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Article
Publication date: 16 August 2022

Edmond Berisha, David Gabauer, Rangan Gupta and Jacobus Nel

Existing empirical evidence suggests that episodes of financial stress (crises) can act as driver of growth of inequality. Consequently, in this study, the authors explore…

Abstract

Purpose

Existing empirical evidence suggests that episodes of financial stress (crises) can act as driver of growth of inequality. Consequently, in this study, the authors explore the time-varying predictive power of an index of financial stress for growth in income (and consumption) inequality in the UK. The authors focus on the UK since income (and consumption) inequality data are available at a high frequency, i.e. on a quarterly basis for over 40 years (June, 1975 to March, 2016).

Design/methodology/approach

The authors use Wang and Rossi's approach to analyze the time-varying impact of financial stress on inequality. Hence, the method provides a more appropriate inference of the effect rather than a constant parameter Granger causality method. Besides, understandably, the time-varying approach helps to depict the time-variation in the strength of predictability of financial stress on inequality.

Findings

This study’s findings point that financial distress correspond to subsequent increases in inequality, with the index of financial stress containing important information in predicting growth in income inequality for both in and out-of-sample periods. Interestingly, the strength of the in-sample predictive power is high post the period of the global financial crisis, as was observed in the early part of the sample. The authors believe these findings highlight an important role of financial stress for inequality – an area of investigation that has in general remained untouched.

Originality/value

Accurate prediction of inequality at a higher frequency should be more relevant to policymakers in designing appropriate policies to circumvent the wide-ranging negative impacts of inequality, compared to when predictions are only available at the lower annual frequency.

Details

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

Keywords

Article
Publication date: 8 May 2017

Mehmet Balcilar, Rangan Gupta and Charl Jooste

The purpose of this paper is to study the evolution of monetary policy uncertainty and its impact on the South African economy.

Abstract

Purpose

The purpose of this paper is to study the evolution of monetary policy uncertainty and its impact on the South African economy.

Design/methodology/approach

The authors use a sign restricted SVAR with an endogenous feedback of stochastic volatility to evaluate the sign and size of uncertainty shocks. The authors use a nonlinear DSGE model to gain deeper insights about the transmission mechanism of monetary policy uncertainty.

Findings

The authors show that monetary policy volatility is high and constant. Both inflation and interest rates decline in response to uncertainty. Output rebounds quickly after a contemporaneous decrease. The DSGE model shows that the size of the uncertainty shock matters – high uncertainty can lead to a severe contraction in output, inflation and interest rates.

Research limitations/implications

The authors model only a few variables in the SVAR – thus missing perhaps other possible channels of shock transmission.

Practical implications

There is a lesson for monetary policy: monetary policy uncertainty, in isolation from general macroeconomic uncertainty, often creates unintended adverse consequences and can perpetuate a weak economic environment. The tasks of central bankers are incredibly difficult. Their models project output and inflation with relatively large uncertainty based on many shocks emanating from various sources. It matters how central bankers react to these expectations and how they communicate the underlying risks associated with setting interest rates.

Originality/value

This is the first study that looks into monetary policy uncertainty into South Africa using a stochastic volatility model and a nonlinear DSGE model. The results should be very useful for the Central Bank as it highlights how uncertainty, that they create, can have adverse economic consequences.

Details

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

Keywords

Article
Publication date: 3 May 2019

Refk Selmi, Rangan Gupta, Christos Kollias and Stephanos Papadamou

Portfolio construction and diversification is a prominent challenge for investors. It reflects market agents’ behavior and response to market conditions. This paper aims…

Abstract

Purpose

Portfolio construction and diversification is a prominent challenge for investors. It reflects market agents’ behavior and response to market conditions. This paper aims to investigate the stock-bond nexus in the case of two emerging and two mature markets, India, South Africa, the UK and the USA, using long-term historical monthly data.

Design/methodology/approach

To address the issue at hand, copula quantile-on-quantile regression (C-QQR) is used to model the correlation structure. Although this technique is driven by copula-based quantile regression model, it retains more flexibility and delivers more robust and accurate estimates.

Findings

Results suggest that there is substantial heterogeneity in the bond-stock returns correlation across the countries under study point to different investors’ behavior in the four markets examined. Additionally, the findings reported herein suggest that using C-QQR in portfolio management can enable the formation of tailored response strategies, adapted to the needs and preferences of investors and traders.

Originality/value

To the best of the authors’ knowledge, no previous study has addressed in a comparative setting the stock-bond nexus for the four countries used here using long-term historical data that cover the periods 1920:08-2017:02, 1910:01-2017:02, 1933:01-2017:02 and 1791:09-2017:02 for India, South Africa, the UK and the USA, respectively.

Details

Studies in Economics and Finance, vol. 38 no. 3
Type: Research Article
ISSN: 1086-7376

Keywords

Article
Publication date: 26 July 2018

Omokolade Akinsomi, Yener Coskun, Rangan Gupta and Chi Keung Marco Lau

This paper aims to examine herding behaviour among investors and traders in UK-listed Real Estate Investment Trusts (REITs) within three market regimes (low, high and…

1031

Abstract

Purpose

This paper aims to examine herding behaviour among investors and traders in UK-listed Real Estate Investment Trusts (REITs) within three market regimes (low, high and extreme volatility periods) from the period June 2004 to April 2016.

Design/methodology/approach

Observations of investors in 36 REITs that trade on the London Stock Exchange as at April 2016 were used to analyse herding behaviour among investors and traders of shares of UK REITs, using a Markov regime-switching model.

Findings

Although a static herding model rejects the existence of herding in REITs markets, estimates from the regime-switching model reveal substantial evidence of herding behaviour within the low volatility regime. Most interestingly, the authors observed a shift from anti-herding behaviour within the high volatility regime to herding behaviour within the low volatility regime, with this having been caused by the FTSE 100 Volatility Index (UK VIX).

Originality/value

The results have various implications for decisions regarding asset allocation, diversification and value management within UK REITs. Market participants and analysts may consider that collective movements and market sentiment/psychology are determinative factors of risk-return in UK REITs. In addition, general uncertainty in the equity market, proxied by the impact of the UK VIX, may also provide a signal for increasing herding-related risks among UK REITs.

Details

Journal of European Real Estate Research, vol. 11 no. 2
Type: Research Article
ISSN: 1753-9269

Keywords

Article
Publication date: 9 April 2020

Aviral Kumar Tiwari, Christophe André and Rangan Gupta

Assessing the strength and time variation of spillovers between returns on residential real estate, real estate investment trusts (REITs), stocks and bonds in the United…

Abstract

Purpose

Assessing the strength and time variation of spillovers between returns on residential real estate, real estate investment trusts (REITs), stocks and bonds in the United States. Spillovers reduce the benefits of portfolio diversification, especially in crisis times, when asset returns tend to be more correlated.

Design/methodology/approach

The Diebold–Yilmaz approach in the time domain and the Baruník–Krehlík methodology in the frequency domain are used. The latter allows distinguishing spillovers generating only short-lived volatility from those with a more persistent effect.

Findings

On average, spillovers between housing, stock and bond returns are relatively modest and shocks to stock and bond markets affect housing returns more than the other way round, even though with variations over time. Spillovers in both directions are much stronger between REITs and stocks than between REITs and housing. Shocks originating in the housing market are most persistent, particularly in the aftermath of the subprime crisis.

Practical implications

Housing provides a hedge against volatility in financial (including REITs) markets. However, hedging strategies involving housing need to take into account potential tail events such as the GFC and the investment horizon.

Originality/value

To the best of the knowledge of the authors, this paper is the first to apply the Baruník–Krehlík methodology to real estate price spillovers. Although the Diebold–Yilmaz methodology has been used in several studies on spillovers between residential real estate and financial asset returns, this paper covers a new set of variables and time span.

Details

Journal of Property Investment & Finance, vol. 38 no. 6
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 19 June 2019

Josine Uwilingiye, Esin Cakan, Riza Demirer and Rangan Gupta

The purpose of this paper is to examine intentional herding among institutional investors with a particular focus on the technology sector that was the driver of the “New…

Abstract

Purpose

The purpose of this paper is to examine intentional herding among institutional investors with a particular focus on the technology sector that was the driver of the “New Economy” in the USA during the dot-com bubble of the 1990s.

Design/methodology/approach

Using data on technology stockholdings of 115 large institutional investors, the authors test the presence of herding by examining linear dependence and feedback between individual investors’ technology stockholdings and that of the aggregate market. Unlike other models to detect herding, the authors use Geweke (1982) type causality tests that allow authors to disentangle spurious herding from intentional herding via tests of bidirectional and instantaneous causality across portfolio positions in technology stocks.

Findings

After controlling information-based (spurious) herding, the tests show that 38 percent of large institutional investors tend to intentionally herd in technology stocks.

Originality/value

The findings support the existing literature that investment decisions by large institutional investors are not only driven by fundamental information, but also by cognitive bias that is characterized by intentional herding.

Details

Review of Behavioral Finance, vol. 11 no. 3
Type: Research Article
ISSN: 1940-5979

Keywords

Article
Publication date: 29 November 2018

Goodness C. Aye, Rangan Gupta and Peter Wanke

The purpose of this paper is to assess the efficiency of agricultural production in South Africa from 1970 to 2014, using an integrated two-stage fuzzy approach.

Abstract

Purpose

The purpose of this paper is to assess the efficiency of agricultural production in South Africa from 1970 to 2014, using an integrated two-stage fuzzy approach.

Design/methodology/approach

Fuzzy technique for order preference by similarity to ideal solution is used to assess the relative efficiency of agriculture in South Africa over the course of the years in the first stage. In the second stage, fuzzy regressions based on different rule-based systems are used to predict the impact of socio-economic and demographic variables on agricultural efficiency. They are compared with the bootstrapped truncated regressions with conditional α levels proposed in Wanke et al. (2016a).

Findings

The results show that the fuzzy efficiency estimates ranged from 0.40 to 0.68 implying inefficiency in South African agriculture. The results further reveal that research and development, land quality, health expenditure–population growth ratio have a significant, positive impact on efficiency levels, besides the GINI index. In terms of accuracy, fuzzy regressions outperformed the bootstrapped truncated regressions with conditional α levels proposed in Wanke et al. (2015).

Practical implications

Policies to increase social expenditure especially in terms of health and hence productivity should be prioritized. Also policies aimed at conserving the environment and hence the quality of land is needed.

Originality/value

The paper is original and has not been previously published elsewhere.

Details

Benchmarking: An International Journal, vol. 25 no. 8
Type: Research Article
ISSN: 1463-5771

Keywords

Article
Publication date: 12 September 2016

Tsangyao Chang, Luis Gil-Alana, Goodness C. Aye, Rangan Gupta and Omid Ranjbar

The purpose of this paper is to investigate whether there exist multiple bubbles in the Brazil, Russia, India, China and South Africa (BRICS) stock markets.

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Abstract

Purpose

The purpose of this paper is to investigate whether there exist multiple bubbles in the Brazil, Russia, India, China and South Africa (BRICS) stock markets.

Design/methodology/approach

In this study, the authors apply the generalized sup Augmented Dickey-Fuller test, a new recursive test proposed by Phillips et al. (2015) and use monthly data on stock price-dividend ratio.

Findings

The empirical results indicate that there exist multiple bubbles in the stock markets of the BRICS. Further, the dates of the bubbles also correspond to specific events in the stock markets of these economies. This finding has important economic and policy implications.

Originality/value

The authors declare that this paper is original and has not been published by another journal previously.

Details

Journal of Economic Studies, vol. 43 no. 4
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 30 October 2009

Rangan Gupta and Emmanuel Ziramba

This paper aims at developing a theoretical model of a world economy characterized by tax evasion. It seeks to analyze whether financial repression can be explained by tax evasion.

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Abstract

Purpose

This paper aims at developing a theoretical model of a world economy characterized by tax evasion. It seeks to analyze whether financial repression can be explained by tax evasion.

Design/methodology/approach

The analysis is performed in overlapping generations dynamic general equilibrium endogenous monetary growth models.

Findings

The paper shows that higher degree of tax evasion within a country, resulting from a higher level of corruption and a lower penalty rate, yields higher degrees of financial repression.

Practical implications

Financial repression can be explained by tax evasion but under specific conditions.

Originality/value

This is the first attempt to analyze financial repression and tax evasion in an endogenous growth model.

Details

Journal of Economic Studies, vol. 36 no. 6
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 18 May 2010

Guangling “Dave” Liu, Rangan Gupta and Eric Schaling

This paper aims to develops an estimable hybrid model that combines the micro‐founded DSGE model with the flexibility of the atheoretical VAR model.

1076

Abstract

Purpose

This paper aims to develops an estimable hybrid model that combines the micro‐founded DSGE model with the flexibility of the atheoretical VAR model.

Design/methodology/approach

The model is estimated via the maximum likelihood technique based on quarterly data on real gross national product (GNP), consumption, investment and hours worked, for the South African economy, over the period of 1970:1 to 2000:4. Based on a recursive estimation using the Kalman filter algorithm, the out‐of‐sample forecasts from the hybrid model are then compared with the forecasts generated from the Classical and Bayesian variants of the VAR for the period 2001:1‐2005:4.

Findings

The results indicate that, in general, the estimated hybrid‐DSGE model outperforms the classical VAR, but not the Bayesian VARs in terms of out‐of‐sample forecasting performances.

Research limitations/implications

The model lacks nominal shocks and needs to be extended into a small open economy framework.

Practical implications

The paper was able to show that, even though the DSGE model is outperformed by the BVAR, a microfounded theoretical DSGE model has a future in forecasting the South African economy.

Originality/value

To the best of the authors' knowledge, this is the first attempt to use an estimable DSGE model to forecast the South African economy.

Details

Journal of Economic Studies, vol. 37 no. 2
Type: Research Article
ISSN: 0144-3585

Keywords

1 – 10 of 156