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1 – 10 of over 21000This paper examines how accounting quality, as measured by earnings opacity, affects the stock market wealth effect, which in turn is shown to be linked to economic growth. Stock…
Abstract
This paper examines how accounting quality, as measured by earnings opacity, affects the stock market wealth effect, which in turn is shown to be linked to economic growth. Stock market wealth effect is negatively affected by earnings opacity. The data also indicate that the exogenous component of the stock market wealth effect — the component defined by earnings opacity‐ is positively associated with economic growth. The direct effect of earnings opacity on economic growth is, as expected negative, but insignificant.
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This study aims to investigate the cointegration and causality relationships between Hong Kong’s residential property price and stock price, using quarterly data, from the 1st…
Abstract
Purpose
This study aims to investigate the cointegration and causality relationships between Hong Kong’s residential property price and stock price, using quarterly data, from the 1st quarter of 1980 to the 3rd quarter of 2015.
Design/methodology/approach
In contrast to other studies, the cointegration test used is the autoregressive distributed lag (ARDL) cointegration (bounds testing) approach of Pesaran et al. (2001) that based on the estimation of an unrestricted error correction model and the causality test is based on non-causality test of Granger et al. (2000). Moreover, this research employs recursive least square procedures and Chow (1960) breakpoint test to detect unknown structural break and variation of relationships between residential property and stock price over the whole sample period.
Findings
The results of ARDL cointegration tests running from stock to residential property markets provide strong evidence to support the hypothesis that the stock and residential properties are cointegrated. The results of Granger et al. (2000) non-causality test support the view of wealth effect that stock price has an important causal effect on residential property price in Hong Kong but not vice versa. In addition, the results of recursive ordinary least squares coefficients estimates and Chow (1960) test (breakpoint test) for structural instability confirm the variation of the relationships between stock and residential property markets over the sample period.
Research limitations/implications
The empirical results from cointegration and causality tests suggest that the residential asset returns are better predicted by including the lagged difference values of stock price.
Originality/value
This is the pioneering study to examine the cointegration and causality study of stock and residential property price in Hong Kong by employing Pesaran ARDL cointegration approach and Granger non-causality approach. Investors are able to perform an effective evaluation to assist in allocating investment funds, and the government bodies can implement supplement housing policy in response to the public needs.
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This paper aims to examine whether there exists a long-run causal relationship between the prices of households’ two major assets: stocks and houses over the period 1975Q1–2017Q1…
Abstract
Purpose
This paper aims to examine whether there exists a long-run causal relationship between the prices of households’ two major assets: stocks and houses over the period 1975Q1–2017Q1 for seven major European countries.
Design/methodology/approach
The paper uses the bootstrap panel Granger causality approach to determine the causal structure, focusing on cross-sectional dependence, slope heterogeneity and structural breaks.
Findings
The findings show that, in most cases, there is a unidirectional causality running from stock price to house price but the converse is not true. This confirms a strong wealth effect in housing markets. The findings are important for not only households but also policymakers concerned with financial stability and housing prices.
Originality/value
First, the methodology used here devotes full attention to dynamic co-movement between housing and stock markets. Second, this study uses a rather long quarterly data, which implies that the findings could be robust. Third, the study uses real personal disposable income as a control variable to remove the effects of economic growth. Fourth, most of the previous studies do not consider the presence of structural breaks and this makes the result of causality invalid and biased. Fifth, most of the previous studies on housing and stock markets concentrated on the US and non-European countries such as China, Korea and Singapore.
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Considering the relationship between the central bank balance sheet and unconventional monetary policy after the 2008 financial crisis, it is crucial to see how the unconventional…
Abstract
Purpose
Considering the relationship between the central bank balance sheet and unconventional monetary policy after the 2008 financial crisis, it is crucial to see how the unconventional monetary policy, given near-zero interest rates, affects future stock market performance. This paper analyzes the impact of the Fed's balance sheet size on stock market performance.
Design/methodology/approach
To analyze the Fed's balance sheet size's long-term stock market implications, this paper uses the asset pricing framework of market return predictability such as Ordinary least squares (OLS) and Generalized method of moments (GMM) analysis.
Findings
Findings in this paper suggest that the Fed's balance sheet size, deflated by asset market wealth, presents evidence of return predictability during 1926–2015 that is robust against standard controls. These results can be explained through the redistribution of risk and the wealth channels of monetary policy transmission. The changing balance sheet size of a central bank (1) affects systemic risk, yields and expectations and (2) signals the future direction of monetary policy and thus economic outlook.
Research limitations/implications
The main implication of these findings is that policymakers should avoid a severe imbalance between a central bank's balance sheet size and assets market wealth.
Originality/value
The empirical evidence in this paper documents a century-old relation between the Fed's balance sheet size and US stock market return using the Fed's balance sheet data for the last 100 years and stock market returns from the Center for research in security prices (CRSP) database.
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How individuals respond to changes in their economic condition varies from country to country. This paper explores the linkage between stock markets and wine sales. In particular…
Abstract
How individuals respond to changes in their economic condition varies from country to country. This paper explores the linkage between stock markets and wine sales. In particular, we look at the performance of exported wines in foreign markets. This paper hinges on the subtle distinction between wealth and income. We also provide an overview of each market analyzed. Our premise is that stock market fluctuations are correlated with wine demand such that changes in one series may change the other. Further, seasonality and price changes are also considered as components of international wine demand. Our results show that in certain countries, stock market returns are correlated with wine demand, positively in some cases, negatively in others.
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Eddie C.M. Hui, Xian Zheng and Wen‐juan Zuo
The purpose of this paper is to explore the long‐run relation and short‐run dynamic correlations between consumption expenditure and household wealth, namely housing wealth and…
Abstract
Purpose
The purpose of this paper is to explore the long‐run relation and short‐run dynamic correlations between consumption expenditure and household wealth, namely housing wealth and stock wealth.
Design/methodology/approach
This paper adopts aggregate time‐series data over the period of 1981Q1‐2010Q4 in Hong Kong. It employs the ARDL to cointegration procedure and the multivariate stochastic volatility (MSV) model to investigate the long‐run elasticity and dynamic correlations between aggregate consumption expenditure and household wealth indicators.
Findings
The results suggest that both housing wealth and stock wealth have significant effects on consumption expenditure after controlling for the aggregate income level. The long‐run elasticity of consumption expenditure with respect to housing wealth and stock wealth are 0.3877 and 0.1424 respectively, while the marginal propensity to consume for housing wealth and for stock wealth are 0.2159 and 0.0266 respectively. The dynamic correlation analysis implies that the decrease in housing and stock wealth may further depress consumer behavior and economic condition during the post‐financial crisis period.
Originality/value
This paper provides useful information with regard to the long‐run and dynamic relations between consumption and different types of wealth components.
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Souhir Neifar and Sebastian Utz
The purpose of this paper is to examine the influence of earnings management (EM) and tax aggressiveness (TA) on shareholder wealth and on stock price crash risk (SPCR) of German…
Abstract
Purpose
The purpose of this paper is to examine the influence of earnings management (EM) and tax aggressiveness (TA) on shareholder wealth and on stock price crash risk (SPCR) of German companies.
Design/methodology/approach
The sample comprises 820 firm-year observations of 188 non-financial companies listed on German stock exchanges from 2008 to 2014. The authors apply generalized least square panel regression to overcome autocorrelation and heteroscedasticity problems.
Findings
EM and TA are not related in terms of affecting shareholder wealth and SPCR. EM has no impact on shareholder wealth but significantly affects SPCR. TA has a significant positive effect on shareholder wealth but no impact on SPCR. Thus, EM practices applied within German companies are non-opportunistic, as they do not affect shareholder wealth and decrease SPCR. TA practices are also non-opportunistic, as they increase shareholder wealth and do not affect SPCR.
Research limitations/implications
This study provides insights that can improve managers’ accounting choices (EM vs TA) and alleviate investor concerns about the effect of managers’ manipulation strategies. Considering other variables affecting TA, such as discretionary book tax differences, may add further insights into this discussion. The analysis of and comparison with other markets may shed more light on the validity and generalizability of the results.
Practical implications
This study recommends that investors must take into consideration the accounting variables to ensure better investment decisions and highlight the importance of CEO choices on market reaction.
Originality/value
The investigation of the mutual impact of EM and TA on shareholder wealth and SPCR is novel, and so too is the analysis of whether EM and TA are complementary or substitute for each other in this relationship.
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Aswin Alora and Mukesh Kumar Barua
Supply chain disruptions can have severe negative consequences on companies. However, studies measuring the financial impacts of supply chain disruptions are largely confined to…
Abstract
Purpose
Supply chain disruptions can have severe negative consequences on companies. However, studies measuring the financial impacts of supply chain disruptions are largely confined to developed nations and large companies. Therefore, this study aims to analyze the impact of supply chain disruption on small companies in the context of an emerging nation. Further, an attempt has been made to classify supply chain disruptions and measure its impact by its type.
Design/methodology/approach
In this research, the event study on 335 supply chain disruption events for a 10 year period starting from 2009 to 2019 has been used.
Findings
The results state that the Indian small and medium companies lost −4.49% of shareholder wealth in disruption. The findings also indicate that the financial and environmental disruptions can have severe effect on shareholder wealth as compared to other category.
Research limitations/implications
The study is confined to a developing country. Considering multiple countries can provide comparative results and therefore a global consensus could be achieved.
Practical implications
The outcomes of the results help managers to plan and prioritize supply chain disruptions, regulatory authorities can plug any possible insider trading practices for small companies in the event of supply chain disruptions. Investors can plan and take prudent investing decisions based on the nature of the disruptions.
Originality/value
To the best of the knowledge, this is the first study measuring the supply chain disruption effects on smaller companies in an emerging nation. The study is also novel in incorporating financial disruptions and measuring source wise impact on shareholder wealth.
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Michael K. Fung and Arnold C. S. Cheng
Using a sample of developed and developing nations (including China and Hong Kong), this study examines the financial market and housing wealth effects on consumption. Housing…
Abstract
Using a sample of developed and developing nations (including China and Hong Kong), this study examines the financial market and housing wealth effects on consumption. Housing performs the dual functions as both a commodity providing a flow of housing services and an investment providing a flow of capital income. With an empirical framework based on the permanent income hypothesis, this study's findings suggest that a rise in housing price has both a positive wealth effect and a negative price effect on consumption. While the positive wealth effect is caused by an increase in capital income from housing investment, the negative price effect is caused by an increase in the cost of consuming housing services. Moreover, the sensitivity of consumption to unanticipated changes in housing price is related to the level of financial and institutional development.
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Cyrus A. Ramezani and James J. Ahern
As digital technologies expand access to new forms of legalized gambling, including sports betting and online gaming, it is important to assess the impact of macroeconomic and…
Abstract
Purpose
As digital technologies expand access to new forms of legalized gambling, including sports betting and online gaming, it is important to assess the impact of macroeconomic and equity market outcomes on fund flows into gambling. The authors’ findings will be of interest to policymakers and the gambling industry, as various forms of gambling, including day trading, gain broad public acceptance.
Design/methodology/approach
The authors examine the impact of macroeconomic forces, business cycles, and financial market wealth on gambling. The authors propose a nonlinear model linking aggregate gambling expenditures to macroeconomic, stock market, and gambling industry variables. The authors estimate the proposed model using nonlinear estimation procedures.
Findings
The authors find that price of wagering, incomes, and supply of gambling opportunities are the primary determinants of wagering demand. Aggregate wagering is negatively impacted by realized stock returns and market volatility, but rises during recessions.
Originality/value
To the best of the authors’ knowledge, the questions posed and addressed in this manuscript have not been addressed in prior literature.
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