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Open Access
Article
Publication date: 11 January 2021

Szymon Stereńczak

This paper aims to empirically indicate the factors influencing stock liquidity premium (i.e. the relationship between liquidity and stock returns) in one of the leading European…

1208

Abstract

Purpose

This paper aims to empirically indicate the factors influencing stock liquidity premium (i.e. the relationship between liquidity and stock returns) in one of the leading European emerging markets, namely, the Polish one.

Design/methodology/approach

Various firms’ characteristics and market states are analysed as potentially affecting liquidity premiums in the Polish stock market. Stock returns are regressed on liquidity measures and panel models are used. Liquidity premium has been estimated in various subsamples.

Findings

The findings vividly contradict the common sense that liquidity premium raises during the periods of stress. Liquidity premium does not increase during bear markets, as investors lengthen the investment horizon when market liquidity decreases. Liquidity premium varies with the firm’s size, book-to-market value and stock risk, but these patterns seem to vanish during a bear market.

Originality/value

This is one of the first empirical papers considering conditional stock liquidity premium in an emerging market. Using a unique methodological design it is presented that liquidity premium in emerging markets behaves differently than in developed markets.

Details

Studies in Economics and Finance, vol. 38 no. 1
Type: Research Article
ISSN: 1086-7376

Keywords

Open Access
Article
Publication date: 12 October 2018

Syed Haroon Rashid, Mohsin Sadaqat, Khalil Jebran and Zulfiqar Ali Memon

This study aims to investigate the market timing strategy in different market conditions (i.e. up, down, normal and in-financial-crisis situation) in the emerging market of…

8762

Abstract

Purpose

This study aims to investigate the market timing strategy in different market conditions (i.e. up, down, normal and in-financial-crisis situation) in the emerging market of Pakistan over the period 1995 to 2015. Furthermore, this study tests the validity of the capital asset pricing model (CAPM) and Fama and French model.

Design/methodology/approach

This study considers monthly stock returns of 167 firms and constructs six different portfolios on the basis of different size and book to market ratio. The Treynor and Mazuy model is used to capture the market timing strategy.

Findings

The results indicate evidence of the market timing in normal market conditions. However, there is less supportive evidence of market timing in up-market, down-market and in-financial-crisis situations. This study also confirms the validity of the capital asset pricing model and Fama and French three-factor model with strong support of value premium and size premium in the stock market.

Practical implications

The findings of this study are helpful to companies in estimating the cost of issuing equity more accurately. The investors can use market timing to make their investment in a more better and profitable manner.

Originality/value

Unlike other previous studies, this study considers an extended period to test the validity of the capital asset pricing model and Fama and French model. In addition, this study is novel in testing the marketing timing of the firms in the context of emerging economy of Pakistan.

Details

Journal of Economics, Finance and Administrative Science, vol. 23 no. 46
Type: Research Article
ISSN: 2077-1886

Keywords

Open Access
Article
Publication date: 7 September 2021

Freddy H. Marín-Sánchez, Julián A. Pareja-Vasseur and Diego Manzur

The purpose of this article is to propose a detailed methodology to estimate, model and incorporate the non-constant volatility onto a numerical tree scheme, to evaluate a real…

Abstract

Purpose

The purpose of this article is to propose a detailed methodology to estimate, model and incorporate the non-constant volatility onto a numerical tree scheme, to evaluate a real option, using a quadrinomial multiplicative recombination.

Design/methodology/approach

This article uses the multiplicative quadrinomial tree numerical method with non-constant volatility, based on stochastic differential equations of the GARCH-diffusion type to value real options when the volatility is stochastic.

Findings

Findings showed that in the proposed method with volatility tends to zero, the multiplicative binomial traditional method is a particular case, and results are comparable between these methodologies, as well as to the exact solution offered by the Black–Scholes model.

Originality/value

The originality of this paper lies in try to model the implicit (conditional) market volatility to assess, based on that, a real option using a quadrinomial tree, including into this valuation the stochastic volatility of the underlying asset. The main contribution is the formal derivation of a risk-neutral valuation as well as the market risk premium associated with volatility, verifying this condition via numerical test on simulated and real data, showing that our proposal is consistent with Black and Scholes formula and multiplicative binomial trees method.

Details

Journal of Economics, Finance and Administrative Science, vol. 26 no. 52
Type: Research Article
ISSN: 2218-0648

Keywords

Open Access
Article
Publication date: 15 March 2022

Sana Tauseef and Philippe Dupuy

This paper aims to expand foreign investors' understanding of potential return enhancement and risk diversification advantages offered by equity market of Pakistan through…

2050

Abstract

Purpose

This paper aims to expand foreign investors' understanding of potential return enhancement and risk diversification advantages offered by equity market of Pakistan through comparing its performance to performances in other markets and investigating what matters for investing in Pakistan's market.

Design/methodology/approach

Comparative analysis of Pakistan Stock Exchange is performed using data for 22 developed and 22 emerging markets over the period 1993–2019. Cross-sectional analysis is performed using data for 130 non-financial firms from Pakistan and Carhart (1997) and Fama and French (2015) models are applied. The role of liquidity with five-factor model is analyzed using turnover rate and Amihud (2002) illiquidity cost as liquidity measures.

Findings

Pakistan's equity offers substantial diversification benefits if added to developed market portfolios. However, observed large returns come together with inverted premia for most traditional factors indicating that investors may want to invest preferably in big stocks with low book-to-market and momentum. Finally, global investors can invest in high yielding stocks with low liquidity risk owing to positive connection between liquidity and returns.

Practical implications

This study will provide investment model for foreign investors to enhance their portfolio returns. Policy makers in Pakistan must identify regulatory steps to facilitate foreign investments.

Originality/value

To the best of the authors' knowledge, this is the first study which identifies efficiency gains offered by Pakistan's equity for global investors.

Details

Journal of Economics, Finance and Administrative Science, vol. 27 no. 54
Type: Research Article
ISSN: 2218-0648

Keywords

Open Access
Article
Publication date: 15 September 2023

Franz Eduard Toerien, John H. Hall and Leon Brümmer

This study investigates whether the disclosure of derivatives is value relevant in emerging markets and evaluates the effects of the 2008/2009 global financial crisis on the value

Abstract

Purpose

This study investigates whether the disclosure of derivatives is value relevant in emerging markets and evaluates the effects of the 2008/2009 global financial crisis on the value relevance of derivative disclosures.

Design/methodology/approach

Panel regression models using sub-samples and a crisis interaction term were applied to a sample of the 200 largest non-financial firms by market capitalization listed on the Johannesburg Stock Exchange (JSE) from 2005 to 2017 to assess the consequences of the financial crisis.

Findings

The results suggest that the disclosure of derivatives is value relevant in the hitherto understudied context of emerging markets. The 2008/2009 financial crisis had a significant impact on derivatives use and the value relevance of derivatives disclosure by JSE-listed companies.

Practical implications

Companies should reconsider both how they employ derivatives as part of their risk management practices and how they communicate derivatives use to stakeholders in the financial statements. The findings facilitate a comparative analysis across various market contexts by researchers and assist investors in better decision-making. The findings can influence regulatory practices and can help standard setters to review disclosure requirements.

Originality/value

The benefits of corporate hedging were studied from an emerging market perspective, using an original dataset and approach to investigate the effects of international financial volatility on emerging markets. The authors tested whether companies are valued differently, based on their disclosure of the use of derivatives in the financial statements, and the effect of the financial crisis on the value relevance derivatives disclosures.

Details

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

Keywords

Open Access
Article
Publication date: 30 June 2010

Jai S. Mah

This paper examines whether or not one of the export incentives, i.e. export insurance, provided by the Korean government has promoted the export supply of Korea. The role of…

Abstract

This paper examines whether or not one of the export incentives, i.e. export insurance, provided by the Korean government has promoted the export supply of Korea. The role of transaction cost in administering the export insurance system is considered in the current analysis. The small sample cointegration tests show that the concerned variables are not cointegrated. The empirical evidence using the first differenced data shows that the provision of export incentives in terms of export insurance by the government does not have a significant effect on increasing the export supply of Korea.

Details

Journal of International Logistics and Trade, vol. 8 no. 1
Type: Research Article
ISSN: 1738-2122

Keywords

Open Access
Article
Publication date: 17 March 2023

Cheol-Won Yang

The recommendation of the analyst report is not only limited to a small number of ratings, but also biased toward a buy opinion with the absence of sell opinion. As an alternative…

Abstract

The recommendation of the analyst report is not only limited to a small number of ratings, but also biased toward a buy opinion with the absence of sell opinion. As an alternative to this, this paper aims to extract analysts' textual opinions embedded in the report body through text analysis and examine the profitability of investment strategies. Analyst opinion about a firm is measured by calculating the frequency of positive and negative words in the report text through the Korean sentiment lexicon for finance (KOSELF). To verify the usefulness of textual opinions, the author constructs a calendar-time based portfolios by the analysts' textual opinion variable of each stock. When opinion level is used, investment strategy has no significant hedged portfolio return. However, hedged portfolio constructed by opinion change shows significant return of 0.117% per day (2.57% per month). In addition, the hedged return increases to 0.163% per day (3.59% per month) when the opening price is used instead of closing price. This study show that the analysts’ opinion extracted from text analysis contains more detailed spectrum than recommendation and investment strategies using them give significant returns.

Details

Journal of Derivatives and Quantitative Studies: 선물연구, vol. 31 no. 2
Type: Research Article
ISSN: 1229-988X

Keywords

Content available
Book part
Publication date: 10 April 2023

Abstract

Details

Comparative Analysis of Trade and Finance in Emerging Economies
Type: Book
ISBN: 978-1-80455-758-7

Open Access
Article
Publication date: 2 April 2019

Fuad Fuad, Agung Juliarto and Puji Harto

This study aims to examine whether International Financial Reporting Standards (IFRS) convergence process adds value to the accounting quality dimensions, including accruals…

7010

Abstract

Purpose

This study aims to examine whether International Financial Reporting Standards (IFRS) convergence process adds value to the accounting quality dimensions, including accruals quality, earnings smoothing, timely loss recognition and earnings persistence.

Design/methodology/approach

It analyzes the hypothesis of accounting quality changes in post-IFRS convergence by using the univariate and multivariate statistics. Particularly, the authors rely on panel data analyses using industrial companies’ data from 2008 until 2014, comprising 3,861 firm-years observations, in Indonesia.

Findings

The results indicate that there is no conclusive evidence that all accounting quality dimensions including accruals quality, earnings smoothing, timely loss recognition and earnings persistence increased in post-IFRS convergence.

Practical implications

The findings of this study may help regulators and standard setters to consider future adoption of IFRS, mostly to figure out the best “formula” to increase the usefulness of accounting information in post-IFRS convergence.

Originality/value

Rather than doing piecemeal work, the current study focuses on IFRS convergence on a broader aspect of accounting quality dimensions. It also focuses on the convergence process of IFRS as an alternative of full adoption, which has been the focus of many research studies.

Details

Journal of Economics, Finance and Administrative Science, vol. 24 no. 48
Type: Research Article
ISSN: 2077-1886

Keywords

Open Access
Article
Publication date: 5 November 2018

Jorge Guillen

308

Abstract

Details

Journal of Economics, Finance and Administrative Science, vol. 23 no. 46
Type: Research Article
ISSN: 2077-1886

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