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1 – 10 of over 3000Arunava Bandyopadhyay, Souvik Bhowmik and Prabina Rajib
Guar Gum (GG) is used in Shale oil exploration. Excessive price increase in the Guar futures market had a spillover impact on Guar spot prices and affected Guar export from India…
Abstract
Purpose
Guar Gum (GG) is used in Shale oil exploration. Excessive price increase in the Guar futures market had a spillover impact on Guar spot prices and affected Guar export from India as Shale oil producers started exploring alternate sources. In this paper, the role of excessive speculation in the futures market, and its adverse impact on the guar-based agri-business ecosystem have been empirically explored.
Design/methodology/approach
Volatility spillover dynamics between WTI crude oil and Guar futures have been explored using bivariate-Granger Causality, BEKK–GARCH models with Wavelet multi-resolution analysis. The wavelet-based models capture the multi-scale features of mean and volatility spillover to identify the effect of heterogenous investment behavior in the time and frequency domain.
Findings
The results provide evidence that excessive speculation in futures markets increases spot market volatility. The results also suggest that the excess presence of short-term investors can destabilize the futures market.
Research limitations/implications
The purpose of the commodity futures market is to support price discovery and risk management. However, speculative practices can destabilize these purposes leading to the failure of the business ecosystem.
Originality/value
The novelty of this paper is twofold. First, it explores the economic linkages between the spot and futures market and tests whether the presence of heterogeneous traders affects the economic linkages. Second, it models the impact of short-term speculative investment on the destabilization of the spot market.
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Venkata Narasimha Chary Mushinada and Venkata Subrahmanya Sarma Veluri
The purpose of the paper is to empirically test the overconfidence hypothesis at Bombay Stock Exchange (BSE).
Abstract
Purpose
The purpose of the paper is to empirically test the overconfidence hypothesis at Bombay Stock Exchange (BSE).
Design/methodology/approach
The study applies bivariate vector autoregression to perform the impulse-response analysis and EGARCH models to understand whether there is self-attribution bias and overconfidence behavior among the investors.
Findings
The study shows the empirical evidence in support of overconfidence hypothesis. The results show that the overconfident investors overreact to private information and underreact to the public information. Based on EGARCH specifications, it is observed that self-attribution bias, conditioned by right forecasts, increases investors’ overconfidence and the trading volume. Finally, the analysis of the relation between return volatility and trading volume shows that the excessive trading of overconfident investors makes a contribution to the observed excessive volatility.
Research limitations/implications
The study focused on self-attribution and overconfidence biases using monthly data. Further studies can be encouraged to test the proposed hypotheses on daily data and also other behavioral biases.
Practical implications
Insights from the study suggest that the investors should perform a post-analysis of each investment so that they become aware of past behavioral mistakes and stop continuing the same. This might help investors to minimize the negative impact of self-attribution and overconfidence on their expected utility.
Originality/value
To the best of the authors’ knowledge, this is the first study to examine the investors’ overconfidence behavior at market-level data in BSE, India.
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Many developing countries are pursuing policies that foster international financial integration after decades of financial repression. Greater access to foreign financial markets…
Abstract
Purpose
Many developing countries are pursuing policies that foster international financial integration after decades of financial repression. Greater access to foreign financial markets may have both positive and negative impact on the performance of the economy. One of the concerns of international financial integration is macroeconomic volatility which may affect both monetary and real sectors. Zimbabwe has chosen to pursue a financial liberalization strategy in the form of imperfect financial integration following periods of excessive domestic shocks. An upsurge of capital flows since the epic of economic crisis in the 2000s has been observed with varying macroeconomic impacts. This study empirically examines the impact of partial international financial integration on the volatility of macroeconomic variables.
Design/methodology/approach
The study utilized an ARDL Model suggested by Pesaran et al., (2003) which is appropriate for short time periods.
Findings
The results show that financial integration has a negative effect on output volatility while insignificant on consumption volatility.
Practical implications
The study recommends that the country should gradually liberalize the capital account and properly sequence financial development reforms in order to minimize losses from global financial integration.
Originality/value
The study used time series for Zimbabwe during a period of external imbalance, repeated economic cycles, sudden stops in capital flows and limited scope of imperfect financial integration. Findings in such an economy will be a referral for policymakers in other economies that would want to pursue international financial integration.
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This paper examines the effectiveness of the three macro-prudential measures introduced by the Korean government in 2010 and 2011: (i) introduction of limit for FX forward…
Abstract
This paper examines the effectiveness of the three macro-prudential measures introduced by the Korean government in 2010 and 2011: (i) introduction of limit for FX forward positions of domestic banks and foreign bank branches, (ii) reintroduction of tax on foreign investors' earnings from Korean government bonds, and (iii) imposition of macro-prudential stability levy on non-deposit foreign currency liabilities appeared in bank balance sheets. The results show that the three measures were not successful: The limits of FX forward position did not lead to the decrease in foreign borrowings. The reintroduction of the tax did not reduce foreign investments in Korean government bonds. Lastly, the levy on non-deposit foreign currency liabilities did not lower the foreign borrowings from the banks and did not result in more financing through deposits for banks. The ineffectiveness of the capital flow management system in controling the amount of foreign capital flows implies that the system might not be effective in mitigating the pressure on exchange rate caused by excessive volatility of foreign capital flows.
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Are share markets too volatile? While it is difficult to ignore share market volatility it is important to determine whether volatility is excessive. This paper replicates the…
Abstract
Are share markets too volatile? While it is difficult to ignore share market volatility it is important to determine whether volatility is excessive. This paper replicates the Shiller (1981) test as well as applying standard time series analysis to annual Australian stock market data for the period 1883 to 1999. While Shiller’s test suggests the possibility of excess volatility, time series analysis identifies a long‐run relationship between share market value and dividends, consistent with the share market reverting to its fundamental discounted cash flow value over time.
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This paper aims to investigate the effect of the political risk on Bitcoin return and volatility during the 2016 US pre-election and post-election periods.
Abstract
Purpose
This paper aims to investigate the effect of the political risk on Bitcoin return and volatility during the 2016 US pre-election and post-election periods.
Design/methodology/approach
A daily composite political risk index is calculated by using the principal component analysis and Google Trends. A quantile regression approach is adopted to assess the effect of the political risk index on Bitcoin return and volatility for both periods subject to market conditions.
Findings
Findings reveal that the political risk index tends to increase when moving from the pre-election period to the post-election one. This is mostly attributed to the new challenges faced by the new elected government. During the pre-election period, the quantiles regression shows that the political risk index negatively affects Bitcoin return when the market is bearish, whereas a positive impact on volatility is found in bearish and bullish markets. When the political situation becomes severer during the post-election period, the quantiles plots show that the increase of the political risk index leads to a significant increase of Bitcoin return, whereas Bitcoin volatility remains relatively stable. This means that Bitcoin can be adopted as a hedging tool when the political situation becomes severer.
Originality/value
Comparing to the existed studies in the field, this paper considers Google trends as a main source to assess the daily composite political risk index during the 2016 US presidential election.
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This paper aims to investigate price responses and volatility spillovers between commodity spot and futures markets. The study ultimately seeks the evidence-based claims on the…
Abstract
Purpose
This paper aims to investigate price responses and volatility spillovers between commodity spot and futures markets. The study ultimately seeks the evidence-based claims on the efficiency of the long run and short run horizontal price transmissions from futures markets to spot markets.
Design/methodology/approach
This study used the most recent daily price series of pepper, cardamom and rubber, during the period 2004–2019, use “cointegration-ECM-GARCH framework” and verify the persisting validity of the “expectancy theory” of commodity futures pricing.
Findings
The results offer overwhelming evidence of futures market dominance in the price discoveries and volatility spillovers in spot markets. However, this paper finds asymmetric responses between cash and futures prices across markets. The hedging efficiency of futures contracts is commodities specific’ where spices futures are more efficient than the rubber futures.
Practical implications
The study passes on vital information to the producers and traders of spices and rubber who have a potential interest in the use of futures contracts to make profits from arbitrage between futures and cash markets.
Originality/value
The paper is unique in terms of understanding asymmetric price linkages in markets for plantation crops.
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In October of 1987 stock market prices all over the world fell by staggering amounts. A financial panic spreading beyond stock markets did not occur and it would appear that any…
Abstract
In October of 1987 stock market prices all over the world fell by staggering amounts. A financial panic spreading beyond stock markets did not occur and it would appear that any real economic consequences of the crash have, thus far, been small. A superficial reading of economic history suggests that things might have turned out a whole lot worse. It is this thought that makes an evaluation of various restrictions designed to limit stock market volatility ‐ so called circuit breakers ‐ timely.
This chapter investigates the relative magnitude of the benefits of global diversification from the viewpoint of domestic investors in various countries by forming time-rolling…
Abstract
This chapter investigates the relative magnitude of the benefits of global diversification from the viewpoint of domestic investors in various countries by forming time-rolling efficient frontiers. To enhance feasibility of asset allocation strategies, the constraints of short-sales and over-weighting investments are taken into account. The empirical results suggest that local investors in less developed countries, particularly in Latin America, East Asia, and Southern Europe, comparatively benefit more from global diversification. Investors in the countries of civic-law origin tend to benefit more from global investment than the ones in the common-law states. Although the global market has become more integrated over the past decades, diversification benefits for domestic investors declined but did not vanish. The results of this chapter are useful for asset management professionals to determine target markets to promote the sales of international funds.