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Open Access
Article
Publication date: 30 November 2007

Jae Ha Lee and Deok Hee Hahn

This study explores the Granger causal relationship between return and volume in the KOSPI200 spot and option markets for the period from December 13. 2002 to December 9…

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Abstract

This study explores the Granger causal relationship between return and volume in the KOSPI200 spot and option markets for the period from December 13. 2002 to December 9. 2004. using minute-by-minute data. Specifically, we examine the lead-lag relationship among OPtion volume, option return, cash volume, and cash return to determine whether option volume and return impact cash return.

Our results show that option volume has no direct impact on cash return as cash return unilaterally leads option volume‘ While option volume impacts cash volume. cash return unilaterally leads cash volume. implying no indirect impact of option volume on cash return.

However, there is evidence that option return impacts cash return directly, given a bilateral causality between option return and casll return. Option return also impacts cash volume, but again cash volume has no impact on cash return. meaning no indirect impact of option return on cash return. Our findings were generally robust across days of the week and different maturities. Finally, we analyzed lead-lag relationship within the option market. and found a bilateral causality between option volume and option return. This implies that option volume may impact cash return indirectly via option return.

Details

Journal of Derivatives and Quantitative Studies, vol. 15 no. 2
Type: Research Article
ISSN: 2713-6647

Keywords

Article
Publication date: 4 October 2022

Roozbeh Balounejad Nouri

The purpose of this study, the nonlinear relationship between the real estate market and the stock market was investigated in Iran. For this intent, the monthly data from…

Abstract

Purpose

The purpose of this study, the nonlinear relationship between the real estate market and the stock market was investigated in Iran. For this intent, the monthly data from 2012:4 to 2022:5 is used.

Design/methodology/approach

In this study, the quantile-on-quantile estimation method is used, which is a combination of the nonparametric estimation methods and the quantile regression.

Findings

The research results show that, in the low quantiles, the effect of stock market return on the housing market return is negative or zero. In fact, in this situation, the increasing returns in the stock market will shift part of the financial resources of the economy to the market and create stagnation or even negative returns in the housing market. This situation is seen more strongly in some other quantiles, including the 0.25 and 0.75 quantiles; in contrast, the effect of high quantiles of stock market returns is positive on the housing market.

Originality/value

It seems that the demand in the housing market increase in a situation where the returns of the stock market are growing, and the market is in a bullish condition, and this causes an increase in the price and returns in this market. In addition, the results show that the effect of stock market returns on capital market returns is asymmetric and nonlinear.

Details

International Journal of Housing Markets and Analysis, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1753-8270

Keywords

Abstract

Details

Broken Pie Chart
Type: Book
ISBN: 978-1-78743-554-4

Book part
Publication date: 24 March 2005

Charles W. Hodges, Haim Levy and James A. Yoder

We use stochastic dominance to test whether investors should prefer riskier securities as the investment horizon lengthens. Simulated return distributions for stocks…

Abstract

We use stochastic dominance to test whether investors should prefer riskier securities as the investment horizon lengthens. Simulated return distributions for stocks, bonds, and U.S. Treasury bills are generated for holding periods of one to 20 years and stochastic dominance tests are run to establish preferences among the alternative portfolios. With independent returns, we find no evidence that high-risk securities (stocks) dominate low-risk securities (bonds) as the investment horizon lengthens. Under the assumption that security returns are correlated across time, we find that common stocks dominate corporate bonds and U.S. Treasury bills for sufficiently long investment horizons.

Details

Research in Finance
Type: Book
ISBN: 978-0-76231-161-3

Book part
Publication date: 25 March 2010

Helen Xu

This study presents evidence of a statistically significant negative correlation between crude oil and equities over the past 20 years. Including proper proportions of…

Abstract

This study presents evidence of a statistically significant negative correlation between crude oil and equities over the past 20 years. Including proper proportions of negatively correlated assets in a diversified portfolio can improve the ratio of reward relative to risk, and therefore, adding crude oil with equities into a diversified portfolio can provide superior portfolio performance, compared with equities alone. Because crude oil prices held stable for nearly a century before the oil crisis of 1973, and oil derivatives did not begin trading actively on public markets until the 1980s, the diversification value of oil is a relatively new phenomenon. Also contributing to the phenomenon, the majority of oil reserves and the majority of crude oil production capacity worldwide are held by entities that are not traded in public equity markets, and therefore, the diversification benefits of oil cannot be fully realized by holding a portion of the global market portfolio of equities.

Details

Research in Finance
Type: Book
ISBN: 978-1-84950-726-4

Book part
Publication date: 16 February 2006

Uri Ben-Zion and Niklas Wagner

Overnight risk is of particular interest for many market participants including traders who provide liquidity to the market, but also to market participants with longer…

Abstract

Overnight risk is of particular interest for many market participants including traders who provide liquidity to the market, but also to market participants with longer investment horizons who want to determine whether a given risk–return tradeoff can justify possible intermediate portfolio hedging transactions. Overnight risk may in particular play a highly significant role in emerging markets, given that information is incorporated into prices at a slower rate and liquidity may hinder a quick unwinding of portfolio positions.

Details

Emerging European Financial Markets: Independence and Integration Post-Enlargement
Type: Book
ISBN: 978-0-76231-264-1

Book part
Publication date: 27 November 2017

Thaddeus Sim and Ronald H. Wright

Historical stock prices have long been used to evaluate a stock’s future returns as well as the risks associated with those returns. Similarly, historical dividends have…

Abstract

Historical stock prices have long been used to evaluate a stock’s future returns as well as the risks associated with those returns. Similarly, historical dividends have been used to evaluate the intrinsic value of a stock using, among other methods, a dividend discount model. In this chapter, we propose an alternate use of the dividend discount model to enable an investor to assess the risks associated with a particular stock based on its dividend history. In traditional applications of the dividend discount model for stock valuation, the value of a stock is the net present value of its future cash dividends. We propose an alternative approach in which we calculate the internal rate of return for a stream of future cash dividends assuming the current stock price. We use a bootstrapping approach to generate a stream of future cash dividends, and use a Monte Carlo simulation approach to run multiple trials of the model. The probability distribution of the internal rates of return obtained from the simulation model provides an investor with an expected percentage return and the standard deviation of the return for the stock. This allows an investor to not only compare the expected internal rates of return for a group of stocks but to also evaluate the associated risks. We illustrate this internal rate of return approach using stocks that make up the Dow Jones Industrial Average.

Details

Growing Presence of Real Options in Global Financial Markets
Type: Book
ISBN: 978-1-78714-838-3

Keywords

Article
Publication date: 20 September 2022

Nang Biak Sing and Rajkumar Giridhari Singh

This paper aims to investigate the influence of attention and sentiment in the Indian stock market during the unusual COVID-19 crisis in the first and second waves of the pandemic.

Abstract

Purpose

This paper aims to investigate the influence of attention and sentiment in the Indian stock market during the unusual COVID-19 crisis in the first and second waves of the pandemic.

Design/methodology/approach

In this study, the capital asset pricing model (CAPM) is used to estimate the expected return. The autoregressive distributed lag (ARDL) model with optimal lag value selection and Granger causality using the vector autoregressive (VAR) estimation model were applied to find out whether there is a causal relationship between investors' attention and sentiment that influence stock returns across 14 sectors.

Findings

The results show that increased attention to COVID-19 substantially varied in the first wave and second wave market reactions. The upsurge attention of COVID-19 shows a negative influence with lower expected returns in the second wave. The sentiment of investors contrasts from the lower expected return in the first wave to the higher expected return in the second wave of the pandemic. Moreover, investors’ sentiment in a state of fear is associated with lower returns.

Originality/value

The authors capture sentiment based on attention and investors mood using novel data set during the COVID-19 pandemic shock. The study is among a few which take a comprehensive stock market response during initial and subsequent waves across sector returns.

Details

Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0307-4358

Keywords

Open Access
Article
Publication date: 29 September 2022

Jasvir S. Sura, Rajender Panchal and Anju Lather

The main aim of this paper is to examine the claim that economic value added (EVA) advocates its superiority over the traditional accounting-based financial performance…

Abstract

Purpose

The main aim of this paper is to examine the claim that economic value added (EVA) advocates its superiority over the traditional accounting-based financial performance measures, i.e. profit after tax (PAT), earnings per share (EPS), return on assets (ROA), return on equity (ROE) and return on investment (ROI) in the Indian manufacturing sector and at the same time, give empirical facts. It also tests and examines the information content of various performance measures and their relationship with stock returns.

Design/methodology/approach

The paper uses the sample of 534 Indian manufacturing companies from the Bombay Stock Exchange (BSE) during the period 2000–2018. Multiple regression models are applied to examine the information content of EVA and traditional performance measures in explaining shareholders’ returns.

Findings

Relative information content tests revealed that traditional accounting-based measures such as EPS, ROE and ROA performed better than EVA in explaining the returns of Indian manufacturing companies. Incremental information content of EVA adds little contribution to information content above traditional performance measures. The claim of superiority of EVA over accounting-based measures in association with shareholder returns is proved invalid in Indian manufacturing companies.

Originality/value

This study concludes that EVA has no superiority over traditional accounting-based financial performance measures in explaining stock returns of Indian manufacturing companies. To achieve heftiness in outcomes, panel data are tested by using Breusch–Pagan–Godfrey (BPG) test for heteroskedasticity, Hausman’s test for fixed and random effect, variance inflation factor (VIF) test for multicollinearity and Durbin–Watson test for autocorrelation.

Details

IIM Ranchi journal of management studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2754-0138

Keywords

Article
Publication date: 30 September 2022

Triinu Tapver

The authors examine the performance of individual global equity funds in Central and Eastern Europe (CEE) and separate the skill of their fund managers from luck.

Abstract

Purpose

The authors examine the performance of individual global equity funds in Central and Eastern Europe (CEE) and separate the skill of their fund managers from luck.

Design/methodology/approach

The authors use cross-sectional bootstrap simulations to study the monthly net and gross returns of 175 funds over the period September 2005 to December 2019. Simulations are applied to three, four, and five-factor asset pricing models, and to regressions run on fund-specific benchmark indexes. The authors also examine the value added by all funds and by fund size groups.

Findings

Using multifactor models, a majority of the individual funds fail to deliver alpha, both net and gross of fees; whereas, most of the negative alphas appear due to poor skills, not bad luck. Relative to benchmark indexes, about 5% of the sample shows skill only gross of fees, indicating that fund management fees absorb this skill. As a whole, global equity funds in CEE add more economic value than they destroy, gross of fees, which is largely driven by large funds.

Practical implications

Market-tracking passive indexes are the most reliable choice for investors who want to maximise their risk-adjusted returns at the lowest possible cost. However, investors with a high level of risk appetite might prefer small actively managed funds in CEE when market conditions are stable or growing. Investors who are less risk tolerant might prefer large actively managed funds.

Originality/value

This is the first study to shed light on the presence of skill in mutual fund returns in CEE.

Details

Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0307-4358

Keywords

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