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Article
Publication date: 8 May 2017

Shah Saeed Hassan Chowdhury, M. Arifur Rahman and M. Shibley Sadique

The main purpose of this paper is to investigate autocorrelation structure of stock and portfolio returns in a unique market setting of Saudi Arabia, where nearly all…

Abstract

Purpose

The main purpose of this paper is to investigate autocorrelation structure of stock and portfolio returns in a unique market setting of Saudi Arabia, where nearly all active traders are the retail individuals and the market operates under severe limits to arbitrage. Specifically, the authors examine how return autocorrelation of Saudi Arabian stock market is related to factors such as the day of the week, stock trading, performance on the preceding day and volatility.

Design/methodology/approach

The sample consists of the daily stock price and index data of 159 firms listed in Tadawul (Saudi Arabian Stock Exchange) for the period from January 2004 through December 2015. The methodology of Safvenblad (2000) is primarily used to investigate the autocorrelation structure of individual stock and index returns. The authors also use the Sentana and Wadhwani (1992) methodology to test for the presence of feedback traders in the Saudi stock market.

Findings

Results show that there is significantly positive autocorrelation in individual stock, size portfolio and market returns and that the last two are almost always larger than the first. Return autocorrelation is negatively related to firm size. Interestingly, return autocorrelation is positively related to trading frequency. For portfolios, autocorrelation of returns following a high absolute return day is significantly higher than that following a low absolute return day. Similarly, return autocorrelation during volatile periods is generally larger than that during tranquil periods. Return correlation between weekdays is usually larger than that between the first and last days of the week. Overall, the results suggest that the possible reason for positive autocorrelation in stock returns could be the presence of negative feedback traders who are engaged in frequent profit-taking activities.

Originality/value

This is the first paper that thoroughly investigates the autocorrelation structure of the returns of the Saudi stock market using both index and individual stock returns. As this US$583bn (as of August 21, 2014) market opened to foreign institutional investors in June 2015, the results of this paper should be of significant value for the potential uninformed foreign investors in this relatively lesser known and previously closed yet highly prospective market.

Details

Review of Accounting and Finance, vol. 16 no. 2
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 25 February 2014

Antje Schimke and Thomas Brenner

This paper aims to examine the short-term structure of the impact of R&D investments on turnover growth, indicating differences between tangible and intangible…

Abstract

Purpose

This paper aims to examine the short-term structure of the impact of R&D investments on turnover growth, indicating differences between tangible and intangible investments. The main questions are whether R&D and capital investments accompany firms' growth in the subsequent periods and how this relationship depends on other characteristics of the firms, such as size and industry. In addition, the authors study the relationship between R&D investments and the autocorrelation dynamics of firm growth.

Design/methodology/approach

The paper uses the European Industrial R&D Investment Scoreboard as data source. This data source includes 1,000 European companies with information on employees, turnover, sector affiliation and details on capital expenditure and R&D expenditure.

Findings

The authors find that R&D activities have, on average, a positive effect on turnover growth, while capital investments show both, positive and negative, relationships with firm growth. The relationship and its temporal structure strongly depend on firm size and industry affiliation as well as whether investments are considered as one-time or permanent activities.

Originality/value

Usually, the impacts of firm characteristics on firm growth are studied without explicitly considering time. Firm characteristics and firm growth are usually measured and examined at the same point in time. In contrast, the study will focus on the short-term structure of the influence of firm characteristics on turnover growth, especially the impact of R&D investments.

Details

Studies in Economics and Finance, vol. 31 no. 1
Type: Research Article
ISSN: 1086-7376

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Book part
Publication date: 21 November 2014

Yixiao Sun

New asymptotic approximations are established for the Wald and t statistics in the presence of unknown but strong autocorrelation. The asymptotic theory extends the usual…

Abstract

New asymptotic approximations are established for the Wald and t statistics in the presence of unknown but strong autocorrelation. The asymptotic theory extends the usual fixed-smoothing asymptotics under weak dependence to allow for near-unit-root and weak-unit-root processes. As the locality parameter that characterizes the neighborhood of the autoregressive root increases from zero to infinity, the new fixed-smoothing asymptotic distribution changes smoothly from the unit-root fixed-smoothing asymptotics to the usual fixed-smoothing asymptotics under weak dependence. Simulations show that the new approximation is more accurate than the usual fixed-smoothing approximation.

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Book part
Publication date: 24 May 2007

Frederic Carluer

“It should also be noted that the objective of convergence and equal distribution, including across under-performing areas, can hinder efforts to generate growth

Abstract

“It should also be noted that the objective of convergence and equal distribution, including across under-performing areas, can hinder efforts to generate growth. Contrariwise, the objective of competitiveness can exacerbate regional and social inequalities, by targeting efforts on zones of excellence where projects achieve greater returns (dynamic major cities, higher levels of general education, the most advanced projects, infrastructures with the heaviest traffic, and so on). If cohesion policy and the Lisbon Strategy come into conflict, it must be borne in mind that the former, for the moment, is founded on a rather more solid legal foundation than the latter” European Commission (2005, p. 9)Adaptation of Cohesion Policy to the Enlarged Europe and the Lisbon and Gothenburg Objectives.

Details

Managing Conflict in Economic Convergence of Regions in Greater Europe
Type: Book
ISBN: 978-1-84950-451-5

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Book part
Publication date: 2 March 2011

Josep García Blandón

This chapter simultaneously investigates the most important calendar anomalies in stock returns: day of the week, turn of the month, turn of the year and holiday periods…

Abstract

This chapter simultaneously investigates the most important calendar anomalies in stock returns: day of the week, turn of the month, turn of the year and holiday periods, in four of the most important Latin American stock markets: Argentina, Brazil, Mexico and Chile. Previous evidence available for these countries is very limited. Our results indicate that the three markets show a rather similar pattern regarding return seasonality. A day of the week effect, consisting in negative returns on Mondays, is reported for all the stock markets but the Mexican. The turn of the year effect is observed only in Argentina, and moderate holiday and turn of the month effects are reported in the Brazilian and the Mexican markets, respectively. In addition, significant levels of first-order return autocorrelation are reported for the four stock markets. The contemporary financial crisis has dramatically affected the behaviour of stock prices worldwide, causing, among other effects, a huge increase in price volatility and probably changing the behaviour of participants in financial markets. We have also investigated to what extent our results have been affected by the current abnormal situation.

Details

The Impact of the Global Financial Crisis on Emerging Financial Markets
Type: Book
ISBN: 978-0-85724-754-4

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Article
Publication date: 28 October 2014

Ashley Elaine Hungerford and Barry Goodwin

The purpose of this paper is to investigate the effects of crop insurance premiums being determined by small samples of yields that are spatially correlated. If spatial…

Abstract

Purpose

The purpose of this paper is to investigate the effects of crop insurance premiums being determined by small samples of yields that are spatially correlated. If spatial autocorrelation and small sample size are not properly accounted for in premium ratings, the premium rates may inaccurately reflect the risk of a loss.

Design/methodology/approach

The paper first examines the spatial autocorrelation among county-level yields of corn and soybeans in the Corn Belt by calculating Moran's I and the effective spatial degrees of freedom. After establishing the existence of spatial autocorrelation, copula models are used to estimate the joint distribution of corn yields and the joint distribution of soybean yields for a group of nine counties in Illinois. Bootstrap samples of the corn and soybean yields are generated to estimate copula models with the purpose of creating sampling distributions.

Findings

The estimated bootstrap confidence intervals demonstrate that the copula parameter estimates and the premium rates derived from the parameter estimates can vary greatly. There is also evidence of bias in the parameter estimates.

Originality/value

Although small samples will always be an issue in crop insurance ratings and assumptions must be made for the federal crop insurance program to operate at its current scale, this analysis sheds light on some of the issues caused by using small samples and will hopefully lead to the mitigation of these small sample issues.

Details

Agricultural Finance Review, vol. 74 no. 4
Type: Research Article
ISSN: 0002-1466

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Article
Publication date: 1 October 2003

Raphael N. Markellos, Terence Mills and Costas Siriopoulos

This paper employs three months of observations sampled at 60‐second intervals to analyzethe behavior of two basket indices from the emerging Athens Stock Exchange: the…

Abstract

This paper employs three months of observations sampled at 60‐second intervals to analyze the behavior of two basket indices from the emerging Athens Stock Exchange: the General Index of the Main (Listed) Securities Market and the Index of the Secondary (Unlisted) Securities Market. The empirical analysis employs robust regression using dummy variables to uncover a rich variety of time‐of‐day regularities in the first four moments of the distribution of returns, the tail behavior, and the dynamic and cross‐dynamic behavior of the two markets. Markets tend to behave differently during their opening and closing, while results are invariably sensitive to outliers. Overall, the results are comparable to those reported for developed equity markets. However, in contrast to other studies, we find no conclusive evidence of long‐memory in either the mean or variance process. ARMA models of seasonally differenced absolute returns were used as a simple but effective way of dealing with the strong regularity in volatility.

Details

Managerial Finance, vol. 29 no. 9
Type: Research Article
ISSN: 0307-4358

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Book part
Publication date: 6 January 2016

Michel van der Wel, Sait R. Ozturk and Dick van Dijk

The implied volatility surface is the collection of volatilities implied by option contracts for different strike prices and time-to-maturity. We study factor models to…

Abstract

The implied volatility surface is the collection of volatilities implied by option contracts for different strike prices and time-to-maturity. We study factor models to capture the dynamics of this three-dimensional implied volatility surface. Three model types are considered to examine desirable features for representing the surface and its dynamics: a general dynamic factor model, restricted factor models designed to capture the key features of the surface along the moneyness and maturity dimensions, and in-between spline-based methods. Key findings are that: (i) the restricted and spline-based models are both rejected against the general dynamic factor model, (ii) the factors driving the surface are highly persistent, and (iii) for the restricted models option Δ is preferred over the more often used strike relative to spot price as measure for moneyness.

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Book part
Publication date: 2 December 2003

Louis Gagnon and G.Andrew Karolyi

Using intraday prices for the S&P 500 and Nikkei Stock Average stock indexes and aggregate trading volume for the New York and Tokyo Stock Exchanges, we show how short-run…

Abstract

Using intraday prices for the S&P 500 and Nikkei Stock Average stock indexes and aggregate trading volume for the New York and Tokyo Stock Exchanges, we show how short-run comovements between national stock market returns vary over time in a way related to the trading volume and liquidity in those markets. We frame our analysis in the context of the heterogeneous-agent models of trading developed by Campbell, Grossman and Wang (1993) and Blume, Easley and O’Hara (1994) and Wang (1994) which predict that trading volume acts as a signal of the information content of a given price move. While we find that there exists significant short-run dependence in returns and volatility between Japan and the U.S., we offer new evidence that these return “spillovers” are sensitive to interactions with trading volume in those markets. The cross-market effects with volume are revealed in both close-to-open and open-to-close returns and often exhibit non-linear patterns that are not predicted by theory.

Details

The Japanese Finance: Corporate Finance and Capital Markets in ...
Type: Book
ISBN: 978-1-84950-246-7

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Article
Publication date: 5 December 2016

Nkechi Srodah Owoo

Recent research into enterprise performance has focussed on the importance of firm proximity to total productivity. Using spatial correlation of firm performance as a…

Abstract

Purpose

Recent research into enterprise performance has focussed on the importance of firm proximity to total productivity. Using spatial correlation of firm performance as a proxy for knowledge transfers and diffusion, the purpose of this paper is to examine the evidence for these spatial effects in non-farm enterprise performance in Uganda, across space and time.

Design/methodology/approach

The author uses data from the geo-referenced Uganda National Panel Survey from 2010 to 2012, and employs explicit spatial techniques in the analysis of rural non-farm enterprise performance. Spatial autocorrelation of firm performance are used as proxies for knowledge transfers and information flows among enterprises across space and over time.

Findings

The study finds evidence of spatial spillover effects across space and time in Uganda. This implies that, as existing studies of developed countries have found, social infrastructure and firm proximity contribute significantly to the performance of rural economies, through information exchange and knowledge transfers.

Practical implications

Given the communal nature of rural households in the African setting, knowledge exchange and transfers among neighbouring firms should be encouraged as studies have found they have strong effects on business performance. Additionally, business “leaders” could also be useful in disseminating useful new technologies and applications to neighbouring enterprises in order to boost performance and productivity.

Social implications

There should be better targeting of policy interventions to clusters of particularly needy enterprises.

Originality/value

To the best of the author’s knowledge, this is the first time that spatio-temporal effects of business performance have been explored. While spatial analyses of business performance have been carried out in developed countries, studies using explicit spatial techniques in the developing country setting have been conspicuously absent.

Details

African Journal of Economic and Management Studies, vol. 7 no. 4
Type: Research Article
ISSN: 2040-0705

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