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11 – 20 of over 17000
Article
Publication date: 1 October 2021

Bechir Ben Ghozzi and Hasna Chaibi

The authors provide a comparative analysis between emerging and developed financial markets in terms of the effects of political risks on stock market returns and volatility. The…

Abstract

Purpose

The authors provide a comparative analysis between emerging and developed financial markets in terms of the effects of political risks on stock market returns and volatility. The authors also examine whether this impact depends on the nature of political risks. Therefore, this study aims to detect which financial markets are the most profitable and the riskiest in terms of political risks.

Design/methodology/approach

The authors investigate the impact of political risks on the excess stock market return and its conditional volatility using the generalized ARCH model for a sample of 46 developed and emerging markets over a period ranging from 1995 to 2019. In order to test how the nature of political risks affects equity excess returns and volatility differently in different markets, the authors employ (1) a composite political risk score, (2) the four subgroups of political risks as defined by Bekaert et al. (2005, 2014) and (3) the individual dimensions of political risks.

Findings

The findings indicate that the composite political risk is priced into both stock markets. The effect of political risks is positive for excess returns and negative for volatility. The authors show that the political risk leads to more volatility in developed markets. Nevertheless, the effect of individual components varies according to the market category.

Practical implications

The authors provide a framework for predicting market returns and volatility using changes in the political risk of the country. The findings help investors make investment decisions based on the political decisions of governments. In other words, investors should consider political uncertainty when determining their expected earnings.

Originality/value

The authors engage monthly panel data methodology in terms of the political risk stock market relationship. In addition, the authors consider recent and very long data covering the period 1995–2019. Furthermore, this study combines three various political risk measures, and both equity returns and volatility.

Details

EuroMed Journal of Business, vol. 17 no. 4
Type: Research Article
ISSN: 1450-2194

Keywords

Article
Publication date: 12 February 2018

Irma Malafronte, Maria Grazia Starita and John Pereira

This paper aims to examine whether risk disclosure practices affect stock return volatility and company value in the European insurance industry.

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Abstract

Purpose

This paper aims to examine whether risk disclosure practices affect stock return volatility and company value in the European insurance industry.

Design/methodology/approach

Using a self-constructed “risk disclosure index for insurers” (RDII) to measure the extent of information disclosed on risks and using panel data regression on a sample of European insurers for 2005-2010, it tests the relationship between RDII and stock return volatility; whether this relationship is affected by financial crisis; and whether RDII affects insurance companies’ embedded value.

Findings

The main results indicate that higher RDII contributes to higher volatility, suggesting that “less is more” rather than “more is good”. However, higher RDII leads to lower volatility when the insurer has a positive net income, thus “more is good when all is good” and “less is good when all is bad”. Furthermore, the relationship between RDII and stock return volatility is not affected by financial crisis, raising concerns regarding the effectiveness of insurers’ risk disclosure to reassure the market. Moreover, higher RDII is found to impact positively on embedded value, thus contributing toward higher firm value.

Practical implications

The findings could drive insurers’ choices on communication and transparency, alongside regulators’ decisions about market discipline. They also suggest that risk disclosure could be used to strengthen market discipline and should be added to the other variables traditionally used in stock return volatility and firm value estimation models in the insurance industry.

Originality/value

This paper offers new insights in the debate on the bright and dark sides of risk disclosure in the insurance industry and provides interesting implications for insurers and their stakeholders.

Details

Review of Accounting and Finance, vol. 17 no. 1
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 22 February 2011

Bashar S. Al‐Yaseen and Husam Aldeen Al‐Khadash

This paper seeks to examine the risk relevance of fair value income measures under IAS 39 and IAS 40.

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Abstract

Purpose

This paper seeks to examine the risk relevance of fair value income measures under IAS 39 and IAS 40.

Design/methodology/approach

The study sample comprises Jordanian insurance companies. Data were collected from two main sources: Jordanian insurance companies' annual reports, and the official website of the Amman Stock Exchange. The study begins by investigating the volatility of four income measures, calculated by including and excluding holding gains or losses of financial instruments and property investments. Then it examines the association between its four income volatility measures and one stock market‐based risk factor, in order to provide evidence on the risk‐related information content of each income volatility measure.

Findings

Income based on fair values reflects income volatility more than historical cost‐based income. It is also found that income is (not) more volatile with the recognition of unrealized fair value gains/losses on financial instruments (investment property). Results of assessing the relative explanatory power of income volatility measures suggest that not all fair value income volatility measures can be a good proxy of the total risk. On the contrary, none of our income volatility measures provides significant incremental risk‐relevant information for total risk.

Originality/value

Most prior studies have focused on the value relevance of fair value accounting in Western developed countries, and mainly in the banking sector. This study makes a significant contribution to existing knowledge via exploring the applications of fair value accounting by insurance companies and investigating the implications of mark‐to‐market on risk, instead of share price, in an emerging country – Jordan. The findings of this study are useful to researchers and capital‐market participants interested in explaining accounting and market risk measures.

Details

Journal of Accounting in Emerging Economies, vol. 1 no. 1
Type: Research Article
ISSN: 2042-1168

Keywords

Article
Publication date: 18 April 2017

Hisham Al Refai, Mohamed Abdelaziz Eissa and Rami Zeitun

The risk-return relationship is one of the most widely investigated topics in finance, yet this relationship remains one of the most controversial topics. The purpose of this…

Abstract

Purpose

The risk-return relationship is one of the most widely investigated topics in finance, yet this relationship remains one of the most controversial topics. The purpose of this paper is to investigate the asymmetric volatility and the risk-return tradeoff at the sector level in the emerging stock market of Jordan.

Design/methodology/approach

Data consist of daily prices for 22 sub-sectors spanning from August 1, 2006, to September 30, 2015, covering the periods of pre, during, and after the global financial crisis. The EGARCH-M model is used to document the patterns of asymmetric volatility of sub-sector returns and the risk-return tradeoff during the non-overlapping three sub-sample periods.

Findings

The major findings of this study are as follows. In the pre-crisis period, the results suggest some evidence of a positive relationship between risk and return. The results also reveal that good news has more effect than bad news during the same period. In the crisis period, there is a negative but insignificant risk-return relationship and negative shocks have more impact than positive ones. In the post-crisis period, the authors find positive but insignificant risk-return tradeoff with weak evidence of volatility asymmetry.

Practical implications

The results have major implications for investors willing to engage their investment decisions in the Amman Stock Exchange (ASE) and for policymakers who seek to attract and retain regional and international investors. Since the empirical investigation is conducted at the sector level, the study may aid investors to target specific sub-sectors with positive and significant risk-return tradeoff. In addition, investors need to monitor the asymmetric patterns which make the level of risk-aversion more susceptible to coming news. For policymakers, the latest infrastructure reforms are crucial to achieving the potential for growth but the ASE market authority needs to undergo further reforms and provide various promotional incentives.

Originality/value

Although there are numerous studies on asymmetric volatility and risk-return tradeoff, there is a lack of parallel studies at the sector level for both developed and emerging stock markets. Such assessment at the sector level is crucial for international investors after their choice of countries or markets for better choice of portfolio diversification and allocation of financial resources.

Details

International Journal of Emerging Markets, vol. 12 no. 2
Type: Research Article
ISSN: 1746-8809

Keywords

Book part
Publication date: 3 September 2021

Pedro Manuel Nogueira Reis and Carlos Pinho

Purpose: This work provides an empirical analysis of investor behaviour's simultaneous influence due to the surprise effect caused by COVID-19 cases and government responses to…

Abstract

Purpose: This work provides an empirical analysis of investor behaviour's simultaneous influence due to the surprise effect caused by COVID-19 cases and government responses to market risk. This analysis compares tourism assets risk with other sectors and different types of investors' assets and categories in Europe.

Design: The paper applies an ARIMA with a GARCH model to predict conditional volatility of models for market uncertainty. Nonlinear models, factor analysis and time series linear regression for stationary variables in first differences are applied to predict market uncertainty.

Findings: We demonstrate that market risk does not arise from COVID-19 cases but instead from the surprise effect, as the market accurately predicts future cases. Only the volatility of the sectors Travel, Airline, and Utility are influenced by both surprise effect and government response, but only the travel sector reveals an interaction effect with both government response effort and surprise effect.

Originality: The article mutually studies the simultaneous interactions among investor behaviour due to the surprised effect caused by COVID-19 and government responses to the pandemic and the influence on professional investors' volatility in two asset types and between different sectors.

Practical implications: With this model and results, investors and financial service providers may verify whether or not government intervention during pandemic periods is effective in reducing uncertainty and risk levels on sectors, types of investors and different sorts of assets.

Details

Pandemics and Travel
Type: Book
ISBN: 978-1-80071-071-9

Keywords

Article
Publication date: 24 August 2020

Hechem Ajmi and Nadia Arfaoui

This paper aims to investigate the effect of the political risk on Bitcoin return and volatility during the 2016 US pre-election and post-election periods.

Abstract

Purpose

This paper aims to investigate the effect of the political risk on Bitcoin return and volatility during the 2016 US pre-election and post-election periods.

Design/methodology/approach

A daily composite political risk index is calculated by using the principal component analysis and Google Trends. A quantile regression approach is adopted to assess the effect of the political risk index on Bitcoin return and volatility for both periods subject to market conditions.

Findings

Findings reveal that the political risk index tends to increase when moving from the pre-election period to the post-election one. This is mostly attributed to the new challenges faced by the new elected government. During the pre-election period, the quantiles regression shows that the political risk index negatively affects Bitcoin return when the market is bearish, whereas a positive impact on volatility is found in bearish and bullish markets. When the political situation becomes severer during the post-election period, the quantiles plots show that the increase of the political risk index leads to a significant increase of Bitcoin return, whereas Bitcoin volatility remains relatively stable. This means that Bitcoin can be adopted as a hedging tool when the political situation becomes severer.

Originality/value

Comparing to the existed studies in the field, this paper considers Google trends as a main source to assess the daily composite political risk index during the 2016 US presidential election.

Details

Journal of Financial Economic Policy, vol. 13 no. 1
Type: Research Article
ISSN: 1757-6385

Keywords

Book part
Publication date: 29 December 2016

Emawtee Bissoondoyal-Bheenick, Robert Brooks, Sirimon Treepongkaruna and Marvin Wee

This chapter investigates the determinants of the volatility of spread in the over-the-counter foreign exchange market and examines whether the relationships differ in the crisis…

Abstract

This chapter investigates the determinants of the volatility of spread in the over-the-counter foreign exchange market and examines whether the relationships differ in the crisis periods. We compute the measures for the volatility of liquidity by using bid-ask spread data sampled at a high frequency of five minutes. By examining 11 currencies over a 13-year sample period, we utilize a balanced dynamic panel regression to investigate whether the risk associated with the currencies quoted or trading activity affects the variability of liquidity provision in the FX market and examine whether the crisis periods have any effect. We find that both the level of spread and volatility of spread increases during the crisis periods for the currencies of emerging countries. In addition, we find increases in risks associated with the currencies proxied by realized volatility during the crisis periods. We also show risks associated with the currency are the major determinants of the variability of liquidity and that these relationships strengthen during periods of uncertainty. First, we develop measures to capture the variability of liquidity. Our measures to capture the variability of liquidity are non-parametric and model-free variable. Second, we contribute to the debate of whether variability of liquidity is adverse to market participants by examining what drives the variability of liquidity. Finally, we analyze seven crisis periods, allowing us to document the effect of the crises on determinants of variability of liquidity over time.

Details

Risk Management in Emerging Markets
Type: Book
ISBN: 978-1-78635-451-8

Keywords

Article
Publication date: 13 February 2017

Martin Christopher and Matthias Holweg

The purpose of this paper is to provide an update to the Supply Chain Volatility Index (SCVI), and expand on prior work by presenting a conceptual framework illustrating how firms…

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Abstract

Purpose

The purpose of this paper is to provide an update to the Supply Chain Volatility Index (SCVI), and expand on prior work by presenting a conceptual framework illustrating how firms can deal with persistent volatility, the ensuing risk and mitigate the cost implications for their supply chain operations.

Design/methodology/approach

The authors use long-term time series of secondary data to assemble a “basket” of key indicators that are relevant to the business context within which global supply chains operate. The authors also report on five years of feedback gained from presentations of the SCVI to scholars and practitioners.

Findings

Volatility has reduced from record levels experienced during the global financial crises, yet remains at levels considerably higher than prior to the crisis, with no sign of a return to the more stable conditions that prevailed when many current supply chain networks were designed.

Research limitations/implications

The authors reaffirm that new mental models are needed which embrace volatility as a factor in supply chain design, rather than seek to eradicate it in supply chain operations. Traditional static “network optimisation” based on a simple definition of low unit cost seems no longer appropriate under conditions of persistent volatility.

Practical implications

The authors provide a conceptual link of volatility, risk and cost in the supply chain, and outline how firms can develop a supply chain strategy by managing their exposure to volatility.

Originality/value

The authors challenge the common assumption that volatility invariably leads to risk and higher cost in the supply chain. Instead the authors argue that the supply chain structure can mitigate the exposure to supply chain risk. The authors introduce the concepts of recovery and resilience cost within a framework designed to help firms manage volatility-induced risk by minimising the adverse cost implications of volatility in their supply chains.

Details

International Journal of Physical Distribution & Logistics Management, vol. 47 no. 1
Type: Research Article
ISSN: 0960-0035

Keywords

Article
Publication date: 20 February 2017

Worawuth Kongsilp and Cesario Mateus

The purpose of this paper is to investigate the role of volatility risk on stock return predictability specified on two global financial crises: the dot-com bubble and recent…

3063

Abstract

Purpose

The purpose of this paper is to investigate the role of volatility risk on stock return predictability specified on two global financial crises: the dot-com bubble and recent financial crisis.

Design/methodology/approach

Using a broad sample of stock options traded on the American Stock Exchange and the Chicago Board Options Exchange from January 2001 to December 2010, the effect of different idiosyncratic volatility forecasting measures are examined on future stock returns in four different periods (Bear and Bull markets).

Findings

First, the authors find clear and robust empirical evidence that the implied idiosyncratic volatility is the best stock return predictor for every sub-period both in Bear and Bull markets. Second, the cross-section firm-specific characteristics are important when it comes to stock returns forecasts, as the latter have mixed positive and negative effects on Bear and Bull markets. Third, the authors provide evidence that short selling constraints impact negatively on stock returns for only a Bull market and that liquidity is meaningless for both Bear and Bull markets after the recent financial crisis.

Practical implications

These results would be helpful to disclose more information on the best idiosyncratic volatility measure to be implemented in global financial crises.

Originality/value

This study empirically analyses the effect of different idiosyncratic volatility measures for a period that involves both the dotcom bubble and the recent financial crisis in four different periods (Bear and Bull markets) and contributes the existing literature on volatility measures, volatility risk and stock return predictability in global financial crises.

Details

China Finance Review International, vol. 7 no. 1
Type: Research Article
ISSN: 2044-1398

Keywords

Article
Publication date: 1 May 2006

Kim Hiang Liow and Qiong Huang

Aims to investigate whether the level and volatility of interest rates affect the excess returns of major Asian listed property markets within a time‐varying risk framework.

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Abstract

Purpose

Aims to investigate whether the level and volatility of interest rates affect the excess returns of major Asian listed property markets within a time‐varying risk framework.

Design/methodology/approach

A three‐factor model is employed with excess return volatility, interest rate level and interest rate volatility as its factors. The generalized autoregressive conditionally heteroskedasticity in the mean (GARCH‐M) analyzes are undertaken on monthly excess returns of property stock indexes for the period 1987‐2003.

Findings

Property stocks are generally sensitive to changes in the long‐term and short‐term interest rates and to a lesser extent, their volatility. Moreover, there are disparities in the magnitude as well as direction of sensitivities in interest rate level and volatility across the listed property markets and under different market conditions. Overall, results indicate changes in the ARCH parameter, risk premia, volatility persistence and interest rate level and volatility effects before and after the 1997 Asian financial crisis. However, these noted changes are not uniform and depend on the individual listed property markets.

Originality/value

The findings enhance investors' understanding in financial asset pricing and complement existing evidence in international real estate. With the increasing significance of property stocks as real estate investment vehicles for international investors to gain property exposure in Asia and internationally, the paper is timely and provides the basis for more advanced research in international real estate investment strategies and capital asset pricing.

Details

Journal of Property Investment & Finance, vol. 24 no. 3
Type: Research Article
ISSN: 1463-578X

Keywords

11 – 20 of over 17000