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Our result of this paper aims to indicate that the beta pricing formula could be applied in a long-term model setting as well.
Abstract
Purpose
Our result of this paper aims to indicate that the beta pricing formula could be applied in a long-term model setting as well.
Design/methodology/approach
In this paper, we show that the capital asset pricing model can be derived from a three-period general equilibrium model.
Findings
We show that our extended model yields a Pareto efficient outcome.
Practical implications
The capital asset pricing model (CAPM) model can be used for pricing long-lived assets.
Social implications
Long-term modelling and sustainability can be modelled in our setting.
Originality/value
Our results were only known for two periods. The extension to 3 periods opens up a large scope of applicational possibilities in asset pricing, behavioural analysis and long-term efficiency.
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Keywords
Sub-Saharan African (SSA) region has been battling illegal outflow of capital over the years, with little success recorded so far. Without adequate attention, unemployment…
Abstract
Purpose
Sub-Saharan African (SSA) region has been battling illegal outflow of capital over the years, with little success recorded so far. Without adequate attention, unemployment, infrastructure deficiencies and inefficient capital might be worse in the future. The purpose of this study is to investigate if institutional quality mitigates the effect of capital flight (CF) on economic growth.
Design/methodology/approach
The panel data from 26 SSA countries spanning 1998 to 2018 are used. The analysis of this study was carried out through a two-step generalized method of moments technique. The principal component index is used to group the institutional quality/governance indicators into three categories: political governance, economic governance and institutional governance.
Findings
The study found that CF is harmful to the economic growth of the SSA region. The study also found that, among the indicators of institutional quality, only the rule of law and control of corruption stimulate economic growth. Contrary to expectation, the finding indicates that institutional quality does mitigate the effect of CF on economic growth in the SSA region.
Originality/value
This study provides an insight into the relevance of institutional quality in mitigating CF in sub-Saharan African region.
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Maria Daniela Giammanco, Lara Gitto and Ferdinando Ofria
Non-performing loans (NPLs) may determine an overall weakness of the banking system within a country. The purpose of the present study is to analyze the impact of government…
Abstract
Purpose
Non-performing loans (NPLs) may determine an overall weakness of the banking system within a country. The purpose of the present study is to analyze the impact of government failures on NPLs in Asian countries in the time span 2000–2020. The variables employed as proxies of government failures are public debt as % of gross domestic product (GDP) and a government ineffectiveness index proposed by the World Bank.
Design/methodology/approach
The econometric approach employed is a panel generalised time series (GLS) model with heteroskedasticity and autocorrelation specific to each panel.
Findings
The results confirm that public debt as % of GDP and governmental ineffectiveness impacted significantly on NPLs for Asian countries in the observed period.
Originality/value
The literature offers similar results only for some individual Asian countries, while a wider analysis is lacking for Asian macroareas. The present paper considers 31 Asian countries, and supports the idea that a healthy financial sector is correlated to institutional quality and political regime. Hence, policy makers are advised to monitor governance indicators to reduce NPLs.
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Imtiaz Sifat, Azhar Mohamad and Zarinah Hamid
Magnet effect entails a hypothesis in market microstructure entailing a systemic likelihood of prices being sucked toward the theoretical threshold. The purpose of this paper is…
Abstract
Purpose
Magnet effect entails a hypothesis in market microstructure entailing a systemic likelihood of prices being sucked toward the theoretical threshold. The purpose of this paper is to investigate the existence of magnet effect in Bursa Malaysia via overnight returns.
Design/methodology/approach
This study investigates the existence of magnet effect via overnight returns in Bursa Malaysia by utilizing historical daily price data from 1994 to 2017 by probabilistic regression approaches. The authors divide the study period into three distinct regimes based on regulatory limit mechanisms.
Findings
Based on demarcated regimes, the authors find evidence of magnet effect in Bursa Malaysia throughout all regimes, with a heightened magnitude detected between 2002 and 2013. Moreover, upper limit scenarios exhibit a greater propensity for magnet effect. The authors end the paper with implications of the findings for portfolio managers, intraday traders, and policymakers.
Originality/value
The research is the first of its kind in attempting to measure the magnet effect in Malaysia via overnight jumps.
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Keywords
Natalia V. Trusova, Inna Ye. Yakusheva, Yuliia M. Zavoloka, Alina H. Yefremenko, Yuliia A. Malashenko and Maryna V. Sidnenko
The article deals with the imperatives of functioning of the financial market of Ukraine in the global space of debt loading.
Abstract
Purpose
The article deals with the imperatives of functioning of the financial market of Ukraine in the global space of debt loading.
Design/methodology/approach
Within the Laffer debt curve model, the dependence of gross domestic product (GDP) change on the level of debt of the financial system for countries that form the economic core in the global financial space and well control the level of the indicator, as well as new member states that have a different level of secure debt loading and affect the portion of the financial market that forms a portfolio of securities to cover the cost of nonperforming government securities is mentioned.
Findings
It has been shown that stock indices, as constituent indicators of changes in the price environment of a certain group of securities in time space, allow to estimate the general direction of the market movement even when prices within the index basket change in different directions.
Originality/value
The dynamics of changing the debt loading of the financial system of Ukraine in the current, medium-term perspective is analyzed. The amount of the fixed and floating rate debt of the government internal securities is determined to ensure the diversification of interest rate risk. Using the parameters of the model of approximation functions of dimensionless quantities, the corridor of a safe level of general government debt in the country was determined.
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Laila Memdani and Guruprasad Shenoy
The purpose of this paper is to study the following: short-run and long-run associations between the terror-affected country’s stock market index and other global countries’…
Abstract
Purpose
The purpose of this paper is to study the following: short-run and long-run associations between the terror-affected country’s stock market index and other global countries’ equity indices and gold; the volatility of stock market indices when one of the countries is affected by a terrorist attack; and the linkages between terrorism and the returns in the selected stock markets.
Design/methodology/approach
To study the impact of the Taj attack on other global indices, the authors selected top five countries’ stock market indices, namely, FTSE, DJI, NIKKEI, SSEC and DAX. The short-run and long-run associations are also compared with gold. The authors used the autoregressive distributed lag model, LM test and bounds test for analyzing the short-run and long-run impact; ARCH family models to study the volatility impact; and the MAR model to study the impact on returns.
Findings
The authors found that all the global indices had a short-run association with the terror-affected country’s benchmark index, i.e. BSE. Gold moved as expected, with it having a short-run impact on the terror-affected country. All the global indices except DJI have volatility of share price movement either positively or negatively. As the benchmark of the terror-affected country fell, NIKKEI, HSI, IXIC, DAX and CAC also fell; that is, it had a positive influence on the terror-affected country’s index. Post the Mumbai attacks, DJI, NIKKEI, SSEC, DAX, BSE and CAC performed well in performance measure returns compared with the pre-attack period. Whereas, FTSE and GOLD performed well in performance measure returns in the pre-attack period compared with the post-attack period. GOLD proved that it is the best avenue to invest in, as it has only a short-term association with the terror-affected country’s index.
Research limitations/implications
The authors studied the short-run and long-run associations with only five countries’ benchmark indices.
Practical implications
The authors found that all the global indices had long- and short-run associations with the terror-affected country’s benchmark index, i.e. BSE. Global indices like DJI, NIKKEI, SSEC, DAX and FTSE had a short-term association with the affected country’s index. Gold moved as expected, with it having a short-run impact on the terror-affected country. All the global indices except DJI have volatility of share price movement either positively or negatively. As the benchmark of the terror-affected country fell, NIKKEI, HSI, IXIC, DAX, TSX, BVSP and CAC also fell; i.e., it had a positive influence on the terror-affected country’s index. Post the Mumbai attacks, DJI, NIKKEI, SSEC, DAX, BSE and CAC performed well in performance measure returns compared with the pre-attack period. Whereas, FTSE and GOLD performed well in performance measure returns in the pre-attack period compared with the post-attack period. GOLD proved that it is the best avenue to invest in, as it has only a short-term association with the terror-affected country’s index. In all the relationships were mixed with respect to terror attacks, and GOLD took the lead run out of all the associations it had in the 16-year time span from 2000 to 2016.
Social implications
The research has got an important implication to the investors. It shows that patience is the key, as all the indices had only short-term associations with the BSE. It implies that investors’ returns will be negative in the short run, but if they continue investing, in the long run, the impact of terrorism tapers out and the returns will increase.
Originality/value
There is a lot of research done on the impact of the US attacks on the stock markets of other countries, but on the impact of the Taj attack in India, there is hardly any research.
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Nenavath Sreenu and Ashis Kumar Pradhan
The stock market has shown fluctuating degrees of volatility because of the recent COVID-19 pandemic in India. The present research aims to investigate the effect of the COVID-19…
Abstract
Purpose
The stock market has shown fluctuating degrees of volatility because of the recent COVID-19 pandemic in India. The present research aims to investigate the effect of the COVID-19 on the stock market volatility, and whether the economic package can control the market volatility or not, measured by a set of certain sector-level economic features and factors such as resilience variables.
Design/methodology/approach
We examine the correlation matrix, basic volatility model and robustness tests to determine the sector-level economic features and macroeconomic factors helpful in diminishing the volatility rising because of the COVID-19.
Findings
The outcomes of this study are significant as policymakers and financial analysts can apply these economic factors to set policy replies to handle the unexpected fluctuation in the stock market in sequence to circumvent any thinkable future financial crisis.
Originality/value
The originality of the paper is to measure the variables affecting the stock market volatility due to COVID-19, and understand the impact of capital market macroeconomic variables and dummy variables to theoretically explain the COVID-19 impact on stock market volatility.
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The study aims to pose the question: Has lending to small businesses been a source of increased risk in microfinance institutions (MFIs)? This question is pertinent given the…
Abstract
Purpose
The study aims to pose the question: Has lending to small businesses been a source of increased risk in microfinance institutions (MFIs)? This question is pertinent given the higher levels of perceived riskiness of lending to small business operators owing to their opacity.
Design/methodology/approach
The study accommodates panel bias by using system generalised method of moments (GMM) estimators on micro-level data from 2004 to 2014.
Findings
Study findings indicate that lending to small businesses by MFIs does not affect credit and insolvency risk in these institutions. However, using disaggregated data, there is evidence that lending to small businesses by cooperatives significantly reduces their insolvency risk exposure. Conversely, lending to small business by micro-banks, cooperatives, non-bank financial institutions and non-governmental organizations does not significantly affect their risk exposure.
Practical implications
These findings imply that the technologies that have been used by MFIs in lending to small enterprises have helped them mitigate the problems of adverse selection and moral hazard.
Originality/value
Information economics theory postulates that small firms are excluded from formal financial markets owing to their opacity. The hypothesis has not attracted much empirical research interest; hence, this study aims to bridge this gap in knowledge.
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Soheil Kazemian, Rashidah Abdul Rahman and Zuraeda Ibrahim
This study aims to evaluate the current practices conducted based on in-depth interviews with 16 Amanah Ikhtiar Malaysia (AIM) medium-level managers who were selected randomly…
Abstract
Design/methodology/approach
This study aims to evaluate the current practices conducted based on in-depth interviews with 16 Amanah Ikhtiar Malaysia (AIM) medium-level managers who were selected randomly, including branch managers and operational officers. All of the interviewees have two characteristics; they face customers directly and influence their decision-making.
Findings
Based on the findings of this study, AIM has a high level of customer orientation and inter-function coordination and a middle level in competitor orientation.
Originality/value
This paper initially presents the definition of a unique concept, namely, Islamic market orientation, which is defined based on the incorporation of Islamic concepts and market orientation by discussing the characteristics of Islamic market-oriented organisations. Then, an empirical discussion for evaluating market orientation in a microfinance provider is presented. The paper uses the synthesis of different real positions for developing discussions on whether AIM is following market orientation strategies, and, if so, at which level it is located from each dimension’s point of view.
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After the COVID-19 outbreak, the Federal Reserve has undertaken several monetary policies to alleviate the pandemic consequences on the stock markets leading to a misunderstanding…
Abstract
Purpose
After the COVID-19 outbreak, the Federal Reserve has undertaken several monetary policies to alleviate the pandemic consequences on the stock markets leading to a misunderstanding on the cryptocurrency market response. This paper aims to evaluate the effects of the Federal Reserve monetary policy on the Islamic and conventional cryptocurrency dynamics during the COVID-19 pandemic. We, specifically, examine the associate bubbles and feedbacks effects.
Design/methodology/approach
This paper developed a novel methodology that detects market bubbles using the statistical indicators defined by Psychological (PSY) tests. It also investigated the effect of the Federal Open Market Committee (FOMC) announcements on conventional and Islamic cryptocurrencies compatible with Islamic laws “Shari’ah” by using the event-driven regression.
Findings
The empirical results show that the FOMC announcements have a positive significant effect after one day of the event and a negative effect before two days of the announcement on the conventional cryptocurrency markets. However, the reaction of Islamic cryptocurrencies to these events is not significant except for Hello Gold after one day of the announcement. Besides, the Hello Gold and X8X cryptocurrencies present no bubbles during this period. However, Bitcoin and Ethereum markets have short-lived bubbles.
Research limitations/implications
The main contribution of this study is the investigation of the response and vulnerability to pandemic shocks of a new category of cryptocurrencies backed by tangible assets. This work has practical implications as it provides new insights into trading opportunities and market reactions.
Originality/value
To our knowledge, this work is the first study that compares the response of Islamic and conventional cryptocurrency markets to FOMC announcements during the COVID-19 pandemic and examines the presence of bubbles in these markets. Besides, the originality of this work is derived from the novelty of the data employed and the method used (PSY tests) in this study.
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