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1 – 10 of 42Hakan Yildirim, Saffet Akdag and Andrew Adewale Alola
The last decades have experienced increasingly integrated global political and economic dynamics ranging especially from the influence of exchange rates and trade amid other…
Abstract
Purpose
The last decades have experienced increasingly integrated global political and economic dynamics ranging especially from the influence of exchange rates and trade amid other sources of uncertainties. The purpose of this study is to examine the exchange rate dynamics of Brazil, Russia, India, China, and South Africa (BRICS) and the Republic of Turkey.
Design/methodology/approach
Given this perceived global dynamics, the current study examined the BRICS countries and the Republic of Turkey's exchange rate dynamics by using the United States (US) monthly dollar exchange rate data between January 2002 and August 2019. The price bubble which is expressed as exceeding the real value of assets' prices which is observably caused by speculative movements is investigated by using the Supremum Augmented Dickey-Fuller (SADF) and the Generalized Supremum Augmented Dickey-Fuller (GSADF) approaches.
Findings
Accordingly, the GSADF test results opined that there are price bubbles in the dollar exchange rate of other countries except for the United States Dollar (USD)/Indian Rupee (INR) exchange rate. As the related countries are classified as developing countries in terms of their structure, they are also expectedly the subject of speculative exchange rate movements. Speculative movements in exchange rates may cause serious problems in national economies.
Originality/value
Thus, the current study provides a policy framework to the BRICS countries and the Republic of Turkey.
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Mian Sajid Nazir, Javeria Mahmood, Fizza Abbas and Ayesha Liaqat
The upsurge of globalization has made investors cautious toward investing decisions, and, resultantly, sophisticated techniques of forecasting and analyzing the stock markets have…
Abstract
Purpose
The upsurge of globalization has made investors cautious toward investing decisions, and, resultantly, sophisticated techniques of forecasting and analyzing the stock markets have emerged. Particularly, this trend has gained momentum in emerging economies. One such trend is to overcome the investing risks associated with formation of rational bubbles. Bubbles are formed when asset prices inflate to a very high level temporarily, and they ultimately burst. Investors may take advantage of this short-lived phenomenon and gain high returns, but may also suffer as the entire investing value declines when the bubble bursts. The purpose of this paper is to identify rational bubbles in the emerging capital markets of South Asian region.
Design/methodology/approach
The monthly data have been obtained from June 1997 to February 2018 for Pakistan, Bombay, Dhaka and Colombo stock markets, and supremum-Augmented Dicky Fuller test developed by Phillips and Yu (2011) has been utilized to identify the rational bubbles.
Findings
The results revealed the presence of rational bubbles in South Asian equity markets. The current study is of significant nature for the facilitation of investors in future-making investing decisions concerning with the formation of rational bubbles.
Originality/value
Several studies have been conducted on stock markets of developed regions. Specific bubble episodes, which occurred previously, have helped the researchers and investors in gaining plenty of insights. A lot of studies have been conducted on the SAARC region as well. But they have used the conventional unit root test for bubble identification and not used as extensive data as, in this study, have been taken. This research is aimed to study equity prices of the four stock markets to establish the fact that if rational bubbles exist in the index, they are reflected in the returns or not.
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This chapter presents several approaches for identifying and dating the speculative bubble on real estate market. Using the real estate price index (IPAI), statistical and…
Abstract
This chapter presents several approaches for identifying and dating the speculative bubble on real estate market. Using the real estate price index (IPAI), statistical and structural approaches were combined in order to detect the existence of a bubble on the Moroccan real estate market. The results obtained affirm that the Moroccan real estate market experienced a speculative bubble during the period 2006–2008 explained mainly by the boom of credit during the same period. The use of the Markov switching model affirmed that the speculative bubble on Morocco is cyclic and consequently corroborates the critic formulated by Evans (1991) concerning the traditional approaches for the detection of financial bubbles. Thus, the analysis of the series of the bubble, extracted using the Kalman filter, affirms the existence of two regimes, namely an explosive regime and a normal regime. The first regime describes the periods of explosion of the bubble and lasts for about 9 quarters, while the second, lasting for 14 quarters, describes the periods of return to the average cycle.
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Marcelo M. de Oliveira and Alexandre C. L. Almeida
Speculative bubbles have been occurring periodically in local or global real-estate markets and are considered a potential cause of economic crises. In this context, the detection…
Abstract
Speculative bubbles have been occurring periodically in local or global real-estate markets and are considered a potential cause of economic crises. In this context, the detection of explosive behaviors in the financial market and the implementation of early warning diagnosis tests are of critical importance. The recent increase in Brazilian housing prices has risen concerns that the Brazilian economy may have a speculative housing bubble. In the present chapter, we employ a recently proposed recursive unit root test in order to identify possible speculative bubbles in data from the Brazilian residential real-estate market. The empirical results show evidence for speculative price bubbles both in Rio de Janeiro and São Paulo, the two main Brazilian cities.
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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.
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.
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Soumya Bhadury and Bhanu Pratap
In the economic literature, a crisis has been thematically defined around bank runs, failure of large financial corporations, and financial distress. Section 1 summarizes our…
Abstract
In the economic literature, a crisis has been thematically defined around bank runs, failure of large financial corporations, and financial distress. Section 1 summarizes our learnings about international banking crisis, in terms of the origin and impact of such crises. This provides us an international benchmark before we delve deeper into India's banking distress, its size and trends. Section 2 focuses on the twin-balance-sheet crisis in India. On one side, corporate firms recklessly overleveraged, resulting in excess capacities and business diversification. On the other side, banks, both private and public, fell prey to excessive and procyclical credit lending and improper monitoring. Overall, too many projects were left too weakly monitored. Separately, we have focused on two subsections, first, how the financial institutions in India have overstretched their credit-disposal limit during market upturns. Second, we found absence of any theoretically grounded approaches to determine the capital-adequacy ratios (CARs) for the banks. In Section 3, we have identified the steps taken so far by the Banking regulator and the Government to resolve the crisis. Further, we critically examine the role of Korea Asset Management Corporation (KAMCO) towards a successful non-performing assets (NPAs) resolution in South Korea. Few key takeaways include, (1) establishing a public asset-management company (AMC) focused on maximization of recoveries and resolution of stressed assets, (2) well-defined governance structure for the AMC ensuring it works on market principles, shielded from political interferences, and (3) realistic asset valuation and transfer price that ensures limited downside risks for the public AMC.
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Up until 1993, the South African armed forces were an essentially all-white conscript force, fighting a war ‘in proxy’ in neighbouring states and within the country, against a…
Abstract
Up until 1993, the South African armed forces were an essentially all-white conscript force, fighting a war ‘in proxy’ in neighbouring states and within the country, against a perceived communist onslaught. During this period, the former South African Defence Force (SADF) was central to state functioning and funding. With the end of the Cold War and the subsequent demise of Apartheid, the armed forces were forced to adapt not only to the new security environment, but to the imperatives spelt out in the newly forged Constitution of the Republic of South Africa. This was to be a traumatic time for the newly established South African National Defence Force (SANDF), which came into being in April 1994. The challenge of having to integrate seven former enemies into one cohesive force has been no mean task, and the legacies of past loyalties continue to divide the forces. The challenges stretched beyond just the need to integrate, thereby swelling the size of the SANDF, but to downscale the forces to affordable levels in years to come. As Seegers (1996, p. 280) states, “the SANDF encountered two big problems simultaneously, integration and a desperate popular need for employment”. Therefore, rationalisation would inevitably be met with some collective resistance. Adapting to the principles enshrined in the Constitution also meant that the SANDF had to adapt its policies and practices to meet the democratic imperatives spelt out in the Bill of Rights. Without doubt, one of the most contentious issues was the pressure exerted on the SANDF, even before 1994, to amend its labour relations mechanisms for uniformed personnel. The Constitution provided the legal sanction for military unions and despite vehement resistance, the SANDF eventually had to concede to this right when it lost the case in the Constitutional Court in 1998. Even so, the shock of having to deal with trade unions within its ranks and to bargain with the unions over “all matters of mutual interest” has been no mean feat.
Aktham Maghyereh and Hussein Abdoh
This study examines the extent to which gold and silver bubbles are correlated and which metal’s bubble spills over to the other. In addition, the overlap in bubble-like episodes…
Abstract
Purpose
This study examines the extent to which gold and silver bubbles are correlated and which metal’s bubble spills over to the other. In addition, the overlap in bubble-like episodes for the two metals is demonstrated and the influence of crises (global financial crises, European debt crisis and the COVID-19 pandemic) on the development of these episodes is compared.
Design/methodology/approach
This study proposes a two-step approach. In the first step, price bubbles are identified based on the backward sup augmented Dickey–Fuller of Phillips et al. (2015a, 2015b) and modified by Phillips and Shi (2018). In the second step, the correlation in the contagion effect of the bubbles between the two precious metal prices is measured using a nonparametric regression with a time-varying coefficient approach developed by Greenaway-McGrevy and Phillips (2016).
Findings
The findings suggest that the safe-haven property of gold and silver during financial market turbulence induces excessive price increases beyond their fundamental values. Furthermore, the results indicate that bubbles are contagious among precious metal markets and flow mainly from gold to silver; these findings are associated with the period after 2005, particularly during the global financial crisis. A contagious bubble effect is not found between gold and silver during the coronavirus disease 2020 pandemic.
Practical implications
The results suggest that financial market participants should consider portfolio weights in precious markets in light of the bubble correlation between gold and silver, especially during crises.
Originality/value
To the best of the authors’ knowledge, this is the first study that explores the correlation of bubble-like episodes between gold and silver.
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The purpose of this paper is to test for the presence of bubbles in the US lodging/hotel real estate investment trust (REIT) subsector from 1994 to 2016. It also compares the…
Abstract
Purpose
The purpose of this paper is to test for the presence of bubbles in the US lodging/hotel real estate investment trust (REIT) subsector from 1994 to 2016. It also compares the profitability of a buy-and-hold strategy with several technical trading rules when applied to lodging REITs.
Design/methodology/approach
To investigate speculative bubbles, the sequential right-sided unit root tests of Phillips, Shi and Yu (2015a, b) are used.
Findings
The results confirm the possibility of the existence of multiple bubbles and explosive behavior in prices and the price-dividend ratio. One of the detected bubbles coincides with the financial economic crisis of 2008 using both measures. In addition, several technical rules are found to be superior to a naïve buy-and-hold strategy even after adjusting for risk.
Practical implications
These findings will be of interest to policy makers, who can use such models as an early alert to take anticipative action to avoid bursting of bubbles and consequent negative effects on the economy. The findings also provide important information to investors attempting to devise trading rules that utilize the signals from bubble detection, as well as to hotel executives devising policies aimed at reducing risk and creating more firm value to maximize shareholder wealth. Moreover, valuation and bubbles are important to lenders and creditors who use assets as collaterals for financing hotel REITs.
Originality/value
Hotels are a unique hybrid of retail and housing that combine operating business with real estate. This paper is the first to investigate speculative bubbles in lodging REITs.
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Vicente Esteve and María A. Prats
This paper aims to analyze the dynamics of the Spanish public debt–gross domestic product ratio during the period 1850–2020.
Abstract
Purpose
This paper aims to analyze the dynamics of the Spanish public debt–gross domestic product ratio during the period 1850–2020.
Design/methodology/approach
This study uses a recent procedure to test for recurrent explosive behavior (Phillips et al., 2011; Phillips et al., 2015a, 2015b) to identify episodes of explosive public debt dynamics and also the episodes of fiscal adjustments over this long period.
Findings
The identified episodes of explosive behavior of public debt coincided with fiscal stress events, whereas fiscal adjustments and changes in economic policies stabilized public finances after periods of explosive dynamics of public debt.
Originality/value
The longer than usual span of the data should allow the authors to obtain some more robust results than in most of previous analyses of long-run sustainability.
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