Pub Date : 2023-08-29DOI: 10.1108/sef-03-2023-0136
U. Kayani, C. Gan, M. Rabbani, Yousra Trichilli
Purpose This study aims to thoroughly examine and understand the relationship between working capital management (WCM) and the sustainable financial performance (FP) in the context of the New Zealand companies listed on stock exchange. Design/methodology/approach This study has applied various regression techniques to examine WCM and the sustainable FP relationship. The data set period is from 2009 to 2019. The results are robust upon various layers of robustness parameters. The system-generalized method of moments is applied for managing endogeneity issue. Findings The research reveals compelling evidence of a meaningful connection between WCM and sustainable FP indicators. The study specifically highlights the significant negative associations between the cash conversion cycle, average collection period and average age of inventory with the firm’s sustainable FP. Through robust analyses and various parameter adjustments, the study ensures the credibility and reliability of its conclusions, further reinforcing the impact of WCM on the financial health of New Zealand-listed firms. Practical implications This study provides future directions for researchers to explore the dynamic relationship between WCM and a firm sustainable FP because it is still a demanding and challenging area. Future research may care to explore the optimal way to reduce the cash conversion cycle, average collection period and average age of inventory for New Zealand firms. The current study does provide insights to NZ financial managers, which is useful for improving sustainable FP by efficiently managing WCM. Originality/value WCM is problematic and constitutes a notable challenge; it requires further research, especially in small economies such as New Zealand. Hence, it is an updated and fresh attempt based on a larger data set to measure the empirical relationship between WCM and the sustainable performance of New Zealand-listed firms. Furthermore, the current study uses dynamic panel data estimation techniques in addition to multiple regression techniques.
{"title":"Is short-term firm performance an indicator of a sustainable financial performance? Empirical evidence","authors":"U. Kayani, C. Gan, M. Rabbani, Yousra Trichilli","doi":"10.1108/sef-03-2023-0136","DOIUrl":"https://doi.org/10.1108/sef-03-2023-0136","url":null,"abstract":"\u0000Purpose\u0000This study aims to thoroughly examine and understand the relationship between working capital management (WCM) and the sustainable financial performance (FP) in the context of the New Zealand companies listed on stock exchange.\u0000\u0000\u0000Design/methodology/approach\u0000This study has applied various regression techniques to examine WCM and the sustainable FP relationship. The data set period is from 2009 to 2019. The results are robust upon various layers of robustness parameters. The system-generalized method of moments is applied for managing endogeneity issue.\u0000\u0000\u0000Findings\u0000The research reveals compelling evidence of a meaningful connection between WCM and sustainable FP indicators. The study specifically highlights the significant negative associations between the cash conversion cycle, average collection period and average age of inventory with the firm’s sustainable FP. Through robust analyses and various parameter adjustments, the study ensures the credibility and reliability of its conclusions, further reinforcing the impact of WCM on the financial health of New Zealand-listed firms.\u0000\u0000\u0000Practical implications\u0000This study provides future directions for researchers to explore the dynamic relationship between WCM and a firm sustainable FP because it is still a demanding and challenging area. Future research may care to explore the optimal way to reduce the cash conversion cycle, average collection period and average age of inventory for New Zealand firms. The current study does provide insights to NZ financial managers, which is useful for improving sustainable FP by efficiently managing WCM.\u0000\u0000\u0000Originality/value\u0000WCM is problematic and constitutes a notable challenge; it requires further research, especially in small economies such as New Zealand. Hence, it is an updated and fresh attempt based on a larger data set to measure the empirical relationship between WCM and the sustainable performance of New Zealand-listed firms. Furthermore, the current study uses dynamic panel data estimation techniques in addition to multiple regression techniques.\u0000","PeriodicalId":45607,"journal":{"name":"Studies in Economics and Finance","volume":null,"pages":null},"PeriodicalIF":1.9,"publicationDate":"2023-08-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48975702","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 : 2023-08-23DOI: 10.1108/sef-04-2023-0207
Muhammad Farid Ahmed, S. Satchell
Purpose The purpose of this paper is to provide theory for some popular models and strategies used by practitioners in constructing optimal portfolios. King (2007), for example, advocated adding a diversification term to mean-variance problems to create better portfolios and provided clear empirical evidence that this is beneficial. Design/methodology/approach The authors provide an analytical framework to help us understand different portfolio construction practices that may incorporate diversification and conviction strategies; this allows us to connect our analysis to ideas in psychophysics and behavioural finance. The critical psychological ideas are cognitive dissonance and entropy; the economics are based on expected utility theory. The empirical section uses the theory outlined and provides the basis for constructing such portfolios. Findings The model presented allows the incorporation of different strategies within a mean-variance framework, ranging from diversification and conviction strategies to more ESG-oriented ones. The empirical analysis provides a practical application. Originality/value To the best of the authors’ knowledge, this model is the first to bridge the gap between portfolio optimisation and the psychological ideas mentioned in a coherent analytical framework.
{"title":"Conviction, diversification or something else: constructing optimal portfolios with additional attributes","authors":"Muhammad Farid Ahmed, S. Satchell","doi":"10.1108/sef-04-2023-0207","DOIUrl":"https://doi.org/10.1108/sef-04-2023-0207","url":null,"abstract":"\u0000Purpose\u0000The purpose of this paper is to provide theory for some popular models and strategies used by practitioners in constructing optimal portfolios. King (2007), for example, advocated adding a diversification term to mean-variance problems to create better portfolios and provided clear empirical evidence that this is beneficial.\u0000\u0000\u0000Design/methodology/approach\u0000The authors provide an analytical framework to help us understand different portfolio construction practices that may incorporate diversification and conviction strategies; this allows us to connect our analysis to ideas in psychophysics and behavioural finance. The critical psychological ideas are cognitive dissonance and entropy; the economics are based on expected utility theory. The empirical section uses the theory outlined and provides the basis for constructing such portfolios.\u0000\u0000\u0000Findings\u0000The model presented allows the incorporation of different strategies within a mean-variance framework, ranging from diversification and conviction strategies to more ESG-oriented ones. The empirical analysis provides a practical application.\u0000\u0000\u0000Originality/value\u0000To the best of the authors’ knowledge, this model is the first to bridge the gap between portfolio optimisation and the psychological ideas mentioned in a coherent analytical framework.\u0000","PeriodicalId":45607,"journal":{"name":"Studies in Economics and Finance","volume":null,"pages":null},"PeriodicalIF":1.9,"publicationDate":"2023-08-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43815621","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 : 2023-08-18DOI: 10.1108/sef-04-2023-0200
Ridha Esghaier
Purpose This paper aims to test the empirical validity of the dynamic trade-off theory in its symmetric and asymmetric versions in explaining the capital structure of a panel of publicly listed US industrial firms over the period from 2013 to 2019. It analyzes the existence of an adjustment of leverage toward its target level and whether the speed of this adjustment is influenced by the debt measure, the model specification or/and the fact that the actual debt ratio is higher or lower than its long-term target level. Design/methodology/approach This paper uses a quantitative research methodology using panel data analysis under the partial adjustment model and the error correction model using the generalized moment method in first differences and in systems to explore the dynamic nature of firms’ capital structure behavior. Findings The results show that the effects of the conventional determinants of leverage are globally consistent with the trade-off theory predictions. The dynamic versions confirm that firms exhibit leverage-targeting behavior. Although this speed of adjustment (SOA) depends on the debt and model specifications, it is around 60% on average. The estimated SOA is higher for the market leverage measure compared to the book leverage. The asymmetric adjustment model reveals that firms are more sensitive to reducing leverage than increasing it when they are away from their target; overleveraged firms exhibit approximately 5% faster adjustment than underleveraged firms when book leverage is used. Originality/value The originality of this research paper lies in its development and test of an asymmetric model to allow the leverage adjustment speed to vary depending on whether the firm’s debt ratio is above or below its target level and the methodological approach as well as the different model specifications used and the insights generated through the application of rigorous econometric techniques.
{"title":"The dynamic trade-off theory of capital structure: evidence from a panel of US industrial companies","authors":"Ridha Esghaier","doi":"10.1108/sef-04-2023-0200","DOIUrl":"https://doi.org/10.1108/sef-04-2023-0200","url":null,"abstract":"\u0000Purpose\u0000This paper aims to test the empirical validity of the dynamic trade-off theory in its symmetric and asymmetric versions in explaining the capital structure of a panel of publicly listed US industrial firms over the period from 2013 to 2019. It analyzes the existence of an adjustment of leverage toward its target level and whether the speed of this adjustment is influenced by the debt measure, the model specification or/and the fact that the actual debt ratio is higher or lower than its long-term target level.\u0000\u0000\u0000Design/methodology/approach\u0000This paper uses a quantitative research methodology using panel data analysis under the partial adjustment model and the error correction model using the generalized moment method in first differences and in systems to explore the dynamic nature of firms’ capital structure behavior.\u0000\u0000\u0000Findings\u0000The results show that the effects of the conventional determinants of leverage are globally consistent with the trade-off theory predictions. The dynamic versions confirm that firms exhibit leverage-targeting behavior. Although this speed of adjustment (SOA) depends on the debt and model specifications, it is around 60% on average. The estimated SOA is higher for the market leverage measure compared to the book leverage. The asymmetric adjustment model reveals that firms are more sensitive to reducing leverage than increasing it when they are away from their target; overleveraged firms exhibit approximately 5% faster adjustment than underleveraged firms when book leverage is used.\u0000\u0000\u0000Originality/value\u0000The originality of this research paper lies in its development and test of an asymmetric model to allow the leverage adjustment speed to vary depending on whether the firm’s debt ratio is above or below its target level and the methodological approach as well as the different model specifications used and the insights generated through the application of rigorous econometric techniques.\u0000","PeriodicalId":45607,"journal":{"name":"Studies in Economics and Finance","volume":null,"pages":null},"PeriodicalIF":1.9,"publicationDate":"2023-08-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47169826","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 : 2023-07-26DOI: 10.1108/sef-02-2023-0070
Aarzoo Sharma, A. Tiwari, E. Abakah, Freeman Brobbey Owusu
Purpose This paper aims to examine the cross-quantile correlation and causality-in-quantiles between green investments and energy commodities during the outbreak of COVID-19. To be specific, the authors aim to address the following questions: Is there any distributional predictability among green bonds and energy commodities during COVID-19? Is there exist any directional predictability between green investments and energy commodities during the global pandemic? Can green bonds hedge the risk of energy commodities during a period of the financial crisis. Design/methodology/approach The authors use the nonparametric causality in quantile and cross-quantilogram (CQ) correlation approaches as the estimation techniques to investigate the distributional and directional predictability between green investments and energy commodities respectively using daily spot prices from January 1, 2020, to March 26, 2021. The study uses daily closing price indices S&P Green Bond Index as a representative of the green bond market. In the case of energy commodities, the authors use S&P GSCI Natural Gas Spot, S&P GSCI Biofuel Spot, S&P GSCI Unleaded Gasoline Spot, S&P GSCI Gas Oil Spot, S&P GSCI Brent Crude Spot, S&P GSCI WTI, OPEC Oil Basket Price, Crude Oil Oman, Crude Oil Dubai Cash, S&P GSCI Heating Oil Spot, S&P Global Clean Energy, US Gulf Coast Kerosene and Los Angeles Low Sulfur CARB Diesel Spot. Findings From the CQ correlation results, there exists an overall negative directional predictability between green bonds and natural gas. The authors find that the directional predictability between green bonds and S&P GSCI Biofuel Spot, S&P GSCI Gas Oil Spot, S&P GSCI Brent Crude Spot, S&P GSCI WTI Spot, OPEC Oil Basket Spot, Crude Oil Oman Spot, Crude Oil Dubai Cash Spot, S&P GSCI Heating Oil Spot, US Gulf Coast Kerosene-Type Jet Fuel Spot Price and Los Angeles Low Sulfur CARB Diesel Spot Price is negative during normal market conditions and positive during extreme market conditions. Results from the non-parametric causality in the quantile approach show strong evidence of asymmetry in causality across quantiles and strong variations across markets. Practical implications The quantile time-varying dependence and predictability results documented in this paper can help market participants with different investment targets and horizons adopt better hedging strategies and portfolio diversification to aid optimal policy measures during volatile market conditions. Social implications The outcome of this study will promote awareness regarding the environment and also increase investor’s participation in the green bond market. Further, it allows corporate institutions to fulfill their social commitment through the issuance of green bonds. Originality/value This paper differs from these previous studies in several aspects. First, the authors have included a wide range of energy commodities, comprising three green bond indices and 14 energy commodity indices. Sec
{"title":"A cross-quantile correlation and causality-in-quantile analysis on the relationship between green investments and energy commodities during the COVID-19 pandemic period","authors":"Aarzoo Sharma, A. Tiwari, E. Abakah, Freeman Brobbey Owusu","doi":"10.1108/sef-02-2023-0070","DOIUrl":"https://doi.org/10.1108/sef-02-2023-0070","url":null,"abstract":"\u0000Purpose\u0000This paper aims to examine the cross-quantile correlation and causality-in-quantiles between green investments and energy commodities during the outbreak of COVID-19. To be specific, the authors aim to address the following questions: Is there any distributional predictability among green bonds and energy commodities during COVID-19? Is there exist any directional predictability between green investments and energy commodities during the global pandemic? Can green bonds hedge the risk of energy commodities during a period of the financial crisis.\u0000\u0000\u0000Design/methodology/approach\u0000The authors use the nonparametric causality in quantile and cross-quantilogram (CQ) correlation approaches as the estimation techniques to investigate the distributional and directional predictability between green investments and energy commodities respectively using daily spot prices from January 1, 2020, to March 26, 2021. The study uses daily closing price indices S&P Green Bond Index as a representative of the green bond market. In the case of energy commodities, the authors use S&P GSCI Natural Gas Spot, S&P GSCI Biofuel Spot, S&P GSCI Unleaded Gasoline Spot, S&P GSCI Gas Oil Spot, S&P GSCI Brent Crude Spot, S&P GSCI WTI, OPEC Oil Basket Price, Crude Oil Oman, Crude Oil Dubai Cash, S&P GSCI Heating Oil Spot, S&P Global Clean Energy, US Gulf Coast Kerosene and Los Angeles Low Sulfur CARB Diesel Spot.\u0000\u0000\u0000Findings\u0000From the CQ correlation results, there exists an overall negative directional predictability between green bonds and natural gas. The authors find that the directional predictability between green bonds and S&P GSCI Biofuel Spot, S&P GSCI Gas Oil Spot, S&P GSCI Brent Crude Spot, S&P GSCI WTI Spot, OPEC Oil Basket Spot, Crude Oil Oman Spot, Crude Oil Dubai Cash Spot, S&P GSCI Heating Oil Spot, US Gulf Coast Kerosene-Type Jet Fuel Spot Price and Los Angeles Low Sulfur CARB Diesel Spot Price is negative during normal market conditions and positive during extreme market conditions. Results from the non-parametric causality in the quantile approach show strong evidence of asymmetry in causality across quantiles and strong variations across markets.\u0000\u0000\u0000Practical implications\u0000The quantile time-varying dependence and predictability results documented in this paper can help market participants with different investment targets and horizons adopt better hedging strategies and portfolio diversification to aid optimal policy measures during volatile market conditions.\u0000\u0000\u0000Social implications\u0000The outcome of this study will promote awareness regarding the environment and also increase investor’s participation in the green bond market. Further, it allows corporate institutions to fulfill their social commitment through the issuance of green bonds.\u0000\u0000\u0000Originality/value\u0000This paper differs from these previous studies in several aspects. First, the authors have included a wide range of energy commodities, comprising three green bond indices and 14 energy commodity indices. Sec","PeriodicalId":45607,"journal":{"name":"Studies in Economics and Finance","volume":null,"pages":null},"PeriodicalIF":1.9,"publicationDate":"2023-07-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42708668","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 : 2023-07-18DOI: 10.1108/sef-11-2022-0542
F. Gobbi, S. Mulinacci
Purpose The purpose of this paper is to introduce a generalization of the time-varying correlation elliptical copula models and to analyse its impact on the tail risk of a portfolio of foreign currencies during the Covid-19 pandemic. Design/methodology/approach The authors consider a multivariate time series model where marginal dynamics are driven by an autoregressive moving average (ARMA)–Glosten-Jagannathan-Runkle–generalized autoregressive conditional heteroscedastic (GARCH) model, and the dependence structure among the residuals is given by an elliptical copula function. The correlation coefficient follows an autoregressive equation where the autoregressive coefficient is a function of the past values of the correlation. The model is applied to a portfolio of a couple of exchange rates, specifically US dollar–Japanese Yen and US dollar–Euro and compared with two alternative specifications of the correlation coefficient: constant and with autoregressive dynamics. Findings The use of the new model results in a more conservative evaluation of the tail risk of the portfolio measured by the value-at-risk and the expected shortfall suggesting a more prudential capital allocation policy. Originality/value The main contribution of the paper consists in the introduction of a time-varying correlation model where the past values of the correlation coefficient impact on the autoregressive structure.
{"title":"Time-varying dependence and currency tail risk during the Covid-19 pandemic","authors":"F. Gobbi, S. Mulinacci","doi":"10.1108/sef-11-2022-0542","DOIUrl":"https://doi.org/10.1108/sef-11-2022-0542","url":null,"abstract":"\u0000Purpose\u0000The purpose of this paper is to introduce a generalization of the time-varying correlation elliptical copula models and to analyse its impact on the tail risk of a portfolio of foreign currencies during the Covid-19 pandemic.\u0000\u0000\u0000Design/methodology/approach\u0000The authors consider a multivariate time series model where marginal dynamics are driven by an autoregressive moving average (ARMA)–Glosten-Jagannathan-Runkle–generalized autoregressive conditional heteroscedastic (GARCH) model, and the dependence structure among the residuals is given by an elliptical copula function. The correlation coefficient follows an autoregressive equation where the autoregressive coefficient is a function of the past values of the correlation. The model is applied to a portfolio of a couple of exchange rates, specifically US dollar–Japanese Yen and US dollar–Euro and compared with two alternative specifications of the correlation coefficient: constant and with autoregressive dynamics.\u0000\u0000\u0000Findings\u0000The use of the new model results in a more conservative evaluation of the tail risk of the portfolio measured by the value-at-risk and the expected shortfall suggesting a more prudential capital allocation policy.\u0000\u0000\u0000Originality/value\u0000The main contribution of the paper consists in the introduction of a time-varying correlation model where the past values of the correlation coefficient impact on the autoregressive structure.\u0000","PeriodicalId":45607,"journal":{"name":"Studies in Economics and Finance","volume":null,"pages":null},"PeriodicalIF":1.9,"publicationDate":"2023-07-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46671126","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 : 2023-07-11DOI: 10.1108/sef-03-2023-0149
V. Kumari, Rima Assaf, Faten Moussa, Dharen Kumar Pandey
Purpose The purpose of this study is to examine the impacts of the Glasgow Climate Pact on global oil and gas sector stocks. Further, this study also examines if the nations' Climate Change Performance Index (CCPI) and World Energy Trilemma Index (WETI) drive the abnormal returns around the event. Design/methodology/approach The authors apply the event study analysis to 691 global oil and gas firms across 52 countries. Further, they apply the cross-sectional examination of cumulative abnormal returns (CARs) across 502 firms. Findings The emerging markets experienced significant negative abnormal returns on the event day. The CCPI negatively affects longer pre-event CARs, while WETI significantly negatively associates with CARs during longer pre- and post-event windows. Volatility is negatively related to pre- and post-event abnormal returns, while past returns positively drive pre-event period CARs but negatively drive post-event window CARs. This study finds an interesting association between liquidity (CACL) and CARs, as CACL positively drives pre-event CARs, but post-event CARs are negatively associated with CACL. The CARs do not significantly correlate with leverage, size and book-to-market ratio. Practical implications This study's findings on the impact of climate risks on financial markets have significant implications for global regulatory bodies. Policymakers should reduce stock volatility and enhance environmental disclosures by publicly traded companies to accurately price and assess the potential impacts of climate risks. Governments should examine the effects of environmental restrictions on investor behavior, especially in developing countries with limited access to capital. Therefore, policymakers need to consider the far-reaching impacts of environmental regulations while introducing them. Originality/value Climate risks are expected to impact the global financial market significantly. Prior studies provide limited evidence on how such climate pacts impact the oil and gas sector. Hence, this study, while bridging this gap, provides important implications for policymakers and stakeholders, particularly the emerging markets that are more sensitive.
{"title":"Impacts of climate pact on global oil and gas sector stocks","authors":"V. Kumari, Rima Assaf, Faten Moussa, Dharen Kumar Pandey","doi":"10.1108/sef-03-2023-0149","DOIUrl":"https://doi.org/10.1108/sef-03-2023-0149","url":null,"abstract":"\u0000Purpose\u0000The purpose of this study is to examine the impacts of the Glasgow Climate Pact on global oil and gas sector stocks. Further, this study also examines if the nations' Climate Change Performance Index (CCPI) and World Energy Trilemma Index (WETI) drive the abnormal returns around the event.\u0000\u0000\u0000Design/methodology/approach\u0000The authors apply the event study analysis to 691 global oil and gas firms across 52 countries. Further, they apply the cross-sectional examination of cumulative abnormal returns (CARs) across 502 firms.\u0000\u0000\u0000Findings\u0000The emerging markets experienced significant negative abnormal returns on the event day. The CCPI negatively affects longer pre-event CARs, while WETI significantly negatively associates with CARs during longer pre- and post-event windows. Volatility is negatively related to pre- and post-event abnormal returns, while past returns positively drive pre-event period CARs but negatively drive post-event window CARs. This study finds an interesting association between liquidity (CACL) and CARs, as CACL positively drives pre-event CARs, but post-event CARs are negatively associated with CACL. The CARs do not significantly correlate with leverage, size and book-to-market ratio.\u0000\u0000\u0000Practical implications\u0000This study's findings on the impact of climate risks on financial markets have significant implications for global regulatory bodies. Policymakers should reduce stock volatility and enhance environmental disclosures by publicly traded companies to accurately price and assess the potential impacts of climate risks. Governments should examine the effects of environmental restrictions on investor behavior, especially in developing countries with limited access to capital. Therefore, policymakers need to consider the far-reaching impacts of environmental regulations while introducing them.\u0000\u0000\u0000Originality/value\u0000Climate risks are expected to impact the global financial market significantly. Prior studies provide limited evidence on how such climate pacts impact the oil and gas sector. Hence, this study, while bridging this gap, provides important implications for policymakers and stakeholders, particularly the emerging markets that are more sensitive.\u0000","PeriodicalId":45607,"journal":{"name":"Studies in Economics and Finance","volume":null,"pages":null},"PeriodicalIF":1.9,"publicationDate":"2023-07-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48303093","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 : 2023-07-10DOI: 10.1108/sef-12-2022-0569
P. Pamungkas, Taufiq Arifin, Irwan Trinugroho, Evan Lau, B. Sergi
Purpose This study aims to investigate the effect of credit relaxation policy during the COVID-19 pandemic and its efficacy as a countercyclical policy on bank risk and stability. Design/methodology/approach Using a sample of 39 listed Indonesian banks, the authors investigate the effect of credit relaxation policy on banks’ risk and stability. Data were retrieved from Eikon DataStream from monthly financial statements from June 2019 to December 2020. The authors use panel data analysis with a fixed-effect estimator to estimate the model. Findings The authors find that the credit relaxation policy affects banks’ stability. The authors also find no significant relationship between the policy and bank risk measured by non-performing loans. The authors also find that the policy mainly affects small banks and both state-owned and private banks. Originality/value This research has some policy implications that issuing prompt regulations to respond to urgent situations is needed and is very important to face crisis conditions and reduce the negative impact of such crises.
{"title":"COVID-19, stability and regulation: evidence from Indonesian banks","authors":"P. Pamungkas, Taufiq Arifin, Irwan Trinugroho, Evan Lau, B. Sergi","doi":"10.1108/sef-12-2022-0569","DOIUrl":"https://doi.org/10.1108/sef-12-2022-0569","url":null,"abstract":"\u0000Purpose\u0000This study aims to investigate the effect of credit relaxation policy during the COVID-19 pandemic and its efficacy as a countercyclical policy on bank risk and stability.\u0000\u0000\u0000Design/methodology/approach\u0000Using a sample of 39 listed Indonesian banks, the authors investigate the effect of credit relaxation policy on banks’ risk and stability. Data were retrieved from Eikon DataStream from monthly financial statements from June 2019 to December 2020. The authors use panel data analysis with a fixed-effect estimator to estimate the model.\u0000\u0000\u0000Findings\u0000The authors find that the credit relaxation policy affects banks’ stability. The authors also find no significant relationship between the policy and bank risk measured by non-performing loans. The authors also find that the policy mainly affects small banks and both state-owned and private banks.\u0000\u0000\u0000Originality/value\u0000This research has some policy implications that issuing prompt regulations to respond to urgent situations is needed and is very important to face crisis conditions and reduce the negative impact of such crises.\u0000","PeriodicalId":45607,"journal":{"name":"Studies in Economics and Finance","volume":null,"pages":null},"PeriodicalIF":1.9,"publicationDate":"2023-07-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44804001","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 : 2023-07-05DOI: 10.1108/sef-03-2023-0123
Pablo Agnese
Purpose This paper aims to analyze the connectedness between bitcoin (BTC) and other traditional assets (e.g. metals) in times of financial turbulence like the COVID pandemic. The purpose is to see to what extent BTC is mimicking the role precious metals are known for, that of being a reliable store of value. Design/methodology/approach The author relies on vector autoregressive modeling, as it yields a very flexible framework for forecasting and interpreting the interdependencies among variables, while providing a very intuitive framework when the underlying structural model is unknown. The author performs the analysis first for the whole sample and then for a “COVID-19 subsample.” Findings The author finds evidence supporting a stronger link between BTC and gold in COVID-19 times, with BTC the main driving force. The author quantifies the contribution of BTC to the surge in gold’s price during those early months of COVID-19 in the order of 28%, thus lending support to the idea of intrinsic or fundamental value in BTC. Practical implications Investors might consider including BTC in their portfolios as a long-term investment, very much like they do with gold. Social implications Cryptos at large represent an important check on the ever-expanding monetary policy pursued by central banks in recent times. Originality/value The COVID-19 pandemic has taken its toll on the world economy. It is thus timely to reevaluate the relationship between BTC and other assets such as gold and silver, which are traditionally seen as safe havens against uncertainty.
{"title":"Too hot and too close. Bitcoin and gold dynamics during COVID times","authors":"Pablo Agnese","doi":"10.1108/sef-03-2023-0123","DOIUrl":"https://doi.org/10.1108/sef-03-2023-0123","url":null,"abstract":"\u0000Purpose\u0000This paper aims to analyze the connectedness between bitcoin (BTC) and other traditional assets (e.g. metals) in times of financial turbulence like the COVID pandemic. The purpose is to see to what extent BTC is mimicking the role precious metals are known for, that of being a reliable store of value.\u0000\u0000\u0000Design/methodology/approach\u0000The author relies on vector autoregressive modeling, as it yields a very flexible framework for forecasting and interpreting the interdependencies among variables, while providing a very intuitive framework when the underlying structural model is unknown. The author performs the analysis first for the whole sample and then for a “COVID-19 subsample.”\u0000\u0000\u0000Findings\u0000The author finds evidence supporting a stronger link between BTC and gold in COVID-19 times, with BTC the main driving force. The author quantifies the contribution of BTC to the surge in gold’s price during those early months of COVID-19 in the order of 28%, thus lending support to the idea of intrinsic or fundamental value in BTC.\u0000\u0000\u0000Practical implications\u0000Investors might consider including BTC in their portfolios as a long-term investment, very much like they do with gold.\u0000\u0000\u0000Social implications\u0000Cryptos at large represent an important check on the ever-expanding monetary policy pursued by central banks in recent times.\u0000\u0000\u0000Originality/value\u0000The COVID-19 pandemic has taken its toll on the world economy. It is thus timely to reevaluate the relationship between BTC and other assets such as gold and silver, which are traditionally seen as safe havens against uncertainty.\u0000","PeriodicalId":45607,"journal":{"name":"Studies in Economics and Finance","volume":null,"pages":null},"PeriodicalIF":1.9,"publicationDate":"2023-07-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49477936","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 : 2023-07-04DOI: 10.1108/sef-12-2022-0599
Xuebing Yang, Huilan Zhang
Purpose The purpose of this paper is to study the US stock market and try to explain why short-term contrarian profits have largely disappeared in the past two decades. Design/methodology/approach In this work, the authors decompose the short-term contrarian profits into cross-sectional variations, firm-level overreactions and lead-lag effects to study the changes in their shares. Then, the authors study the behavior of the subgroups in the winner and loser subportfolios of contrarian investment strategies. Findings The authors find that short-term contrarian profits have largely vanished since 2000. Changes in the shares of the three components of contrarian profits, which are cross-sectional variations, firm-level overreactions and lead-lag effects, are not the main reason for the disappearance of contrarian profits in the past two decades. Instead, the disappearance of short-term contrarian profits is primarily due to the heterogeneous evolution of subgroups in the portfolio, which leads to a decrease in the overall level of overreactions that drive the contrarian profit. Originality/value The work explains the disappearance of short-term contrarian profits in the US stock market.
{"title":"Evolution of short-term contrarian profits","authors":"Xuebing Yang, Huilan Zhang","doi":"10.1108/sef-12-2022-0599","DOIUrl":"https://doi.org/10.1108/sef-12-2022-0599","url":null,"abstract":"\u0000Purpose\u0000The purpose of this paper is to study the US stock market and try to explain why short-term contrarian profits have largely disappeared in the past two decades.\u0000\u0000\u0000Design/methodology/approach\u0000In this work, the authors decompose the short-term contrarian profits into cross-sectional variations, firm-level overreactions and lead-lag effects to study the changes in their shares. Then, the authors study the behavior of the subgroups in the winner and loser subportfolios of contrarian investment strategies.\u0000\u0000\u0000Findings\u0000The authors find that short-term contrarian profits have largely vanished since 2000. Changes in the shares of the three components of contrarian profits, which are cross-sectional variations, firm-level overreactions and lead-lag effects, are not the main reason for the disappearance of contrarian profits in the past two decades. Instead, the disappearance of short-term contrarian profits is primarily due to the heterogeneous evolution of subgroups in the portfolio, which leads to a decrease in the overall level of overreactions that drive the contrarian profit.\u0000\u0000\u0000Originality/value\u0000The work explains the disappearance of short-term contrarian profits in the US stock market.\u0000","PeriodicalId":45607,"journal":{"name":"Studies in Economics and Finance","volume":null,"pages":null},"PeriodicalIF":1.9,"publicationDate":"2023-07-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49418796","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 : 2023-06-23DOI: 10.1108/sef-12-2022-0579
Muhammad Aftab, M. Naeem, M. Tahir, Izlin Ismail
Purpose Exchange rate volatility is an important factor affecting investors and policymakers. This study aims to examine the impact of uncertainties, in terms of changes in economic policy, monetary policy and global financial markets, on exchange rate volatility. Design/methodology/approach The study uses the GARCH (1,1) univariate model to calculate exchange rate volatility. Economic and monetary policy uncertainties are measured using news-based indices, while global financial market volatility is measured using the implied volatility index. Panel autoregressive distributed lag modeling is used to analyze the impact of uncertainty on exchange rate volatility in the short and long run. The sample consists of 26 developed and emerging markets from 2005 to 2020. Findings The study finds that economic policy uncertainty significantly increases exchange rate volatility. Similarly, global financial market uncertainty leads to increased exchange rate volatility. The effect of US monetary policy uncertainty reduces exchange rate volatility. Originality/value This research contributes to the existing literature on exchange rate fluctuations by examining the impact of uncertainties on exchange rate volatility. The study uses novel news-based indices for measuring economic and monetary policy uncertainties and includes a broader sample of emerging and advanced markets. The findings have important implications for investors and policymakers.
{"title":"Does uncertainty promote exchange rate volatility? Global evidence","authors":"Muhammad Aftab, M. Naeem, M. Tahir, Izlin Ismail","doi":"10.1108/sef-12-2022-0579","DOIUrl":"https://doi.org/10.1108/sef-12-2022-0579","url":null,"abstract":"\u0000Purpose\u0000Exchange rate volatility is an important factor affecting investors and policymakers. This study aims to examine the impact of uncertainties, in terms of changes in economic policy, monetary policy and global financial markets, on exchange rate volatility.\u0000\u0000\u0000Design/methodology/approach\u0000The study uses the GARCH (1,1) univariate model to calculate exchange rate volatility. Economic and monetary policy uncertainties are measured using news-based indices, while global financial market volatility is measured using the implied volatility index. Panel autoregressive distributed lag modeling is used to analyze the impact of uncertainty on exchange rate volatility in the short and long run. The sample consists of 26 developed and emerging markets from 2005 to 2020.\u0000\u0000\u0000Findings\u0000The study finds that economic policy uncertainty significantly increases exchange rate volatility. Similarly, global financial market uncertainty leads to increased exchange rate volatility. The effect of US monetary policy uncertainty reduces exchange rate volatility.\u0000\u0000\u0000Originality/value\u0000This research contributes to the existing literature on exchange rate fluctuations by examining the impact of uncertainties on exchange rate volatility. The study uses novel news-based indices for measuring economic and monetary policy uncertainties and includes a broader sample of emerging and advanced markets. The findings have important implications for investors and policymakers.\u0000","PeriodicalId":45607,"journal":{"name":"Studies in Economics and Finance","volume":null,"pages":null},"PeriodicalIF":1.9,"publicationDate":"2023-06-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49509028","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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