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Article
Publication date: 24 September 2020

Mehmet Emin Yildiz, Yaman Omer Erzurumlu and Bora Kurtulus

The beta coefficient used for the cost of equity calculation is at the heart of the valuation process. This study conducts comparative analyses of the classical capital…

Abstract

Purpose

The beta coefficient used for the cost of equity calculation is at the heart of the valuation process. This study conducts comparative analyses of the classical capital asset pricing model (CAPM) and downside CAPM risk parameters to gain further insight into which risk parameter leads to better performing risk measures at explaining stock returns.

Design/methodology/approach

The study conducts a comparative analysis of 16 risk measures at explaining the stock returns of 4531 companies of 20 developed and 25 emerging market index for 2000–2018. The analyses are conducted using both the global and local indices and both USD and local currency returns. Calculated risk measures are analyzed in a panel data setup using a univariate model. Results are investigated in country-specific and model-specific subsets.

Findings

The results show that (1) downside betas are better than CAPM betas at explaining the stock returns, (2) both risk measure groups perform better for emerging markets, (3) global downside beta model performs better than global beta model, implying the existence of the contagion effect, (4) high significance levels of total risk and unsystematic risk measures further support the shortfall of CAPM betas and (5) higher correlation of markets after negative shocks such as pandemics puts global CAPM based downside beta to a more reliable position.

Research limitations/implications

The data are limited to the index securities as beta could be time varying.

Practical implications

Results overall provide insight into the cost of equity calculation and emerging market assets valuation.

Originality/value

The framework and methodology enable us to compare and contrast CAPM and downside-CAPM risk measures at the firm level, at the global/local level and in terms of the level of market development.

Details

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

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Article
Publication date: 1 February 2021

Yaman Omer Erzurumlu and Idris Ucardag

This paper aims to investigate private pension fund investor sentiment against fund performance and cost in an environment of frequent regulatory changes. The analyses are…

Abstract

Purpose

This paper aims to investigate private pension fund investor sentiment against fund performance and cost in an environment of frequent regulatory changes. The analyses are conducted in a low return, high-cost private pension fund market environment, which makes it easier to observe the relationship between investor sentiment to return and cost.

Design/methodology/approach

This paper conducts fixed effect, random effect and random effect within between effect panel data analyses of all Turkish private pension funds from 2011 to 2019. This paper conducts the analyses using aggregate data and subsets based on fund characteristics and pre-post regulation periods.

Findings

When regulations provide compensation and improve market efficiency in a pension fund market, investor focus shifted from performance to cost. Investors allocated assets with respect to return realization when adequately compensated for risk or had favorable cost contract clauses. Consequently, investors in pension funds with lower expected returns and no special fee reduction clauses tended to adopt the strategy of cost minimization.

Research limitations/implications

The overlap of regulatory change periods could complicate the ability to distinguish the impact of any one specific change. The findings therefore cannot be generalized to differently structured markets.

Practical implications

Regulatory changes could lead to a switch of investor objectives. When regulatory changes compensate investors and increase market efficiency, investors objective could switch from performance to cost.

Originality/value

This study investigates investor sentiment in a relatively young private pension fund market, in which the relevant regulatory body ambitiously implements frequent changes in regulation. The selected market is unique in the sense that it has negative real returns and high costs, which make investor focus to return and cost more readily apparent.

Details

Journal of Financial Regulation and Compliance, vol. 29 no. 2
Type: Research Article
ISSN: 1358-1988

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Article
Publication date: 19 June 2020

Yaman Omer Erzurumlu, Tunc Oygur and Alper Kirik

Considering the different motivation for the creation of each of these cryptocurrencies, the purpose of this paper is to examine whether there is a dominant external…

Abstract

Purpose

Considering the different motivation for the creation of each of these cryptocurrencies, the purpose of this paper is to examine whether there is a dominant external factor in the cryptocurrency world. Using a novel two-step time and frequency independent methodology, the authors examine a large scope of cryptocurrencies and external factors within the same period, and analytical framework.

Design/methodology/approach

The examined cryptocurrencies are Bitcoin, Ethereum, Ripple, Litecoin, Monero and Dash. In total, 18 external factors from 5 factor families are selected based on the mining motivation of these cryptocurrencies. The study first examines discrete wavelet transform-based (WTB) correlations, reduce the dimension and focuson relevant pairs. Selected pairs are further examined by wavelet coherence to capture the intermittent nature of the relationships allowing the most needed “Flexibility of frequency and time domains”.

Findings

Each coin appears to operate as a unique character with the exception of Bitcoin and Litecoin. There is no prominent external driver. The cryptocurrency market is not a clear substitute for a specific factor or market. Two-step WTB filtered wavelet coherence analysis help us to analyze a large number of factor without the loss of focus. The co-movements within the cryptocurrencies spillover from Ethereum to altcoins and later to Bitcoin.

Originality/value

The study presents one of the first examples of two-step WTB filtered wavelet coherence analysis. The methodology suggests an approach for simultaneous examination of large number of variables. The scope of the study provides a rather holistic view of the co-movements of external factors and major cryptocurrencies.

Details

Studies in Economics and Finance, vol. 37 no. 3
Type: Research Article
ISSN: 1086-7376

Keywords

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