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1 – 10 of over 1000This 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…
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.
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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…
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.
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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.
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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…
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.
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.
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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.
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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.
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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…
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.
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