Search results
1 – 10 of over 8000Vasudeva Murthy and Albert Okunade
This study aims to investigate, for the first time in the literature, the stochastic properties of the US aggregate health-care price inflation rate series, using the data on…
Abstract
Purpose
This study aims to investigate, for the first time in the literature, the stochastic properties of the US aggregate health-care price inflation rate series, using the data on health-care inflation rates for a panel of 17 major US urban areas for the period 1966-2006.
Design/methodology/approach
This goal is undertaken by applying the first- and second-generation panel unit root tests and the panel stationary test developed recently by Carrion-i-Silvestre et al. (2005) that allows for endogenously determined multiple structural breaks and is flexible enough to control for the presence of cross-sectional dependence.
Findings
The empirical findings indicate that after controlling for the presence of cross-sectional dependence, finite sample bias, and asymptotic normality, the US aggregate health-care price inflation rate series can be characterized as a non-stationary process and not as a regime-wise stationary innovation process.
Research limitations/implications
The research findings apply to understanding of health-care sector price escalation in US urban areas. These findings have timely implications for the understanding of the data structure and, therefore, constructs of economic models of urban health-care price inflation rates. The results confirming the presence of a unit root indicating a high degree of inflationary persistence in the health sector suggests need for further studies on health-care inflation rate persistence using the alternative measures of persistence. This study’s conclusions do not apply to non-urban areas.
Practical implications
The mean and variance of US urban health-care inflation rate are not constant. Therefore, insurers and policy rate setters need good understanding of the interplay of the various factors driving the explosive health-care insurance rates over the large US metropolitan landscape. The study findings have implications for health-care insurance premium rate setting, health-care inflation econometric modeling and forecasting.
Social implications
Payers (private and public employers) of health-care insurance rates in US urban areas should evaluate the value of benefits received in relation to the skyrocketing rise of health-care insurance premiums.
Originality/value
This is the first empirical research focusing on the shape of urban health-care inflation rates in the USA.
Details
Keywords
Aviral Kumar Tiwari and K.G. Suresh
This study aims to examine the stationarity characteristics of per capita GDP of 17 Asian countries and subpanels for South Asia, East Asia, and high income Asian countries in…
Abstract
Purpose
This study aims to examine the stationarity characteristics of per capita GDP of 17 Asian countries and subpanels for South Asia, East Asia, and high income Asian countries in nonlinear framework.
Design/methodology/approach
The authors employed a recently developed nonlinear panel unit root test suggested by Ucar and Omaga in PESTAR framework for full panel and the subpanels.
Findings
The results indicate that per capita GDP for the full panel of Asian countries and panel of South Asian countries are linear nonstationary, whereas for the panel of East Asia and high income developed countries have a nonlinear data generating process and are stationary.
Originality/value
The use of newly developed nonlinear panel unit root test for Asian countries is the main contribution of the study. In that aspect, this is the first study to employ such a test in this area.
Details
Keywords
Tatre Jantarakolica and Korbkul Jantarakolica
For the past decades, issues concerning the impact of economic integration on financial integration, especially exchange rate integration, has been criticized among several…
Abstract
For the past decades, issues concerning the impact of economic integration on financial integration, especially exchange rate integration, has been criticized among several regions such as ASEAN. This chapter intends to: (i) test for the exchange rate integration among the ASEAN-5, including Indonesia, Philippines, Malaysia, Singapore, and Thailand, using panel data techniques; and (ii) determine the impact of economic integration on the level of exchange rate integration among the ASEAN-5 countries. The purchasing power parity (PPP) is tested using panel unit root tests on monthly data. The results confirm the PPP among the ASEAN-5 countries due to lower transaction costs from ASEAN agreements. The chapter applies Multivariate GARCH (M-GARCH) models using daily data to determine the level of exchange rate integration among the ASEAN-3, including Malaysia, Singapore, and Thailand. The results of panel cointegration tests using quarterly data of economic integration and exchange rate integration confirm the impact of international trade openness on exchange rate integration. With free trade agreements leading to lower trade barriers, lower transaction costs, and low transportation costs, the economic integration among ASEAN countries practically leads to a higher degree of exchange rate integration. The findings imply that trade liberalization has the strongest effect on the real exchange rate. As such, regulators of ASEAN countries should pay more attention to the exchange rate policies of each other because of the interdependence of their exchange rates.
Details
Keywords
Hassan Shirvani and Natalya V. Delcoure
The purpose of this paper is to examine the presence of unit roots in the stock prices of 16 OECD countries.
Abstract
Purpose
The purpose of this paper is to examine the presence of unit roots in the stock prices of 16 OECD countries.
Design/methodology/approach
Heterogeneous panel unit root tests developed by Im et al. (1997/2003) and Pesaran (2007).
Findings
Under the assumption of cross-sectional independence across the panel, the authors find no evidence of unit roots, thus failing to reject mean reversion in the stock prices for all the countries in the sample. However, under the assumption of cross-sectional dependence, an assumption borne out by the diagnostic test results, the authors find support for the presence of unit roots in the stock prices.
Practical implications
Thus, the use of more robust panel unit root tests seems to raise questions about the long-run predictability of the stock market, at least in the context of the OECD countries.
Originality/value
Thus, it seems that in the long run, an investment policy of buy and hold has still much to offer.
Details
Keywords
Veli Yilanci and Muhammed Sehid Gorus
In this study, we aim to test the stochastic convergence of per capita clean energy use in 30 OECD (Organization for Economic Co-operation and Development) countries for the…
Abstract
Purpose
In this study, we aim to test the stochastic convergence of per capita clean energy use in 30 OECD (Organization for Economic Co-operation and Development) countries for the period of 1965–2017.
Design/methodology/approach
This study employed both linear and nonlinear panel unit root tests, and unlike other studies, this study allowed fractional values in addition to integer values for frequencies in the Fourier functions. Integer values of frequency indicate temporary breaks, while fractional values show permanent breaks.
Findings
The results of the linear panel unit root test indicate that clean energy use does not converge to group average for almost all OECD countries. However, the results of nonlinear panel unit root tests provide evidence that the stochastic convergence hypothesis of clean energy consumption cannot be rejected for most countries. This study does not find any evidence for stochastic convergence of clean energy use in Australia, Canada, Denmark, Ireland, Norway or Sweden. Therefore, the policies regarding clean energy are mandatory in these countries due to their effectiveness. This study also reveals that there are permanent structural breaks in the convergence process of clean energy consumption in approximately half of OECD countries.
Originality/value
This study considers temporary and permanent smooth structural shifts in addition to nonlinearity when testing the stationarity of clean energy consumption in a country i relative to the group average. This new method eliminates deficiencies of the previous panel data techniques. Thus, it provides more reliable results compared to existing literature.
Details
Keywords
Gizem Uzuner, Bünyamin Fuat Yıldız, Murat Anıl Mercan and Wing-Keung Wong
The specific objective of the study is to investigate the presence of natural rate of crime rates in selected emerging economies by using panel unit roots. The majority of the…
Abstract
Purpose
The specific objective of the study is to investigate the presence of natural rate of crime rates in selected emerging economies by using panel unit roots. The majority of the literature examines the issue using conventional unit root tests in a country-specific context. Meanwhile, there is no panel unit root investigation has been undertaken considering both cross-sectional dependence (CD) and structural changes.
Design/methodology/approach
As a result, this study is to fill the aforementioned gap and validate the natural rate of crime rates for 10 countries by using a Fourier panel unit root test. The advantage of the test is that structural shifts are modelled as gradual or smooth changes with a Fourier approximation, and it also accounts cross-sectional dependency. Thus, the Fourier panel unit root test may have better performance in capturing potential changes in the nature of data.
Findings
The result of the conventional unit roots test shows evidence of the hysteresis effect in crime, as it stands does not adequately account for smooth transitions or breaks. On contrary, the Fourier panel unit root test confirms the natural rate hypothesis in crime rates. The present results highlight the detrimental effects of crime cannot be abated by short-run deterrence policies.
Originality/value
Contrary to previous studies, the theoretical implications of the study imply that the empirical models consider the dynamic nature of crime rates should account for natural rate properties instead of the hysteresis assumption.
Details
Keywords
P.S. Nirmala, P.S. Sanju and M. Ramachandran
– The purpose of this paper was to examine the long-run causal relations between share price and dividend in the Indian market.
Abstract
Purpose
The purpose of this paper was to examine the long-run causal relations between share price and dividend in the Indian market.
Design/methodology/approach
Panel vector error correction model is estimated to examine the long-run causal relations between share price and dividend. Prior to this, panel unit root tests and panel cointegration tests are carried out to test the unit root properties of the data and test for the existence of long-run cointegrating relationship between the variables, respectively.
Findings
The results of empirical investigation reveal that there exists bi-directional long-run causality between share price and dividends.
Research limitations/implications
For the chosen sample, data on share price are available only for limited years. This limits the time dimension of the sample. Hence, in the future, the analysis can be extended to cover longer time series.
Practical implications
The interplay between share prices and dividends needs to be given due consideration by firms while framing their policies. A change in dividend policy would have an effect on the market value of the firm; hence, firms need to frame dividend policy in such a way that it would enhance their market value. Similarly, investors need to take into consideration the influence of share prices and dividends on each other. While making investment decisions, they need to consider the dividend history of shares, as better dividends would lead to better share prices.
Originality/value
To the best of the authors' knowledge, this study is the first attempt in the Indian market to examine the long-run causal relations between share price and dividend. The results of this study would be helpful to the investors in taking wise investment decisions. It would also enable firms in formulating appropriate dividend policies.
Details
Keywords
Serdar Yaman and Turhan Korkmaz
Introduction: Financial failure is a concept that may arise from many internal and external factors such as operational, financial, and economic items and may incur serious…
Abstract
Introduction: Financial failure is a concept that may arise from many internal and external factors such as operational, financial, and economic items and may incur serious losses. Over-indebtedness arising from managerial misjudgments may cause high financial distress, insufficiency, and bankruptcy. In this regard, determination of effects of capital structure decisions on financial failure risk is crucial.
Aim: The main purpose of this study is to explore the relationship between capital structure decisions and financial failure risk. For this purpose, data from Borsa İstanbul (BIST) for listed food and beverage companies for the period from 2004 to 2019 is used. Another purpose of this study is to compare the financial failure models considering capital structure theories.
Method: In the study, capital structure decisions are associated with five different financial ratios; while the financial failure risk is proxied by financial failure scores of Altman (1968), Springate (1978), Ohlson (1980), Taffler (1983), and Zmijewski (1984). Therefore, five different panel data models are used for testing these hypotheses.
Findings: The results of panel data analysis reveal that capital structure decisions have statistically significant effects on financial failure risk for all models; however, those effects vary from one financial failure model to another. Also, the results show that in the models in which financial failure risk is proxied by the Altman (1968) and Taffler (1983) scores, the aggressive financial policies increase the financial failure risk. However, regarding the models in which financial failure risk is proxied by the Springate (1978), Ohlson (1980), and Zmijewski (1984) scores, aggressive financial policies decrease the financial failure risk.
Originality of the Study: To the best of our knowledge, this chapter is original and important in terms of revealing the effects of capital structure decisions on the financial failure risk and comparing the financial failure models.
Implications: The results revealed that the risk of financial failure models represented by Altman (1968) and Taffler (1983) scores are found to be statistically stronger and more successful in meeting theoretical expectations compared to other models. Therefore, it would be more appropriate to refer Altman’s (1968) and Taffler’s (1983) financial failure models in financial failure risk measurements.
Details
Keywords
Paresh Kumar Narayan and Seema Narayan
There are several studies that investigate evidence for mean reversion in stock prices. However, there is no consensus as to whether stock prices are mean reverting or random walk…
Abstract
Purpose
There are several studies that investigate evidence for mean reversion in stock prices. However, there is no consensus as to whether stock prices are mean reverting or random walk (unit root) processes. The goal of this paper is to re‐examine mean reversion in stock prices.
Design/methodology/approach
The authors use five different panel unit root tests, namely the Im, Pesaran and Shin t‐bar test statistic, the Levin and Lin test, the Im, Lee, and Tieslau Lagrangian multiplier test statistic, the seemingly unrelated regression test, and the multivariate augmented Dickey Fuller test advocated by Taylor and Sarno.
Findings
The main finding is that there is no mean reversion of stock prices, consistent with the efficient market hypothesis.
Research limitations/implications
One issue not considered by this study is the role of structural breaks. It may be the case that the efficient market hypothesis is contingent on structural breaks in stock prices. Future studies should model structural breaks.
Practical implications
The findings have implications for econometric modelling, in particular forecasting.
Originality/value
This paper adds to the scarce literature on the mean reverting property of stock prices based on panel data; thus, it should be useful for researchers.
Details
Keywords
– This paper investigates whether mean reversion holds for a panel of 16 OECD stock price indices for the period 1970 to 2011.
Abstract
Purpose
This paper investigates whether mean reversion holds for a panel of 16 OECD stock price indices for the period 1970 to 2011.
Design/methodology/approach
We employ seemingly unrelated regression (SUR)-based linear and non-linear unit root tests which are not only able to exploit the power of panel data analysis but also account for cross sectional dependencies as well as identify which panel members are stationary.
Findings
In contrast to a literature that offers mixed findings on stationarity, it was found that most of our sample is characterized as mean- or trend-reverting with approximated half-lives in the region of three to five years.
Originality/value
In contrast to other panel unit root tests of stock prices, the authors identify which individual panel members are stationary and non-stationary using a SURADF test. A further novelty of our approach is that we also develop a SUR-based panel KSS test that allows us to explore the possibility that stock prices exhibit non-linear stationarity.
Details