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1 – 10 of 61Omer Cayirli, Koray Kayalidere and Huseyin Aktas
The purpose of this paper is to investigate the impact of changes in credit stock on real and financial indicators in Turkey with a focus on conditional and time-varying dynamics.
Abstract
Purpose
The purpose of this paper is to investigate the impact of changes in credit stock on real and financial indicators in Turkey with a focus on conditional and time-varying dynamics.
Design/methodology/approach
In addition to lag-augmented vector autoregression (LA-VAR) based time-varying Granger causality tests, threshold models and a research setting that identifies high/low states of credit growth based on 24-month moving averages are used to explore regime-dependent behavior. For investigating the asymmetric dynamics, the authors use a methodology that identifies good/bad news in credit growth based on 24-month moving averages and standard deviations.
Findings
Results strongly suggest that the impact of changes in credit stock induces conditional responses. Moreover, we find evidence for asymmetric responses. In the case of Turkey, efforts to spur growth through credit produce a strong negative byproduct, a depreciation in the exchange rate. The authors also find that changes in credit stock have become more relevant for uncertainties in inflation and exchange rate expectations, particularly in the era after mid-2018 in which credit growth volatility has increased noticeably.
Originality/value
This study provides a comprehensive analysis of time-varying and conditional responses to a change in credit stock in a major emerging economy. Using a moving threshold based only on the available information in the analysis of state-dependency represents a new approach.
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Amira Said and Chokri Ouerfelli
This paper aims to examine the dynamic conditional correlation (DCC) and hedging ratios between Dow Jones markets and oil, gold and bitcoin. Using daily data, including the…
Abstract
Purpose
This paper aims to examine the dynamic conditional correlation (DCC) and hedging ratios between Dow Jones markets and oil, gold and bitcoin. Using daily data, including the COVID-19 pandemic and the Russia–Ukraine war. We employ the DCC-generalized autoregressive conditional heteroskedasticity (GARCH) and asymmetric DCC (ADCC)-GARCH models.
Design/methodology/approach
DCC-GARCH and ADCC-GARCH models.
Findings
The most of DCCs among market pairs are positive during COVID-19 period, implying the existence of volatility spillovers (Contagion-effects). This implies the lack of additional economic gains of diversification. So, COVID-19 represents a systematic risk that resists diversification. However, during the Russia–Ukraine war the DCCs are negative for most pairs that include Oil and Gold, implying investors may benefit from portfolio-diversification. Our hedging analysis carries significant implications for investors seeking higher returns while hedging their Dow Jones portfolios: keeping their portfolios unhedged is better than hedging them. This is because Islamic stocks have the ability to mitigate risks.
Originality/value
Our paper may make a valuable contribution to the existing literature by examining the hedging of financial assets, including both conventional and Islamic assets, during periods of stability and crisis, such as the COVID-19 pandemic and the Russia–Ukraine war.
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Considering the frequency of extreme events, enhancing the global financial system's stability has become crucial. This study aims to investigate the contagion effects of extreme…
Abstract
Purpose
Considering the frequency of extreme events, enhancing the global financial system's stability has become crucial. This study aims to investigate the contagion effects of extreme risk events in the international commodity market on China's financial industry. It highlights the significance of comprehending the origins, severity and potential impacts of extreme risks within China's financial market.
Design/methodology/approach
This study uses the tail-event driven network risk (TENET) model to construct a tail risk spillover network between China's financial market and the international commodity market. Combining with the characteristics of the network, this study employs an autoregressive distributed lag (ARDL) model to examine the factors influencing systemic risks in China's financial market and to explore the early identification of indicators for systemic risks in China's financial market.
Findings
The research reveals a strong tail risk contagion effect between China's financial market and the international commodity market, with a more pronounced impact from the latter to the former. Industrial raw materials, food, metals, oils, livestock and textiles notably influence China's currency market. The systemic risk in China's financial market is driven by systemic risks in the international commodity market and network centrality and can be accurately predicted with the ARDL-error correction model (ECM) model. Based on these, Chinese regulatory authorities can establish a monitoring and early warning mechanism to promptly identify contagion signs, issue timely warnings and adjust regulatory measures.
Originality/value
This study provides new insights into predicting systemic risk in China's financial market by revealing the tail risk spillover network structure between China's financial and international commodity markets.
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Ahlem Lamine, Ahmed Jeribi and Tarek Fakhfakh
This study analyzes the static and dynamic risk spillover between US/Chinese stock markets, cryptocurrencies and gold using daily data from August 24, 2018, to January 29, 2021…
Abstract
Purpose
This study analyzes the static and dynamic risk spillover between US/Chinese stock markets, cryptocurrencies and gold using daily data from August 24, 2018, to January 29, 2021. This study provides practical policy implications for investors and portfolio managers.
Design/methodology/approach
The authors use the Diebold and Yilmaz (2012) spillover indices based on the forecast error variance decomposition from vector autoregression framework. This approach allows the authors to examine both return and volatility spillover before and after the COVID-19 pandemic crisis. First, the authors used a static analysis to calculate the return and volatility spillover indices. Second, the authors make a dynamic analysis based on the 30-day moving window spillover index estimation.
Findings
Generally, results show evidence of significant spillovers between markets, particularly during the COVID-19 pandemic. In addition, cryptocurrencies and gold markets are net receivers of risk. This study provides also practical policy implications for investors and portfolio managers. The reached findings suggest that the mix of Bitcoin (or Ethereum), gold and equities could offer diversification opportunities for US and Chinese investors. Gold, Bitcoin and Ethereum can be considered as safe havens or as hedging instruments during the COVID-19 crisis. In contrast, Stablecoins (Tether and TrueUSD) do not offer hedging opportunities for US and Chinese investors.
Originality/value
The paper's empirical contribution lies in examining both return and volatility spillover between the US and Chinese stock market indices, gold and cryptocurrencies before and after the COVID-19 pandemic crisis. This contribution goes a long way in helping investors to identify optimal diversification and hedging strategies during a crisis.
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Sanshao Peng, Catherine Prentice, Syed Shams and Tapan Sarker
Given the cryptocurrency market boom in recent years, this study aims to identify the factors influencing cryptocurrency pricing and the major gaps for future research.
Abstract
Purpose
Given the cryptocurrency market boom in recent years, this study aims to identify the factors influencing cryptocurrency pricing and the major gaps for future research.
Design/methodology/approach
A systematic literature review was undertaken. Three databases, Scopus, Web of Science and EBSCOhost, were used for this review. The final analysis comprised 88 articles that met the eligibility criteria.
Findings
The influential factors were identified and categorized as supply and demand, technology, economics, market volatility, investors’ attributes and social media. This review provides a comprehensive and consolidated view of cryptocurrency pricing and maps the significant influential factors.
Originality/value
This paper is the first to systematically and comprehensively review the relevant literature on cryptocurrency to identify the factors of pricing fluctuation. This research contributes to cryptocurrency research as well as to consumer behaviors and marketing discipline in broad.
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The study investigates the inter-linkages between geopolitical risk (GPR) and food price (FP).
Abstract
Purpose
The study investigates the inter-linkages between geopolitical risk (GPR) and food price (FP).
Design/methodology/approach
By employing the bootstrap full- and sub-sample rolling-window Granger causality tests.
Findings
The empirical results show that there is a time-varying bidirectional causality between GPR and FP. High GPR leads to a rise in FP, suggesting that geopolitical events usually may disrupt supply and demand conditions in food markets, and even trigger global food crises. However, the negative effect of GPR on FP does not support this view in certain periods. This is mainly because GPR is also related to the global economic situation and oil price, which together have impacts on the food market. These results cannot always be supported by the inter-temporal capital asset pricing model, which states that GPR affects FP in a positive manner. Conversely, there is a positive impact of FP on GPR, indicating that the food market is an effective tool that can reflect global geopolitical environment.
Originality/value
In the context of the Russia–Ukraine conflict, these analyses can assist investors and policymakers to understand the sensitivity of FP to GPR. Also, it will provide significant revelations for governments to attach importance to the role of food price information in predicting geopolitical events, thus contributing to a more stable international environment.
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Martin Hoesli, Louis Johner and Jon Lekander
Using data spanning 145 years for Sweden, the authors investigate the benefits of holding multi-family properties for investors who aim to hedge wage growth.
Abstract
Purpose
Using data spanning 145 years for Sweden, the authors investigate the benefits of holding multi-family properties for investors who aim to hedge wage growth.
Design/methodology/approach
The authors assess the risk-adjusted excess return that results from adding multi-family properties to a mixed-asset portfolio that aims to track wage growth. The authors also analyse the macroeconomic determinants of asset returns. Finally, the authors test whether a causal relationship exists between the growth rate of real wages and that of real net operating income.
Findings
The benefits from holding multi-family properties are the greatest for low-risk allocation approaches. For more risky strategies, the role of real estate is more muted, and it varies greatly over time. Holding real estate was most beneficial during the first two decades of the 21st century. Multi-family properties are found to be the only asset class to be positively related to wage growth. The authors show that the net operating income acts as the transmission channel between wages and property returns.
Practical implications
The paper assesses whether the growing interest of pension funds for multi-family properties is warranted in the context of a portfolio that aims to track wage growth.
Originality/value
Using long term data makes it possible to use a rolling windows approach and hence to consider multiple outcomes for an allocation strategy over a typical investment horizon. This permits to assess the dispersion of performance across several periods rather than just one as is commonly done in the literature. The results show that the conclusions that would be drawn from looking at the past two or three decades of data differ substantially from those for earlier time periods.
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This 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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Zaifeng Wang, Tiancai Xing and Xiao Wang
We aim to clarify the effect of economic uncertainty on Chinese stock market fluctuations. We extend the understanding of the asymmetric connectedness between economic uncertainty…
Abstract
Purpose
We aim to clarify the effect of economic uncertainty on Chinese stock market fluctuations. We extend the understanding of the asymmetric connectedness between economic uncertainty and stock market risk and provide different characteristics of spillovers from economic uncertainty to both upside and downside risk. Furthermore, we aim to provide the different impact patterns of stock market volatility following several exogenous shocks.
Design/methodology/approach
We construct a Chinese economic uncertainty index using a Factor-Augmented Variable Auto-Regressive Stochastic Volatility (FAVAR-SV) model for high-dimensional data. We then examine the asymmetric impact of realized volatility and economic uncertainty on the long-term volatility components of the stock market through the asymmetric Generalized Autoregressive Conditional Heteroskedasticity-Mixed Data Sampling (GARCH-MIDAS) model.
Findings
Negative news, including negative return-related volatility and higher economic uncertainty, has a greater impact on the long-term volatility components than positive news. During the financial crisis of 2008, economic uncertainty and realized volatility had a significant impact on long-term volatility components but did not constitute long-term volatility components during the 2015 A-share stock market crash and the 2020 COVID-19 pandemic. The two-factor asymmetric GARCH-MIDAS model outperformed the other two models in terms of explanatory power, fitting ability and out-of-sample forecasting ability for the long-term volatility component.
Research limitations/implications
Many GARCH series models can also combine the GARCH series model with the MIDAS method, including but not limited to Exponential GARCH (EGARCH) and Threshold GARCH (TGARCH). These diverse models may exhibit distinct reactions to economic uncertainty. Consequently, further research should be undertaken to juxtapose alternative models for assessing the stock market response.
Practical implications
Our conclusions have important implications for stakeholders, including policymakers, market regulators and investors, to promote market stability. Understanding the asymmetric shock arising from economic uncertainty on volatility enables market participants to assess the potential repercussions of negative news, engage in timely and effective volatility prediction, implement risk management strategies and offer a reference for financial regulators to preemptively address and mitigate systemic financial risks.
Social implications
First, in the face of domestic and international uncertainties and challenges, policymakers must increase communication with the market and improve policy transparency to effectively guide market expectations. Second, stock market authorities should improve the basic regulatory system of the capital market and optimize investor structure. Third, investors should gradually shift to long-term value investment concepts and jointly promote market stability.
Originality/value
This study offers a novel perspective on incorporating a Chinese economic uncertainty index constructed by a high-dimensional FAVAR-SV model into the asymmetric GARCH-MIDAS model.
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Salma Mokdadi and Zied Saadaoui
This paper aims to study the impact of geopolitical uncertainty on corporate cost of debt and the moderating role of information asymmetry between creditors and borrowing firms.
Abstract
Purpose
This paper aims to study the impact of geopolitical uncertainty on corporate cost of debt and the moderating role of information asymmetry between creditors and borrowing firms.
Design/methodology/approach
This study uses 5,223 firm-quarter observations on German-listed firms spanning 2010:Q1–2021:Q4. This study regresses the cost of debt financing on the geopolitical risk, accounting quality and other control variables. Information asymmetry is measured using the performance-matched Jones-model discretionary accrual and the stock bid-ask spread. It uses interaction terms to check if information asymmetry moderates the impact of geopolitical uncertainty on the cost of debts and control for the moderating role of business risk. For the sake of robustness check, it uses long-term cost of debt and bond spread as alternative dependent variables. In addition, this study executes instrumental variables regression and propension score matching to control for potential endogeneity problems.
Findings
Estimation results show that geopolitical uncertainty exerts a positive impact on the cost of debt. This impact is found to be more important on the cost of long-term debts. Information asymmetry is found to exacerbate the positive impact of geopolitical risk on the cost of debt. These results are robust to the change of the dependent variable and to the mitigation of potential endogeneity. At high levels of information asymmetry, this impact is more important for firms belonging to “Transportation”, “Automobiles and auto parts”, “Chemicals”, “Industrial and commercial services”, “Software and IT services” and “Industrial goods” business sectors.
Research limitations/implications
Geopolitical uncertainty should be seriously considered when setting strategies for corporate financial management in Germany and similar economies that are directly exposed to geopolitical risks. Corporate managers should design a comprehensive set of corporate policies to improve their transparency and accountability during increasing uncertainty. Policymakers are required to implement innovative monetary and fiscal policies that take into consideration the heterogeneous impact of geopolitical uncertainty and information transparency in order to contain their incidence on German business sectors.
Originality/value
Despite its relevance to corporate financing conditions, little is known about the impact of geopolitical uncertainty on the cost of debt financing. To the best of the authors’ knowledge, there is still no empirical evidence on how information asymmetry between creditors and borrowing firms shapes the impact of geopolitical uncertainty on the cost of debt. This paper tries to fill this gap by interacting two measures of information asymmetry with geopolitical uncertainty. In contrast with previous studies, this study shows that the impact of geopolitical uncertainty on the cost of debt is non-linear and heterogeneous. The results show that the impact of geopolitical uncertainty does not exert the same impact on the cost of debt instruments with different maturities. This impact is found to be heterogeneous across business sectors and to depend on the level of information asymmetry.
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