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Article
Publication date: 26 October 2012

Timo H. Leivo

The purpose of this paper is to examine the added value of combining a momentum indicator with a value indicator in varying stock market conditions.

Abstract

Purpose

The purpose of this paper is to examine the added value of combining a momentum indicator with a value indicator in varying stock market conditions.

Design/methodology/approach

A comprehensive sample of Finnish non‐financial stocks is first divided into three‐quantile portfolios based on valuation multiples and composite value measures. The value and glamour portfolios are divided further into two‐sextile portfolios based on the price momentum indicator. The performance of portfolios is evaluated on the basis of their raw and risk‐adjusted returns. Moreover, the impact of the stock market cycle on relative performance of quantile portfolios is examined.

Findings

Taking account of price momentum beside relative valuation criteria enhances the performance of most of the value‐only portfolios during the full sample period (1993‐2009). During bullish conditions, the inclusion of a momentum criterion somewhat adds value to an investor, but during bearish conditions this added value is negative.

Research limitations/implications

The sample of stocks is not large in spite of its comprehensiveness from the local stock market aspect. Future studies can apply the approach to other stock markets.

Practical implications

The paper provides useful implications in portfolio management. The combination of the value and momentum criteria has paid off to the investor, despite the fact that its added value during bearish periods is negative, on an average.

Originality/value

This is the first time that the impact of the stock market cycle on the added value of combining price momentum with composite value measures as a portfolio‐formation criterion is examined.

Details

Review of Accounting and Finance, vol. 11 no. 4
Type: Research Article
ISSN: 1475-7702

Keywords

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Article
Publication date: 5 May 2021

Abdollah Ah Mand, Hawati Janor, Ruzita Abdul Rahim and Tamat Sarmidi

The purpose of this paper is to investigate whether market conditions have an effect on investors’ propensity to herd in an emerging economy’s stock market. Additionally…

Abstract

Purpose

The purpose of this paper is to investigate whether market conditions have an effect on investors’ propensity to herd in an emerging economy’s stock market. Additionally, given the lack of research on Islamic behavioral finance, the authors further investigate if the herding phenomenon is distinct in Islamic versus conventional stocks.

Design/methodology/approach

The authors used daily data for the period of 1995–2016 according to the herding behavior model of Chang et al. (2000), which relies on cross-sectional absolute deviation of returns.

Findings

Findings reveal the herding behavior of investors among Shariah-compliant during up and down market exits with non-linear relationship to the market return, while for conventional stocks herding behavior does not exist with linear nor nonlinear relationships during the up and down market. Furthermore, for the whole market, herding behavior only exists during upmarket with a nonlinear relationship to the market return. However, this relationship is not significant. Moreover, the results of this study are robust with respect to the effect of the Asian and global financial crisis.

Practical implications

The findings are useful for investors to identify which market conditions are associated with rational and irrational behavior of investors.

Originality/value

Most of the theoretical and empirical studies on herding behavior have focused on developed countries. Only a few studies have paid attention to the herding behavior in Islamic financial markets, particularly in the context of an emerging market such as Malaysia. This study fills this void.

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Article
Publication date: 16 August 2021

Sinem Guler Kangalli Uyar, Umut Uyar and Emrah Balkan

The purpose of this paper is to scrutinize three different points: How safe haven properties of precious metals (gold, silver, platinum and palladium) differentiate in two…

Abstract

Purpose

The purpose of this paper is to scrutinize three different points: How safe haven properties of precious metals (gold, silver, platinum and palladium) differentiate in two recent major crises such as the Global Financial Crisis (GFC) and the COVID-19 pandemic? How safe haven properties of precious metals change by the severity and the duration of shocks? and whether precious metals have hedge properties or not in normal conditions against different stock markets.

Design/methodology/approach

To analyze the time-varying behavior of precious metals with respect to stock market returns, the authors used the rolling window approach. After obtaining the time-varying beta series that way, the authors regressed the beta series on different severities of stock market shocks.

Findings

The findings show that the number of safe haven precious metals increases in the COVID-19 pandemic period compared to the GFC. Furthermore, the number of safe haven precious metals increases as the severity of shocks increases and the duration of them extended. Finally, in the absence of an extreme market condition, only gold has strong hedge asset properties.

Originality/value

To the best of the authors’ knowledge, this study is the first that examines the safe haven and hedge properties of all tradable precious metals against seven major stock markets. Besides this, it presents a comparative analysis for the safe haven properties of precious metals in terms of two major crises.

Details

Studies in Economics and Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 26 February 2019

Zaheer Anwer, Wajahat Azmi and Shamsher Mohamad Ramadili Mohd

The purpose of this paper is to appraise the effectiveness of monetary policy actions in variant market conditions for Islamic stocks. These stocks offer ground for a…

Abstract

Purpose

The purpose of this paper is to appraise the effectiveness of monetary policy actions in variant market conditions for Islamic stocks. These stocks offer ground for a natural experiment as they have restrictions on the line of business and their distinguished capital structure does not allow them to combat the liquidity crisis through the use of leverage.

Design/methodology/approach

The paper uses the quantile regression approach for a multi-country sample of Islamic stock indices to assess the impact of domestic as well as US expansionary monetary policy on stock returns of Islamic indices at various locations of distribution of returns.

Findings

It is found that, at lower return levels, an expansionary monetary policy has a negative effect on the returns. In other cases, there is no significant impact of policy rate change on index returns.

Research limitations/implications

It is more appropriate to use firm level data of Islamic stocks instead of stock indices. However, the information regarding index constituents is not publicly available.

Practical implications

The paper offers useful information to investors and policy makers. It shows that central banks should improve their credibility for monetary policy to be effective and their policies must be designed keeping in view the strong impact of US rate on global monetary environment.

Originality/value

This paper provides first empirical evidence of the impact of discount rates on the returns of Islamic stocks in different market conditions.

Details

International Journal of Emerging Markets, vol. 14 no. 4
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 30 September 2013

Yoon Koh, Seoki Lee, Sudipta Basu and Wesley S. Roehl

– The purpose of this study is to identify determinants of involuntary cross-listing (CL) of US restaurant companies on the Frankfurt Stock Exchange (FSE).

Abstract

Purpose

The purpose of this study is to identify determinants of involuntary cross-listing (CL) of US restaurant companies on the Frankfurt Stock Exchange (FSE).

Design/methodology/approach

The study utilizes a mixed method design with an interview and a pooled logistic regression analysis with panel dataset using the company-clustered standard error to develop and test the hypotheses.

Findings

The empirical investigation identified determinants of involuntary CL by examining ten factors, including size, firm growth opportunities, leverage, financial flexibility, international operation, profitability, overall German economic condition, industry growth opportunities, restaurant type, and local operation. The study found three determinants – large size, favorable economic condition in Germany and positive industry growth opportunities – utilizing the sample that covers the entire periods of involuntary CL of US restaurant companies on the FSE.

Originality/value

This paper uncovers the phenomenon of involuntary CL, which many stock exchanges have strategically adopted by simplifying listing requirements for companies already listed in other stock markets, focusing on US restaurant companies. The number of involuntarily cross-listed US restaurant companies greatly increased to 50 percent of domestically listed US restaurant companies while those companies are largely unaware of the phenomenon. The research advances understanding of involuntary CLs, which previously received little attention.

Details

International Journal of Contemporary Hospitality Management, vol. 25 no. 7
Type: Research Article
ISSN: 0959-6119

Keywords

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Article
Publication date: 16 October 2009

Narcyz Roztocki and Heinz Roland Weistroffer

Enterprise application integration (EAI) technologies are critical to functionally integrate diverse corporate computer systems, and as such may be expected to have a…

Abstract

Purpose

Enterprise application integration (EAI) technologies are critical to functionally integrate diverse corporate computer systems, and as such may be expected to have a positive effect on business value. The purpose of this paper is to examine the market reaction to announcements of EAI investments as a surrogate for investor perceived business value of such technology.

Design/methodology/approach

An event study approach is used with 81 announcements of EAI investments between 1998 and 2005, taken from Lexis‐Nexis database.

Findings

The results suggest that investors do not always receive EAI investments positively, especially if the announcements are from financially distressed companies and if market conditions are unfavorable.

Research limitations/implications

Limitations include the possibility of confounding events, possible bias in the identified announcements, and our focus on EAI technology only. Future research may try to better account for confounding events, identify a more comprehensive list of relevant announcements, and also look at other technologies.

Practical implications

Managers should not view EAI technology as a panacea for organizational problems. Financial markets mostly respond negatively to EAI announcements when the announcing company is perceived as an investment risk or the announcement is released during bear market conditions.

Originality/value

This study expands the existing body of knowledge on IT contribution to market value. The focus on EAI technology allows for better comparison of results and testing of hypotheses. Also new is the finding that perceived company risk as well as market conditions play an important role in the reaction to IT investment announcements.

Details

Journal of Enterprise Information Management, vol. 22 no. 6
Type: Research Article
ISSN: 1741-0398

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Article
Publication date: 30 December 2020

Joseph Emmanuel Tetteh and Anthony Amoah

In the wake of climate change and its associated impact on firms' performance, this paper attempts to provide a piece of empirical evidence in support of the effect of…

Abstract

Purpose

In the wake of climate change and its associated impact on firms' performance, this paper attempts to provide a piece of empirical evidence in support of the effect of weather conditions on the stock market performance.

Design/methodology/approach

Monthly time-series dataset and the fully modified ordinary least square (FMOLS) semi-parametric econometric technique are used to establish the effect of weather variables on stock market return.

Findings

This study finds that temperature and wind speed have a negative and statistically significant relationship with stock market performance. Likewise, humidity exhibits a negative relationship with stock market performance, albeit insignificant. The relevant stock market and macroeconomic control variables are statistically significant in addition to exhibiting their expected signs. The findings lend support to advocates of behavioural factors inclusion in asset pricing and decision-making.

Practical implications

For policy purposes, the authors recommend that traders, investors and stock exchange managers must take into consideration different weather conditions as they influence investors' behaviour, investment decisions, and consequently, the stock market performance.

Originality/value

To the best of the authors’ knowledge, this study provides the first empirical evidence of the nexus between disaggregated weather measures and stock market performance in Ghana. This study uses monthly data (which are very rare in the literature, especially for developing country studies) to provide empirical evidence that weather influences stock market performance.

Details

Journal of Economic and Administrative Sciences, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1026-4116

Keywords

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Article
Publication date: 3 November 2020

Brahmadev Panda and Gaurav Kumar

The purpose of this paper is to ascertain determining factors of ownership concentration and institutional portfolio ownership in the listed firms of an emerging market

Abstract

Purpose

The purpose of this paper is to ascertain determining factors of ownership concentration and institutional portfolio ownership in the listed firms of an emerging market during pre-crisis and post-crisis periods and find variations in determining factors between the two varying market conditions.

Design/methodology/approach

This paper considers 316 listed firms for the pre-crisis period and 408 firms for the post-crisis period, from the NIFTY-500. Pre-crisis period ranges from FY2000-01 to FY2007-08 and post-crisis period ranges from FY2009-10 to FY2016-17. Two-step GMM is utilized to test the hypotheses by controlling the unobserved heterogeneity and endogeneity issues.

Findings

Higher investment and stock market growth leads to ownership dispersion in both the market conditions. Industry information asymmetry leads to dispersion in pre-crisis, while improves concentration in post-crisis phase. Firm size, legal environment and economic growth are found to be a positive determinant of institutional ownership irrespective of market conditions. Institutional investment proliferates with higher stock liquidity and PE ratio, while declines with augmented firm risk, current ratio and stock market turnover during post-crisis phase.

Practical implications

Policymakers should construct a robust legal environment and focus to improve economic conditions to boost institutional ownership. Corporate executives should concentrate to increase stock liquidity and earnings of the firms, and lower market risk to draw more institutional portfolio investments.

Originality/value

This study would enrich emerging governance literature since studies on the determining factors of ownership holdings are limited in the emerging world. It adds novelty by capturing two different market conditions such as pre-crisis and post-crisis phases to obtain the time-dependent and time-independent determinants. It adds uniqueness by considering the determinants of institutional ownership, which is scarce in ownership studies.

Details

Managerial Finance, vol. 47 no. 5
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 17 August 2012

Qin Lei and Xuewu Wang

The purpose of this paper is to provide some rational perspectives for the flight‐to‐liquidity event rather than simply attributing it to the change in investor sentiment.

Abstract

Purpose

The purpose of this paper is to provide some rational perspectives for the flight‐to‐liquidity event rather than simply attributing it to the change in investor sentiment.

Design/methodology/approach

The paper builds a model to highlight the inherent difference in investors' investment horizon, and thus their sensitivity to changes in transaction costs in the stock and bond markets. When stock market deterioration results in higher trading costs, the existing marginal investor shifts wealth to bonds instead of remaining indifferent between stocks and bonds. At the new equilibrium, there is a higher fraction of bond ownership and a longer average investment horizon among stock holders. The paper then empirically tests the model predictions using data in the US stock and bond markets.

Findings

The authors find evidence strongly supporting this paper's theoretical predictions. Days with high stock illiquidity, high stock volatility and low stock return are associated with high yield spread in the bond market. This contemporaneous linkage between the stock market and the bond market is even stronger during periods with strong net outflows from stock mutual funds and strong net inflows to money market funds. The paper also demonstrates the existence of a maturity pattern that the predicted effects, especially the effects of stock illiquidity, are much stronger over shorter maturities.

Originality/value

The finding of this model that the investment horizon of the marginal investor (and thus the equilibrium price impact in the bond market) responds to changes in market conditions contributes to the theoretical debate on whether transaction costs matter. The flow evidence strengthens our understanding of the asset pricing implications of portfolio rebalancing decisions, and the maturity effect bolsters the case for flights to liquidity/quality due to heterogeneity in investment horizon without resorting to investor irrationality or behavioral attributes. In fact, it is arguably difficult to reconcile with a behavioral explanation.

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Book part
Publication date: 15 December 2004

Ryoichi Sakano

In an economy with a developed financial system, wages and salaries are not the only source of income for households. Capital markets allow households to invest their…

Abstract

In an economy with a developed financial system, wages and salaries are not the only source of income for households. Capital markets allow households to invest their saving and earn interest and return. An accumulation of wealth is greater for households with higher incomes, who then earn more interest and returns from their wealth, leading to more inequality of income among households. The recent financial crisis experienced in Japan, characterized by a substantial decrease in stock and real estate prices, should have had a reversing effect on the income distribution among Japanese households. Time-series data of quintile income shares and a measure of income inequality in Japan are used to analyze the effects of the financial bubble of the late 1980s and the financial crisis of the 1990s on the income distribution in Japan. The result reveals a significant de-equalizing effect of rising asset prices on income distribution in Japan. However, the equalizing effect of the falling prices of stocks and real estate was partially offset by the de-equalizing effect of rising unemployment in the late 1990s. Furthermore, taking into account the effect of the financial market condition, the income distribution fluctuates less pro-cyclically than previous studies indicated.

Details

Studies on Economic Well-Being: Essays in the Honor of John P. Formby
Type: Book
ISBN: 978-0-76231-136-1

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