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Article
Publication date: 30 June 2021

Faheem Aslam, Paulo Ferreira and Wahbeeah Mohti

The investigation of the fractal nature of financial data has been growing in the literature. The purpose is to investigate the multifractal behavior of frontier markets

Abstract

Purpose

The investigation of the fractal nature of financial data has been growing in the literature. The purpose is to investigate the multifractal behavior of frontier markets using multifractal detrended fluctuation analysis (MFDFA).

Design/methodology/approach

This study used daily closing prices of nine frontier stock markets up to 31-Aug-2020. A preliminary analysis reveals that these markets exhibit fat tails and clustering patterns. For a more robust analysis, a combination of Seasonal and Trend Decomposition using Loess (STL) and MFDFA has been employed. The former method is used to decompose daily stock returns, where later detected the long rang dependence in the series.

Findings

The results confirm varying degree of multifractality in frontier stock markets, implying that they exhibit long-range dependence. Based on these multifractality levels, Serbian and Romanian stock markets are the ones exhibiting least long-range dependence, while Slovenian and Mauritius stock markets indicating highest dependence in their series. Furthermore, the markets of Kenya, Morocco, Romania and Serbia exhibit mean reversion (anti-persistent) behavior while the remaining frontier markets show persistent behaviors.

Practical implications

The information given by the detection of the fractal measure of data can support for investment and policymaking decisions.

Originality/value

Frontier markets are of great potential from the perspective of international diversification. However, most of the research focused on other emerging and developed markets, especially in the context of multifractal analysis. This study combines the STL method and a physics-based robust technique, MFDFA to detect the multifractal behavior of frontier stock markets.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 21 December 2018

Neha Seth and Monica Singhania

The purpose of this paper is to analyze the existence of volatility spillover effect in frontier markets. This study also examines whether any linkages exist among these…

Abstract

Purpose

The purpose of this paper is to analyze the existence of volatility spillover effect in frontier markets. This study also examines whether any linkages exist among these markets or not.

Design/methodology/approach

Monthly data of regional frontier markets, from 2009 to 2016, are analyzed using Multivariate GARCH (BEKK and Dynamic Conditional Correlation (DCC)) models.

Findings

The result of cointegration test shows that the sample frontier markets are not linked in long run, and Granger causality test reveals that the markets under consideration do not cause each other even in the short run. BEKK test says that the effect of the arrival of shock from the own market does not last for longer, whereas shock from other markets lasts with the stronger persistence, and according to DCC test, the volatility spillover exists for all the markets.

Practical implications

The results of present study suggest that the frontier markets are not cointegrated in the long run as well as in the short run, which opens the doors for long-term investments in these markets in future, which may lead to decent returns. Long-term investors may draw the benefits from including the financial assets in their portfolios from these non-integrated frontier markets; nevertheless, they have to consider and implement diversification and hedging strategies during the period of financial turmoil, so as to protect themselves against economic and financial distress.

Originality/value

Significant work has been done on developed, developing and emerging markets but frontier markets are not explored much so far. This paper is an attempt to see the status of frontier stock markets as potential financial markets for diversification benefits.

Details

Journal of Advances in Management Research, vol. 16 no. 3
Type: Research Article
ISSN: 0972-7981

Keywords

Article
Publication date: 2 February 2015

Aswini Sukumaran, Rakesh Gupta and Thadavilil Jithendranathan

The purpose of this paper is to examine whether there exist significant benefits from diversification into frontier markets for an Australian investor in comparison to a…

1205

Abstract

Purpose

The purpose of this paper is to examine whether there exist significant benefits from diversification into frontier markets for an Australian investor in comparison to a US investor.

Design/methodology/approach

The study uses the computationally efficient ADCC GARCH model to estimate time-varying correlations of returns. The authors also compare the results to DCC GARCH correlations in order to test whether the results are model-specific. Optimal portfolios with several restrictions were constructed and the results from Australian and US investors were compared. The study also uses a holding out period that is rebalanced at the end of each quarter using new portfolio weights.

Findings

The study finds that there are significant benefits for the Australian investor from diversifying into frontier markets. However, the benefits to the US investor are much higher than that of an Australian investor. The results from the holding out period also present significantly higher benefits to the US investor compared to the Australian investor.

Originality/value

This study examines the diversification benefits to the Australian investor from frontier markets and compares the benefits of the Australian and the US investors. The results emphasise the potential benefits from including frontier markets in the portfolio. The paper also presents a holding out period analysis.

Details

International Journal of Managerial Finance, vol. 11 no. 1
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 7 August 2017

Nisha Mary Thomas, Smita Kashiramka and Surendra S. Yadav

The purpose of this paper is to investigate the long-run equilibrium relationship between developed, emerging and frontier markets of the Asia-Pacific region during…

Abstract

Purpose

The purpose of this paper is to investigate the long-run equilibrium relationship between developed, emerging and frontier markets of the Asia-Pacific region during January 2000 to June 2016.

Design/methodology/approach

Zivot and Andrews’ unit root test is used to examine the existence of unit root in index series in the presence of a structural break. Gregory and Hansen’s test of cointegration is employed to examine the stable long-run relationship between the indices under study.

Findings

The results suggest that the emerging markets of China and Thailand and the frontier markets of Sri Lanka and Pakistan are fairly segmented from most of the markets in the Asia-Pacific region. Hence, these markets provide good diversification opportunities to global investors. Bidirectional cointegration analysis indicates that emerging and frontier markets influence developed markets. Hence, it can be inferred that the de facto position that only bigger markets influence small markets no longer holds true in the current environment.

Practical implications

The findings of this study will provide valuable inputs to global investors for creating an optimal investment portfolio.

Originality/value

This study does a comprehensive examination of market integration in the Asia-Pacific region. It also contributes to the thin body of work done on frontier markets. Unlike past studies, this paper analyzes the bidirectional cointegration relationship to examine if the notion that only bigger markets influence smaller markets holds true or not. Finally, this study employs advanced techniques of unit root test and cointegration test that consider structural breaks in the models.

Details

Journal of Advances in Management Research, vol. 14 no. 3
Type: Research Article
ISSN: 0972-7981

Keywords

Article
Publication date: 4 November 2014

Syed Manzur Quader and Michael Dietrich

Using a panel of 1,122 UK firms listed on the London Stock Exchange over the period of 1981-2009, corporate efficiencies are predicted in this paper as inverse proxies of…

Abstract

Purpose

Using a panel of 1,122 UK firms listed on the London Stock Exchange over the period of 1981-2009, corporate efficiencies are predicted in this paper as inverse proxies of agency cost and the agency cost hypotheses are tested. The paper aims to discuss this issue.

Design/methodology/approach

Stochastic frontier analysis is used to estimate corporate efficiency of firms, but from two different perspectives. The long-run and short-run corporate efficiencies are predicted focussing on modern approach of value maximization and traditional approach of profit maximization, respectively.

Findings

The estimation results reveal that, an average firm in the sample achieves 74.5 percent of its best performing peer's market value and 86.6 percent of its best performing peer's profit and both of them are highly significant in the analysis. The long-run market value efficiency supports the agency cost of outside equity and the short-run profit efficiency supports the agency cost of outside debt hypothesis. Also there is a positive rank correlation between these two efficiencies which confirms that an average firm in the UK suffers from inefficiency or agency conflicts to a certain extent, no matter whether the firm is driven by short-run or long-run growth perspectives.

Research limitations/implications

The predicted broad measures of agency costs in the paper have wider implications in enhancing the understanding of the UK firms’ corporate performance especially when they operate under a relatively free and market based governance and financial system.

Originality/value

The work is distinguished by the large panel of UK firms and a long period of time that is considered. Emphasizing on the empirical implications of the distinctions between short-run and long-run efficiency is also novel.

Details

International Journal of Productivity and Performance Management, vol. 63 no. 8
Type: Research Article
ISSN: 1741-0401

Keywords

Article
Publication date: 2 October 2017

Abdullah Promise Opute and Nnamdi O. Madichie

This paper aims to evaluate the working relationship between accounting and marketing, exploring the nature and antecedents of their integration and consequences on firm…

1089

Abstract

Purpose

This paper aims to evaluate the working relationship between accounting and marketing, exploring the nature and antecedents of their integration and consequences on firm performance.

Design/methodology/approach

The methodological approach in this study is twofold. First, a review of literature is used to identify core antecedents in the body of literature. Subsequently, four exploratory case studies were used in examining the antecedents of accounting–marketing integration from a frontier market perspective.

Findings

This study identifies information sharing and involvement as core elements of accounting–marketing integration; cultural diversity and management mechanisms (policy, structural and procedural justice) as antecedents of accounting–marketing integration; and country of origin as a mediating factor on the extent of association of some variables on their integration. Finally, this study establishes that there is a positive association between accounting–marketing integration and organisational performance.

Research limitations/implications

This study has two major limitations. First, it is qualitative and based on a review of literature and evidence from four case studies. Second, it explored only the less developed country context. Future research should, therefore, aim to address these gaps.

Practical implications

This study draws attention to the fact that accounting and marketing are culturally diverse, and strategic managerial mechanisms must be used to maintain a relevant and effective level of information sharing and involvement towards enhancing organisational performance.

Originality/value

Using exploratory case studies to support the development of a framework, the authors contend that organisations would optimise organisational performance if due attention is given to both information sharing and involvement dimensions of integration, as well as appropriate managerial mechanisms adopted in managing their relationship.

Open Access
Article
Publication date: 16 June 2022

Fatma Mathlouthi and Slah Bahloul

This paper aims at examining the co-movement dependent regime and causality relationships between conventional and Islamic returns for emerging, frontier and developed…

Abstract

Purpose

This paper aims at examining the co-movement dependent regime and causality relationships between conventional and Islamic returns for emerging, frontier and developed markets from November 2008 to August 2020.

Design/methodology/approach

First, the authors used the Markov-switching autoregression (MS–AR) model to capture the regime-switching behavior in the stock market returns. Second, the authors applied the Markov-switching regression and vector autoregression (MS-VAR) models in order to study, respectively, the co-movement and causality relationship between returns of conventional and Islamic indexes across market states.

Findings

Results show the presence of two different regimes for the three studied markets, namely, stability and crisis periods. Also, the authors found evidence of a co-movement relationship between the conventional and Islamic indexes for the three studied markets whatever the regime. For the Granger causality, it is proved only for emerging and developed markets and only during the stability regime. Finally, the authors conclude that Islamic indexes can act as diversifiers, or safe-haven assets are not strongly supported.

Originality/value

This paper is the first study that examines the co-movement and the causal relationship between conventional and Islamic indexes not only across different financial markets' regimes but also during the COVID-19 period. The findings may help investors in making educated decisions about whether or not to add Islamic indexes to their portfolios especially during the recent outbreak.

Details

Journal of Capital Markets Studies, vol. 6 no. 2
Type: Research Article
ISSN: 2514-4774

Keywords

Article
Publication date: 28 October 2022

Szymon Stereńczak

The positive illiquidity–return relationship (so-called liquidity premium) is a well-established pattern in international developed stock markets. The magnitude of…

Abstract

Purpose

The positive illiquidity–return relationship (so-called liquidity premium) is a well-established pattern in international developed stock markets. The magnitude of liquidity premium should increase with market illiquidity. Existing studies, however, do not confirm this conjecture with regard to frontier markets. This may result from applying different approaches to the investors' holding period. The paper aims to identify the role of the holding period in shaping the illiquidity–return relationship in emerging and frontier stock markets, which are arguably considered illiquid.

Design/methodology/approach

The authors utilise the data on stocks listed on fourteen exchanges in Central and Eastern Europe. The authors regress stock returns on liquidity measures variously transformed to reflect the clientele effect in a liquidity–return relationship.

Findings

The authors show that the investors' holding period moderates the illiquidity–return relationship in CEE markets and also show that the liquidity premium in these markets is statistically and economically relevant.

Practical implications

The findings may be of great interest to investors, companies and regulators. Investors and companies should take liquidity into account when making decisions; regulators should employ liquidity-enhancing actions to decrease companies' cost of capital and expand firms' investment opportunities, which will improve growth perspectives for the entire economy.

Originality/value

These findings enrich the understanding of the role that the investors' holding period plays in the illiquidity–return relationship in CEE markets. To the best knowledge, this is the first study which investigates the effect of holding period on liquidity premium in emerging and frontier markets.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Book part
Publication date: 23 August 2011

Matthew E. Sarkees and Ryan Luchs

Purpose – This chapter explores the basic characteristics of stochastic frontier estimation, discusses advantages of the method that make it conducive to research in…

Abstract

Purpose – This chapter explores the basic characteristics of stochastic frontier estimation, discusses advantages of the method that make it conducive to research in international marketing, and provides an application to demonstrate its use. Potential applications in international marketing research are also discussed.

Methodology – Stochastic Frontier Estimation.

Findings – Stochastic frontier estimation models, prevalent in other fields, are very limited in the international marketing literature. Many potential opportunities exist for its use in the context of international marketing.

Originality/value of paper – The intent of this chapter is to show that stochastic frontier estimation is a potentially valuable tool for international marketing research. We show this by demonstrating the use of the tool and by providing examples of potential research studies.

Details

Measurement and Research Methods in International Marketing
Type: Book
ISBN: 978-1-78052-095-7

Keywords

Article
Publication date: 8 May 2017

Roland Mwesigwa Banya and Nicholas Biekpe

The degree and impact of competitiveness in the banking sector is of great importance as this has great impact on the financial system and the wider economy. A question of…

1259

Abstract

Purpose

The degree and impact of competitiveness in the banking sector is of great importance as this has great impact on the financial system and the wider economy. A question of interest here is, does competition in the commercial banking sector boost or hamper economic growth. The purpose of this paper is to test the hypothesis that competitiveness in commercial banking is linked to economic growth.

Design/methodology/approach

The authors use the Boone (2008) indicator to estimate competitiveness of banking markets in ten frontier countries in Africa from 2005 to 2012. This model measures banking competitiveness by assessing the relationship between relative marginal costs and relative market share. Through a panel data model, the authors examine the effect banking sector competitiveness has on economic growth.

Findings

The results of Boone (2008) indicator suggest that, to a greater extent, banks in the countries studied have a competitive banking sector. The results of the panel data estimation support the hypothesis that banking sector competition impacts positively on economic growth.

Practical implications

The paper recommends for more policy geared towards enhancing bank competition. This is because competitive banking system will allocate resources more efficiently to improve economic growth.

Originality/value

To the best of the authors’ knowledge, this is the first study to test the link between bank competition and economic growth in a cross-section of Frontier African countries.

Details

Journal of Economic Studies, vol. 44 no. 2
Type: Research Article
ISSN: 0144-3585

Keywords

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