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Open Access
Article
Publication date: 12 April 2023

Michael O'Neill and Gulasekaran Rajaguru

The authors analyse six actively traded VIX Exchange Traded Products (ETPs) including 1x long, −1x inverse and 2x leveraged products. The authors assess their impact on the VIX…

Abstract

Purpose

The authors analyse six actively traded VIX Exchange Traded Products (ETPs) including 1x long, −1x inverse and 2x leveraged products. The authors assess their impact on the VIX Futures index benchmark.

Design/methodology/approach

Long-run causal relations between daily price movements in ETPs and futures are established, and the impact of rebalancing activity of leveraged and inverse ETPs evidenced through causal relations in the last 30 min of daily trading.

Findings

High frequency lead lag relations are observed, demonstrating opportunities for arbitrage, although these tend to be short-lived and only material in times of market dislocation.

Originality/value

The causal relations between VXX and VIX Futures are well established with leads and lags generally found to be short-lived and arbitrage relations holding. The authors go further to capture 1x long, −1x inverse as well as 2x leveraged ETNs and the corresponding ETFs, to give a broad representation across the ETP market. The authors establish causal relations between inverse and leveraged products where causal relations are not yet documented.

Details

Journal of Accounting Literature, vol. 46 no. 2
Type: Research Article
ISSN: 0737-4607

Keywords

Article
Publication date: 7 July 2023

Hardeep Singh Mundi and Shailja Vashisht

This paper aims to review, systematize and integrate existing research on disposition effect and investments. This study conducts bibliometric analysis, including performance…

Abstract

Purpose

This paper aims to review, systematize and integrate existing research on disposition effect and investments. This study conducts bibliometric analysis, including performance analysis and science mapping and thematic analysis of studies on disposition effect.

Design/methodology/approach

This study adopted a thematic and bibliometric analysis of the papers related to the disposition effect. A total of 231 papers published from 1971 to 2021 were retrieved from the Scopus database for the study, and bibliometric analysis and thematic analysis were performed.

Findings

This study’s findings demonstrate that research on the disposition effect is interdisciplinary and influences the research in the domain of both corporate and behavioral finance. This review indicates limited research on cross-country data. This study indicates a strong presence of work on investor psychology and behavioral finance when it comes to the disposition effect. The findings of thematic analysis further highlight that most of the research has focused on prospect theory, trading strategies and a few cognitive and emotional biases.

Practical implications

The findings of this study can be used by investors to minimize their biases and losses. The study also highlights new techniques in machine learning and neurosciences, which can help investment firms better understand their clients’ behavior. Policymakers can use the study’s findings to nudge investors’ behavior, focusing on minimizing the effects of the disposition effect.

Originality/value

This study has performed the quantitative bibliometric and thematic analysis of existing studies on the disposition effect and identified areas of future research on the phenomenon of disposition effect in investments.

Details

Qualitative Research in Financial Markets, vol. 16 no. 2
Type: Research Article
ISSN: 1755-4179

Keywords

Article
Publication date: 28 December 2023

Yadong Dou, Xiaolong Zhang and Ling Chen

The coal-fired power plants have been confronted with new operation challenge since the unified carbon trading market was launched in China. To make the optimal decision for the…

Abstract

Purpose

The coal-fired power plants have been confronted with new operation challenge since the unified carbon trading market was launched in China. To make the optimal decision for the carbon emissions and power production has already been an important subject for the plants. Most of the previous studies only considered the market prices of electricity and coal to optimize the generation plan. However, with the opening of the carbon trading market, carbon emission has become a restrictive factor for power generation. By introducing the carbon-reduction target in the production decision, this study aims to achieve both the environmental and economic benefits for the coal-fired power plants to positively deal with the operational pressure.

Design/methodology/approach

A dynamic optimization approach with both long- and short-term decisions was proposed in this study to control the carbon emissions and power production. First, the operation rules of carbon, electricity and coal markets are analyzed, and a two-step decision-making algorithm for annual and weekly production is presented. Second, a production profit model based on engineering constraints is established, and a greedy heuristics algorithm is applied in the Gurobi solver to obtain the amounts of weekly carbon emission, power generation and coal purchasing. Finally, an example analysis is carried out with five generators of a coal-fired power plant for illustration.

Findings

The results show that the joint information of the multiple markets of carbon, electricity and coal determines the real profitability of power production, which can assist the plants to optimize their production and increase the profits. The case analyses demonstrate that the carbon emission is reduced by 2.89% according to the authors’ method, while the annual profit is improved by 1.55%.

Practical implications

As an important power producer and high carbon emitter, coal-fired power plants should actively participate in the carbon market. Rather than trade blindly at the end of the agreement period, they should deeply associate the prices of carbon, electricity and coal together and realize optimal management of carbon emission and production decision efficiently.

Originality/value

This paper offers an effective method for the coal-fired power plant, which is struggling to survive, to manage its carbon emission and power production optimally.

Details

International Journal of Energy Sector Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1750-6220

Keywords

Book part
Publication date: 4 April 2024

Kwang-Jing Yii, Zi-Han Soh, Lin-Hui Chia, Khoo Shiang-Lin Jaslyn, Lok-Yew Chong and Zi-Chong Fu

In the stock market, herding behavior occurs when investors mimic the actions of others in their investment decisions. As a result, the market becomes inefficient and speculative…

Abstract

In the stock market, herding behavior occurs when investors mimic the actions of others in their investment decisions. As a result, the market becomes inefficient and speculative bubbles form. This study aims to investigate the relationship between information, overconfidence, market sentiment, experience and national culture, and herding behavior among Malaysian investors. A total of 400 questionnaires are distributed to bank institutions' investors. The survey design based on cross-sectional data is analyzed using the Partial Least Squares Structural Equation Model. The results indicate that information, market sentiment, experience, and national culture are positively related to herding behavior, while overconfidence has no effect. With this, the government should strengthen regulations to prevent the dissemination of misleading information. Moreover, investors are encouraged to overcome narrow thinking by expanding their understanding of different cultures when making investment decisions.

Details

Advances in Pacific Basin Business, Economics and Finance
Type: Book
ISBN: 978-1-83753-865-2

Keywords

Article
Publication date: 6 October 2023

Md. Mahmudul Alam, Yasmin Mohamad Tahir, Abdulazeez Y.H. Saif-Alyousfi and Reza Widhar Pahlevi

This research paper aims to empirically explore how stock market investors’ perceptions are affected by extreme climatic events like El Nino and floods in Malaysia.

Abstract

Purpose

This research paper aims to empirically explore how stock market investors’ perceptions are affected by extreme climatic events like El Nino and floods in Malaysia.

Design/methodology/approach

This study uses structural equation modelling (SEM) to analyse the empirical data gathered through a questionnaire survey involving 273 individual investors from Bursa Malaysia between January and June 2019.

Findings

Results reveal that companies’ efforts, especially for agriculture and plantation-based industries, to adapt to climate change risk at the production, business and stock market levels significantly impact investors’ behaviour and investment decisions. Moreover, stock market investors’ climate change knowledge shows a significant moderating effect on corporate climate change adaptation initiatives and investors’ decisions to invest in Malaysian agricultural and plantation industry stocks.

Practical implications

This research has significant implications for practice and policy, as it measures the stock market investors’ level of awareness about climate change events and explores the companies’ strategies to reduce climatic risks to their business model.

Social implications

This study shows the way to adjust the climate change information in the stock market investment decision to improve market efficiency and sustainable stock exchanges initiative.

Originality/value

To the best of the authors’ knowledge, this paper is the pioneer one to provide a comprehensive link between climate change events and business performances at production level, business level and stock market levels by drawing inferences from empirical data on investors’ behaviours. This study also added value in investment theories and financial literature by observing the climate change as an important factor to determine the investors’ decisions in the stock market.

Details

Sustainability Accounting, Management and Policy Journal, vol. 15 no. 1
Type: Research Article
ISSN: 2040-8021

Keywords

Article
Publication date: 9 January 2024

Subhamoy Chatterjee and R.P. Mohanty

Interest rate derivatives (IRDs) are the essential components of financial risk management and are used across various industry sectors. The objective is to analyze the…

Abstract

Purpose

Interest rate derivatives (IRDs) are the essential components of financial risk management and are used across various industry sectors. The objective is to analyze the differences in approach to managing interest rate risks between the Indian corporates that execute IRDs and the ones that do not.

Design/methodology/approach

Interest rate fluctuations require Indian corporates to hedge their exposures in foreign currency interest rates. This is all the more true for mid-sized corporates because of their balance sheet exposures. Additionally, they may not have the resources to formulate risk management policies. This paper analyzes data collected from financial statements of a diverse set of companies that use IRD and helps in formulating such a strategy.

Findings

The results indicate significant differences for some of the parameters like information asymmetry and agency cost between users and non-users of IRDs. The study further suggests causality between users of derivatives and parameters like size, growth and debt.

Research limitations/implications

The study compares users and non-users of IRDs, thereby identifying factors unique to users of IRDs. It also studies causality relations which explain the motivation to do IRDs. Thus, it enables risk managers to use this as a reference point to decide on their strategies.

Originality/value

While there are multiple studies across geographies and sectors including commercial banks in India on the usage of interest rate swaps, this study focuses on Indian mid-tier corporates. Furthermore, the study distinguishes between users and non-users based on financial parameters, which in turn would provide a framework for decision-hedging strategies.

Open Access
Article
Publication date: 18 December 2023

Franz Eduard Toerien and Elda du Toit

The purpose of this study is to evaluate whether the amendments to International Accounting Standard (IAS) 39 and the introduction of International Financial Reporting Standards…

Abstract

Purpose

The purpose of this study is to evaluate whether the amendments to International Accounting Standard (IAS) 39 and the introduction of International Financial Reporting Standards (IFRS) 9 enhanced the readability, and thus the quality and usefulness of risk disclosure information.

Design/methodology/approach

Readability analyses are performed on companies listed on the Johannesburg Stock Exchange (JSE) from 2005 to 2021. The sample period includes the period when companies disclosed information according to IAS 39 (2005–2017) and IFRS 9 (2018–2021).

Findings

The results of the analyses show risk disclosures for JSE-listed companies to be complex and difficult to understand. Furthermore, risk disclosures have become longer and less readable with the introduction of amendments to IAS 39 and the introduction of IFRS 9.

Research limitations/implications

This study uses readability measures as a proxy for the complexity and usefulness of risk disclosures. The amount of utility a user of financial statements derives could be dependent on other factors such as the quality of disclosure, individual user background and perceptions.

Practical implications

The results have valuable implications for the various stakeholders that make use of the information contained in financial statements. Stakeholders such as regulators and standard setters should carefully assess how accounting standards change to ensure that one of the key objectives of the IASB, namely, to provide information that is relevant, reliable and understandable, is met.

Originality/value

The results of this study contribute to the discourse on the usefulness of companies’ risk disclosures. Though, to the best of the authors’ knowledge, this is the first study to compare the readability of risk disclosures from an emerging market perspective, the results can be applied to other countries using IFRS to assess the readability of risk disclosures.

Details

Accounting Research Journal, vol. 37 no. 1
Type: Research Article
ISSN: 1030-9616

Keywords

Article
Publication date: 15 January 2024

Shalini Velappan

This study aims to investigate the co-volatility patterns between cryptocurrencies and conventional asset classes across global markets, encompassing 26 global indices ranging…

Abstract

Purpose

This study aims to investigate the co-volatility patterns between cryptocurrencies and conventional asset classes across global markets, encompassing 26 global indices ranging from equities, commodities, real estate, currencies and bonds.

Design/methodology/approach

It used a multivariate factor stochastic volatility model to capture the dynamic changes in covariance and volatility correlation, thus offering empirical insights into the co-volatility dynamics. Unlike conventional research on price or return transmission, this study directly models the time-varying covariance and volatility correlation.

Findings

The study uncovers pronounced co-volatility movements between cryptocurrencies and specific indices such as GSCI Energy, GSCI Commodity, Dow Jones 1 month forward and U.S. 10-year TIPS. Notably, these movements surpass those observed with precious metals, industrial metals and global equity indices across various regions. Interestingly, except for Japan, equity indices in the USA, Canada, Australia, France, Germany, India and China exhibit a co-volatility movement. These findings challenge the existing literature on cryptocurrencies and provide intriguing evidence regarding their co-volatility dynamics.

Originality

This study significantly contributes to applying asset pricing models in cryptocurrency markets by explicitly addressing price and volatility dynamics aspects. Using the stochastic volatility model, the research adding methodological contribution effectively captures cryptocurrency volatility's inherent fluctuations and time-varying nature. While previous literature has primarily focused on bitcoin and a few other cryptocurrencies, this study examines the stochastic volatility properties of a wide range of cryptocurrency indices. Furthermore, the study expands its scope by examining global asset markets, allowing for a comprehensive analysis considering the broader context in which cryptocurrencies operate. It bridges the gap between traditional asset pricing models and the unique characteristics of cryptocurrencies.

Details

Studies in Economics and Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1086-7376

Keywords

Open Access
Article
Publication date: 12 December 2023

Sun-Joong Yoon

In 2022, US financial regulators proposed to mandate a single central clearing mechanism for treasury bonds and repo transactions to stabilize financial markets. The systemic…

Abstract

In 2022, US financial regulators proposed to mandate a single central clearing mechanism for treasury bonds and repo transactions to stabilize financial markets. The systemic risks inherent in repo markets were first highlighted by the global financial crisis and, as a response, global financial authorities such as the Financial Stability Board (FSB) and Bank for International Settlements (BIS) have advocated for the introduction of a central counterparty (CCP). This study examines the structural characteristics of Korean repo markets and proposes the introduction of CCPs as a way to mitigate systemic risk. To this end, the author analyzes the structural differences between US and European repo markets and estimates the potential consequences of introducing CCP clearing in local repo markets. In general, CCPs offer two benefits: they can reduce required capital through netting in multilateral transactions, and they can mitigate the effects of risk transfer by isolating counterparty risk during periods of turbulence. In Korea, the latter effect is expected to play a pivotal role in mitigating potential risks.

Details

Journal of Derivatives and Quantitative Studies: 선물연구, vol. 32 no. 1
Type: Research Article
ISSN: 1229-988X

Keywords

Open Access
Article
Publication date: 23 February 2024

Bonha Koo and Ryumi Kim

Using the next-day and next-week returns of stocks in the Korean market, we examine the association of option volume ratios – i.e. the option-to-stock (O/S) ratio, which is the…

Abstract

Using the next-day and next-week returns of stocks in the Korean market, we examine the association of option volume ratios – i.e. the option-to-stock (O/S) ratio, which is the total volume of put options and call options scaled by total underlying equity volume, and the put-call (P/C) ratio, which is the put volume scaled by total put and call volume – with future returns. We find that O/S ratios are positively related to future returns, but P/C ratios have no significant association with returns. We calculate individual, institutional, and foreign investors’ option ratios to determine which ratios are significantly related to future returns and find that, for all investors, higher O/S ratios predict higher future returns. The predictability of P/C depends on the investors: institutional and individual investors’ P/C ratios are not related to returns, but foreign P/C predicts negative next-day returns. For net-buying O/S ratios, institutional net-buying put-to-stock ratios consistently predict negative future returns. Institutions’ buying and selling put ratios also predict returns. In short, institutional put-to-share ratios predict future returns when we use various option ratios, but individual option ratios do not.

Details

Journal of Derivatives and Quantitative Studies: 선물연구, vol. 32 no. 1
Type: Research Article
ISSN: 1229-988X

Keywords

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