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Article
Publication date: 9 August 2021

Mucahit Aydin, Ugur Korkut Pata and Veysel Inal

The aim of this study is to investigate the relationship between economic policy uncertainty (EPU) and stock prices during the period from March 2003 to March 2021.

Abstract

Purpose

The aim of this study is to investigate the relationship between economic policy uncertainty (EPU) and stock prices during the period from March 2003 to March 2021.

Design/methodology/approach

The study uses asymmetric and symmetric frequency domain causality tests and focuses on BRIC countries, namely, Brazil, Russia, India and China.

Findings

The findings of the symmetric causality test confirm unidirectional permanent causality from EPU to stock prices for Brazil and India and bidirectional causality for China. However, according to the asymmetric causality test, the findings for China show that there is no causality between the variables. The results for Brazil and India indicate that there is unidirectional permanent causality from positive components of EPU to positive components of stock prices. Moreover, for Brazil, there is unidirectional temporary causality from the negative components of EPU to the negative components of stock prices. For India, there is temporary causality in the opposite direction.

Originality/value

The reactions of financial markets to positive and negative shocks differ. In this context, to the best of the authors’ knowledge, this study is the first attempt to examine the causal relationships between stock prices and uncertainty using an asymmetric frequency domain approach. Thus, the study enables the analysis of the effects of positive and negative shocks in the stock market separately.

Details

Applied Economic Analysis, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN:

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Book part
Publication date: 25 September 2020

Letife Özdemir

Purpose: Through globalization, financial markets have become more integrated and their tendency to act together has increased. The majority of the literature states that…

Abstract

Purpose: Through globalization, financial markets have become more integrated and their tendency to act together has increased. The majority of the literature states that there is a cointegration between developed and emerging markets. How do positive or negative shocks in developed markets affect emerging markets? And how do positive or negative shocks in emerging markets affect developed markets? For this reason, the aim of the study is to investigate the asymmetric causality relationship between developed and emerging markets with Hatemi-J asymmetric causality test.

Design/methodology/approach: In this study, the Dow Jones Industrial Average (DJIA) index was used to represent developed markets and the Morgan Stanley Capital International (MSCI) Emerging Market Index was used to represent emerging markets. The asymmetric causality relationship between the DJIA Index and the MSCI Emerging Market Index was investigated using monthly data between January 2009 and April 2019. In the first step of the study, the Johansen Cointegration Test was used to determine whether there is a cointegration between the markets. In the next step, the Hatemi-J asymmetric causality test was applied to see the asymmetric causality relationship between the markets.

Findings: There is a weak correlation between developed and emerging markets. This result is important for international investors who want to diversify their portfolios. As a result of the Johansen Cointegration Test, it was found that there is a long-term relationship between the MSCI Emerging Market Index and the DJIA Index. Therefore, investors who make long-term investment plans should not forget that these markets act together and take into account the causal relationship between them. According to the asymmetric causality test results, a unidirectional causality relationship from the MSCI Emerging Market Index to the DJIA Index was determined. This causality shows that negative shocks in the MSCI Emerging Market Index have positive effects on the DJIA Index.

Originality/value: This study contributes to the literature as it is one of the first studies to examine the asymmetrical relationship between developed and emerging markets. This study is also useful in predicting the short- and long-term relationship between markets. In addition, this study helps investors, portfolio managers, company managers, policymakers, etc., to understand the integration of financial markets.

Details

Uncertainty and Challenges in Contemporary Economic Behaviour
Type: Book
ISBN: 978-1-80043-095-2

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Article
Publication date: 15 June 2021

Mustafa Kırca and Şerif Canbay

This study aims to investigate whether changes in consumer interest rate, exchange rate and housing supply have permanent effects on housing inflation in Turkey.

Abstract

Purpose

This study aims to investigate whether changes in consumer interest rate, exchange rate and housing supply have permanent effects on housing inflation in Turkey.

Design/methodology/approach

For this purpose, data from 2010M01 to 2020M06 and changes in consumer interest rate, exchange rate, housing supply and housing inflation were used. Relationships between variables are analyzed first by the Granger causality tests and then the conditional frequency domain causality tests. The conditional frequency domain causality test specifically reveals the permanent causality between variables, whether there is a permanent effect.

Findings

According to the Granger causality test results, there are causality relationships from changes in the consumer interest rate and exchange rate to housing inflation. However, there is no causality relationship between housing supply and housing inflation. According to the conditional frequency domain causality test results, there is causality for the permanent and mid-term from changes in the consumer interest rate to housing inflation and causality for the mid-term and temporary from changes in the exchange rate to housing inflation. Additionally, it was found that there are causality relationships between changes in the consumer interest rate and changes in the exchange rate.

Research limitations/implications

The first limit of the study is that only 2010M01-2020M06 months can be considered. Because the date that variables started common is 2010M01. Besides, there is a limit in the study in variables used. Many variables, both micro and macro, can be added to affect housing inflation.

Originality/value

Housing inflation is a remarkable issue in Turkey. There is an increase in the number of studies on the subject in recent years. For this reason, the study is trying to contribute by approaching the subject from a different angle. The most important contribution of the study is that it has not been investigated whether the determinants of housing inflation have permanent or temporary effects, which were not done in previous studies. In addition, the method used reveals how many months the effects of changes in exchange rates, consumer interest rates and housing supply on housing inflation last. Based on the findings obtained from the methods, important economic and political implications have been put forward in depth.

Details

International Journal of Housing Markets and Analysis, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1753-8270

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Article
Publication date: 11 April 2021

Eray Gemici and Müslüm Polat

This study aims to examine the volatility spillovers between Bitcoin (BTC), Litecoin (LTC) and Ethereum (ETH) as they are related to structural breaks.

Abstract

Purpose

This study aims to examine the volatility spillovers between Bitcoin (BTC), Litecoin (LTC) and Ethereum (ETH) as they are related to structural breaks.

Design/methodology/approach

This study examines the daily period from August 7, 2015 to July 10, 2018 by conducting causality-in-mean and causality-in-variance tests among cryptocurrencies.

Findings

The findings showed that there was one-way causality-in-mean from BTC to LTC and ETH, but there was no causality-in-mean from LTC and ETH to BTC. On the other hand, considering the structural breaks included in the variance equations, the estimation results showed that there were short-term causality-in-variance from LTC to BTC and long-term causality-in-variance from BTC to LTC.

Originality/value

This study fills the gap by contributing in two ways. First, to the best of the authors’ knowledge, this is the first study that used the cross-correlation function (CCF) of causality to explore causality-in-variance among cryptocurrencies. Second, this study considers the structural breaks in variance in the return series.

Details

Studies in Economics and Finance, vol. 38 no. 4
Type: Research Article
ISSN: 1086-7376

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Book part
Publication date: 23 June 2016

Eric Renault and Daniela Scidá

Many Information Theoretic Measures have been proposed for a quantitative assessment of causality relationships. While Gouriéroux, Monfort, and Renault (1987) had…

Abstract

Many Information Theoretic Measures have been proposed for a quantitative assessment of causality relationships. While Gouriéroux, Monfort, and Renault (1987) had introduced the so-called “Kullback Causality Measures,” extending Geweke’s (1982) work in the context of Gaussian VAR processes, Schreiber (2000) has set a special focus on Granger causality and dubbed the same measure “transfer entropy.” Both papers measure causality in the context of Markov processes. One contribution of this paper is to set the focus on the interplay between measurement of (non)-markovianity and measurement of Granger causality. Both of them can be framed in terms of prediction: how much is the forecast accuracy deteriorated when forgetting some relevant conditioning information? In this paper we argue that this common feature between (non)-markovianity and Granger causality has led people to overestimate the amount of causality because what they consider as a causality measure may also convey a measure of the amount of (non)-markovianity. We set a special focus on the design of measures that properly disentangle these two components. Furthermore, this disentangling leads us to revisit the equivalence between the Sims and Granger concepts of noncausality and the log-likelihood ratio tests for each of them. We argue that Granger causality implies testing for non-nested hypotheses.

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Abstract

Details

New Directions in Macromodelling
Type: Book
ISBN: 978-1-84950-830-8

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Article
Publication date: 15 December 2020

Qiming Chen, Xinyi Fei, Lie Xie, Dongliu Li and Qibing Wang

1. To improve the causality analysis performance, a novel causality detector based on time-delayed convergent cross mapping (TD-CCM) is proposed in this work. 2. Identify…

Abstract

Purpose

1. To improve the causality analysis performance, a novel causality detector based on time-delayed convergent cross mapping (TD-CCM) is proposed in this work. 2. Identify the root cause of plant-wide oscillations in process control system.

Design/methodology/approach

A novel causality analysis framework is proposed based on denoising and periodicity-removing TD-CCM (time-delayed convergent cross mapping). We first point out that noise and periodicity have adverse effects on causality detection. Then, the empirical mode decomposition (EMD) and detrended fluctuation analysis (FDA) are combined to achieve denoising. The periodicities are effectively removed through singular spectrum analysis (SSA). Following, the TD-CCM can accurately capture the causalities and locate the root cause by analyzing the filtered signals.

Findings

1. A novel causality detector based on denoising and periodicity-removing time-delayed convergent cross mapping (TD-CCM) is proposed. 2. Simulation studies show that the proposed method is able to improve the causality analysis performance. 3. Industrial case study shows the proposed method can be used to analyze the root cause of plant-wide oscillations in process control system.

Originality/value

1. A novel causality detector based on denoising and periodicity-removing time-delayed convergent cross mapping (TD-CCM) is proposed. 2. The influences of noise and periodicity on causality analysis are investigated. 3. Simulations and industrial case shows that the proposed method can improve the causality analysis performance and can be used to identify the root cause of plant-wide oscillations in process control system.

Details

Journal of Intelligent Manufacturing and Special Equipment, vol. 1 no. 1
Type: Research Article
ISSN: 2633-6596

Keywords

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Article
Publication date: 3 March 2020

Djavlonbek Kadirov, Ibraheem Bahiss and Ahmet Bardakcı

Highlighting the need for a profound move towards desecularisation of Islamic scholarship, this conceptual paper aims to clarify the concept of causality from the Islamic…

Abstract

Purpose

Highlighting the need for a profound move towards desecularisation of Islamic scholarship, this conceptual paper aims to clarify the concept of causality from the Islamic marketing research perspective and extends a number of suggestions for improving theory building and hypothesis development in the field.

Design/methodology/approach

The approach taken is largely conceptual. In addition, this study collates the stated hypotheses in the articles published in this journal in the past five years and analyses the structure of causal statements to uncover key tendencies.

Findings

The review of historical and current views on causality indicates that most commentators agree that assuming the existence of the necessary connection between cause and effect is misleading. The Islamic traditions based on occasionalism and modern science agree that causal statements reflect, at best, probabilistic assumptions.

Research limitations/implications

This paper offers a number of insights and recommendations for theory building and hypothesis development in Islamic marketing. By following the occasionalism perspective and the notion of Sunnah of Allah, researchers will be able to build methodologically coherent and genuine Islamic marketing knowledge.

Practical implications

Correctly stated and tested hypotheses can be used by public policymakers to enforce effective consumer and market policies.

Originality/value

This paper tackles a complex issue of causality in Islamic marketing research which has not hitherto been discussed well in the literature. This research is also a unique step towards developing pioneering avenues within the domain of Islamic marketing research methodology.

Details

Journal of Islamic Marketing, vol. 12 no. 2
Type: Research Article
ISSN: 1759-0833

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Article
Publication date: 5 October 2020

Isaac Cliford Queku, Seth Gyedu and Emmanuel Carsamer

The purpose of the paper is to investigate the causal relationships and speed of adjustment of stock prices to changes in macroeconomic information (MEI) in Ghana from…

Abstract

Purpose

The purpose of the paper is to investigate the causal relationships and speed of adjustment of stock prices to changes in macroeconomic information (MEI) in Ghana from 1996 to 2018 using monthly data. The paper seeks to conduct the investigation at individual MEI level rather than the composite MEI.

Design/methodology/approach

Quantitative approach was used in this paper. Monthly data span of 1996–2018 was used. The delay and half-life technique was used to determine the speed with which the information resulting from the changes in the macroeconomic are evident in the stock price. Thereafter, Toda–Yamamoto Granger no-causality approach was used to examine the causal relationship amongst variables.

Findings

The paper revealed that although the market adjustment to MEI has improved, the speed is till slow. The exchange rate exhibited the slowest speed in respect of the market reaction while the market reaction to money supply was the fastest. Toda–Yamamoto Granger no-causality estimation also revealed a bi-directional causality between MEI (gross domestic product, interest rate and money supply) and stock price and uni-directional relationship flowing from MEI (the exchange rate and foreign direct investment) to stock price. The paper also found no causality between inflation and stock price.

Research limitations/implications

The findings although revealed improved level of market efficiency in comparison with the earlier data, the speed of adjustment is still undesirable. Rigorous approach should be adopted for the implementation of major reforms such as alternative market so as to increase the number of share listing and to increase the scope of investors' participation to enhancing trading volume and marketability and ultimately speed up information diffusion.

Practical implications

The practical implication of the low level of information processing rate of Ghana Stock Exchange (averagely more than a month) is that astute investors and market analysts could employ MEI to outperform the market prior to their infusion onto the stock market.

Originality/value

This study is one of the few studies in the Ghanaian literature that has extended the investigation of the speed of adjustment beyond composite or aggregate macroeconomic level estimation to estimation at individual variable level. This contribution is very relevant since each macroeconomic variable has unique characteristics and require specific policy framework, it is important to consider the speed of adjustment from the perspective of each of the individual variables.

Details

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

Keywords

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Article
Publication date: 5 May 2015

Wasim Ahmad and Sanjay Sehgal

– This paper aims to examine the destabilization effect in the case of India’s agricultural commodity market for the sample period of 01 January 2009 to 31 May 2013.

Abstract

Purpose

This paper aims to examine the destabilization effect in the case of India’s agricultural commodity market for the sample period of 01 January 2009 to 31 May 2013.

Design/methodology/approach

The daily data of eight agricultural commodities traded on the National Commodity & Derivatives Exchange, viz., barley, castor seed, chana (chickpea), chilli, potato, pepper, refined soya and soybean, have been used in this study. At the first stage of the empirical analysis, the study estimates the time-varying spot market volatility by using the exponential generalized autoregressive conditional heteroscedasticity model and applies three different high and band-pass filters, viz., the two-sided linear band-pass filter by Hodrick and Prescott (1997), the fixed-length symmetric band-pass filter by Baxter and King (1999) and the asymmetric band-pass filter by Christiano and Fitzgerald (2003), to calculate the unexpected liquidity of sample commodities. At the second stage of the empirical analysis, the study applies linear Granger causality and recently developed non-linear causality given by Diks and Panchenko (2006) to examine the cause and effect between time-varying volatility of spot market and futures market liquidity of sample commodities.

Findings

The linear and non-linear causality results suggest the destabilizing effect of commodity futures on the underlying spot market for chana, chilli and pepper. The empirical findings are in contrast with the recommendations of Abhijit Sen’s committee and provide important direction for further policy research.

Research limitations/implications

The study has a limitation in that it is based on the daily data. The use of intra-day data would have been more suitable for such type of analysis.

Practical implications

The study has strong policy implications from a financial policy perspective, as there is already disagreement among researchers and policy makers with regard to the functioning of commodity derivatives markets in India. There have been many occasions when commodity market regulators have to undertake decisions of suspension of trading of many commodities. The study also provides new directions of policy research with regards to the restructuring of the commodity derivatives market in India.

Social implications

The findings of this study may further help the regulators and policy makers to undertake decisions about how to provide an alternative platform for farmers to sell their agricultural produce more efficiently. This will certainly have some impact on the socioeconomic set-up of the country, as India is primarily an agriculture-dominated country.

Originality/value

So far not many studies have investigated the destabilization hypothesis in the case of emerging markets. This study is a novel attempt to fill the gap. In the case of emerging markets and especially in the case of India’s commodity derivatives market, this is the first study that examines the destabilization hypothesis in the case of India by applying new methods of high and band-pass filters and non-linear causality.

Details

Journal of Financial Economic Policy, vol. 7 no. 2
Type: Research Article
ISSN: 1757-6385

Keywords

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