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Article
Publication date: 15 January 2020

Selma Izadi and Abdullah Noman

The existence of the weekend effect has been reported from the 1950s to 1970s in the US stock markets. Recently, Robins and Smith (2016, Critical Finance Review, 5…

Abstract

Purpose

The existence of the weekend effect has been reported from the 1950s to 1970s in the US stock markets. Recently, Robins and Smith (2016, Critical Finance Review, 5: 417-424) have argued that the weekend effect has disappeared after 1975. Using data on the market portfolio, they document existence of structural break before 1975 and absence of any weekend effects after that date. The purpose of this study is to contribute some new empirical evidences on the weekend effect for the industry-style portfolios in the US stock market using data over 90 years.

Design/methodology/approach

The authors re-examine persistence or reversal of the weekend effect in the industry portfolios consisting of The New York Stock Exchange (NYSE), The American Stock Exchange (AMEX) and The National Association of Securities Dealers Automated Quotations exchange (NASDAQ) stocks using daily returns from 1926 to 2017. Our results confirm varying dates for structural breaks across industrial portfolios.

Findings

As for the existence of weekend effects, the authors get mixed results for different portfolios. However, the overall findings provide broad support for the absence of weekend effects in most of the industrial portfolios as reported in Robins and Smith (2016). In addition, structural breaks for other weekdays and days of the week effects for other days have also been documented in the paper.

Originality/value

As far as the authors are aware, this paper is the first research that analyzes weekend effect for the industry-style portfolios in the US stock market using data over 90 years.

Details

Journal of Financial Economic Policy, vol. 12 no. 4
Type: Research Article
ISSN: 1757-6385

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Article
Publication date: 13 September 2021

Mahtab Athari, Atsuyuki Naka and Abdullah Noman

This paper aims to achieve two main objectives. The first is to introduce a suitable adjustment to the conventional dividend-price ratio, which would address econometric…

Abstract

Purpose

This paper aims to achieve two main objectives. The first is to introduce a suitable adjustment to the conventional dividend-price ratio, which would address econometric concerns and improve the predictability of the equity premium. The second is to compare the predictive performance of the newly introduced adjusted dividend-price ratio with the conventional dividend-price ratio.

Design/methodology/approach

The authors hypothesize that the adjusted dividend-price ratio will have better predictive power and forecasting quality for equity premium compared to the conventional dividend-price ratio. To test the hypothesis, the authors predict equity premium with both variables on a sample of 11 developed and emerging market indexes over a period spanning June 1995 to March 2017. To accommodate time variation in parameter values or structural breaks in the data, the authors conducted a fixed window rolling regressions using both variables. A variety of forecast techniques including magnitude and sign accuracy measures are applied to compare the performance of forecasts.

Findings

The adjusted dividend-price ratio is shown to be stationary and has both lower persistence and variability compared with the conventional dividend-price ratio. The authors find that the adjusted dividend-price ratio provides superior out-of-sample (OOS) performance compared to the conventional dividend-price ratio, for both size and sign accuracy, in forecasting equity premium for the majority of the countries in the sample.

Research limitations/implications

This paper introduces an easy-to-follow modification in the conventional dividend-price ratio that can be replicated by researchers and practitioners alike. However, the study has a limitation in that it does not capture the impact of dividend-paying firms within each index on the predictive ability of the adjusted dividend-price ratio.

Practical implications

The knowledge of equity premium predictability is important in implementing market-timing strategies and could be beneficial for portfolio and risk management. The newly introduced variable is easy to construct using widely available data without the need for complex econometric estimation. Investors can use this variable to predict equity premiums in international markets, both developed and emerging. The findings of this paper will be relevant to financial analysts, portfolio managers, investors and researchers in international finance. For example, by using the adjusted dividend-price ratio, investors would see up to 0.5% improvement in their OOS monthly forecasts of the equity premium.

Originality/value

To the best of the authors’ knowledge, this is the first paper that proposes adjustment in the conventional dividend-price ratio based on the past observations of the most recent quarter. In this way, the paper offers fresh insight that dividend-price ratio is still useful to predict equity premium albeit, after some adjustments and modifications. The findings of the paper would result in renewed interest in using the dividend-price ratio as a predictor of the equity premium.

Details

Review of Accounting and Finance, vol. 20 no. 3/4
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 9 November 2015

Abdullah Noman

This paper aims to examine the impact of the return differential between the domestic and foreign markets on the risk exposure of country mutual funds (CMFs). It is argued…

Abstract

Purpose

This paper aims to examine the impact of the return differential between the domestic and foreign markets on the risk exposure of country mutual funds (CMFs). It is argued that when US market returns are higher than the foreign market returns, the returns chasing investors will tilt their portfolio toward the US market assets, increasing the co-movement between the US market and CMF return.

Design/methodology/approach

The sample includes 19 exchange traded funds (ETFs) and 18 closed-end mutual funds (CEFs) over the period between 2001 and 2011. A static two-factor model is used to get the benchmark results. On the other hand, a conditional specification is used, with the return differential as the information variable, to capture the variation in the exposure of the country funds to their underlying risks.

Findings

Empirically, the authors find results that partially support their argument. The results of the static two-factor model indicate that the CMFs are exposed to the foreign market risks, whereas the local (US) market risk is not generally priced. The results obtained from the conditional specification, however, shows that the estimated US betas are significant for a number of CMFs.

Practical implications

A possible interpretation of this finding is that the return differential encourages return chasing behavior of the US investors documented in the international investment literature. This, in turn, may contribute to the time-varying exposure of the CMF return to their underlying risk factors. The findings of the paper have important implications for the investors as the time variation in risk exposure of CMFs causes fluctuation in diversification benefits over time.

Originality/value

To the best of the authors’ knowledge, this is the first paper that uses return differential as the information variable in a conditional factor model.

Details

Review of Accounting and Finance, vol. 14 no. 4
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 3 August 2015

Abdullah Noman, Mohammad Nakibur Rahman and Atsuyuki Naka

This paper aims to uncover potential contemporaneous relationship between foreign portfolio investment (FPI) and another popular type of cross-border investment outflow…

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2568

Abstract

Purpose

This paper aims to uncover potential contemporaneous relationship between foreign portfolio investment (FPI) and another popular type of cross-border investment outflow, namely, foreign direct investment (FDI).

Design/methodology/approach

The relationship between FPI and FDI are modeled using simultaneous equations approach to take potential endogeneity in to account. In a panel of 45 countries over the period of 2001-2009, FPI and FDI are found to be strategically complimentary to each other.

Findings

The two-stage least square estimates suggest existence of both statistically and economically significant relationship between these two types of outflows. In particular, the FDI outflow has empirically significant predictive power in explaining the FPI outflow. Similarly, the FPI outflow also has significant explanatory power for the observed level of FDI outflow. Second, the FPI has greater explanatory power for FDI outflow than the FDI for the FPI outflow.

Originality/value

The authors believe that the paper would contribute to the relevant literature in terms of its originality and scope. The empirical findings of the paper have valuable policy implications.

Details

Journal of Financial Economic Policy, vol. 7 no. 3
Type: Research Article
ISSN: 1757-6385

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Article
Publication date: 27 July 2012

Abdullah M. Noman, Sarkar Humayun Kabir and Omar K.M.R. Bashar

The purpose of this paper is to uncover the direction of causality between foreign exchange market and stock market in Bangladesh, where financial markets are yet in their…

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2069

Abstract

Purpose

The purpose of this paper is to uncover the direction of causality between foreign exchange market and stock market in Bangladesh, where financial markets are yet in their early development stage.

Design/methodology/approach

The paper employs the Granger causality tests using monthly data spanning over two decades. In order to study possible existence of causality in the data, sub‐samples are constructed in addition to the full sample.

Findings

The overall results indicate absence of any causality running between foreign exchange market and stock market in the full sample and in the sub‐sample created around the stock market crash.

Originality/value

This study would be the first of its kind using Granger causality approach to test whether change in exchange rates lead to changes in the stock market in Bangladesh, and vice‐versa. The paper also offers some implications of the findings which could be of significant value to policy makers.

Details

Studies in Economics and Finance, vol. 29 no. 3
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 2 November 2010

Abu N.M. Wahid, Mohammad Salahuddin and Abdullah M. Noman

This paper seeks to contribute to the study of the relationship between savings and investment in a panel of five South Asian countries.

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1180

Abstract

Purpose

This paper seeks to contribute to the study of the relationship between savings and investment in a panel of five South Asian countries.

Design/methodology/approach

A number of unit root tests such as Levin, Lin, and Chu or LLC, Breitung, Im, Pesaran, and Shin or IPS, Fisher‐type tests using ADF and Fisher‐type tests using PP tests are conducted that confirm the non‐stationarity of data. Then the paper applies maximum likelihood‐based panel cointegration method to examine the relationship between savings and investment using data on investment and savings for five South Asian developing countries, namely, Bangladesh, Pakistan, India, Nepal, and Sri Lanka over the period 1973‐2007 compiled from the World Development Indicator (WDI) Database 2008 CD‐ROM.

Findings

The results obtained suggest that savings and investment are cointegrated, which implies that the Feldstein‐Horioka (F‐H) puzzle does not hold in this region. It is also found that most of these countries have maintained an international solvency condition.

Originality/value

This is another contribution that would enrich the existing literature on the F‐H puzzle. The paper includes data that involve the longest sample period. No other study, as of now, has employed the panel cointegration method to study the savings investment relationship in this region.

Details

Journal of Economic Studies, vol. 37 no. 6
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 11 February 2021

Noman Younas, Shahab UdDin, Tahira Awan and Muhammad Yar Khan

The purpose of this paper is to examine the impact of corporate governance index (PAKCGI) on firm financial distress for a sample of 152 non-financial firms listed at…

Abstract

Purpose

The purpose of this paper is to examine the impact of corporate governance index (PAKCGI) on firm financial distress for a sample of 152 non-financial firms listed at Pakistan Stock Exchange (PSX) over the period from 2003 to 2017.

Design/methodology/approach

To examine the impact of PAKCGI on financial distress (Altman Z-Score), random effect model is applied. The PAKCGI is a self-constructed index based on the five important factors of corporate governance practices, i.e. board of directors, audit committees, right of shareholders, disclosures and risk management. The binary coding approach is adopted for the construction of PAKCGI. Altman Z-Score model is used as a proxy for financial distress indicator. The absolute value of Altman Z-score has been taken as financial distress indicator.

Findings

The outcomes of the study indicate a positive impact of PAKCGI on risk of firms’ financial distress. The positive coefficient of PAKCGI implies that the good corporate practices work as catalyst to reduce risk of financial distress in Pakistan. A significant negative impact of block holders on financial distress suggests that the concentrated block ownership take monopolistic decision to protect their interests. It has also been observed that significant positive impact of institutional ownership on financial distress exists in the Pakistani listed firms. Furthermore, this study also reveals that significant negative association between board size, CEO duality and financial distress indicator.

Research limitations/implications

The findings may encourage the Pakistani listed companies to follow and implement good corporate governance practices, which would lead to increase the confidence of investors, regulators and stakeholders.

Originality/value

The current study extends the corporate governance literature by examining the relationship between the corporate governance attributes and the financial distress status of Pakistani listed companies. From the academic perspective, this paper adds to the knowledge concerning the association between corporate governance practices and risk of financial distress in emerging markets.

Details

Corporate Governance: The International Journal of Business in Society, vol. 21 no. 4
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 13 April 2021

Sahar Jawad and Ann Ledwith

The purpose of this paper is to presents a new modeling approach that provides a measurement tool for evaluating the effectiveness of Project Control Systems (PCS) and the…

Abstract

Purpose

The purpose of this paper is to presents a new modeling approach that provides a measurement tool for evaluating the effectiveness of Project Control Systems (PCS) and the improvement of the project control capability as a part of an organization's project management processes.

Design/methodology/approach

This study used a project management maturity approach to develop a measurement model of PCS success. The key elements in this model have been identified using the Fuzzy Analytic Hierarchy Process (FAHP) method to analyze data from a case study involving contractor companies in Saudi's petroleum and chemical industry.

Findings

The results identified six critical elements for PCS success: (1) Change Management, (2) Earned Value, (3) Baselined Plan, (4) Resource Loaded, (5) Progress Method and (6) Governance Program. In addition, Project Forecasting and Corrective Action Verification were identified as the main areas where clients and contractors need to focus for the effective deployment of a PCS.

Practical implications

The results of this study were used to create a PCS Maturity Model (PCSMM) and a PCS Success Index (PCSSI). The value of this index can help project managers to identify the maturity level of their PCS and improvement areas that lead to enhanced project performance.

Originality/value

This research presents an alternative maturity model for PCS assessment that provides a practical tool to identify areas for improving the critical elements of PCS success. The study draws a clear distinction between overall project success and the success of the PCS.

Details

Engineering, Construction and Architectural Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0969-9988

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Article
Publication date: 6 April 2021

Noman Arshed and Rukhsana Kalim

This study aims to develop and estimate the Musharaka demand and supply model for full-fledged Islamic banks to explore patterns and stability of Musharaka equilibrium in…

Abstract

Purpose

This study aims to develop and estimate the Musharaka demand and supply model for full-fledged Islamic banks to explore patterns and stability of Musharaka equilibrium in the market.

Design/methodology/approach

This quantitative study uses a deductive approach to explore financial statement-level data of 30 Islamic banks of six countries between 2012 and 2017.

Findings

The results show that the Musharaka market is stable when Musharaka demand is purchase price elastic and supply is sale price inelastic. It indicates that the current banking industry is unable to increase supply when there is an increase in Musharaka returns. In comparison, industry demand for Musharaka is increasing at a higher rate, corresponding to a decrease in Musharaka price.

Practical Implications

This study is fundamental in estimating the market stable market returns and market quantity of Musharaka financing. If market returns and quantity deviate, market forces will push it to equilibrium.

Originality/value

The theoretical and empirical studies worked on the application and suitability of Musharaka financing. However, they failed to explain demand and supply forces in determining the level of Musharaka financing in the economy using empirical data. Without an equilibrium model, policymakers would be unable to predict the movement of the Islamic stock market index (the price of Musharaka financing) and the incidence of Musharaka financing. Further, it is not possible to apply expansionary intervention by policymakers if the stability of the market is unknown.

Details

Journal of Islamic Accounting and Business Research, vol. 12 no. 3
Type: Research Article
ISSN: 1759-0817

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Article
Publication date: 26 February 2019

Misbah Habib, Jawad Abbas and Rahat Noman

The purpose of this paper is to investigate the impact of human capital (HC), intellectual property rights (IPRs) and research and development (R&D) expenditures on total…

Abstract

Purpose

The purpose of this paper is to investigate the impact of human capital (HC), intellectual property rights (IPRs) and research and development (R&D) expenditures on total factor productivity (TFP), which leads to economic growth.

Design/methodology/approach

The panel data technique is used on a sample of 16 countries categorized into two groups, namely Brazil, Russia, India and China (BRIC) and Central and Eastern European (CEE) countries and, in order to make a comparison for the time period of 2007–2015, the researchers used a fixed effect model as an estimation method for regression.

Findings

The results indicate that HC, IPRs and R&D expenditures appear to be statistically significant and are strong factors in determining changes in TFP and exhibit positive results in all sample sets. Moreover, IPRs alone do not accelerate growth in an economy, especially taking the case of emerging nations.

Originality/value

Considering the importance of CEE and BRIC countries, and inadequate research on these regions with respect to current study’s variables and techniques, the present research provides valuable insights about the importance of HC, IPR and R&D activities and their impact on TFP, which leads to economic growth. IPRs create a fertile environment for R&D activities, knowledge creation and economic development. Distinct nations can attain better economic status via HC, R&D activities, innovation, trade and FDI, although the relative significance of these channels is likely to differ across countries depending on their developmental levels.

Details

International Journal of Social Economics, vol. 46 no. 6
Type: Research Article
ISSN: 0306-8293

Keywords

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