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1 – 10 of over 12000Sharneet Singh Jagirdar and Pradeep Kumar Gupta
The present study reviews the literature on the history and evolution of investment strategies in the stock market for the period from 1900 to 2022. Conflicts and relationships…
Abstract
Purpose
The present study reviews the literature on the history and evolution of investment strategies in the stock market for the period from 1900 to 2022. Conflicts and relationships arising from such diverse seminal studies have been identified to address the research gaps.
Design/methodology/approach
The studies for this review were identified and screened from electronic databases to compile a comprehensive list of 200 relevant studies for inclusion in this review and summarized for the cognizance of researchers.
Findings
The study finds a coherence to complex theoretical documentation of more than a century of evolution on investment strategy in stock markets, capturing the characteristics of time with a chronological study of events.
Research limitations/implications
There were complications in locating unpublished studies leading to biases like publication bias, the reluctance of editors to publish studies, which do not reveal statistically significant differences, and English language bias.
Practical implications
Practitioners can refine investment strategies by incorporating behavioral finance insights and recognizing the influence of psychological biases. Strategies span value, growth, contrarian, or momentum indicators. Mitigating overconfidence bias supports effective risk management. Social media sentiment analysis facilitates real-time decision-making. Adapting to evolving market liquidity curbs volatility risks. Identifying biases guides investor education initiatives.
Originality/value
This paper is an original attempt to pictorially depict the seminal works in stock market investment strategies of more than a hundred years.
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This research mainly intends to ascertain the stimulus of investor investment tendencies on the amount of capital investment in the share market.
Abstract
Purpose
This research mainly intends to ascertain the stimulus of investor investment tendencies on the amount of capital investment in the share market.
Design/methodology/approach
Utilizing a sample of 477 individual investors who actively trade on the Bangladesh capital market, this empirical study was conducted. The objective of this examination is to ascertain the investment trading behavior of retail investors in the Bangladesh capital market using multiple regression, hypothesis testing and correlation analysis.
Findings
The coefficients of market categories, preferred share price ranges and investment source reveal negative predictor correlations; all predictors are statistically significant, with the exception of investment source. Positive predictive correlations exist between investor category, financial literacy degree, investment duration, emotional tolerance level, risk consideration, investment monitoring activities, internal sentiment and correct investment selection. Except for risk consideration and investment monitoring activities, all components have statistically significant predictions. The quantity of capital invested in the stock market is heavily influenced by the investment duration, preferred share price ranges, investor type, emotional toleration level and decision-making accuracy level.
Research limitations/implications
This investigation was conducted exclusively with Bangladeshi individual stockholders. Therefore, the existing study can be extended to institutional investors and conceivably to other divisions. It is possible to conduct this similar study internationally. And the query can enlarge with more sample size and use a more sophisticated econometric model. Despite that the outcomes of this study help the regulatory authorities to arrange more informative seminars and consciousness programs.
Practical implications
The conclusions have practical implications since they empower investors to modify their portfolios based on elements including share price ranges, investment horizons and emotional stability. To improve chances of success and reach financial objectives, they stress the significance of bettering financial understanding, active monitoring and risk analysis. Results can also be enhanced by distributing ownership over a number of market sectors and price points. The results highlight the value of patience and giving potential returns enough time.
Originality/value
This study on the trading behavior of investors in Bangladesh is unique and based on field study, and the findings of this study will deliver information to the stakeholders of the capital market regarding the investors’ trading behavior belonging to different categories, financial literacy level, investment duration, emotional tolerance level and internal feeling.
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A controversy about whether liberalization through market opening is a necessary and sufficient condition for a stable and balanced growth in the developing countries was…
Abstract
A controversy about whether liberalization through market opening is a necessary and sufficient condition for a stable and balanced growth in the developing countries was retriggered by the 2008 global financial crisis. This paper aims to analyze 1) the impact of market openness on the economic growth and financial development, 2) the dynamic correlation between the compositional change in foreign investments and the returns of domestic financial markets, 3) the effect of foreign portfolio investment on the stock market activity (liquidity and profitability). Our empirical findings infer that the income level has a positive relationship with financial openness and the foreign portfolio investments cause price fluctuations in the domestic stock market. These results imply that the precautionary and effective policies such as prudential regulations on the short-term capital transactions are strongly needed to emerging markets in order to prevent the excessive fluctuations in the financial markets over the macroeconomic fundamentals.
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This study aims to examine the impact of stock market valuation on corporate investment. Specifically, it attempts to understand the influence of both the fundamental and…
Abstract
Purpose
This study aims to examine the impact of stock market valuation on corporate investment. Specifically, it attempts to understand the influence of both the fundamental and non-fundamental components of stock price on firms’ investment decisions.
Design/methodology/approach
The study decomposes the market-to-book (MB) ratio into three components, namely, firm-level mispricing, industry mispricing and growth component to examine the effect of each of these components on corporate investment decisions. Based on the literature review, four testable hypotheses concerning the relationship between market valuation and corporate investment have been generated. These hypotheses have been tested on the panel data of 1,311 Indian Public Limited Manufacturing Firms using a pooled data regression model.
Findings
The study finds that both the fundamental and non-fundamental components of stock price influence the investment decisions along with the cash flow variable. The market valuation–investment nexus is more pronounced in the case of equity-dependent firms, which shows that stock valuation affects corporate investment predominantly through the equity transaction channel. Further, the positive relationship between industry mispricing and corporate investment demonstrates that the market sentiment also affects firms’ investment decisions.
Originality/value
The relationship between the different components of market value and corporate investment decisions has not been explored in India. Hence, the present study is unique because it breaks the MB ratio down into growth and mispricing components and examines the impact of each of these components on corporate investment.
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Daniel Stefan Hain and Roman Jurowetzki
The purpose of this paper is to shed light on the changing pattern and characteristics of international financial flows in the emerging entrepreneurial ecosystems of Sub-Saharan…
Abstract
Purpose
The purpose of this paper is to shed light on the changing pattern and characteristics of international financial flows in the emerging entrepreneurial ecosystems of Sub-Saharan Africa (SSA), provide a novel taxonomy to classify and analyze them, and discuss how such investments contribute to competence building and sustainable development.
Design/methodology/approach
In an exploratory study, the authors analyze the characteristics of international venture capital investors and the start-ups receiving funding in Kenya and map their interaction. The authors proceed by developing a novel taxonomy, classifying investors according to their main rationales (for-profit-for-impact), and start-ups according to the locus of needs and markets addressed by the start-up (local-global) and the locus of the start-ups capacity and knowledge (local-global).
Findings
The authors observe a new type of mainly western investors who support innovative ideas in SSA by identifying and investing in domestically developed technical innovations with the potential to address global market needs. The authors find such innovations to be mainly developed at the intersect of global and local knowledge.
Originality/value
The authors shed light on the – up to now – under-researched emerging phenomenon of international high-tech investments in SSA, and develop a novel taxonomy of technology investments in low-income countries, guiding further research on the conditions, impact, practical, and policy implications of this new form of finance flows.
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Waqas Bin Khidmat, Man Wang and Sadia Awan
The purpose of this paper is to investigate the value relevance of Research and development (R&D) and free cash flow (FCF) in an efficient investment setup. Most importantly, this…
Abstract
Purpose
The purpose of this paper is to investigate the value relevance of Research and development (R&D) and free cash flow (FCF) in an efficient investment setup. Most importantly, this paper examines whether the value relevance of R&D and FCF is associated with life cycle stages. Furthermore, this paper reports whether the market response to R&D and FCF is different in competitive market as compared to the concentrated market.
Design/methodology/approach
The analysis is based on the Ohlson (1995) model for the determination of value relevance of earnings and book value. Capitalized R&D and FCF data comprising of the Chinese A-listed firms from the year 2008 to 2016 are selected for this study. Following Anthony and Ramesh (1992), the authors divided the firm life cycle into different stages. HHI index is used to measure the product market competition.
Findings
The main result shows that R&D and FCF are value relevant in Chinese A-listed firms. The impact of R&D and FCF on the value relevance of earnings and book value is also positive and significant. The findings of the effect of R&D and FCF on the value relevance of accounting information signify that the information content (R2=0.46) of the mature stage is higher than that of the growth and stagnant stage. The explanatory power measured by R2 value for competitive industries (0.47) is much higher than the concentrated industries (0.33).
Research limitations/implications
Despite taking into account all the possible available variables, there are few limitations of the study. This study only studies the effect of EPS, BPS, R&D and FCF on the value relevance of accounting information. Other determinant such as size, growth, leverage and firm age is ignored. Since the R&D expenditure is discretionary, therefore the findings cannot be generalized to all the sectors. A sector wise comparative study can be done in future, to understand the differences in the information contents of R&D and FCF. Also, the tax effect of R&D is ignored in this study. For future call, the value relevance of tax effect on R&D can be explored.
Practical implications
The investors can now determine the present value of all the future cash flows of investing activities. The results of the study are significant for the Chinese investors who should incorporate the R&D and FCF along with investment efficiency. The investors should keep in mind the life cycle stage while investing in a certain stock. The competitive markets have more information content than the concentrated markets. The corporate managers can benefit from this study while issuing new shares. The market responds positively to the stock having investment efficient R&D and FCF investment. For the policy implication perspective, the security market regulator should devise the effective pro-effective product market regulations.
Originality/value
The contribution of this study is manifold. First, according to the authors’ knowledge, this is the first study that incorporates investment efficiency with R&D and FCF and explores its effect on the value relevance of accounting information. Second, the impact of R&D on the value relevance is studied by numerous researchers (Lev and Sougiannis, 1996; Han and Manry, 2004). Similarly, FCF-agency cost effect has also been investigated by (Rahman and Mohd-Saleh, 2008; Chen et al., 2012) but the value relevance of R&D and FCF during different life cycle stages still needs to be answered. Finally, this study also tries to answers the question if the market response to R&D and FCF is different in a competitive market as compared to the concentrated market.
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Ahamuefula Ephraim Ogbonna and Olusanya Elisa Olubusoye
This study aims to investigate the response of green investments of emerging countries to own-market uncertainty, oil-market uncertainty and COVID-19 effect/geo-political risks…
Abstract
Purpose
This study aims to investigate the response of green investments of emerging countries to own-market uncertainty, oil-market uncertainty and COVID-19 effect/geo-political risks (GPRs), using the tail risks of corresponding markets as measures of uncertainty.
Design/methodology/approach
This study employs Westerlund and Narayan (2015) (WN)-type distributed lag model that simultaneously accounts for persistence, endogeneity and conditional heteroscedasticity, within a single model framework. The tail risks are obtained using conditional standard deviation of the residuals from an asymmetric autoregressive moving average – ARMA(1,1) – generalized autoregressive conditional heteroscedasticity – GARCH(1,1) model framework with Gaussian innovation. For out-of-sample forecast evaluation, the study employs root mean square error (RMSE), and Clark and West (2007) (CW) test for pairwise comparison of nested models, under three forecast horizons; providing statistical justification for incorporating oil tail risks and COVID-19 effects or GPRs in the predictive model.
Findings
Green returns responds significantly to own-market uncertainty (mostly positively), oil-market uncertainty (mostly positively) as well as the COVID-19 effect (mostly negatively), with some evidence of hedging potential against uncertainties that are external to the green investments market. Also, incorporating external uncertainties improves the in-sample predictability and out-of-sample forecasts, and yields some economic gains.
Originality/value
This study contributes originally to the green market-uncertainty literature in four ways. First, it generates daily tail risks (a more realistic measure of uncertainty) for emerging countries’ green returns and global oil prices. Second, it employs WN-type distributed lag model that is well suited to account for conditional heteroscedasticity, endogeneity and persistence effects; which characterizes financial series. Third, it presents both in-sample predictability and out-of-sample forecast performances. Fourth, it provides the economic gains of incorporating own-market, oil-market and COVID-19 uncertainty.
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Passive investing has established itself as the dominant force in the world of professionally managed assets, surpassing the concept of index funds. Its meteoric rise is fueled…
Abstract
Purpose
Passive investing has established itself as the dominant force in the world of professionally managed assets, surpassing the concept of index funds. Its meteoric rise is fueled by investors’ preference for its dual benefits of strong diversification and low cost. A comprehensive study of the economic model, addressed areas and market structure has not yet been conducted, despite the existence of numerous studies on more specific topics. To address this gap, this paper examines 943 articles on passive investing published between 1998 and 2022 in SCOPUS and Web of Science.
Design/methodology/approach
The study utilizes the most pertinent tools for conducting a systematic review by the PRISMA framework. This article is the result of SLR and extensive bibliometric analysis. Contextualized systematic literature review is used to screen and select bibliographic data, which is then subjected to a variety of bibliometric analyses. The study provides a bibliometric overview of works on passive investment research that are indexed in Scopus and Web of Science. Bibliometrix, VoS Viewer and Cite Space are the tools used to conduct content and network analysis, to ascertain the present state of research, as well as its focus and direction.
Findings
Our exhaustive analysis yields important findings. One, the previous decade has witnessed a substantial increase in the number of publications and citations; in particular, the inter-disciplinary and international scope of related research has expanded; Second, the top three clusters on “active versus passive funds,” “price discovery and market structures” and “exchange-traded funds (ETFs) as an alternative” account for more than fifty percent of the domain’s knowledge; Third, “Leveraged ETFs (LETFs)” and “environmental, social and governance (ESG)” are the two emerging themes in the passive investing research. Fourth, despite its many benefits, passive investing is not suitable for everyone. To get the most out of what passive investing has to offer, investors, intermediaries and regulators must all exercise sufficient caution. Our study makes a substantial contribution to the field by conducting a comprehensive bibliometric analysis of the existing literature, highlighting key findings and implications, as well as future research directions.
Research limitations/implications
While the study contributes significantly to the field of knowledge, it has several limitations that must be considered when interpreting its findings and implications. With our emphasis on academic journals, the study analyzed only peer-reviewed journal articles, excluding conference papers, reports and technical articles. While we are confident that our approach resulted in a comprehensive and representative database, our reliance on Elsevier Scopus and Web of Science may have resulted in us overlooking relevant work accessible only through other databases. Additionally, specific bibliometric properties may not be time-stable, and certain common distribution patterns of the passive investing literature may still be developing.
Practical implications
With this study, it has been possible to observe and chart the high growth trajectory of passive investing research globally, especially post-US subprime crisis. Despite the widespread adoption of passive investing as an investment strategy, it is not a one-size-fits-all proposition. Market conditions change constantly, and it frequently requires an informed eye to determine when and how much to shift away from active investments and toward passive ones. Currency ETFs enable investors to implement a carry trade strategy in their portfolios; however, as a word of caution, currency stability and liquidity can play a significant role in international ETFs. Similarly, LETFs may be better suited for dynamic strategies and offer less value to a long-term investor. Lastly, the importance of investor education cannot be underestimated in the name of the highly diversified portfolio when using passive alternatives, for which necessary efforts are required by regulators and investors alike.
Social implications
The inexorable trend to passive investing creates numerous issues for fund management, including fee and revenue pressure, which forces traditional managers to seek new revenue streams, such as illiquid and private assets, which also implies increased portfolio risk. Additionally, the increased transparency and efficiency associated with the ETF market indicates that managers must rethink the entire value chain, beginning with technology and the way investments interact. Passive investments have triggered changes in market structure that are still not fully understood or factored in. Active management and a range of valuation opinions on whether a price is “too low” or “too high” provide much-needed depth to a market as it attempts to strike a delicate balance between demand and supply forces, ensuring liquidity at all price points.
Originality/value
I hereby certify that I am the sole author of this paper and that no part of this manuscript has been published or submitted for publication.
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As of May 2022, the National Pension Service of Korea is the world's third-largest pension fund, with assets worth KRW912tn (approximately $US800bn). Of the KRW152tn…
Abstract
As of May 2022, the National Pension Service of Korea is the world's third-largest pension fund, with assets worth KRW912tn (approximately $US800bn). Of the KRW152tn (approximately $US133bn) invested in domestic equities, 45% is outsourced to external asset managers. Given the absence of prior research on the National Pension Service's (NPS's) management method, this study analyzes its trading strategies and market impact according to the fund management method from 2005 to 2022. The results are as follows: First, the stock characteristics selected by internal management using passive strategies are different from those selected by external management, in which various strategies are combined. Second, the contrarian investment strategy, which acts as a market stabilizer, is a characteristic of the external management trading pattern, while internal management increases volatility and does not improve liquidity. Third, there has been a change in the internal management strategy since 2016, when the fund management headquarters was relocated. This study is practically significant and distinctive in that it confirms the differences between the NPS's two investment methods in terms of trading strategies and market impact.
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Ranjan Dasgupta and Sandip Chattopadhyay
The determinants of investors’ sentiment based on secondary stock market proxies in many empirical studies are reported. However, to the best of our knowledge, no study undertakes…
Abstract
Purpose
The determinants of investors’ sentiment based on secondary stock market proxies in many empirical studies are reported. However, to the best of our knowledge, no study undertakes investor sentiment drivers developed from primary survey measures by constructing an investor sentiment index (ISI) in relation to market drivers to date. This study aims to fill this research gap by first developing the ISI for the Indian retail investors and then examining which of the stock market drivers impacts such sentiment.
Design/methodology/approach
The ISI is constructed using the mean scores of eight statements as formulated based on popular direct investor sentiment surveys undertaken across the world. Then, we use the multiple regression approach overall and for top 33.33% (high-sentiment) and bottom 33.33% (low-sentiment) investors based on the responses of 576 respondents on 18 statements (proxying eight study hypotheses) collected in 2016. Moreover, the demography-based classification based investors’ sentiment is examined to make our results more robust and in-depth.
Findings
On an overall basis, the IPO activities/issues and information certainty, trading volume and momentum and institutional investors’ investment activities market drivers significantly and positively impact retail investors is examined. However, only IPO activities/issues and information certainty influences both high- and low-sentiment investors. It is intriguing to report that nature of the stock markets show conflicting results for high- (negative significant) and low- (positive significant) sentiment investors.
Originality/value
The construction of the ISI from primary survey measure is for the first time in Indian context in relation to investigating the stock market drivers influential to retail investors’ sentiment. In addition, hypothesized market drivers are also unique, each representing different fundamental and technical characteristics associated with the Indian market.
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