Search results

1 – 10 of 13
To view the access options for this content please click here

Abstract

Details

Contemporary Issues in Business Economics and Finance
Type: Book
ISBN: 978-1-83909-604-4

To view the access options for this content please click here
Article

Athanasios Fassas, Stephanos Papadamou and Dionisis Philippas

The purpose of this paper is to examine the spillover effects in international financial markets related to investors’ risk aversion as proxied by the variance premium…

Abstract

Purpose

The purpose of this paper is to examine the spillover effects in international financial markets related to investors’ risk aversion as proxied by the variance premium, and how these relationships were affected by the quantitative easing (QE) announcements by the Federal Reserve.

Design/methodology/approach

The empirical analysis employs a multivariate exponential generalized autoregressive conditionally heteroskedastic (VAR-EGARCH) specification, which includes the USA, the UK, Germany, France and Switzerland.

Findings

Two main findings are raised from the empirical analysis. First, the VAR-EGARCH model identifies statistically significant spillover effects identifying the USA as the leading source driving investors’ risk aversion. Second, unconventional monetary easing announcement by the Fed has had significant effects on investors’ risk perspectives.

Practical implications

Accounting for the dynamic volatility of variance premium inter-dependencies, the authors show that the correlations among variance premia increase during the QE announcements by the Federal Reserve, suggesting a herding behavior that may potentially lead to stock price bubbles and undermine financial stability.

Originality/value

This is an empirical attempt that investigates the unexplored effects of unconventional monetary policy decisions in relation with investors’ attitudes toward risk.

Details

Review of Behavioral Finance, vol. 12 no. 2
Type: Research Article
ISSN: 1940-5979

Keywords

To view the access options for this content please click here
Article

Walid M.A. Ahmed

Over a short interval of time (i.e. 2011-2014), Egypt has experienced tectonic political shifts, including the toppling of a long-entrenched dictator, two presidential…

Abstract

Purpose

Over a short interval of time (i.e. 2011-2014), Egypt has experienced tectonic political shifts, including the toppling of a long-entrenched dictator, two presidential elections, and a military coup. The purpose of this paper is to provide an analysis of the impact of such events on the country’s equity market behaviour, both in terms of returns and volatility.

Design/methodology/approach

The data set is composed of daily stock index closing prices for the overall market and top eight most actively traded sectors. To assess the impact of the considered events on the market and sector returns, an event study approach is applied. On the other hand, a univariate VAR-EGARCH model is employed to explore whether, and to what extent, volatilities at the market and sector levels respond to such events.

Findings

The results suggest that political uncertainty has a profound impact on the risk-return profiles of almost all market sectors, with different degrees of intensity. By and large, the price and volatility effects are most pronounced in banks, financial services excluding banks and chemicals sectors, whilst food and beverages as well as construction and materials sectors are found to be the least responsive to these events. The 2013 military coup turns out to be the most pervasive event impinging on the market and sector-specific indices.

Practical implications

The results have a number of practical implications that could be of interest to many parties involved. More specifically, with political dysfunction overshadowing business and investment activities in Egypt, genuine democratic reforms, which entail proper regard for human rights and the rule of law, must have the highest priority of policymakers, in order to secure a positive investment climate and to foster investor confidence. Furthermore, in tandem with considering other relevant factors, multinational companies need to have a thorough assessment of Egypt’s future political course and to develop more robust contingency plans to effectively combat potential threats generated by political vicissitudes.

Originality/value

To the author’s best knowledge, this study is the first attempt to empirically examine the price and volatility effects of the recent presidential events in Egypt, thereby contributing to the relevant literature in this area.

Details

International Journal of Emerging Markets, vol. 12 no. 3
Type: Research Article
ISSN: 1746-8809

Keywords

To view the access options for this content please click here
Article

Melih Kutlu and Aykut Karakaya

This study aimed to investigate return and volatility spillover between the Borsa Istanbul (BIST) and the Moscow Stock Exchange (RTS).

Abstract

Purpose

This study aimed to investigate return and volatility spillover between the Borsa Istanbul (BIST) and the Moscow Stock Exchange (RTS).

Design/methodology/approach

This study used generalized autoregressive conditionally heteroscedasticity (GARCH) model for volatility and the Aggregate Shock (AS) model for return and volatility spillover. The data are divided into six sub-periods. Period events take place between Turkey and Russia.

Findings

BIST investors considered the return and volatility of the RTS, it is observed that Moscow Stock Exchange investors considered only the return of BIST at the full sample. It is only a return spillover from BIST to RTS and neither the return nor the volatility of the RTS is spillover to BIST in the pre-crisis period. No evidence of return and volatility spillover between the BIST and the RTS in the post-crisis period. The returns and volatility spillovers between Russia and Turkey are mutual feedback in the jet crisis period.

Practical implications

Economic developments between Turkey and Russia is growing rapidly in recent years. The return and volatility analysis between the stock exchanges of these two countries is important for investment decisions.

Originality/value

There are many studies in the literature about emerging markets. There are also Turkish and Russian stock exchanges in these studies. However, this study only examined return and volatility spillover analysis between the Turkish and Russian stock exchanges and prevents the results from being overlooked among other countries.

Details

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

Keywords

To view the access options for this content please click here
Book part

Letife Özdemir and Serap Vurur

Capital markets thrive on information, and the information revolution has transformed these markets all over the world. Investors can now keep track of the movements of…

Abstract

Capital markets thrive on information, and the information revolution has transformed these markets all over the world. Investors can now keep track of the movements of capital markets in real-time and they react to the flow of information from around the world. One of the concerns of stock market investors is whether the markets operate efficiently, independently, and with sound fundamentals. However, real market movements tend to exhibit a link as is evident from recent market movements across the world.

The assessment of interdependence between stock markets is an important aspect of international portfolio management. The aim of this chapter is to examine the shock and volatility spillover between the Standard and Poor’s 500 (S&P500) index from the United States (US) Stock Exchange and the Istanbul Stock Exchange 100 (BIST100) index from the Stock Exchange Istanbul.

S&P500 index, which is the most important index representing US markets, and BIST100 index, which is the index representing the Turkish market, were used as variables in this study. In the analysis, the causality in variance test was applied to determine the volatility spillover between these two markets. Later, multivariate GARCH (MGARCH) models were used to measure the volatility spillover in the markets. VAR(1)-GARCH (1,1)-Diagonal BEKK model was applied to the daily data to determine the shock and volatility spillover in the markets.

As a result of the variance causality test, it was found that there is a bi-directional volatility spillover between S&P500 index and BIST100 index. When the return spillover between the markets is examined, a one-way spillover from the S&P500 index to the BIST100 index emerged. Diagonal BEKK model results show that each market is affected by its own news (unexpected shocks) and volatility. Furthermore, the volatility is persistent for both markets. These findings demonstrate that the US market and the Turkish market interact with each other.

To view the access options for this content please click here
Article

Zhang Dengjun

This study aims to link the financial cooperation in the Nordic region and the interdependence between the stock markets in this area. The main emphasis is placed on the…

Abstract

Purpose

This study aims to link the financial cooperation in the Nordic region and the interdependence between the stock markets in this area. The main emphasis is placed on the evolution of this interdependence as the financial integration was proceeding.

Design/methodology/approach

Johansen’s cointegration technique and the exponential generalized autoregressive conditionally heteroskedastic model are applied to test the long-run and short-run interdependences, respectively, among Nordic stock markets. In particular, the recursive estimation approach is used to reveal the evolution of the interdependence between those markets.

Findings

The existence of two cointegrations over the sample period indicates that the markets depend on each other to some extent. The recursive estimation of Johansen’s model further reveals that the interdependence had been greatly improving until late 2008. The interdependence between those markets is also confirmed convincingly by the short-term dynamics, noting that the spillover effects between most pairs of stock volatilities are witnessed in the empirical results.

Practical implications

The findings show the dynamics of the long-run correlations between the Nordic stock markets, which imply the intrinsic response to the process of financial market reforms, the 2008 global financial crisis and the period after the crisis. The evidenced information about determinants of the interdependence between Nordic stock markets is sending strong signals to investors to enhance their investment strategies.

Originality/value

Most of the existing studies have been restricted to the static long-run and/or short-run interdependence among those markets. However, this study contributes to the literature by investigating the dynamics of interdependence among the Nordic stock markets over time; moreover, the evolution of the market interdependence is sketched closely to the process of the regional financial market reforms.

Details

Review of Accounting and Finance, vol. 14 no. 2
Type: Research Article
ISSN: 1475-7702

Keywords

To view the access options for this content please click here
Book part

Sezer Bozkuş Kahyaoğlu and Hilmi Tunahan Akkuş

Introduction – The rapid flow of information between the markets eliminates the possibility of diversifying the portfolio by bringing the markets closer, and may cause the…

Abstract

Introduction – The rapid flow of information between the markets eliminates the possibility of diversifying the portfolio by bringing the markets closer, and may cause the volatility in a market to spread to another market. In this context, revealing the relationships between conventional and participation markets or financial assets is important in terms of portfolio diversification and risk management.

Purpose – The major aim of this work is to analyse the existence of volatility spillover between conventional stock index and participation index based on the indexes in Turkish Capital Markets. BIST-30 and Katılım-30 indexes are used as the representatives of conventional stock index and participation index, respectively.

Methodology – Firstly, the univariate HYGARCH (1,d,1) parameters are calculated, and secondly, the dynamic equicorrelation (DECO) methodology is applied. DECO model is proposed to simplify structural assumptions by introducing a structure in which all twosomes of returns take the same correlation for a given time period. In this way, DECO model enables to have an optimal portfolio selection in comparison to an unrestricted time varying-dynamic correlation approaches and gives more advanced forecasting ability for the duration of the financial crisis periods compared to the various portfolios.

Findings – There is a strong correlation between BIST-30 and Katılım-30. They are affected by the same shocks. We expect to see different investor behaviours for Katılım-30 and BIST-30. However, they seem to have almost the same investor profile. In addition, there is a causality in both ways and volatility spillover between them.

To view the access options for this content please click here
Article

Dilip Kumar and Srinivasan Maheswaran

This paper aims to propose a framework based on the unbiased extreme value volatility estimator (namely, the AddRS estimator) to compute and predict the long position and…

Abstract

Purpose

This paper aims to propose a framework based on the unbiased extreme value volatility estimator (namely, the AddRS estimator) to compute and predict the long position and the short position value-at-risk (VaR) and stressed expected shortfall (ES). The precise prediction of VaR and ES measures has important implications toward financial institutions, fund managers, portfolio managers, regulators and business practitioners.

Design/methodology/approach

The proposed framework is based on the Giot and Laurent (2004) approach and incorporates characteristics like long memory, fat tails and skewness. The authors evaluate its VaR and ES forecasting performance using various backtesting approaches for both long and short positions on four global indices (S&P 500, CAC 40, Indice BOVESPA [IBOVESPA] and S&P CNX Nifty) and compare the results with that of various alternative models.

Findings

The findings indicate that the proposed framework outperforms the alternative models in predicting the long and the short position VaR and stressed ES. The findings also indicate that the VaR forecasts based on the proposed framework provide the least total loss for various long and short position VaR, and this supports the superior properties of the proposed framework in forecasting VaR more accurately.

Originality/value

The study contributes by providing a framework to predict more accurate VaR and stressed ES measures based on the unbiased extreme value volatility estimator.

Details

Studies in Economics and Finance, vol. 34 no. 4
Type: Research Article
ISSN: 1086-7376

Keywords

Abstract

Details

Managerial Finance, vol. 31 no. 2
Type: Research Article
ISSN: 0307-4358

Keywords

To view the access options for this content please click here
Article

Sin-Yu Ho

The purpose of this paper is to examine the macroeconomic determinants of stock market development in South Africa during the period 1975–2015. Specifically, it examines…

Abstract

Purpose

The purpose of this paper is to examine the macroeconomic determinants of stock market development in South Africa during the period 1975–2015. Specifically, it examines the impact of banking sector development, economic growth, inflation rate, real interest rate and trade openness on the development of the South African stock market.

Design/methodology/approach

The author employs autoregressive distributed lag bounds testing procedure that allows the author to empirically investigate both the short- and long-run relationships between the stock market development and its determinants in the context of South Africa. In addition, the author also conducts a sensitivity analysis by accounting for the presence of structural breaks in the underlying series to check for the robustness of the estimation.

Findings

This paper confirms the findings by other studies that banking sector development and economic growth promote stock market development, while inflation rate and real interest rate inhibit stock market development. In addition, this paper finds an interesting result in the fact that trade openness has a negative impact on stock market development, which is different from the findings of many other studies.

Originality/value

Currently, while the theoretical and empirical literature presents diverse views on the relationship between each determinant and stock market development, no study has focussed on the South African stock market. Given the significant role that the South African stock market plays in Africa as measured by its market capitalisation and market capitalisation ratio, there is a need for a better understanding of the macroeconomic factors influencing its development.

Details

International Journal of Emerging Markets, vol. 14 no. 2
Type: Research Article
ISSN: 1746-8809

Keywords

1 – 10 of 13