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Article
Publication date: 23 January 2007

Soo‐Wah Low and Noor Azlan Ghazali

The primary objective of the paper is to examine the short and long run price linkages between Malaysian unit trust funds and the stock market index as proxied by the…

Abstract

Purpose

The primary objective of the paper is to examine the short and long run price linkages between Malaysian unit trust funds and the stock market index as proxied by the Kuala Lumpur composite index (KLCI) over the period 1996‐2000.

Design/methodology/approach

Cointegration analyses are used to identify the long run relationship between unit trust funds and the stock market index while Granger causality tests are used to measure the short run price linkages.

Findings

Cointegration results show that the long run pricing performance of the unit trust funds differs significantly from that of the KLCI. Interestingly, the findings also reveal that two index funds are found not to be cointegrated with the stock market index. In the short run, one‐way Granger causality test shows that changes in the KLCI Granger causes changes in the unit trust funds. This suggests that fund managers are responding to the past changes in the stock market index over the short run.

Research limitations/implications

The findings of non‐cointegration between passively managed funds and the KLCI are restricted to only two index funds in the sample among other actively managed funds. Since there were not enough index funds available over the study period, future research should include more index funds in the analysis.

Practical implications

In the short run, investors may gather information on the changes in their portfolio composition by observing the movement in the KLCI.

Originality/value

The paper represents the first evidence on the pricing relationships between unit trust funds and the local stock market index and the findings are important to investors in terms of their investment strategies.

Details

Managerial Finance, vol. 33 no. 2
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 1 January 1998

Michael E. Parker and Tammy Rapp

The various stock market indexes are interrelated due to the similar fundamentals which determine the movement in the respective markets. Applying the efficient market

Abstract

The various stock market indexes are interrelated due to the similar fundamentals which determine the movement in the respective markets. Applying the efficient market hypothesis, an investor should not be able to predict the movement of one index based on the past movement of another index. If the stock markets are efficient, then no long term comovement should exist between stock market indexes. The existence of a long term relation can be tested by use of cointegration tests and common serial correlation feature tests. If no cointegration exists and if no common serial correlation feature exists, then we would not be rejecting efficiency of the stock markets. Using the S&P 500 stock index, the Wilshire 5000 index, and the NASDAQ index, the Hang Seng index, the Footsie index, and the Nikkei index to proxy world stock market indexes, the empirical results of the cointegration and common feature test support the efficiency of the stock markets in most instances. However, the Footsie index consistently demonstrated a relation with the three US stock market indexes included in the study.

Details

Studies in Economics and Finance, vol. 19 no. 1/2
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 8 November 2011

Bakri Abdul Karim, Mohamad Jais and Samsul Ariffin Abdul Karim

The purpose of this paper is to examine the effects of the current global crisis on the integration and co‐movements of selected stock index futures markets.

Abstract

Purpose

The purpose of this paper is to examine the effects of the current global crisis on the integration and co‐movements of selected stock index futures markets.

Design/methodology/approach

Time series techniques of cointegration and weekly data covering the period from January 2001 to December 2009 were used in this study. The period of analysis was divided into two periods, namely the pre‐crisis period (January 2001‐July 2007) and during crisis period (August 2007‐December 2009).

Findings

No evidence was found of cointegration among the stock index futures markets in both periods. Accordingly, the 2007 subprime crisis does not seem to affect the long‐run co‐movements among the stock index futures markets.

Practical implications

The stock index futures markets provide opportunity for the potential benefits from international portfolio diversification and hedging strategies even after the subprime crisis. The stock index futures significantly extended the variety of investment and risk management strategies available to investors.

Originality/value

Examining the effects of the US subprime crisis on the stock index futures markets integration, to the best of the authors' knowledge, goes clearly beyond the existing literature on the subject matter.

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Article
Publication date: 13 July 2021

Taicir Mezghani, Mouna Boujelbène and Mariam Elbayar

The main objective of this paper is to investigate whether the investors' behavior under optimistic (pessimistic) conditions has an impact on risk transmission between the…

Abstract

Purpose

The main objective of this paper is to investigate whether the investors' behavior under optimistic (pessimistic) conditions has an impact on risk transmission between the Chinese stock and bond markets and the sector indices mainly during the COVID-19 pandemic.

Design/methodology/approach

This study uses a new measure of the investor's sentiment based on Google trend to construct a Chinese investor's sentiment index and a quantile causal approach to examine the causal relationship between googling investor's sentiment and the Chinese stock and bond markets as well as the sector indices. On the other hand, the network connectedness is used to estimate the spillover effect on the investor's sentiment and index returns. To check the robustness of the study results, the authors employed the Chinese VIX, as another measure of the investor's sentiment using daily data from May 2019 to December 2020.

Findings

In fact, the authors found a dual causality between the investor's sentiment and the financial market indices in optimistic or pessimistic situations, which indicates that positive and negative financial market returns may have an effect on the Chinese investor's sentiment. In addition, the results indicated that a pessimistic investor's sentiment has a negative impact on the banking, healthcare and utility sectors. In fact, the study results provide a significant peak of connectivity between the investor's sentiment, the stock market and the sector indices during the 2015–2016 and 2019–2020 turmoil periods that coincide respectively with the 2015 recession of the Chinese economy and the COVID-19 pandemic.

Originality/value

This finding suggests that the Chinese googling investor's sentiment is considered as a prominent channel of shock spillovers during the coronavirus crisis, which confirms the behavioral contagion. This study also identifies the contribution of a particular interest for portfolio managers and investors, which helps them to accordingly design their portfolio strategy.

Details

China Finance Review International, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2044-1398

Keywords

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Article
Publication date: 17 May 2021

Nevi Danila, Kamilah Kamaludin, Sheela Sundarasen and Bunyamin Bunyamin

The purpose of this paper is to examine investor sentiment by measuring the impact of market sentiment shocks on the volatility of the Islamic stock index of five ASEAN…

Abstract

Purpose

The purpose of this paper is to examine investor sentiment by measuring the impact of market sentiment shocks on the volatility of the Islamic stock index of five ASEAN countries, with noise traders as a proxy for market sentiment.

Design/methodology/approach

The GJR-GARCH model is used to capture the empirically observed fact that negative shocks in the past period have a stronger impact on variance than positive shocks in the present.

Findings

All five ASEAN Islamic stock indices show clustering volatility. However, only three countries, namely, Malaysia, Thailand and Singapore, demonstrate leverage effects. In addition, the effect of market sentiment on Islamic stock index returns is observed in the Indonesian and Malaysian markets, which are the two largest Islamic markets with a dominant Muslim population in the ASEAN. This finding implies that the trading behaviours of Muslim investors in the Shariah market are the same as their behaviours in the conventional market, that is, nonadherence to the Sunnah.

Practical implications

Whilst establishing investment strategies, creating portfolios and providing client-advisory services, investors and fund managers should factor in the presence of market sentiment and its impact on stock performance and volatility. In addition, a capital market system preventing rumour-based transactions is compelling.

Social implications

In some markets, the Islamic financial products awareness should be increased through education to attract increased domestic investors with the potential to boost growth in the Islamic stock market.

Originality/value

Investigation market sentiment impacts on the Islamic stock index using noise traders as a proxy.

Details

Journal of Islamic Accounting and Business Research, vol. 12 no. 3
Type: Research Article
ISSN: 1759-0817

Keywords

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Article
Publication date: 16 March 2021

Faten Moussa and Ezzeddine Delhoumi

Several theoretical and empirical studies have shown the significant effects of economic and environmental factors on a large number of financial indicators. In this paper…

Abstract

Purpose

Several theoretical and empirical studies have shown the significant effects of economic and environmental factors on a large number of financial indicators. In this paper the authors are going to study whether the main stock market index, is impacted by the variations of the exchange rate and the interest rates.

Design/methodology/approach

This paper studies the response of the index market return to fluctuations in the interest rate and the exchange rate in five countries from the MENA region (Tunisia, Morocco, Egypt, Turkey and Jordan). To investigate whether this impact exists, the authors used the non-linear autoregressive distributed lag (NARDL) model with daily data from June 1998 to June 2018.

Findings

The application of the non-linear ARDL model confirms the presence of cointegration between return index, interest rate and exchange rate. The results show that the asymmetry hypothesis is only valid for the short run which suggests that the market index is sensitive to the variation in the interest rate and exchange rate. This means that these macroeconomic factors play an important role in the MENA region stock markets.

Originality/value

The findings confirm that the index returns in the MENA region stock markets are related to macroeconomic fundamentals such as the exchange rate and the real interest rate. The reaction of some indices is sensitive to whether the shocks are positive or negative. This finding may help investors to choose their strategies starting from these changes. Accordingly, policy makers must pay attention to the development progress of stock market.

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: 1 May 1994

Christos Negakis and Dimitris Kambouris

This paper explores some institutional aspects of the Athens Stock Exchange (ASE) and investigates the time‐series properties of three major ASE stock indices. The results…

Abstract

This paper explores some institutional aspects of the Athens Stock Exchange (ASE) and investigates the time‐series properties of three major ASE stock indices. The results depict that future returns on these indices are difficult to predict. However, volatility in these indices can be predictable using the GARCH models. Various models for predicting volatility patterns are presented.

Details

Managerial Finance, vol. 20 no. 5
Type: Research Article
ISSN: 0307-4358

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Book part
Publication date: 24 June 2017

Adrian Zicari

The chapter describes the recent history of Sustainability Indices in three Latin American countries: Brazil, Mexico, and Chile. In these countries, local Stock Exchanges…

Abstract

The chapter describes the recent history of Sustainability Indices in three Latin American countries: Brazil, Mexico, and Chile. In these countries, local Stock Exchanges have been recently launching their own Sustainability Indices. This ongoing trend may indicate a particular way of addressing Socially Responsible Investment (SRI) in the region. The chapter relies on secondary data, mainly documents published by the Stock Exchanges themselves, and on some selected academic and practitioner oriented articles. All three countries present some common features. In all cases, local stock markets launched Sustainability Indices, and their composition has been publicly available from the beginning. Consequently, SRI is now developing in the region in a different way from that of developed markets. The chapter is based on secondary data only. Further research may involve interviews and surveys with different stakeholders (i.e., investors, quoted companies, public officials). The illustration of a different way of developing an SRI market may help public officials and investors from other countries, either in Latin America or elsewhere, who intend to promote SRI. There are few studies on SRI in Latin America, and comparative research between different countries in the region is still rare.

Details

Corporate Social Responsibility and Corporate Governance
Type: Book
ISBN: 978-1-78714-411-8

Keywords

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Book part
Publication date: 28 September 2020

Ihsan Erdem Kayral, Hilal Merve Alagoz and Nisa Sansel Tandogan

The aim of this study is to compare volatility persistence with daily volatility and to analyze the asymmetry effect of volatilities in stock markets of emerging…

Abstract

The aim of this study is to compare volatility persistence with daily volatility and to analyze the asymmetry effect of volatilities in stock markets of emerging economies. Using daily observations of stock market indices of selected major emerging countries during the period of January 1, 2002 to December 31, 2018, the authors estimate the persistence, the half-life measure of volatility and the daily volatility of the return series using the GARCH model application. The authors also examine the leverage effect on stock market returns using the EGARCH model estimation. In addition, the authors investigate the impact of the 2008 global financial crisis on various volatility measures and the leverage effect of emerging stock market returns. The authors then examine and compare the different speeds of mean reversion, volatility persistence and leverage effects in the national stock market indices during the pre-crisis, crisis, and post-crisis periods. The authors hereby present evidence that the effects of negative shocks are significantly larger than those of positive shocks in emerging stock markets throughout their different sample periods.

Details

Emerging Market Finance: New Challenges and Opportunities
Type: Book
ISBN: 978-1-83982-058-8

Keywords

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Book part
Publication date: 14 December 2018

Ramazan Yildirim and Mansur Masih

The purpose of this chapter is to analyze the possible portfolio diversification opportunities between Asian Islamic market and other regions’ Islamic markets; namely USA…

Abstract

The purpose of this chapter is to analyze the possible portfolio diversification opportunities between Asian Islamic market and other regions’ Islamic markets; namely USA, Europe, and BRIC. This study makes the initial attempt to fill in the gaps of previous studies by focusing on the proxies of global Islamic markets to identify the correlations among those selected markets by employing the recent econometric methodologies such as multivariate generalized autoregressive conditional heteroscedastic–dynamic conditional correlations (MGARCH–DCC), maximum overlap discrete wavelet transform (MODWT), and the continuous wavelet transform (CWT). By utilizing the MGARCH-DCC, this chapter tries to identify the strength of the time-varying correlation among the markets. However, to see the time-scale-dependent nature of these mentioned correlations, the authors utilized CWT. For robustness, the authors have applied MODWT methodology as well. The findings tend to indicate that the Asian investors have better portfolio diversification opportunities with the US markets, followed by the European markets. BRIC markets do not offer any portfolio diversification benefits, which may be explained partly by the fact that the Asian markets cover partially the same countries of BRIC markets, namely India and China. Considering the time horizon dimension, the results narrow down the portfolio diversification opportunities only to the short-term investment horizons. The very short-run investors (up to eight days only) can benefit through portfolio diversification, especially in the US and European markets. The above-mentioned results have policy implications for the Asian Islamic investors (e.g., Portfolio Management and Strategic Investment Management).

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