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Article
Publication date: 11 February 2014

Zhiyuan Pan, Xu Zheng and Qiang Chen

This study aims to propose a model-free statistic that tests asymmetric correlations of stock returns, in which stocks move more often with the market when the market goes…

Abstract

Purpose

This study aims to propose a model-free statistic that tests asymmetric correlations of stock returns, in which stocks move more often with the market when the market goes down than when it goes up, and then empirically analyze the asymmetric correlations of the China stock market and international stock markets, respectively.

Design/methodology/approach

Using empirical likelihood method, this study designs and conducts a model-free test, which converges to χ2 distribution under regulated conditions and performs well in the finite sample using bootstrap critical value method.

Findings

By analyzing the authors' model-free test, the authors find that compared with Hong et al.'s test that closely relates to the authors, both of the tests are under rejected using asymptotic critical value. However, using the bootstrap critical value method can greatly improve the performance of the two tests. Second, investigating the power of the two tests, the authors find that the proportion of rejections of the authors' test is roughly 10-20 percent larger than Hong et al.'s test in mixed copula model setting. The last finding is the authors find evidence of asymmetric for small-cap size portfolios, but no evidence for middle-cap and large-cap size portfolios in the China stock market. Besides, the authors test asymmetric correlations between the USA and Japan, France and the UK; the asymmetric phenomenon exists in international stock markets, which is similar to Longin and Solnik's findings, but they are not significant according to both the authors' test and Hong et al.'s test.

Research limitations/implications

The findings in this study suggest that both the authors' test and Hong et al.'s test are under rejected using asymptotic critical value. When applying these statistics to test asymmetric correlations, the authors should take care with the choice of critical value.

Practical implications

The empirical analysis has a significant practical implication for asset allocation, asset pricing and risk management fields.

Originality/value

This study constructs a model-free statistic to test asymmetric correlations using empirical likelihood method for the first time and corrects the size performance by bootstrap method, which improves the performance of Hong et al.'s test. To the authors' knowledge, this is the first study to test the asymmetric correlations in the China stock market.

Details

China Finance Review International, vol. 4 no. 1
Type: Research Article
ISSN: 2044-1398

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Book part
Publication date: 25 September 2020

Letife Özdemir

Purpose: Through globalization, financial markets have become more integrated and their tendency to act together has increased. The majority of the literature states that…

Abstract

Purpose: Through globalization, financial markets have become more integrated and their tendency to act together has increased. The majority of the literature states that there is a cointegration between developed and emerging markets. How do positive or negative shocks in developed markets affect emerging markets? And how do positive or negative shocks in emerging markets affect developed markets? For this reason, the aim of the study is to investigate the asymmetric causality relationship between developed and emerging markets with Hatemi-J asymmetric causality test.

Design/methodology/approach: In this study, the Dow Jones Industrial Average (DJIA) index was used to represent developed markets and the Morgan Stanley Capital International (MSCI) Emerging Market Index was used to represent emerging markets. The asymmetric causality relationship between the DJIA Index and the MSCI Emerging Market Index was investigated using monthly data between January 2009 and April 2019. In the first step of the study, the Johansen Cointegration Test was used to determine whether there is a cointegration between the markets. In the next step, the Hatemi-J asymmetric causality test was applied to see the asymmetric causality relationship between the markets.

Findings: There is a weak correlation between developed and emerging markets. This result is important for international investors who want to diversify their portfolios. As a result of the Johansen Cointegration Test, it was found that there is a long-term relationship between the MSCI Emerging Market Index and the DJIA Index. Therefore, investors who make long-term investment plans should not forget that these markets act together and take into account the causal relationship between them. According to the asymmetric causality test results, a unidirectional causality relationship from the MSCI Emerging Market Index to the DJIA Index was determined. This causality shows that negative shocks in the MSCI Emerging Market Index have positive effects on the DJIA Index.

Originality/value: This study contributes to the literature as it is one of the first studies to examine the asymmetrical relationship between developed and emerging markets. This study is also useful in predicting the short- and long-term relationship between markets. In addition, this study helps investors, portfolio managers, company managers, policymakers, etc., to understand the integration of financial markets.

Details

Uncertainty and Challenges in Contemporary Economic Behaviour
Type: Book
ISBN: 978-1-80043-095-2

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Article
Publication date: 29 June 2012

Jullavut Kittiakarasakun, Yiuman Tse and George H.K. Wang

The purpose of this paper is to examine the impact of trades by informed traders and uninformed traders on the asymmetric volatility relation, a stylized fact that has…

Abstract

Purpose

The purpose of this paper is to examine the impact of trades by informed traders and uninformed traders on the asymmetric volatility relation, a stylized fact that has long been puzzling financial economists. Avramov, Chordia, and Goyal's hypothesized that asymmetric volatility, defined as the negative relationship between daily volatility and lagged unexpected return, is governed by the trading dynamics of informed traders and uninformed traders. However, the hypothesis has not been directly tested due to lack of a measure for informed and informed trades. The authors aim to test the hypothesis using a direct measure for informed trades and uninformed trades.

Design/methodology/approach

The authors employ the Computer Trade Reconstruction (CTR) data of Nasdaq‐100 index futures for the period of 2002 through 2004. The dataset contains a unique variable distinguishing informed trades and uninformed trades, allowing the authors to directly examine the impact of the trades (i.e. selling activities) on the asymmetric volatility relation.

Findings

Based on the Nasdaq‐100 index futures data, the asymmetric volatility relation is driven by the selling activity of uninformed traders, particularly from small‐size trades. These results are only significant during the first half of the period, which is more volatile than the second half. The selling impact of informed traders on the asymmetric volatility relation is at most weak for both subperiods.

Research limitations/implications

While risk and returns are important for asset pricing and risk management, most financial researchers consider them from a fundamental perspective. This paper's results suggest that selling activity of uninformed traders can significantly influence asset return and volatility and, hence, deserves more attention from the researchers.

Originality/value

The paper is the first to provide a direct test for Avmarov et al.'s hypothesis and shows that uninformed trades cause the asymmetric volatility. The authors contribute to ongoing discussions of how noise trading behavior can impact asset return and volatility.

Details

Managerial Finance, vol. 38 no. 8
Type: Research Article
ISSN: 0307-4358

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Book part
Publication date: 29 January 2018

Huat Bin (Andy) Ang and Arch G. Woodside

This study applies asymmetric rather than conventional symmetric analysis to advance theory in occupational psychology. The study applies systematic case-based analyses to…

Abstract

This study applies asymmetric rather than conventional symmetric analysis to advance theory in occupational psychology. The study applies systematic case-based analyses to model complex relations among conditions (i.e., configurations of high and low scores for variables) in terms of set memberships of managers. The study uses Boolean algebra to identify configurations (i.e., recipes) reflecting complex conditions sufficient for the occurrence of outcomes of interest (e.g., high versus low financial job stress, job strain, and job satisfaction). The study applies complexity theory tenets to offer a nuanced perspective concerning the occurrence of contrarian cases – for example, in identifying different cases (e.g., managers) with high membership scores in a variable (e.g., core self-evaluation) who have low job satisfaction scores and when different cases with low membership scores in the same variable have high job satisfaction. In a large-scale empirical study of managers (n = 928) in four (contextual) segments of the farm industry in New Zealand, this study tests the fit and predictive validities of set membership configurations for simple and complex antecedent conditions that indicate high/low core self-evaluations, job stress, and high/low job satisfaction. The findings support the conclusion that complexity theory in combination with configural analysis offers useful insights for explaining nuances in the causes and outcomes to high stress as well as low stress among farm managers. Some findings support and some are contrary to symmetric relationship findings (i.e., highly significant correlations that support main effect hypotheses).

Details

Improving the Marriage of Modeling and Theory for Accurate Forecasts of Outcomes
Type: Book
ISBN: 978-1-78635-122-7

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Article
Publication date: 12 January 2015

Wisdom Dube and Andrew Phiri

– The purpose of this paper is to examine asymmetric co-integration effects between nutrition and economic growth for annual South African data from the period 1961-2013.

Abstract

Purpose

The purpose of this paper is to examine asymmetric co-integration effects between nutrition and economic growth for annual South African data from the period 1961-2013.

Design/methodology/approach

The authors deviate from the conventional assumption of linear co-integration and pragmatically incorporate asymmetric effects in the framework through a fusion of the momentum threshold autoregressive and threshold error correction (MTAR-TEC) model approaches, which essentially combines the adjustment asymmetry model of Enders and Silkos (2001); with causality analysis as introduced by Granger (1969); all encompassed by/within the threshold autoregressive (TAR) framework, a la Hansen (2000).

Findings

The findings obtained from the study uncover a number of interesting phenomena for the South Africa economy. First, in coherence with previous studies conducted for developing economies, the authors establish a positive relationship between nutrition and economic growth with an estimated income elasticity of nutritional intake of 0.15. Second, the authors find bi-direction causality between nutrition and economic growth with a stronger causal effect running from nutrition to economic growth. Lastly, the authors find that in the face of equilibrium shocks to the variables, policymakers are slow to responding to deviations of the variables from their co-integrated long run steady state equilibrium.

Originality/value

In the study, the authors make a novel contribution to the literature by exploring asymmetric modelling in the correlation between nutrition intake and economic growth for the exclusive case of South Africa.

Details

Journal of Economic Studies, vol. 42 no. 1
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 2 January 2018

Xiaoxia Dong, Colin Brown, Scott Waldron and Jing Zhang

The purpose of this paper is to analyze price transmission in the Chinese pork market between 1994 and 2016 and examine any incidence and causes of asymmetric price transmission.

Abstract

Purpose

The purpose of this paper is to analyze price transmission in the Chinese pork market between 1994 and 2016 and examine any incidence and causes of asymmetric price transmission.

Design/methodology/approach

The approach uses threshold autoregressive models, asymmetric error correction models and autoregressive moving average models to examine the price transmission using monthly pig and pork prices from 1994 to 2016.

Findings

While a symmetric price transmission between pork and pig prices was identified for the period between June 1994 and June 2007, an asymmetric price transmission response between pork and pig prices was found for the period July 2007 to June 2016. Key factors behind the asymmetric price transmission include the chicken price and China’s provisional purchasing and stockpiling policy which is having a counter-productive impact on prices.

Originality/value

The paper contributes to the literature by examining price transmission in two different periods: 1994 to 2007 where prices are lower and more stable; and 2007 to 2016 where prices are higher and volatile. The paper examines the impact of production and market policies on price transmission in the Chinese pork and pig market, with several policy implications.

Details

British Food Journal, vol. 120 no. 1
Type: Research Article
ISSN: 0007-070X

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Article
Publication date: 25 October 2018

Dylan Agius, Kyriakos I. Kourousis and Chris Wallbrink

The purpose of this paper is to examine the mechanical behaviour of additively manufactured Ti-6Al-4V under cyclic loading. Using as-built selective laser melting (SLM…

Abstract

Purpose

The purpose of this paper is to examine the mechanical behaviour of additively manufactured Ti-6Al-4V under cyclic loading. Using as-built selective laser melting (SLM) Ti-6Al-4V in engineering applications requires a detailed understanding of its elastoplastic behaviour. This preliminary study intends to create a better understanding on the cyclic plasticity phenomena exhibited by this material under symmetric and asymmetric strain-controlled cyclic loading.

Design/methodology/approach

This paper investigates experimentally the cyclic elastoplastic behaviour of as-built SLM Ti-6Al-4V under symmetric and asymmetric strain-controlled loading histories and compares it to that of wrought Ti-6Al-4V. Moreover, a plasticity model has been customised to simulate effectively the mechanical behaviour of the as-built SLM Ti-6Al-4V. This model is formulated to account for the SLM Ti-6Al-4V-specific characteristics, under the strain-controlled experiments.

Findings

The elastoplastic behaviour of the as-built SLM Ti-6Al-4V has been compared to that of the wrought material, enabling characterisation of the cyclic transient phenomena under symmetric and asymmetric strain-controlled loadings. The test results have identified a difference in the strain-controlled cyclic phenomena in the as-build SLM Ti-6Al-4V when compared to its wrought counterpart, because of a difference in their microstructure. The plasticity model offers accurate simulation of the observed experimental behaviour in the SLM material.

Research limitations/implications

Further investigation through a more extensive test campaign involving a wider set of strain-controlled loading cases, including multiaxial (biaxial) histories, is required for a more complete characterisation of the material performance.

Originality/value

The present investigation offers an advancement in the knowledge of cyclic transient effects exhibited by a typical α’ martensite SLM Ti-6Al-4V under symmetric and asymmetric strain-controlled tests. The research data and findings reported are among the very few reported so far in the literature.

Details

Rapid Prototyping Journal, vol. 24 no. 9
Type: Research Article
ISSN: 1355-2546

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Article
Publication date: 8 December 2017

Dimitrios Vortelinos, Konstantinos Gkillas (Gillas), Costas Syriopoulos and Argyro Svingou

The purpose of this paper is to examine the inter-relations among the US stock indices.

Abstract

Purpose

The purpose of this paper is to examine the inter-relations among the US stock indices.

Design/methodology/approach

Data of nine US stock indices spanning a period of sixteen years (2000-2015) are employed for this purpose. Asymmetries are examined via an error correction model. Non-linear inter-relations are researched via Breitung’s nonlinear cointegration, a M-G nonlinear causality model, shocks to the forecast error variance, a shock spillover index and an asymmetric VAR-GARCH (VAR-ABEKK) approach.

Findings

The inter-relations are significant. The results are robust across all types of inter-relations. They are highest in the Lehman Brothers sub-period. Higher stability after the EU debt crisis, enhances independence and growth for the US stock indices.

Originality/value

To the best of the knowledge, this is the first study to examine the inter-relations of US stock indices. Most studies on inter-relations concentrate on the portfolio analysis to reveal diversification benefits among various asset markets internationally. Hence this study contributes to this literature on the inter-relations of a specific asset market (stock), and in a specific nation (USA). The evident inter-relations support the notion of diversification benefits in the US stock markets.

Details

International Journal of Managerial Finance, vol. 14 no. 1
Type: Research Article
ISSN: 1743-9132

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Article
Publication date: 4 March 2019

Clement Olaniyi

The purpose of this paper is to examine the asymmetric behavior between CEO pay and firm performance in Nigeria.

Abstract

Purpose

The purpose of this paper is to examine the asymmetric behavior between CEO pay and firm performance in Nigeria.

Design/methodology/approach

The study adopts a two-step dynamic panel generalized method of moments (GMM) to reveal asymmetric responses of CEO pay to positive and negative shocks in firm performance.

Findings

The research outcomes of a two-step dynamic panel GMM) adopted reveal asymmetric responses of CEO pay to positive and negative shocks in firm performance. This implies that CEOs are handsomely compensated for good performance, but not punished for poor performance.

Originality/value

The study, therefore, suggests that CEO pay fails to serve as an internal corporate governance mechanism to alleviate agency problem in Nigeria’s listed firms.

Details

Journal of Economic Studies, vol. 46 no. 2
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 9 November 2015

Mahmoud Qadan and Joseph Yagil

The recent economic crises have attracted attention to the issue of international equity co-movements and correlations. Using data from 1980 to 2010, the authors examine…

Abstract

Purpose

The recent economic crises have attracted attention to the issue of international equity co-movements and correlations. Using data from 1980 to 2010, the authors examine the international co-movements of both real economic activity, as reflected in industrial production and the gross domestic product (GDP), and financial activity, as reflected in equity market returns. While classic symmetric co-integration tests do not reject the hypothesis of no co-integration, the authors find evidence of asymmetric co-integration in these three variables between the USA and the rest of the Group of Seven (G7) countries. The momentum threshold autoregressive (M-TAR) model captures the nature of the asymmetry most effectively and is the most applicable model for adjustment to long-term equilibrium. This model suggests that the path of adjustment to long-run equilibrium is somewhat different when the price differential is decreasing than when it is increasing. These findings imply that the benefits of asset diversification for investors with a long horizon might be limited in scope.

Design/methodology/approach

This work is based on the theory of integrated time series. The authors use symmetric and asymmetric co-integration tests to market indices, as well as to monthly industrial production statistics and quarterly data about the GDP. In line with the financial economic literature, the authors select the GDP as a proxy that reflects the real economy and share prices to mirror the financial sector of the economy. Because no monthly data exist about GDP, the authors use instead the industrial production. Both variables cover the period from January 1980 to June 2010.

Findings

The overall findings demonstrate that the USA and the rest of the G7 countries are not symmetrically co-integrated with respect to the GDP. Indeed, they are asymmetrically co-integrated. These findings may explain the additional important result that the majority of equity markets are also asymmetrically co-integrated with the USA.

Research limitations/implications

The co-movements of the equity markets and real economic activity imply that the benefits of asset diversification for investors with a long horizon might be limited in scope. In the short run, however, portfolio diversification can be more beneficial due to the short-term fluctuations that may derive from the asymmetric correction process.

Originality/value

Prior research on co-movements has focused mainly on studying the correlations among international equity markets by analyzing conditional correlations or using symmetric co-integration methods; the authors test the existence of a long-term relationship between economic variables with respect to the USA and the rest of the G7 countries using a threshold co-integration model.

Details

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

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