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1 – 10 of over 4000M Anand Shankar Raja, Keerthana Shekar, B Harshith and Purvi Rastogi
The COVID-19 pandemic has recently had an impact on the stock market all over the globe. A thorough review of the literature that included the most cited articles and articles…
Abstract
The COVID-19 pandemic has recently had an impact on the stock market all over the globe. A thorough review of the literature that included the most cited articles and articles from well-known databases revealed that earlier research in the field had not specifically addressed how the BRIC stock markets responded to the COVID-19 pandemic. The data regarding COVID-19 were collected from the World Health Organization (WHO) website, and the stock market data were collected from Yahoo Finance and the respective country’s stock exchange. A random forest regression algorithm takes the closing price of respective stock indices as target variables and COVID-19 variables as input variables. Using this algorithm, a model is fit to the data and is visualised using line plots. This study’s findings highlight a relationship between the COVID-19 variables and stock market indices. In addition, the stock market of BRIC countries showed a high correlation, especially with the Shanghai Composite Stock Index with a correlation value of 0.7 and above. Brazil took the worst hit in the studied duration by declining approximately 45.99%, followed by India by 37.76%. Finally, the data set’s model fit, which employed the random forest machine learning method, produced R2 values of 0.972, 0.005, 0.997, and 0.983 and mean percentage errors of 1.4, 0.8, 0.9, and 0.8 for Brazil, Russia, India, and China (BRIC), respectively. Even now, two years after the coronavirus pandemic started, the Brazilian stock index has not yet returned to its pre-pandemic level.
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The primary objective of this research is to provide evidence that there are two distinct layers of investor sentiments that can affect asset valuation models. The first is…
Abstract
Purpose
The primary objective of this research is to provide evidence that there are two distinct layers of investor sentiments that can affect asset valuation models. The first is general market-wide sentiments, while the second is biased approaches toward specific assets.
Design/methodology/approach
To achieve the goal, the authors conducted a multi-step analysis of stock returns and constructed complex sentiment indices that reflect the optimism or pessimism of stock market participants. The authors used panel regression with fixed effects and a sample of the US stock market to improve the explanatory power of the three-factor models.
Findings
The analysis showed that both market-level and stock-level sentiments have significant contributions, although they are not equal. The impact of stock-level sentiments is more profound than market-level sentiments, suggesting that neglecting the stock-level sentiment proxies in asset valuation models may lead to severe deficiencies.
Originality/value
In contrast to previous studies, the authors propose that investor sentiments should be measured using a multi-level factor approach rather than a single-factor approach. The authors identified two distinct levels of investor sentiment: general market-wide sentiments and individual stock-specific sentiments.
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This research investigates Airbnb’s financial implications in emerging economies and their potential to influence stock market profitability.
Abstract
Purpose
This research investigates Airbnb’s financial implications in emerging economies and their potential to influence stock market profitability.
Design/methodology/approach
Employing a multifaceted approach, the study combines parametric and nonparametric tests, robustness checks, and regression analysis to assess the impact of Airbnb’s announcements on emerging economy stock markets.
Findings
Airbnb’s announcements affect emerging economies' stock markets with a distinct pattern of cumulative abnormal returns (CAR): negative before the announcement and positive afterward. Informed investors strategically leverage this opportunity through short selling before the announcement and acquiring positions following it. Regression analysis validates these trends, revealing that stock index returns and inbound tourism affect CAR before announcements, while GDP growth influences CAR afterward. Announcements pertaining to emerging economies exert a more pronounced impact on stock indices compared to city-specific announcements, with COVID-19 period announcements demonstrating greater significance in abnormal returns than non-COVID-19 period announcements.
Originality/value
This study advances existing literature through a comprehensive range of statistical tests, differentiation between emerging countries and cities, introduction of five macroeconomic variables, and reliance on credible primary Airbnb data. It highlights the potential for investors to leverage Airbnb announcements in emerging markets for stock market profits, emphasizing the need for adaptive investment strategies considering broader macroeconomic factors.
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Elena Fedorova and Polina Iasakova
This paper aims to investigate the impact of climate change news on the dynamics of US stock indices.
Abstract
Purpose
This paper aims to investigate the impact of climate change news on the dynamics of US stock indices.
Design/methodology/approach
The empirical basis of the study was 3,209 news articles. Sentiment analysis was performed by a pre-trained bidirectional FinBERT neural network. Thematic modeling is based on the neural network, BERTopic.
Findings
The results show that news sentiment can influence the dynamics of stock indices. In addition, five main news topics (finance and politics natural disasters and consequences industrial sector and Innovations activism and culture coronavirus pandemic) were identified, which showed a significant impact on the financial market.
Originality/value
First, we extend the theoretical concepts. This study applies signaling theory and overreaction theory to the US stock market in the context of climate change. Second, in addition to the news sentiment, the impact of major news topics on US stock market returns is examined. Third, we examine the impact of sentimental and thematic news variables on US stock market indicators of economic sectors. Previous works reveal the impact of climate change news on specific sectors of the economy. This paper includes stock indices of the economic sectors most related to the topic of climate change. Fourth, the research methodology consists of modern algorithms. An advanced textual analysis method for sentiment classification is applied: a pre-trained bidirectional FinBERT neural network. Modern thematic modeling is carried out using a model based on the neural network, BERTopic. The most extensive topics are “finance and politics of climate change” and “natural disasters and consequences.”
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Zengli Mao and Chong Wu
Because the dynamic characteristics of the stock market are nonlinear, it is unclear whether stock prices can be predicted. This paper aims to explore the predictability of the…
Abstract
Purpose
Because the dynamic characteristics of the stock market are nonlinear, it is unclear whether stock prices can be predicted. This paper aims to explore the predictability of the stock price index from a long-memory perspective. The authors propose hybrid models to predict the next-day closing price index and explore the policy effects behind stock prices. The paper aims to discuss the aforementioned ideas.
Design/methodology/approach
The authors found a long memory in the stock price index series using modified R/S and GPH tests, and propose an improved bi-directional gated recurrent units (BiGRU) hybrid network framework to predict the next-day stock price index. The proposed framework integrates (1) A de-noising module—Singular Spectrum Analysis (SSA) algorithm, (2) a predictive module—BiGRU model, and (3) an optimization module—Grid Search Cross-validation (GSCV) algorithm.
Findings
Three critical findings are long memory, fit effectiveness and model optimization. There is long memory (predictability) in the stock price index series. The proposed framework yields predictions of optimum fit. Data de-noising and parameter optimization can improve the model fit.
Practical implications
The empirical data are obtained from the financial data of listed companies in the Wind Financial Terminal. The model can accurately predict stock price index series, guide investors to make reasonable investment decisions, and provide a basis for establishing individual industry stock investment strategies.
Social implications
If the index series in the stock market exhibits long-memory characteristics, the policy implication is that fractal markets, even in the nonlinear case, allow for a corresponding distribution pattern in the value of portfolio assets. The risk of stock price volatility in various sectors has expanded due to the effects of the COVID-19 pandemic and the R-U conflict on the stock market. Predicting future trends by forecasting stock prices is critical for minimizing financial risk. The ability to mitigate the epidemic’s impact and stop losses promptly is relevant to market regulators, companies and other relevant stakeholders.
Originality/value
Although long memory exists, the stock price index series can be predicted. However, price fluctuations are unstable and chaotic, and traditional mathematical and statistical methods cannot provide precise predictions. The network framework proposed in this paper has robust horizontal connections between units, strong memory capability and stronger generalization ability than traditional network structures. The authors demonstrate significant performance improvements of SSA-BiGRU-GSCV over comparison models on Chinese stocks.
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Sirine Ben Yaala and Jamel Eddine Henchiri
This study aims to predict stock market crashes identified by the CMAX approach (current index level relative to historical maximum) during periods of global and local events…
Abstract
Purpose
This study aims to predict stock market crashes identified by the CMAX approach (current index level relative to historical maximum) during periods of global and local events, namely the subprime crisis of 2008, the political and social instability of 2011 and the COVID-19 pandemic.
Design/methodology/approach
Over the period 2004–2020, a log-periodic power law model (LPPL) has been employed which describes the price dynamics preceding the beginning dates of the crisis. In order to adjust the LPPL model, the Global Search algorithm was developed using the “fmincon” function.
Findings
By minimizing the sum of square errors between the observed logarithmic indices and the LPPL predicted values, the authors find that the estimated parameters satisfy all the constraints imposed in the literature. Moreover, the adjustment line of the LPPL models to the logarithms of the indices closely corresponds to the observed trend of the logarithms of the indices, which was overall bullish before the crashes. The most predicted dates correspond to the start dates of the stock market crashes identified by the CMAX approach. Therefore, the forecasted stock market crashes are the results of the bursting of speculative bubbles and, consequently, of the price deviation from their fundamental values.
Practical implications
The adoption of the LPPL model might be very beneficial for financial market participants in reducing their financial crash risk exposure and managing their equity portfolio risk.
Originality/value
This study differs from previous research in several ways. First of all, to the best of the authors' knowledge, the authors' paper is among the first to show stock market crises detection and prediction, specifically in African countries, since they generate recessionary economic and social dynamics on a large extent and on multiple regional and global scales. Second, in this manuscript, the authors employ the LPPL model, which can expect the most probable day of the beginning of the crash by analyzing excessive stock price volatility.
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Rajesh Mohnot, Arindam Banerjee, Hanane Ballaj and Tapan Sarker
The aim of this research is to re-examine the dynamic linkages between macroeconomic variables and the stock market indices in Malaysia following some transformational changes in…
Abstract
Purpose
The aim of this research is to re-examine the dynamic linkages between macroeconomic variables and the stock market indices in Malaysia following some transformational changes in the policies and the exchange rate regime.
Design/methodology/approach
Using monthly data points for all the economic variables and the stock market index (KLCI Index), the authors applied vector autoregression (VAR) model to examine the relationship. The authors also used impulse response function (IRF) in order to explore the effect of one-unit shock in “X” on “Y” under the VAR environment.
Findings
The authors' study finds a significant relationship between all the macroeconomic variables and the stock market index of Malaysia. The cointegration results indicate a long-term relationship, whereas the vector autoregressive-based impulse response analysis suggests that the Malaysian stock index (KLCI) responds negatively to the money supply, inflation and producer price index (PPI). However, the authors' results indicate a positive response from the stock index to the exchange rate.
Research limitations/implications
The authors' study's results are based on selected macroeconomic variables and the VAR model. Researchers may find other variables and methods more useful and may provide findings accordingly.
Practical implications
Since the results are quite asymmetric, it would be interesting for the market players, policymakers and regulators to consider the findings and explore appropriate opportunities.
Originality/value
While the relationship between macroeconomic variables and stock market indices has been widely examined, a significant gap in the literature remains concerning the role of exchange rate variable on the stock market in an emerging economy context.
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The aim of this paper is threefold: (1) to develop a new measure of investor sentiment rational (ISR) of developing countries by applying principal component analysis (PCA), (2…
Abstract
Purpose
The aim of this paper is threefold: (1) to develop a new measure of investor sentiment rational (ISR) of developing countries by applying principal component analysis (PCA), (2) to investigate co-movements between the ten developing stock markets, the sentiment investor's, exchange rates and geopolitical risk (GPR) during Russian invasion of Ukraine in 2022, (3) to explore the key factors that might affect exchange market and capital market before and mainly during Russia–Ukraine war period.
Design/methodology/approach
The wavelet approach and the multivariate wavelet coherence (MWC) are applied to detect the co-movements on daily data from August 2019 to December 2022. Value-at-risk (VaR) and conditional value-at-risk (CVaR) are used to assess the systemic risks of exchange rate market and stock market return in the developing market.
Findings
Results of this study reveal (1) strong interdependence between GPR, investor sentiment rational (ISR), stock market index and exchange rate in short- and long-terms in most countries, as inferred from (WTC) analysis. (2) There is evidence of strong short-term co-movements between ISR and exchange rates, with ISR leading. (3) Multivariate coherency shows strong contributions of ISR and GPR index to stock market index and exchange rate returns. The findings signal the attractiveness of the Vietnamese dong, Malaysian ringgits and Tunisian dinar as a hedge for currency portfolios against GPR. The authors detect a positive connectedness in the short term between all pairs of the variables analyzed in most countries. (4) Both foreign exchange and equity markets are exposed to higher levels of systemic risk in the period of the Russian invasion of Ukraine.
Originality/value
This study provides information that supports investors, regulators and executive managers in developing countries. The impact of sentiment investor with GPR intensified the co-movements of stocks market and exchange market during 2021–2022, which overlaps with period of the Russian invasion of Ukraine.
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Robert M. Hull, Ashfaq Habib and Muhammad Asif Khan
The main purpose is to explore the impact of major stock markets on China's market where major markets are represented by former G8 nations (current G7 and Russia).
Abstract
Purpose
The main purpose is to explore the impact of major stock markets on China's market where major markets are represented by former G8 nations (current G7 and Russia).
Design/methodology/approach
The article makes use of: stationarity tests (ADF and PP unit root); long-run correlation tests (Johansen integration involving trace and maximum eigenvalue); impact of G8 markets on China (VECM test); influence of G8 markets on volatility in China's market (variance decomposition analysis) and, effect from shocks in G8 markets on China (impulse response function).
Findings
Using a period of 2009–2019 that avoids detecting linkages caused by interdependencies created by two major international crises, the article offers four major findings. First, except for Germany and Russia, G8 markets have a significant causal influence on China with UK having the greatest. Second, G8 markets are not the major source of short-run fluctuation in China's market but over time exercise a noteworthy collective impact with UK having the greatest impact. Third, there are occasions for international portfolio diversification with China's market providing greater diversification than G8 nations. Fourth, all markets provide a short-run window of abnormal profit.
Research limitations/implications
The indexes used to represent national markets are assumed to be adequate representations.
Practical implications
Short-term abnormal profits exist. Investing in China, compared to G8 countries, offers greater portfolio diversification possibilities.
Social implications
Removal of trade and investment barriers cause greater market integration.
Originality/value
By using recent data, this study reveals that G8 stock markets influence China's market.
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Maria Babar, Habib Ahmad and Imran Yousaf
This study examines the information transmission (return and volatility spillovers) among energy commodities (crude oil, natural gas, Brent oil, heating oil, gasoil, gasoline) and…
Abstract
Purpose
This study examines the information transmission (return and volatility spillovers) among energy commodities (crude oil, natural gas, Brent oil, heating oil, gasoil, gasoline) and Asian stock markets which are net importers of energy (China, India, Indonesia, Malaysia, Korea, Pakistan, Philippines, Taiwan, Thailand).
Design/methodology/approach
The information transmission is investigated by employing the spillover index of Diebold and Yilmaz, using daily data for the period January 2000 to May 2021.
Findings
A Strong connectedness is documented between the two classes of asset, especially during crisis periods. Our findings reveal that most of the energy markets, except gasoil and natural gas, are net transmitters of information, whereas all the stock markets, excluding Indonesia and Korea, are net recipients.
Practical implications
The findings are helpful for portfolio managers and institutional investors allocating funds to various asset classes in times of crisis.
Originality/value
All data is original.
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