Search results
1 – 4 of 4Dinci J. Penzin, Kazeem O. Isah and Afees A. Salisu
Given the systemic nature of climate change, there are many interdependencies between its primary components and feedback loops, emphasising the need to simultaneously consider…
Abstract
Purpose
Given the systemic nature of climate change, there are many interdependencies between its primary components and feedback loops, emphasising the need to simultaneously consider the stock market implications of physical and transitional climate-related risks. More importantly, carbon emissions are expected to be reduced through various transition pathways. However, transitional climate risks have been validated as capable of predicting stock market behaviour, hence the motivation for the role of technology shocks.
Design/methodology/approach
We use a GARCH-MIDAS model to examine the relationship between climate change and stock return volatility since it enables data analysis at various frequencies within the same framework. We employ a novel dataset to track technology shocks, and the study spans decades of data from 1880 to 2018.
Findings
We find that the relationship between climate change and stock return volatility is episodic and varies with different degrees of intensity of high-temperature anomalies and technology shocks. Our results suggest that policy actions should include investing in climate technologies to reduce greenhouse gas emissions and encouraging investment in eco-friendly assets.
Originality/value
There has been little or no consideration for the probable complementary effects of physical and transition climate-related risks on stock markets. Hence, the novelty in the context of this study is the hypothesis that transitional risks, if explored from the point of view of technological innovations, can moderate the stock market’s vulnerability to physical climate risks.
Details
Keywords
Manel Mahjoubi and Jamel Eddine Henchiri
This paper aims to investigate the effect of the economic policy uncertainty (EPU), geopolitical risk (GPR) and climate policy uncertainty (CPU) of USA on Bitcoin volatility from…
Abstract
Purpose
This paper aims to investigate the effect of the economic policy uncertainty (EPU), geopolitical risk (GPR) and climate policy uncertainty (CPU) of USA on Bitcoin volatility from August 2010 to August 2022.
Design/methodology/approach
In this paper, the authors have adopted the empirical strategy of Yen and Cheng (2021), who modified volatility model of Wang and Yen (2019), and the authors use an OLS regression with Newey-West error term.
Findings
The results using OLS regression with Newey–West error term suggest that the cryptocurrency market could have hedge or safe-haven properties against EPU and geopolitical uncertainty. While the authors find that the CPU has a negative impact on the volatility of the bitcoin market. Hence, the authors expect climate and environmental changes, as well as indiscriminate energy consumption, to play a more important role in increasing Bitcoin price volatility, in the future.
Originality/value
This study has two implications. First, to the best of the authors’ knowledge, the study is the first to extend the discussion on the effect of dimensions of uncertainty on the volatility of Bitcoin. Second, in contrast to previous studies, this study can be considered as the first to examine the role of climate change in predicting the volatility of bitcoin. This paper contributes to the literature on volatility forecasting of cryptocurrency in two ways. First, the authors discuss volatility forecasting of Bitcoin using the effects of three dimensions of uncertainty of USA (EPU, GPR and CPU). Second, based on the empirical results, the authors show that cryptocurrency can be a good hedging tool against EPU and GPR risk. But the cryptocurrency cannot be a hedging tool against CPU risk, especially with the high risks and climatic changes that threaten the environment.
Details
Keywords
Sabri Burak Arzova, Ayben Koy and Bertaç Şakir Şahin
This study investigates the effect of the day of the week on the volatility of cryptocurrencies. Thus, we reveal investors' perceptions of the day of the week.
Abstract
Purpose
This study investigates the effect of the day of the week on the volatility of cryptocurrencies. Thus, we reveal investors' perceptions of the day of the week.
Design/methodology/approach
The EGARCH model consists of the day of the week for 2019–2022 and the volatility of 11 cryptocurrencies.
Findings
Empirical results show that the weekend harms cryptocurrency volatility. Also, there was positive cryptocurrency volatility at the beginning of the week. Our findings show that weekdays and weekends significantly impact cryptocurrency volatility. Besides, cryptocurrency investors are sensitive to market movements, disclosures, and regulations during the week. Holiday mode and cognitive shortcuts may cause cryptocurrency traders to remain passive on weekends.
Research limitations/implications
This study has some limitations. We include 11 cryptocurrencies in the analysis by limiting cryptocurrencies according to market capitalizations. Further studies may analyze a larger sample. In addition, further studies may examine the moderator and mediator effects of other financial instruments.
Practical implications
The empirical results have research, social and practical conclusions from different aspects. Our analysis may contribute to determining trading strategies, risk management, market efficiency, regulatory oversight, and investment decisions in the cryptocurrency market.
Originality/value
The calendar effect in financial markets has extensive literature. However, cryptocurrencies' weekday and weekend effect needs to be adequately analyzed. Besides, studies analyzing cryptocurrency volatility are limited. We contribute to the literature by investigating the impact of days of the week on cryptocurrency volatility with a large sample and current data.
Details
Keywords
This study aims to investigate the influence of economic policy uncertainty (EPU) and geopolitical risk (GPR) on the relationship between internal cash flow and external financing…
Abstract
Purpose
This study aims to investigate the influence of economic policy uncertainty (EPU) and geopolitical risk (GPR) on the relationship between internal cash flow and external financing in an emerging market, Saudi Arabia. It also examines the role of asset tangibility and financial crisis in establishing this relationship.
Design/methodology/approach
The sample was taken from non-financial sector companies listed on the Saudi Stock Exchange between 2002 and 2019. The data were analyzed using panel data regression analysis, including ordinary least squares and fixed effects model. The author addresses potential endogeneity through the generalized method of moments.
Findings
This study found that both EPU and GPR reduce the sensitivity of external financing to internal cash flow. This implies that firms depend more on internally generated funds during periods of increased EPU and GPR. Besides, this study found that the influence of EPU and GPR on the sensitivity of external financing to internal cash flow is more (less) negative for more tangible firms (during the financial crisis period). This result implies that Saudi firms boasting a higher level of tangibility are more flexible when it comes to seeking external financing. However, the presence of uncertainty during the crisis period makes the external financing costly, and therefore, firms will be less likely to raise funds from external sources.
Practical implications
This study has important implications for managers, policymakers and regulators. First, the paper findings provide insights for corporate decision-makers in helping them to focus on internal funds to finance their investment during uncertain times. Second, the findings help managers to understand the role of asset tangibility in raising external funding when firms face financial constraints due to uncertainty. Third, this study also helps corporates to focus on internal funds to finance their investment during the crisis period because EPU and GPR increase the cost of external finance. Finally, the results provide guidelines for policymakers and regulators to make appropriate policy measures to increase the easy availability of external finance during periods of increased EPU and GPR.
Originality/value
This paper is the first to shed light on the impact of internal funds on external financing while paying close attention to the role of EPU and GPR.
Details