycles over time and across frequencies, which can be used to improve policy formulations and investment strategies across time horizons. Furthermore, the findings aid in explaining the inconsistent findings in the literature.
{"title":"NONLINEAR CAUSAL RELATIONSHIP BETWEEN ECONOMIC POLICY UNCERTAINTY AND MACROECONOMIC VARIABLES IN SELECTED EMERGING MARKET ECONOMIES","authors":"Abigail Naa Korkor Adjei, George Tweneboah, Peterson Owusu Junior","doi":"10.1142/s2010495222400024","DOIUrl":"https://doi.org/10.1142/s2010495222400024","url":null,"abstract":"This paper sought to close the gap on the inconsistent findings on the causal relationship between uncertainty and business cycles. We investigate the causal relationship between economic policy uncertainty (EPU) and business cycles in six emerging market economies, during the period January 1999 to December 2018. We significantly contribute to the literature by adopting a robust nonlinear causality test and the maximal overlap discrete wavelet transform that transforms the series into multilevel wavelet and scaling coefficients. The empirical findings are thus presented in short-, medium-, and long-term dynamics, which correspond to investors’ different time horizons. We further introduce new variables which significantly alter our understanding of the inconsistent findings between EPU and business cycles. We record a handful of evidence to prove that EPU is both a cause and effect of business cycle fluctuations, except for India that records a one-way causality from business cycles to EPU. These findings are significant because they provide investors and policymakers with information on the causal relationship between EPU and business cycles over time and across frequencies, which can be used to improve policy formulations and investment strategies across time horizons. Furthermore, the findings aid in explaining the inconsistent findings in the literature.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2022-09-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48740950","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 : 2022-08-18DOI: 10.1142/s2010495222500245
Raheel Gohar, Salim Bagadeem, B. Chang, Muyu Zong
Various empirical studies have been conducted. However, these studies fail to examine the asymmetric effect of income and price across different quantiles of consumption in the emerging 7 countries. This study extends the existing literature using a novel approach called the quantile ARDL model along with the standard nonlinear ARDL model. Findings based on the nonlinear ARDL model indicate that positive shocks in income positively and significantly affect consumption in the short- and long-run. On the other hand, negative shocks in income do not significantly affect consumption which, therefore, suggests an asymmetric effect of income on consumption. In addition, the quantile ARDL estimates indicate that income positively affects consumption across all quantiles of the consumption except the 95th quantile. Moreover, the quantile ARDL estimates indicate that price variations negatively affect consumption across all emerging 7 countries. These estimates suggest that devising policies without considering the asymmetric effect may lead to unfavorable consequences.
{"title":"DO THE INCOME AND PRICE CHANGES AFFECT CONSUMPTION IN THE EMERGING 7 COUNTRIES? EMPIRICAL EVIDENCE USING QUANTILE ARDL MODEL","authors":"Raheel Gohar, Salim Bagadeem, B. Chang, Muyu Zong","doi":"10.1142/s2010495222500245","DOIUrl":"https://doi.org/10.1142/s2010495222500245","url":null,"abstract":"Various empirical studies have been conducted. However, these studies fail to examine the asymmetric effect of income and price across different quantiles of consumption in the emerging 7 countries. This study extends the existing literature using a novel approach called the quantile ARDL model along with the standard nonlinear ARDL model. Findings based on the nonlinear ARDL model indicate that positive shocks in income positively and significantly affect consumption in the short- and long-run. On the other hand, negative shocks in income do not significantly affect consumption which, therefore, suggests an asymmetric effect of income on consumption. In addition, the quantile ARDL estimates indicate that income positively affects consumption across all quantiles of the consumption except the 95th quantile. Moreover, the quantile ARDL estimates indicate that price variations negatively affect consumption across all emerging 7 countries. These estimates suggest that devising policies without considering the asymmetric effect may lead to unfavorable consequences.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2022-08-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44989450","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 : 2022-08-03DOI: 10.1142/s2010495222500221
Faisal Abbas, Shoaib Ali, Wing-Keung Wong
We hypothesize that both liberalization and economic freedom are double-edged swords for the banking industry because they can increase both stability and fragility of the banks. To test our hypotheses, we use the two-step GMM technique to examine the impact of economic freedom and the impacts of all of its sub-components on the risk-taking behavior of US commercial banks for the period from 2003 to 2019. We find that economic freedom adversely affects banks’ risks, and therefore, increases the stability of the banking system. We observe that not all types of freedoms have positive outcomes in the banking sector, both investment and trade-related deregulation increase the fragility of the banking sector, and any type of relaxation in which banks play a direct role has a negative influence on the characteristics of banks like capital control or trade. Consistent with the competition stability theory, our findings conclude that higher economic freedom will yield higher stability in the US commercial banks. Whereas our findings are heterogeneous across all of its sub-components, all the sub-components expect investment and trade freedom positively influence the banks’ stability. Additionally, the result of this study remains consistent across well-, and under-capitalized banks, and the outcome of this study remains robust to the alternative measures of risk. Regulators, policymakers and bank managers could draw implications from the results in this paper in deciding how much liberalization the banks can handle and they also must consider the heterogeneity in the impacts from all of the sub-components because not all of them generate favorable outcomes for banks.
{"title":"IMPACT OF ECONOMIC FREEDOM AND ITS SUBCOMPONENTS ON COMMERCIAL BANKS’ RISK-TAKING","authors":"Faisal Abbas, Shoaib Ali, Wing-Keung Wong","doi":"10.1142/s2010495222500221","DOIUrl":"https://doi.org/10.1142/s2010495222500221","url":null,"abstract":"We hypothesize that both liberalization and economic freedom are double-edged swords for the banking industry because they can increase both stability and fragility of the banks. To test our hypotheses, we use the two-step GMM technique to examine the impact of economic freedom and the impacts of all of its sub-components on the risk-taking behavior of US commercial banks for the period from 2003 to 2019. We find that economic freedom adversely affects banks’ risks, and therefore, increases the stability of the banking system. We observe that not all types of freedoms have positive outcomes in the banking sector, both investment and trade-related deregulation increase the fragility of the banking sector, and any type of relaxation in which banks play a direct role has a negative influence on the characteristics of banks like capital control or trade. Consistent with the competition stability theory, our findings conclude that higher economic freedom will yield higher stability in the US commercial banks. Whereas our findings are heterogeneous across all of its sub-components, all the sub-components expect investment and trade freedom positively influence the banks’ stability. Additionally, the result of this study remains consistent across well-, and under-capitalized banks, and the outcome of this study remains robust to the alternative measures of risk. Regulators, policymakers and bank managers could draw implications from the results in this paper in deciding how much liberalization the banks can handle and they also must consider the heterogeneity in the impacts from all of the sub-components because not all of them generate favorable outcomes for banks.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2022-08-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41860196","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 : 2022-07-30DOI: 10.1142/s201049522250021x
S. Rey
The aim of this paper is to present a linkage between the real economy (micro and macro) and the financial economy. This relationship is obtained from the non-arbitrage valuation of equities framework. The paper also investigates if this theoretical relationship is actually observed. For this purpose, it proposes and tests an empirical model for excess returns that includes the linkage as a crucial element. The actual observation of the linkage could be of special importance for the financial economics discipline, since it presents several features that are not usually seen in other asset pricing or macro-finance models: (a) the relationship is explicit and does not depend on the estimation of free parameters; (b) it is derived under arbitrage free arguments and does not introduce subjective concepts as utility function or risk aversion; and (c) it explains the observed level of equity risk premium without entering in contradiction with its theoretical foundations. The conclusions of the performed tests are in favor of the concepts provided by the framework, meaning that further research could offer an alternative understanding of the behavior of financial markets and their connection with the real economy.
{"title":"A LINKAGE BETWEEN THE FINANCIAL AND THE REAL ECONOMY","authors":"S. Rey","doi":"10.1142/s201049522250021x","DOIUrl":"https://doi.org/10.1142/s201049522250021x","url":null,"abstract":"The aim of this paper is to present a linkage between the real economy (micro and macro) and the financial economy. This relationship is obtained from the non-arbitrage valuation of equities framework. The paper also investigates if this theoretical relationship is actually observed. For this purpose, it proposes and tests an empirical model for excess returns that includes the linkage as a crucial element. The actual observation of the linkage could be of special importance for the financial economics discipline, since it presents several features that are not usually seen in other asset pricing or macro-finance models: (a) the relationship is explicit and does not depend on the estimation of free parameters; (b) it is derived under arbitrage free arguments and does not introduce subjective concepts as utility function or risk aversion; and (c) it explains the observed level of equity risk premium without entering in contradiction with its theoretical foundations. The conclusions of the performed tests are in favor of the concepts provided by the framework, meaning that further research could offer an alternative understanding of the behavior of financial markets and their connection with the real economy.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2022-07-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49382188","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 : 2022-07-28DOI: 10.1142/s2010495222500233
C. Lok, Shu-Fen Chuah, C. Hooy
The primary purpose of this study is to develop a novel framework to explain the effects of data-driven leadership in IR4.0 adoption on firm performance. We proposed four dimensions for the data-driven leadership: (1) the experience of key personnel with IR4.0 adoption, (2) the appointment of a chief information officer (CIO), (3) the establishment of a technology committee, and (4) the acquisition of technology. This study includes 943 public-listed firms traded on Bursa Malaysia from 2015 to 2019. Using the random effects model (REM), our study shows that data-driven leadership in IR4.0 adoption, particularly the appointment of a CIO and the acquisition of technology, is positively associated with Tobin’s [Formula: see text] and market-to-book value of the firms. Subsample analysis reveals that data-driven leadership has greater significant positive impacts on firm performance in manufacturing-related firms. Further analysis also provides evidence that CEO duality and CEO age negatively affect the role of CIO in manufacturing firms. In contrast, CEO age and founder CEO negatively affect the role of key personnel fitted with IR4.0 experience in nonmanufacturing firms. However, founder CEO in nonmanufacturing-related firms which incorporated IR4.0 technology into the business could significantly improve firm performance. Lastly, there is a noticeable drop in performance when the boards are busy. Our study provides recommendations to both industry and government IR4.0 policy and contributes to leadership literature scholarly, particularly in the data-driven leadership viewpoint in both manufacturing- and nonmanufacturing-related sectors in the era of IR4.0.
{"title":"THE IMPACTS OF DATA-DRIVEN LEADERSHIP IN IR4.0 ADOPTION ON FIRM PERFORMANCE IN MALAYSIA","authors":"C. Lok, Shu-Fen Chuah, C. Hooy","doi":"10.1142/s2010495222500233","DOIUrl":"https://doi.org/10.1142/s2010495222500233","url":null,"abstract":"The primary purpose of this study is to develop a novel framework to explain the effects of data-driven leadership in IR4.0 adoption on firm performance. We proposed four dimensions for the data-driven leadership: (1) the experience of key personnel with IR4.0 adoption, (2) the appointment of a chief information officer (CIO), (3) the establishment of a technology committee, and (4) the acquisition of technology. This study includes 943 public-listed firms traded on Bursa Malaysia from 2015 to 2019. Using the random effects model (REM), our study shows that data-driven leadership in IR4.0 adoption, particularly the appointment of a CIO and the acquisition of technology, is positively associated with Tobin’s [Formula: see text] and market-to-book value of the firms. Subsample analysis reveals that data-driven leadership has greater significant positive impacts on firm performance in manufacturing-related firms. Further analysis also provides evidence that CEO duality and CEO age negatively affect the role of CIO in manufacturing firms. In contrast, CEO age and founder CEO negatively affect the role of key personnel fitted with IR4.0 experience in nonmanufacturing firms. However, founder CEO in nonmanufacturing-related firms which incorporated IR4.0 technology into the business could significantly improve firm performance. Lastly, there is a noticeable drop in performance when the boards are busy. Our study provides recommendations to both industry and government IR4.0 policy and contributes to leadership literature scholarly, particularly in the data-driven leadership viewpoint in both manufacturing- and nonmanufacturing-related sectors in the era of IR4.0.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2022-07-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41757992","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 : 2022-07-15DOI: 10.1142/s2010495222500208
Vinay Khandelwal, Varun Chotia
This paper investigates the Indian equity market for the presence of a beta anomaly. A beta anomaly occurs when the additional market risk taken by an investor is not rewarded. Academic literature shows mixed evidence on whether the market rewards risk-takers or not for the additional risk taken. Using a sample of monthly returns of 265 companies during a period of 240 months from January 2000 to December 2019, the authors test the Indian equity market for the presence of an anomaly. A decile descriptive analysis shows a positive relationship between market risk and returns, and a negative relationship between company-specific risk and returns. A two-stage Fama–MacBeth (FMB) regression procedure is employed to empirically test for the relationship between beta and expected returns. The findings refute the presence of a beta anomaly in the Indian capital market. Also, the study concludes that a linear model of slope-intercept form is enough to explain the beta and expected returns’ relationship. The findings benefit investment managers and wealth advisors by explaining the market risk and expected returns relationship.
{"title":"IS THERE A BETA ANOMALY? — EVIDENCE FROM THE INDIA","authors":"Vinay Khandelwal, Varun Chotia","doi":"10.1142/s2010495222500208","DOIUrl":"https://doi.org/10.1142/s2010495222500208","url":null,"abstract":"This paper investigates the Indian equity market for the presence of a beta anomaly. A beta anomaly occurs when the additional market risk taken by an investor is not rewarded. Academic literature shows mixed evidence on whether the market rewards risk-takers or not for the additional risk taken. Using a sample of monthly returns of 265 companies during a period of 240 months from January 2000 to December 2019, the authors test the Indian equity market for the presence of an anomaly. A decile descriptive analysis shows a positive relationship between market risk and returns, and a negative relationship between company-specific risk and returns. A two-stage Fama–MacBeth (FMB) regression procedure is employed to empirically test for the relationship between beta and expected returns. The findings refute the presence of a beta anomaly in the Indian capital market. Also, the study concludes that a linear model of slope-intercept form is enough to explain the beta and expected returns’ relationship. The findings benefit investment managers and wealth advisors by explaining the market risk and expected returns relationship.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2022-07-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41896578","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 : 2022-07-13DOI: 10.1142/s2010495222500191
Cengiz Karatas, G. Unal
Stock indices are key indicators of the economy since they indicate the strength of a country’s stock market. For this reason, causality, information flow and co-movement analysis of stock indices gain importance in comparing countries’ economies. Here, we apply a novel approach by analyzing the results of two different methodologies; in wavelet coherence (WTC) analysis, the co-movement between stock indices provided and coherent areas can be shown, and information flow is indicated for five-year periods, especially on coherent zones by Transfer Entropy (TE), which detects cause-and-effect relations. This paper analyzed the information flow and co-movement among FTSE100 in the United Kingdom, the DAX in Germany and S&P500 Index in the United States stock indices. Three different results are obtained as follows: (1) DAX is on the leading side in general for five-year periods, (2) bidirectional information flows arise for every pair in the coherent periods and (3) TE-guided WTC analysis shows that TE sign change can be explained by phase angle direction obtained with WTC. These results indicate that both the methods yield proper outcomes in coherent time zones and during financial crisis like the COVID period, which we have faced for two years; for this reason, the results were also obtained for the COVID period, and in general, that shows DAX dominated other indices. We published this study to help researchers understand the connectedness between stock indices and investors avoiding risk in their stock portfolios, especially during financial crisis periods.
{"title":"CAUSALITY, INFORMATION FLOW, AND CO-MOVEMENT ANALYSIS OF MAJOR STOCK INDICES","authors":"Cengiz Karatas, G. Unal","doi":"10.1142/s2010495222500191","DOIUrl":"https://doi.org/10.1142/s2010495222500191","url":null,"abstract":"Stock indices are key indicators of the economy since they indicate the strength of a country’s stock market. For this reason, causality, information flow and co-movement analysis of stock indices gain importance in comparing countries’ economies. Here, we apply a novel approach by analyzing the results of two different methodologies; in wavelet coherence (WTC) analysis, the co-movement between stock indices provided and coherent areas can be shown, and information flow is indicated for five-year periods, especially on coherent zones by Transfer Entropy (TE), which detects cause-and-effect relations. This paper analyzed the information flow and co-movement among FTSE100 in the United Kingdom, the DAX in Germany and S&P500 Index in the United States stock indices. Three different results are obtained as follows: (1) DAX is on the leading side in general for five-year periods, (2) bidirectional information flows arise for every pair in the coherent periods and (3) TE-guided WTC analysis shows that TE sign change can be explained by phase angle direction obtained with WTC. These results indicate that both the methods yield proper outcomes in coherent time zones and during financial crisis like the COVID period, which we have faced for two years; for this reason, the results were also obtained for the COVID period, and in general, that shows DAX dominated other indices. We published this study to help researchers understand the connectedness between stock indices and investors avoiding risk in their stock portfolios, especially during financial crisis periods.","PeriodicalId":43570,"journal":{"name":"Annals of Financial Economics","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2022-07-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49036650","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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