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1 – 10 of 76This study explores the interconnectedness and complexity of risk-varied climate initiatives such as green bonds (GBs), emissions trading systems (ETS) and socially responsible…
Abstract
Purpose
This study explores the interconnectedness and complexity of risk-varied climate initiatives such as green bonds (GBs), emissions trading systems (ETS) and socially responsible investments (SRI). The analysis covers the period from September 2011 to August 2022, using six indices: three representing climate initiatives and three indicating uncertainty.
Design/methodology/approach
To achieve this, the study first examines dynamic lead-lag relations and correlation patterns in the time-frequency domain to analyse the returns of the series. Additionally, it applies an innovative approach to investigate the predictability of uncertainty measurements of climate initiatives across various market conditions and frequency spillovers in the short, medium and long run.
Findings
The findings indicate changing relationships between the series, increased linkages during turbulent market periods and strong co-movements within the network. The ETS is recommended for diversification and hedging against uncertainty indices, whereas the GB may be suitable for long-term diversification.
Practical implications
This study highlights the role of climate initiatives as potential hedges and contagion amplifiers during crises, with implications for policy recommendations and the asymmetric effects on market connectedness.
Originality/value
The paper answers questions that previous studies have not and contributes to the literature regarding financial risk management and social responsibility.
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The COVID-19 pandemic, a sudden and disruptive external shock to the USA and global economy, profoundly affected various operations. Thus, it becomes imperative to investigate the…
Abstract
Purpose
The COVID-19 pandemic, a sudden and disruptive external shock to the USA and global economy, profoundly affected various operations. Thus, it becomes imperative to investigate the repercussions of this pandemic on the US housing market. This study investigates the impact of the COVID-19 pandemic on a crucial facet of the real estate market: the Time on the Market (TOM). Therefore, this study aims to ascertain the net effect of this unprecedented event after controlling for economic influences and real estate market variations.
Design/methodology/approach
Monthly time series data were collected for the period of January 2010 through December 2022 for statistical analysis. Given the temporal nature of the data, we conducted the Durbin–Watson test on the OLS residuals to ascertain the presence of autocorrelation. Subsequently, we used the generalized regression model to mitigate any identified issues of autocorrelation. However, it is important to note that the response variable derived from count data (specifically, the median number of months), which may not conform to the normality assumption associated with standard regression models. To better accommodate this, we opted to use Poisson regression as an alternative approach. Additionally, recognizing the possibility of overdispersion in the count data, we also explored the application of the negative binomial model as a means to address this concern, if present.
Findings
This study’s findings offer an insightful perspective on the housing market’s resilience in the face of COVID-19 external shock, aligning with previous research outcomes. Although TOM showed a decrease of around 10 days with standard regression and 27% with Poisson regression during the COVID-19 pandemic, it is noteworthy that this reduction lacked statistical significance in both models. As such, the impact of COVID-19 on TOM, and consequently on the housing market, appears less dramatic than initially anticipated.
Originality/value
This research deepens our understanding of the complex lead–lag relationships between key factors, ultimately facilitating an early indication of housing price movements. It extends the existing literature by scrutinizing the impact of the COVID-19 pandemic on the TOM. From a pragmatic viewpoint, this research carries valuable implications for real estate professionals and policymakers. It equips them with the tools to assess the prevailing conditions of the real estate market and to prepare for potential shifts in market dynamics. Specifically, both investors and policymakers are urged to remain vigilant in monitoring changes in the inventory of houses for sale. This vigilant approach can serve as an early warning system for upcoming market changes, helping stakeholders make well-informed decisions.
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Muhammad Aftab, Inzamam Ul Haq and Mohamed Albaity
The COVID-19 pandemic has led to global economic policy uncertainty, which has increased the need to investigate ways to mitigate the uncertainty. This study aims to examine the…
Abstract
Purpose
The COVID-19 pandemic has led to global economic policy uncertainty, which has increased the need to investigate ways to mitigate the uncertainty. This study aims to examine the potential of cryptocurrencies as a hedge and safe haven avenue against economic policy uncertainty.
Design/methodology/approach
This study investigates the behavior of the five leading cryptocurrencies in relation to country-level and group-level economic policy uncertainty indices, as measured by the text-based method developed by Baker et al. (The Quarterly Journal of Economics, 2016, 131, 1593–1636). The research covers a broad range of emerging and developed economies from July 2013 to September 2020. The study employs the approach of Narayan et al. (Economic Modelling, 2016, 53, 388–397) to examine the hedging and safe-haven properties of cryptocurrencies.
Findings
This study finds that the top cryptocurrencies play a hedging role against economic policy uncertainty, with some exceptions. Additionally, there is evidence to support the idea that cryptocurrencies can serve as a safe haven during the COVID-19 pandemic. As a result, investors may benefit from using cryptocurrencies as a risk-management avenue during times of uncertainty.
Originality/value
This research contributes to the existing literature by testing the cryptocurrencies' hedging and safe haven properties in a new way, by analyzing their lead and lag behaviors using a recent and innovative approach. Additionally, it examines a wide range of emerging and advanced markets, providing insight into the potential of using cryptocurrencies as a risk mitigation avenue.
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Syed Mabruk Billah, Thi Thu Ha Nguyen and Md Iftekhar Hasan Chowdhury
This study aims to contribute by expanding the existing literature on Sukuk return and volatility and exploring the implications of the Sukuk-exchange rate interactions.
Abstract
Purpose
This study aims to contribute by expanding the existing literature on Sukuk return and volatility and exploring the implications of the Sukuk-exchange rate interactions.
Design/methodology/approach
This study examines the dynamic interactions of Sukuk with exchange rate in 15 countries, employing the Wavelet approach that considers both time and investment horizons.
Findings
The results reveal significant evolving coherence of Sukuk return and volatility with the underlying exchange rate. The relationship is more potent than what this study witnesses in their counterpart bond market. For Sukuk returns, the coherence is negative, whereas it is positive for volatility. Notably, the coherence is strong in the medium to long term and intensifies during extreme economic episodes, especially during the COVID-19 pandemic. These findings are further validated by comparing firm-level matched data for Sukuk and conventional bond.
Originality/value
To the best of the authors’ knowledge, this is the first study that reports the dynamic relationship of Sukuk return and volatility with the underlying exchange rate in 15 countries. Collectively, this study unites valuable insights for faith-based active Islamic investors and cross-border portfolio managers.
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Apica Sharma and Paras Sachdeva
The study focuses on examining the impact of the supply shock on the Indian macroeconomic variables during the COVID-19 period.
Abstract
Purpose
The study focuses on examining the impact of the supply shock on the Indian macroeconomic variables during the COVID-19 period.
Design/methodology/approach
Time-varying factor augmented vector autoregressive model has been employed to study the asymmetry in transmission of supply shock on Indian economy during pre- and post-COVID-19 times.
Findings
The authors find that with supply shock, retail food inflation outpaced in COVID-19 times. Production levels reported by IIP fell to abysmally low levels in the post-COVID-19 times when the economy stalled. The liquidity stimulus provided by the central bank led to the negative response of policy rates to the supply shocks during the COVID-19 times.
Originality/value
The study stands novel in examining the impact of COVID-19 pandemic on Indian economy through the lenses of asymmetric transmission of supply shock during pre- and post-COVID-19 times.
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Sreekha Pullaykkodi and Rajesh H. Acharya
This study examines the semi-strong market efficiency of the Indian agricultural commodity market in light of market reforms and policies. This study investigates whether the…
Abstract
Purpose
This study examines the semi-strong market efficiency of the Indian agricultural commodity market in light of market reforms and policies. This study investigates whether the market reforms have boosted the speed of price adjustment and influenced the market quality.
Design/methodology/approach
The study used the daily data of nine agricultural commodities. To precisely capture the effects of market microstructure changes, this study split the whole data into pre- and post-ban and pre- and post-reform eras. To ascertain the velocity of price adjustment, the authors used the ARMA (1,1) model, and the ADD VRatio was employed to identify the price movement on a specific day.
Findings
This study found that full incorporation of information happens sometimes. The authors noticed no gradual progress in the quickness of price adjustment. Since both methods suggested the same result for the period, the authors confirm that market microstructure changes do not enhance market quality.
Research limitations/implications
This research has implications for academicians, policymakers and market players.
Originality/value
The paper has twofold novelty. First, this is a contemporary topic, and very few studies have been done in the Indian agriculture context. Second, the study has implications for policymakers and government because it highlights the effects of structural changes on market quality and market efficiency.
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Opeoluwa Adeniyi Adeosun, Mosab I. Tabash and Xuan Vinh Vo
This paper aims to accommodate the influence of both economic policy uncertainty and geopolitical risks in the relationship between oil price and exchange-rate returns in the…
Abstract
Purpose
This paper aims to accommodate the influence of both economic policy uncertainty and geopolitical risks in the relationship between oil price and exchange-rate returns in the Brazil, Russia, India, China and South Africa (BRICS) countries through an interaction term (EPGR).
Design/methodology/approach
The authors use continuous wavelet transform (CWT), wavelet coherence (WC) and partial wavelet coherence (PWC). First, the authors apply the CWT to examine the evolution of oil prices, EPGR and exchange rate returns. Second, the authors use WC to investigate the relationship between oil price and exchange rate returns (excluding EPGR). Third, the authors use PWC to account for EPGR’s impact on the oil exchange rate returns dynamics and explore partial correlations in the oil and exchange rate returns dynamics.
Findings
The empirical results generally show that EPGR is a key driver in the oil and exchange rate returns nexus.
Practical implications
The relevance of EPGR in influencing exchange rate volatility is confirmed by the findings. As a result, it is critical for government officials and foreign exchange investors to use EPGR as a leading indicator when establishing foreign exchange trading strategies and economic forecasts.
Originality/value
This study is the first, to the best of the authors’ knowledge, to apply a wavelet-based technique to account for EPGR in the relationship between oil and exchange rate returns in the BRICS countries.
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Yousra Trichilli and Mouna Boujelbène Abbes
This article unveils first the lead–lag structure between the confirmed cases of COVID-19 and financial markets, including the stock (DJI), cryptocurrency (Bitcoin) and…
Abstract
Purpose
This article unveils first the lead–lag structure between the confirmed cases of COVID-19 and financial markets, including the stock (DJI), cryptocurrency (Bitcoin) and commodities (crude oil, gold, copper and brent oil) compared to the financial stress index. Second, this paper assesses the role of Bitcoin as a hedge or diversifier by determining the efficient frontier with and without including Bitcoin before and during the COVID-19 pandemic.
Design/methodology/approach
The authors examine the lead–lag relationship between COVID-19 and financial market returns compared to the financial stress index and between all markets returns using the thermal optimal path model. Moreover, the authors estimate the efficient frontier of the portfolio with and without Bitcoin using the Bayesian approach.
Findings
Employing thermal optimal path model, the authors find that COVID-19 confirmed cases are leading returns prices of DJI, Bitcoin and crude oil, gold, copper and brent oil. Moreover, the authors find a strong lead–lag relationship between all financial market returns. By relying on the Bayesian approach, findings show when Bitcoin was included in the portfolio optimization before or during COVID-19 period; the Bayesian efficient frontier shifts to the left giving the investor a better risk return trade-off. Consequently, Bitcoin serves as a safe haven asset for the two sub-periods: pre-COVID-19 period and COVID-19 period.
Practical implications
Based on the above research conclusions, investors can use the number of COVID-19 confirmed cases to predict financial market dynamics. Similarly, the work is helpful for decision-makers who search for portfolio diversification opportunities, especially during health crisis. In addition, the results support the fact that Bitcoin is a safe haven asset that should be combined with commodities and stocks for better performance in portfolio optimization and hedging before and during COVID-19 periods.
Originality/value
This research thus adds value to the existing literature along four directions. First, the novelty of this study lies in the analysis of several financial markets (stock, cryptocurrencies and commodities)’ response to different pandemics and epidemics events, financial crises and natural disasters (Correia et al., 2020; Ma et al., 2020). Second, to the best of the authors' knowledge, this is the first study that examine the lead–lag relationship between COVID-19 and financial markets compared to financial stress index by employing the Thermal Optimal Path method. Third, it is a first endeavor to analyze the lead–lag interplay between the financial markets within a thermal optimal path method that can provide useful insights for the spillover effect studies in all countries and regions around the world. To check the robustness of our findings, the authors have employed financial stress index compared to COVID-19 confirmed cases. Fourth, this study tests whether Bitcoin is a hedge or diversifier given this current pandemic situation using the Bayesian approach.
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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.
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Nguyen Minh Ha, Bui Hoang Ngoc and Duc Hong Vo
The purpose of this study is to explore the relationship among financial development (FD), economic growth, urbanization and human capital (HC) in Vietnam.
Abstract
Purpose
The purpose of this study is to explore the relationship among financial development (FD), economic growth, urbanization and human capital (HC) in Vietnam.
Design/methodology/approach
This study uses various wavelet tools, including wavelet coherence, wavelet correlation and scale-by-scale Granger causality test, to re-visit the lead–lag structure among economic growth, FD, urbanization and HC in Vietnam from 1980 to 2017.
Findings
The main findings indicate that economic growth and urbanization improve HC at the medium and low frequencies, whereas FD negatively affects HC from 1989 to 2017. Furthermore, the scale-by-scale Granger causality results confirm a uni-directional causality relationship between economic growth to HC at low and high frequencies. In contrast, a bi-directional causality relationship between urbanization and HC is found in the long run.
Research limitations/implications
Policy implications have emerged based on the empirical results from this study. The Vietnamese Government should continue supporting economic integration, implementing investment promotion policies and focussing on foreign direct investment using green technologies.
Originality/value
The impact of FD on HC at different time scales has largely been ignored in Vietnam. This study substantially contributes to the existing literature regarding HC and FD. This analysis is one of the earliest attempts to examine the effects of economic indicators on HC in the time-frequency analysis.
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