Journal articles on the topic 'Stock market price variations'
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1
Jiang, Jing. "Cross-sectional variation of market efficiency." Review of Accounting and Finance 16, no. 1 (February 13, 2017): 67–85. http://dx.doi.org/10.1108/raf-02-2016-0018.
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Purpose This paper aims to provide evidence that market efficiency varies greatly across individual stock, and across market exchanges. Design/methodology/approach Three approaches, partial adjustment model, Dimson beta model and variance ratio test, are used on a large sample of US stocks. Findings This paper finds prices are closer to random walk benchmarks (i.e. more efficient) for stocks with better liquidity provision, frequent trading, greater return volatility, higher prices, larger market capitalizations and smaller trade sizes. These findings suggest that liquidity stimulates arbitrage activity, which, in turn, enhances market efficiency. Market efficiency also varies with information environment. The results show that stocks with greater information-based trading exhibit higher level of efficiency. Finally, market structure influences market efficiency. New York Stock Exchange stocks achieve higher level of efficiency than NASDAQ stocks do. The empirical results are robust and not driven by differences in stock attributes between the two markets. Research limitations/implications Overall, these results indicate that liquidity provision, stock attributes and market structure exert a significant impact on the realization of market efficiency. Practical implications In addition, this paper is also relevant to both stock exchanges facing increased competition and to market regulators. Originality/value Prior studies offer little evidence on the speed at which new information is impounded into the price. There is also limited evidence regarding how liquidity provision and market structure affect market efficiency. Using a transformation of the speed of price adjustment and other measurements as proxies for individual stock efficiency, this study may shed further lights on our understanding of market efficiency.
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Kumar, Rakesh. "Examining the Dynamic and Non-linear Linkages between Crude Oil Price and Indian Stock Market Volatility." Global Business Review 18, no. 2 (March 16, 2017): 388–401. http://dx.doi.org/10.1177/0972150916668608.
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The present study is an attempt to examine the dynamic impact of crude oil price variations in the international market on the Indian stock market volatility. For the purpose, the study uses crude oil monthly price expressed in dollar per barrel, Bombay Stock Exchange (BSE)-listed index BSE Sensex and National Stock Exchange (NSE)-listed CNX Nifty prices for the period from January 2001 to December 2014. GARCH (1,1) model with net crude oil price change as exogenous variable is used to estimate the impact of net oil price change in international market on the conditional volatilities of both the indices. The findings report that net oil price change has a significant impact upon the conditional volatility of both the indices. These findings show that investors redesign their portfolios in response to crude oil price variations in the international market. They can use crude oil price as an important exogenous variable in forecasting models of stock returns and risk in the Indian stock market.
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Messias Marques, Sebastião, and Margarida Catalão-Lopes. "Portuguese stock market returns and oil price variations." Applied Economics Letters 22, no. 7 (October 6, 2014): 515–20. http://dx.doi.org/10.1080/13504851.2014.952888.
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Hsiao, Cody Yu-Ling, Weishun Lin, Xinyang Wei, Gaoyun Yan, Siqi Li, and Ni Sheng. "The Impact of International Oil Prices on the Stock Price Fluctuations of China’s Renewable Energy Enterprises." Energies 12, no. 24 (December 5, 2019): 4630. http://dx.doi.org/10.3390/en12244630.
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In order to address a series of issues, including energy security, global warming, and environmental protection, China has ranked first in global renewable investment for the seventh consecutive year. However, developing a renewable energy industry requires a significant capital investment. Also, the international oil price fluctuations have an important impact on the stock prices of renewable energy firms. Thus, in order to provide implications for market investment as well as policy recommendations, this paper studied the spillover effect of international oil prices on the stock prices of China’s renewable energy listed companies. We used a Vector Autoregressive (VAR) model with innovations using a Factor-GARCH (Generalized Autoregressive Conditional Heteroskedasticity) process to evaluate the impact of market co-movements and time-varying volatility and correlation between the international oil price and China’s renewable energy market. The results show that the international oil price has a significant price spillover effect on the stock prices of China’s renewable energy listed companies. Moreover, the fluctuations of international oil prices have an influence on the stock price variations of Chinese renewable energy listed companies.
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Bak, P., M. Paczuski, and M. Shubik. "Price variations in a stock market with many agents." Physica A: Statistical Mechanics and its Applications 246, no. 3-4 (December 1997): 430–53. http://dx.doi.org/10.1016/s0378-4371(97)00401-9.
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Öhman, Peter, and Darush Yazdanfar. "The nexus between stock market index and apartment and villa prices." International Journal of Housing Markets and Analysis 10, no. 3 (June 5, 2017): 450–67. http://dx.doi.org/10.1108/ijhma-09-2016-0069.
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Purpose The purpose of this study is to investigate the Granger causal link between the stock market index and housing prices in terms of apartment and villa prices. Design/methodology/approach Monthly data from September 2005 to October 2013 on apartment prices, villa prices, the stock market index, mortgage rates and the consumer price index were used. Statistical methods were applied to explore the long-run co-integration and Granger causal link between the stock market index and apartment and villa prices in Sweden. Findings The results indicate that the stock market index and housing prices are co-integrated and that a long-run equilibrium relationship exists between them. According to the Granger causality tests, bidirectional relationships exist between the stock market index and apartment and villa prices, respectively, supporting the wealth and credit-price effects. Moreover, variations in apartment and villa prices are primarily caused by endogenous shocks. Originality/value To the authors’ best knowledge, this study represents a first analysis of the causal nexus between the stock market and the housing market in terms of apartment and villa prices in the Swedish context using a vector error-correction model to analyze monthly data.
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Cakan, Esin, Sercan Demiralay, and Veysel Ulusoy. "Oil Prices and Firm Returns in an Emerging Market." American Business Review 24, no. 1 (May 18, 2021): 166–87. http://dx.doi.org/10.37625/abr.24.1.166-187.
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This study examines the oil price effect on Turkish stock market as an emerging country on firm level data. After controlling short term interest rate, nominal exchange rate and crude oil price, we find that firms behave differently to a change in oil prices. The findings include these: i) variations in oil prices do not significantly affect Turkish firm returns. Out of 153, only 38 firms are affected significantly by oil price after controlling exchange rate and interest rate; ii) oil prices influence stock returns of Turkish firms, suggesting that under reaction and gradual information diffusion hypotheses may hold. iii) small and middle-sized firms are more affected negatively from oil price changes, where large-sized firms affected more positively. The empirical findings of this study have potential implications and offer significant insights for both practitioners and policy makers.
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Muhtaseb, Buthaina M. A., and Ghazi Al-Assaf. "Oil Price Fluctuations and Their Impact on Stock Market Returns in Jordan: Evidence from an Asymmetric Cointegration Analysis." International Journal of Financial Research 8, no. 1 (December 8, 2016): 172. http://dx.doi.org/10.5430/ijfr.v8n1p172.
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This paper examines whether Amman stock market returns responds asymmetrically to oil price fluctuations for the quarterly period 2000-2015 by applying asymmetric cointegration. Using both TAR and MTAR specification of Enders and Siklos’s (2001) models, and based on the asymmetric ECM, the results provide evidence that stock returns react to oil price variations in an asymmetric manner. In particular, rising oil prices has a larger impact on stock returns; this implies that increases in oil prices have a significant effect on the behavior of stock market in Jordan. The significant relationship between oil prices and stock returns strengthen their predictability power, so that appropriate strategies may be built on the basis of expected increases or decreases in oil prices.
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Singhania, Monica, and Shachi Prakash. "Volatility and cross correlations of stock markets in SAARC nations." South Asian Journal of Global Business Research 3, no. 2 (July 29, 2014): 154–69. http://dx.doi.org/10.1108/sajgbr-04-2012-0056.
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Purpose – The purpose of this paper is to examine cross-correlation in stock returns of SAARC countries, conditional and unconditional volatility of stock markets and to test efficient market hypothesis (EMH). Design/methodology/approach – Stock indices of India, Bangladesh, Sri Lanka and Pakistan are considered to serve as proxy for stock markets in SAARC countries. Data consist of daily closing price of stock indices from 2000 to 2011. Since preliminary testing indicated presence of serial autocorrelation and volatility clustering, family of GARCH models is selected. Findings – Results indicate presence of serial autocorrelation in stock market returns, implying dependence of current stock prices on stock prices of previous times and leads to rejection of EMH. Significant relationship between stock market returns and unconditional volatility indicates investors’ expectation of extra risk premium for exposing their portfolios to unexpected variations in stock markets. Cross-correlation revealed level of integration of South Asian economies with global market to be high. Research limitations/implications – Business cycles and other macroeconomic developments affect most companies and lead to unexplained relationships. The paper finds stock markets to exist at different levels of development as economic liberalization started at different points of time in SAARC countries. Practical implications – Correlation between stock indices of SAARC economies are found to be low which is in line with intra-regional trade being one of lowest as compared to other regional groups. Results point towards greater need for economic cooperation and integration between SAARC countries. Greater financial integration leads to development of markets and institutions, effective price discovery, higher savings and greater economic progress. Originality/value – The paper focuses on EMH and risk return relation for SAARC nations.
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Kelly, Patrick J. "Information Efficiency and Firm-Specific Return Variation." Quarterly Journal of Finance 04, no. 04 (December 2014): 1450018. http://dx.doi.org/10.1142/s2010139214500189.
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Reasoning that private firm-specific information causes firm-specific return variation that drives down market-model R2s, [Morck et al., 2000, The Information Content of Stock Markets: Why do Emerging Markets have Synchronous Stock Price Movements? Journal of Financial Economics, 58, 215–260] begin a large body of research which interprets R2 as an inverse measure of price informativeness. Low-R2s or "synchronicity," as it is called in this literature, signal that prices more efficiently incorporate private firm-specific information, and high R2s indicate less. For this to be true, we would expect that low-R2 stocks have characteristics that facilitate private informed trade, i.e., lower information costs and fewer impediments to arbitrage. However, in this paper we document the opposite: Low-R2 stocks are small, young, and followed by few analysts, and have high bid-ask spreads, high price impact, greater short-sale constraints and are infrequently traded. In fact, microstructure measures suggest that private-information events are less likely for low-R2 stocks than high, and that differences in R2 are driven as much by firm-specific volatility on days without private news as by firm-specific volatility on days with private news. These results call into question prior research using R2 to measure the information content of stock prices.
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Ghosh, T. P. "Economic Diversification and the State of Oil Dependency of UAE Stock Returns-An Analysis of ADX Indices 2014-2019." Accounting and Finance Research 8, no. 4 (November 6, 2019): 199. http://dx.doi.org/10.5430/afr.v8n4p199.
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Impact of commodity price risk on stock return remains an important forecasting parameters across stock markets of developed and emerging markets. In recent times the subdued oil price poses a challenge to the economic imbalance among oil producing countries, and thus non-oil diversification has been adopted as an economic solution. Amongst the GCC countries, the intensity of non-oil diversification has been found to be higher in the UAE which prompted to conduct a separate study of impact of oil price volatility on stock returns of Abu Dhabi Securities Market General Index and various sectoral indices. This study examines whether UAE stock returns are still associated with changes in oil price as reported in earlier research despite significant improvements in non-oil sector GDP contributions. The empirical assessment is based on weekly returns of the Abu Dhabi Stock Market General Index and four sectoral indices, namely, banking, industrial, energy and real estate in relation to variations in weekly WTI prices for the period between 1st week of 2012 to 29th week of 2019, i.e., for a period of 392 weeks applying Vector Error Correction model and Granger Causality test. It is found that there exists both long run and short run association between oil price volatility and stock return except model misspecification in respect of industrial and energy sectors arising out of serial correlation. Two lagged weekly oil price movements are found to be strong explanatory variables of stock returns.
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Baral, Krishna Babu. "Effects of Stock Market Development on Economic Growth in Nepal." Janapriya Journal of Interdisciplinary Studies 8 (December 31, 2019): 87–96. http://dx.doi.org/10.3126/jjis.v8i0.27302.
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Financial intermediaries and stock markets are important for the economic growth. The relationship between stock market development and economic growth has been extensively studied in the recent years. This study used analytical research design that involves bi-variate analysis by using simple regression model to examine the relationship between stock market development (measured by size and liquidity of the stock market) and economic growth (measured by logarithm of capital GDP at constant price) in Nepal during the period 2007-2017. Secondary data were collected from the official websites of Ministry of Finance (MoF) and Nepal Stock Exchange (NEPSE). It is assumed that economic growth is the function of stock market development for the purpose of data analysis. Empirical results of this study indicate significant positive relationship between economic growth and stock market development. Moreover, stock market development explained considerable variations in economic growth of Nepal i.e. size of the stock market explained 57.7 percent, and liquidity of the stock market explained 41.6 percent variation in economic growth of Nepal.
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YANG, CHUNXIA, YING SHEN, and BINGYING XIA. "EVOLUTION OF SHANGHAI STOCK MARKET BASED ON MAXIMAL SPANNING TREES." Modern Physics Letters B 27, no. 03 (December 13, 2012): 1350022. http://dx.doi.org/10.1142/s021798491350022x.
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In this paper, using a moving window to scan through every stock price time series over a period from 2 January 2001 to 11 March 2011 and mutual information to measure the statistical interdependence between stock prices, we construct a corresponding weighted network for 501 Shanghai stocks in every given window. Next, we extract its maximal spanning tree and understand the structure variation of Shanghai stock market by analyzing the average path length, the influence of the center node and the p-value for every maximal spanning tree. A further analysis of the structure properties of maximal spanning trees over different periods of Shanghai stock market is carried out. All the obtained results indicate that the periods around 8 August 2005, 17 October 2007 and 25 December 2008 are turning points of Shanghai stock market, at turning points, the topology structure of the maximal spanning tree changes obviously: the degree of separation between nodes increases; the structure becomes looser; the influence of the center node gets smaller, and the degree distribution of the maximal spanning tree is no longer a power-law distribution. Lastly, we give an analysis of the variations of the single-step and multi-step survival ratios for all maximal spanning trees and find that two stocks are closely bonded and hard to be broken in a short term, on the contrary, no pair of stocks remains closely bonded for a long time.
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GAUDENZI, Barbara, and Alessandro BUCCIOL. "JET FUEL PRICE VARIATIONS AND MARKET VALUE: A FOCUS ON LOW-COST AND REGULAR AIRLINE COMPANIES." Journal of Business Economics and Management 17, no. 6 (December 21, 2016): 977–91. http://dx.doi.org/10.3846/16111699.2016.1209784.
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We analyze the relationship between dynamics to stock prices and jet fuel prices, conditional on financial and company-specific variables, in the airline sector. In particular, our contribution to the literature is in the comparison between regular and low-cost airline companies. We run a set of fixed-effect regressions where the dependent variable, the stock daily return of the airline company (observed between 2008 and 2014) is regressed over three sets of explanatory variables (financial, company-specific and time variables). While large and small companies provide similar results, we find that the company price return – among different variables – correlates only with the jet fuel return and the stock market return. Our work also suggests that there is a difference between regular and low-cost companies. We speculate that this possibly arises because low-cost companies stock-pile in a more efficient way, which depends less on current jet fuel price. Our evidence then sheds light on the efficiency of the low-cost model and may suggest to export part of its practice among regular airline companies.
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Al Masum, Abdullah. "Dividend Policy and Its Impact on Stock Price – A Study on Commercial Banks Listed in Dhaka Stock Exchange." Global Disclosure of Economics and Business 3, no. 1 (June 30, 2014): 7–16. http://dx.doi.org/10.18034/gdeb.v3i1.166.
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How do dividend policy decisions affect a firm’s stock price, is a widely researched topic in the field of investments and finance but still it remains a mystery that whether dividend policy affects the stock prices or not. There are those who suggest that dividend policy is irrelevant because they argue a firm’s value should be determine by the basic earning power and business risk of the firm, in which case value depends only on the income (cash) produced, not on how the income is split between dividends and retained earnings and opponents of this statement called dividend is irrelevance, that investors care only about the total returns they receive, not whether they receive those returns in the form of dividends, capital gains or both.The results of researches conducted in various stock markets are different. There are many internal and external factors, which simultaneously affect stock prices and it is almost impossible to segregate the effect of each so the variations remain. This paper empirically estimates excess stock market returns for all the thirty banks listed in Dhaka Stock Exchange for the period of 2007 to 2011. Attempts are made to examine, what kind of relationship exists between dividend policy and stock market returns of private commercial banks in Bangladesh, and to what degree the returns on stocks can be explained by their respective dividend policy for the same period of time. Various theories related to dividend policy are tested in various parts of the world with different results and findings. Various other articles are reviewed, written in Bangladesh and abroad to see the significance of dividend policy on the stock prices and to compare the results of this research with those conducted earlier. Sample size is large i.e. all the listed commercial banks of Dhaka Stock Exchange so the results are reliable and valid. Panel data approach is used to explain the relationship between dividends and stock prices after controlling the variables like Earnings per Share, Return on Equity, Retention Ratio have positive relation with Stock Prices and significantly explain the variations in the market prices of shares, while the Dividend Yield and Profit after Tax has negative, insignificant relation with stock prices. Overall results of this study indicate that Dividend Policy has significant positive effect on Stock Prices.
JEL Classification Code: D78; E64; H54; R53; G21
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ROGER, Patrick, Tristan ROGER, and Alain SCHATT. "Idiosyncratic volatility and nominal stock prices: evidence from approximate factor structures." Finance Bulletin 1, no. 1 (March 28, 2017): 30–45. http://dx.doi.org/10.20870/fb.2017.1.1.1853.
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Approximate factor structures defined by Chamberlain and Rotschild (1983) allow to test whether a given quantitative firm characteristic (the nominal stock price in this paper) is a determinant of the idiosyncratic volatility of stock returns. Our study of 8,000 U.S stocks over the period 1980-2014 shows that small price stocks exhibit a higher idiosyncratic volatility than large price stocks. This relationship is persistent over time and robust to variations in the number of common factors of the approximate factor structure. Moreover, this small price effect does not hide a small-firm effect because it is still valid when we analyze the tercile of large firms. Our result confirms that small price stocks have lottery-type characteristics and, therefore, it is not in line with the efficient market hypothesis.
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Kumar, Rakesh, and Raj S. Dhankar. "Asymmetric Volatility and Cross Correlations in Stock Returns under Risk and Uncertainty." Vikalpa: The Journal for Decision Makers 34, no. 4 (October 2009): 25–36. http://dx.doi.org/10.1177/0256090920090403.
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Capital market efficiency is a matter of great interest for policy makers and investors in designing investment strategy. If efficient market hypothesis (EMH) holds true, it will prevent the investors to realize extra return by utilizing the inherent information of stocks. They will realize extra returns only by incorporating the extra risky stocks in their portfolios. While empirical tests of EMH and risk-return relationship are plentiful for developed stock markets, the focus on emerging stock markets like India, Pakistan, Sri Lanka, etc., began with the liberalization of financial systems in these markets. With globalization and deregulation, the enormous opportunities of investment in South Asian stock markets have attracted the domestic and foreign institutional investors in general, and to reduce their portfolio risk by diversifying their funds across the markets in particular. The efforts are made in this study to examine the cross-correlation in stock returns of South Asian stock markets, their regional integration, and interdependence on global stock market. The study also examines the important aspects of investment strategy when investment decisions are made under risk and uncertainty. The study uses Bombay stock exchange listed index BSE 100 for India, Colombo stock exchange listed Milanka Price Index for Sri Lanka, Karachi stock exchange listed KSE 100 for Pakistan, Dhaka stock exchange listed DSE-General Index for Bangladesh, and S & P Global 1200 to represent the global market. It carries out a comprehensive analysis, tracing the autocorrelation in stock returns, cross correlations in stock returns under risk and uncertainty, interdependency among the South Asian stock markets, and that with the global stock market. The research methodology applied in the study includes application of Ljung-Box to examine the cross-correlation in stock returns, ARCH and its generalized models for the estimation of conditional and asymmetric volatilities, and Ljung-Box as a diagnostic testing of fitted models, and finally correlation to examine the interdependency of these markets in terms of stock returns and expected volatility. The results bring out the following: L-B statistics suggests the presence of autocorrelation in stock returns in all Asian stock markets; however, for the global market, autocorrelations are significant at 15 lags, and thereafter they are insignificant. The significant autocorrelations in stock returns report volatility clustering in stock returns, reject the EMH, and hold that current stock returns are significantly affected by returns being offered in the past. ARCH and its generalized models significantly explain the conditional volatility in all stock markets in question. The study rejects the relationship between stock returns and expected volatility; however, the relationship is significant with unexpected volatility. It brings out that investors adjust their risk premium for expected variations in stock prices, but they expect extra risk premium for unexpected variations. With their entry into the liberalization phase, South Asian stock markets have reported regional interdependence, and also interdependence with the global stock market.
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Güntner, Jochen H. F. "HOW DO INTERNATIONAL STOCK MARKETS RESPOND TO OIL DEMAND AND SUPPLY SHOCKS?" Macroeconomic Dynamics 18, no. 8 (June 7, 2013): 1657–82. http://dx.doi.org/10.1017/s1365100513000084.
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Building on Kilian and Park's (2009) structural VAR analysis of the effects of oil demand and supply shocks on the U.S. stock market, this paper focuses on the differences and commonalities of stock price responses in oil exporting and importing economies in 1974–2011. Structural oil price shocks add to our understanding of the 2008 stock market crash. I find that unexpected reductions in world oil supply do not affect stock returns in any of six OECD countries. Although an increase in global aggregate demand consistently raises oil prices and cumulative real stock returns, the effect is more persistent for oil exporters. Other, e.g., precautionary oil demand shocks have a detrimental impact on stock markets in oil-importing countries, a statistically insignificant effect for Canada, and a significantly positive effect for Norway. Oil price shocks account for a larger share of the variation in aggregate international stock returns than in national stock returns.
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Majanga, Byson Beracah. "Corporate CAPEX and market capitalization of firms on Malawi stock exchange: an empirical study." Journal of Financial Reporting and Accounting 16, no. 1 (March 12, 2018): 108–19. http://dx.doi.org/10.1108/jfra-10-2016-0080.
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Purpose Market capitalization of firms reflects the current value of a firm and provides a reasonable basis on mergers and acquisition bargains. Determinants of a firm’s increasing or decreasing market capitalization are multi-faceted, hence the study. The paper is about a historical study of the responsiveness of common share prices of some listed industrial companies to the firms’ investments in capital expenditure. This study aims to discuss the impact of capital expenditure on a firm’s market capitalization, with a focus on companies listed on the Malawi stock exchange (MSE). Design/methodology/approach The study reviews data collected from published annual reports for the years from 2007 to 2015. The variations in capital expenditure (CAPEX) which are termed “increase” or “decrease” were studied to establish their association with variations in stock prices before the increase or decrease, and after the increase or decrease. As stock price changes are caused by other determinants, the variables of return on capital employed (ROCE), net profit margin (NPM), asset turnover (ATO) and earnings retention ratio (ERT) were analyzed, and a respective correlation test was done against CAPEX movement over the years through panel data analysis and regression analysis to establish the correlation between the variables using XLSTAT. Findings At 95 per cent confidence level, CAPEX correlates with ROCE and NPM at 0.373 and 0.249 coefficients, respectively, and negatively with ERT at 6.45e-2. With tests favoring a positive relationship between elements of profitability and stock price, the study finds that there is a positive relationship between a firm’s CAPEXs and its future stock prices. Research limitations/implications The firm’s commitment to CAPEX has a positive impact on its stock price on the stock exchange. These findings, however, need to be interpreted with caution as the data reviewed excluded that from financial institutions, the inclusion of which may affect the outcome, and that the data are derived from a small and young stock market which may be lacking in its efficiency compared to the old and big ones the world over. Originality/value The study was undertaken based on the study of listed companies on the Malawi Stock Exchange, and the results may or may not reflect the reality on the ground in other stock exchanges.
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Alrafaya, Ahmad Abdalla. "Effect of Liberalization of Amman Stock Market on the Prices Fluctuation for the Period (1994-2015)." Asian Journal of Finance & Accounting 10, no. 1 (May 24, 2018): 274. http://dx.doi.org/10.5296/ajfa.v10i1.12252.
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This study aimed to identify the relationship between the information and fluctuations in stocks return following the liberalization process of financial market, and illustrate the effect of liberalization of Amman Stock Exchange on price fluctuations, and the trend of this influence. To achieve this goal the researcher depended on the data of the daily stocks returns for Amman stock market for the period (1994-2015).The study was based on the analytical descriptive method. The period from which the financial data were taken was divided into two periods: first, the pre-liberalization of the financial market (1994-2000), and the second period, the post-liberalization which extended from 2001 to 2015, the appropriate statistical analysis was conducted through (e-views) program, and using the (GARCH) model.The results showed that there is an effect of the stock market liberalization on the fluctuations pattern in the Jordanian Stock Exchange, the speed and accuracy of information flow to the market has increased after stock market liberalization, it also appeared that there are some events and factors such as wars and catastrophes which lead to strong and illogical fluctuations in the stock market, and that the variation in price changes before the liberalization period was integrated variation which indicates that news have perpetual influences on price changes.
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Chao, Yong, Chen Yao, and Mao Ye. "Discrete Pricing and Market Fragmentation: A Tale of Two-Sided Markets." American Economic Review 107, no. 5 (May 1, 2017): 196–99. http://dx.doi.org/10.1257/aer.p20171046.
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Security trading now fragments into more than ten almost identical stock exchanges in the United States. We show that discrete pricing is one economic force that prevents the consolidation of trading volume. The uniform one-cent tick size (minimum price variation), imposed by the SEC's Rule 612, leads to more dispersed trading for lower priced securities. When a security reverse splits, its price increases and relative tick size (one cent divided by the price) decreases. We find that reverse splits consolidate trading of securities, using securities with identical underlying fundamentals that do not reverse split as the control group.
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López-García, María Nieves, Miguel Angel Sánchez-Granero, Juan Evangelista Trinidad-Segovia, Antonio Manuel Puertas, and Francisco Javier De las Nieves. "Volatility Co-Movement in Stock Markets." Mathematics 9, no. 6 (March 11, 2021): 598. http://dx.doi.org/10.3390/math9060598.
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The volatility and log-price collective movements among stocks of a given market are studied in this work using co-movement functions inspired by similar functions in the physics of many-body systems, where the collective motions are a signal of structural rearrangement. This methodology is aimed to identify the cause of coherent changes in volatility or price. The function is calculated using the product of the variations in volatility (or price) of a pair of stocks, averaged over all pair particles. In addition to the global volatility co-movement, its distribution according to the volatility of the stocks is also studied. We find that stocks with similar volatility tend to have a greater co-movement than stocks with dissimilar volatility, with a general decrease in co-movement with increasing volatility. On the other hand, when the average volatility (or log-price) is subtracted from the stock volatility (or log-price), the co-movement decreases notably and becomes almost zero. This result, interpreted within the background of many body physics, allows us to identify the index motion as the main source for the co-movement. Finally, we confirm that during crisis periods, the volatility and log-price co-movement are much higher than in calmer periods.
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Cont, Rama, and Jean-Philipe Bouchaud. "HERD BEHAVIOR AND AGGREGATE FLUCTUATIONS IN FINANCIAL MARKETS." Macroeconomic Dynamics 4, no. 2 (June 2000): 170–96. http://dx.doi.org/10.1017/s1365100500015029.
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We present a simple model of a stock market where a random communication structure between agents generically gives rise to heavy tails in the distribution of stock price variations in the form of an exponentially truncated power law, similar to distributions observed in recent empirical studies of high-frequency market data. Our model provides a link between two well-known market phenomena: the heavy tails observed in the distribution of stock market returns on one hand and herding behavior in financial markets on the other hand. In particular, our study suggests a relation between the excess kurtosis observed in asset returns, the market order flow, and the tendency of market participants to imitate each other.
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Rahal, F. "ASSESSING THE IMPACT OF ACCOUNTING INFORMATION ABOUT COMPANIES ON THEIR STOCK QUOTES: AN EMPIRICAL ANALYSIS OF THE ACTIVITIES OF COMPANIES PARTICIPATING IN KUWAIT AND SAUDI ARABIA STOCK EXHANGES." Vestnik of Polotsk State University. Part D. Economic and legal sciences, no. 5 (June 27, 2021): 5–14. http://dx.doi.org/10.52928/2070-1632-2021-56-5-5-14.
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Market Share Prices have important roles in determining the performance of the companies. Companies aim continuously to have a high market share prices for many goals. Therefore, understanding all variables that affect share prices is vital for investors. To examine if the Accounting Information affects market share prices, we studied the effect of some financial ratios determined from accounting statements on share prices for listed firms on Kuwait Stock Exchange and Saudi Stock Exchange. For Kuwait stock exchange, the quantitative methodology relied on the panel multiple regression through compiling and analyzing the Accounting Information and Market Share Price using secondary data for the period 2011 – 2018. The independent variables are Return on Equity (ROE), Earning per Share (EPS), and Dividend per Share(DPS) and the dependent variable is Market Share Price (MSP) of premier listed companies on Kuwait stock exchange. The analysis of the coefficient of correlation (R) shows that the correlation is very strong among DPS and EPS, DPS and ROE, EPS and ROE whilst it is strong among MSP and ROE, MSP and DPS, and EPS and MSP. Moreover, the variation of the three variables affects strongly the variation of MSP significantly on 1%. Therefore, there is a cause-effect relation between Accounting Information and MSP. Moreover, this paper examines the impact of return and leverage ratios on the Market Share Price of listed firms on Saudi Stock Exchange. The panel-data approach of fixed effect is used during the period of 2015 to 2018. To achieve the purpose of research return on equity as a proxy for profitability information, debt to equity ratio as a proxy for profitability ratio and natural logarithm of total assets as a proxy for the firms’ size are considered as dependent variables while market share price is considered as an independent variable. The results indicate that debt ratio and degree of financial leverage is negatively determining the share price while size has significant positive impact on the share. Debt to equity ratio is insignificant in effecting share price.
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Nguyen, Pascal, Younes Ben Zaied, and Thu Phuong Pham. "Does idiosyncratic risk matter? Evidence from mergers and acquisitions." Journal of Risk Finance 20, no. 4 (August 19, 2019): 313–29. http://dx.doi.org/10.1108/jrf-03-2018-0040.
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Purpose This paper aims to investigate whether idiosyncratic volatility is a priced risk factor in the Australian stock market. Design/methodology/approach The authors use the change in idiosyncratic volatility around acquisition announcements and the related stock price revaluation to test whether the idiosyncratic risk is priced. If the idiosyncratic risk is priced, increases (decreases) in idiosyncratic volatility should be associated with decreases (increases) in the acquirer’s stock price, as the latter’s future cash flows are discounted at a higher (lower) rate. The sample consists of 2,656 completed acquisitions by Australian listed firms over the period January 1990 to October 2014 for which deal value represents more than 5 per cent of the acquirer’s market value. Findings Increases (decreases) in idiosyncratic risk are associated with significant decreases (increases) in firm value. This negative relationship is robust to the presence of outliers; is unaffected by the incidence of the 2007-2008 financial crisis; holds using alternative measures of idiosyncratic risk; and is more significant after excluding the resources sector. Firms with a higher idiosyncratic risk prior to the acquisition, and firms avoiding stock to pay for the acquisition, experience a more significant stock price increase in relation to a decrease in idiosyncratic risk. Research limitations/implications Considering the small size of the Australian economy, investors may have less scope to mitigate idiosyncratic risk. As a consequence, idiosyncratic risk is associated with the positive excess return, contrary to what standard asset pricing theory assumes. The results support Merton’s (1987) hypothesis that investors are exposed to idiosyncratic risk due to imperfect portfolio diversification and receive compensation for bearing that risk. Practical implications The pricing of idiosyncratic risk may also explain why the Australian stock market has historically offered a high equity risk premium. A practical implication would be for international investors to take advantage of the diversification constraints of local investors to capture higher risk premiums and achieve superior returns. Originality/value While prior studies demonstrate that stocks with higher idiosyncratic risk are associated with higher subsequent returns, the authors show that an increase in idiosyncratic risk is associated with a decrease in stock prices using acquisition announcements as shocks to a firm’s idiosyncratic risk. In other words, the results arise from within-firm variations rather than from cross-sectional differences in stock returns.
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Atiq, Zeeshan, and Muhammad Farhan. "IMPACT OF OIL PRICES ON STOCK RETURNS: EVIDENCE FROM PAKISTAN’S STOCK MARKET." Journal of Social Sciences and Humanities 57, no. 2 (December 31, 2018): 47–63. http://dx.doi.org/10.46568/jssh.v57i2.31.
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Very few studies have investigated the movement in stock returns that result due to changes in oil prices. In recent years due to cooling down of China, unveiled oil reserves of Iran, decreasing demand worldwide and discovery of shale gases the world has experienced a large fall in the oil prices. These changes are also affecting performance of manufacturing and other associated companies in countries all over the world. Pakistan has also been affected by these changes in many ways. Especially, the returns on stock markets have been affected a lot by the variations in the oil prices. This paper using monthly data set from years 2014 to 2016 of the non-financial firms operated in Pakistan Stock Exchange (PSX), investigates the effect of variation in oil prices on returns on stock. Results from the panel data analysis indicate a negative relationship between the variables. Since, Pakistan is an oil importing, movement in the prices contribute towards affecting the production cost in a positive manner which in turn affects the execution of the enterprises as well as returns of the stocks negatively.
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Kumar, Dr Vishal, and Ritu Rani. "Performance Evaluation of Selected Banking Stocks Listed on Bombay Stock Exchange During Pre & Post Covid-19 Crisis." International Journal of Innovation and Economic Development 7, no. 3 (August 2021): 53–61. http://dx.doi.org/10.18775/ijied.1849-7551-7020.2015.73.2005.
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Investing in the stock market has always been regarded as risky. Market sentiment is a factor that influences stock prices. The purpose of this study is to assess the performance of selected banking stocks based on risk and excess return generated by them during the study period. The study also determines the effect of certain financial variables on sample banking stocks during the time crisis of Covid’19. Economic variables such as the BSE Sensex, rate of exchange, variation in FII (Foreign Institutional Investors), and coupon rate of Government Sector (G-Sec) were analysed in conjunction with the analysis of banking stocks. The regression and correlation tests are used to determine the significance of variables using SPSS. Following the BSE’s performance provides insight into the future modifications throughout the price levels of bank shares. Following a sharp decline in the market, private sector bank stock prices are correct, but not public sector bank stock prices. Throughout the first part of the research, there is a direct relationship between the BSE, Sensex, and the selected stocks, but only a weak correlation with FII, G-Sec coupon rate, and the exchange rate. Along the second part of the research, the relationship between stock prices and economic variables varies widely between banks.
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Belassi, Walid, and Sherif S. Elbarrad. "Using Statistical Analysis to Investigate the Relevance of Accounting Information in Emerging Financial Markets: An Empirical Study." Asian Social Science 16, no. 6 (May 31, 2020): 1. http://dx.doi.org/10.5539/ass.v16n6p1.
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Despite extensive literature and numerous published work on the area of value relevance of accounting information, a major part of the studies have been conducted on large and developed capital markets. While there are a number of published articles in the area of value relevance of accounting information in developing markets, there is still a need to investigate more developing markets to see if there are similarities or different attributes of each market that could shed more light on the importance and usefulness of accounting relevance in developing markets. To study further the gap of accounting relevance in developing markets, this study investigates the relationship between the accounting information – represented in the financial ratios, F-Score, M-Score, in addition to market-related measures – and stock price represented in the ratio of Price to Book Value (PBV) per share and Price-Earnings (PE) Ratio. In order to shed light on the significant variables that affect the stock price in emerging markets, this study examines the cement sector in Saudi Arabia. The results of the study indicate that F-score, inventory turnover, current ratio, debt-to-equity ratio, return on assets, and average trading are significant determinants of PBV. Combined, they explain 75.1% of the variations in PBV. The study also shows that F-score and inventory turnover are significant determinants of PE. Combined, they explain 23.1% of the variations in PE.
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LEE, DOOWON, M. KABIR HASSAN, and M. ARIFUR RAHMAN. "FIRM SPECIFIC VARIATION IN RETURNS AND FUNDAMENTALS IN KOREA STOCK MARKET." Singapore Economic Review 60, no. 04 (September 2015): 1550092. http://dx.doi.org/10.1142/s0217590815500927.
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We explore the link between firm-specific variations in stock returns and firm fundamentals in the context of a simple present value framework and test the effect of market openness and firms' industry belonging on stock price informativeness in Korea. Using detailed accounting data and an extensive control for firm-specific characteristics, we find that alternative proxies of cash flow shocks explain a significant part of the variation in firm-specific returns. The effect, however, is not uniform across market sectors. Although greater foreign shareholding in a firm is important to establish a stronger positive linkage between cash flow shocks and stock returns variation prior to the Asian financial crisis, this condition is not necessary after the Korean market was fully opened up to the foreign investors in the post-crisis period.
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Bouri, Elie, Riza Demirer, Rangan Gupta, and Jacobus Nel. "COVID-19 Pandemic and Investor Herding in International Stock Markets." Risks 9, no. 9 (September 13, 2021): 168. http://dx.doi.org/10.3390/risks9090168.
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The aim of this study is to understand the effect of the recent novel coronavirus pandemic on investor herding behavior in global stock markets. Utilizing a daily newspaper-based index of financial uncertainty associated with infectious diseases, we examine the association between pandemic-induced market uncertainty and herding behavior in a set of 49 global stock markets. More specifically, we study the pattern of cross-sectional market behavior and examine whether the pandemic-induced uncertainty drives directional similarity across the global stock markets that cannot be explained by the standard asset pricing models. Utilizing a time-varying variation of the static herding model, we first identify periods during which herding is detected. We then employ probit models to examine the possible association between pandemic-induced uncertainty and the formation of herding. Our findings show a strong association between herd formation in stock markets and COVID-19 induced market uncertainty. The herding effect of COVID-19 induced market uncertainty is particularly strong for emerging stock markets as well as European PIIGS stock markets that include some of the hardest hit economies in Europe by the pandemic. The findings establish a direct link between the recent pandemic and herd formation among market participants in global financial markets. Considering the evidence that herding behavior can drive security prices away from equilibrium values supported by fundamentals and further contribute to price fluctuations in financial markets, our findings have significant implications for policy makers and investors in their efforts to monitor investor sentiment and mitigate mis-valuations that might occur as a result. Furthermore, the evidence on the behavioral pattern of stock investors in relation to infectious diseases uncertainty can be useful in studying price discovery in stock markets and might help market participants in forming hedging strategies to mitigate downside risk in their investment portfolios.
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Brandi, Vinicius Ratton. "Predictability of stock market indexes following large drawdowns and drawups." Brazilian Review of Finance 19, no. 1 (March 6, 2021): 1–23. http://dx.doi.org/10.12660/rbfin.v19n1.2021.81140.
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The efficient market hypothesis is one of the most popular subjects in the empirical finance literature. Previous studies of the stock markets, which are mostly based on fixed-time price variations, have inconclusive findings: evidence of short-term predictability varies according to different samples and methodologies. We propose a novel approach and use drawdowns and drawups as triggers, to investigate the existence of short-term abnormal returns in the stock markets. As these measures are not computed within a fixed time horizon, they are flexible enough to capture subordinate, time-dependent processes that could drive market under- or overreaction. Most estimates in our results support the efficient market hypothesis. The underreaction hypothesis receives stronger support than does overreaction, with higher prevalence of return continuations than reversals. Evidence for the uncertain information hypothesis is present in some markets, mainly after lower-magnitude events.
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Abdelhedi, Mouna, and Mouna Boujelbène-Abbes. "Transmission of shocks between Chinese financial market and oil market." International Journal of Emerging Markets 15, no. 2 (August 27, 2019): 262–86. http://dx.doi.org/10.1108/ijoem-07-2017-0244.
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Purpose The purpose of this paper is to empirically investigate the volatility spillover between the Chinese stock market, investor’s sentiment and oil market, specifically during the 2014‒2016 turmoil period. Design/methodology/approach This study used the daily and monthly China market price index, oil-price index and composite index of Chinese investor’s sentiment. The authors first use the DCC GARCH model in order to study the correlation between variables. Second, the authors use a continuous wavelet decomposition technique so as to capture both time- and frequency-varying features of co-movement variables. Finally, the authors examine the spillover effects by estimating the BEKK GARCH model. Findings The wavelet coherency results indicate a substantial co-movement between oil and Chinese stock markets in the periods of high volatility. BEKK GARCH model outcomes confirm this relation and report the noteworthy bidirectional transmission of volatility between oil market shocks and the Chinese investor’s sentiment, chiefly in the crisis period. These results support the behavioral theory of contagion and highlight that the Chinese investor’s sentiment is a channel through which shocks are transmitted between the oil and Chinese equity markets. Thus, these results are important for Chinese authorities that should monitor the investor’s sentiment to better control the interaction between financial and real markets. Originality/value This study makes three major contributions to the existing literature. First, it pays attention to the recent 2015 Chinese stock market bumble. Second, it has gone some way toward enhancing our understanding of the volatility spillover between the investor’s sentiment, investor’s sentiment variation, oil prices and stock market returns (variables of interest) during oil and stock market crises. Third, it uses the continuous wavelet decomposition technique since it reveals the linkage between variables of interest at different time horizons.
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Lee, Changmin, and Hyoung-Goo Kang. "The Joint Dynamics of Stock and Bond Risk-Returns in Japan." International Studies Review 11, no. 2 (October 19, 2010): 93–100. http://dx.doi.org/10.1163/2667078x-01102005.
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We examine the joint dynamics of stocks and bonds in the Japanese marker by computing the prices of risks and their relationship in stock and bond factors. We deconstruct market factors into industry factors and incorporate bond factors such as the level. Slope, and curvature of yield curves. This paper contributes to the: literature by identifying the risk-return relationship in Japanese financial market in explaining the cross-sectional variations of stock returns in consideration of the bond market, and illustrating the importance of macro information in stock returns. Our approach and results provide practical implications to hedge fund managers, mutual fund managers, and basket traders.
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Islam, Misbahul, and Jayanta Chakraborti. "Futures and forward contract as a route of hedging the risk." Risk Governance and Control: Financial Markets and Institutions 5, no. 4 (2015): 68–78. http://dx.doi.org/10.22495/rgcv5i4art6.
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In the present highly uncertain business scenario, the importance of risk management is much greater than ever before. Variations in the prices of agricultural and non-agricultural commodities are induced, over time, by demand-supply dynamics. The last two decades have witnessed many-fold increase in the volume of international trade and business due to the wave of globalization and liberalization sweeping across the world. This has led to rapid and unpredictable variations in financial assets prices, interest rates and exchange rates, and subsequently, to exposing the corporate world to an unwieldy financial risk. As a result, financial markets have experienced rapid variations in interest and exchange rates, stock market prices thus exposing the corporate world to a state of growing financial risk. The emergence of derivatives market is an ingenious feat of financial engineering that provides an effective and less costly solution to the problem of risk that is embedded in the price unpredictability of the underlying asset. Derivatives provide an effective solution to the problem of risk caused by uncertainty and volatility in underlying assets. These are the financial instruments that are linked to a specific financial instrument or indicator or commodity and through which specific risks can be traded in financial markets in their own right. In actual practice there are various different types of derivatives but this paper emphasizes on the two most important types of derivatives i.e. futures and forward contracts. These two are the most commonly used types of derivatives in financial markets. We can hedge the risk of price variations in stocks, bonds, commodities, currencies, interest rates, market indices etc. This study is about the futures and forward contracts. This paper presents various types of futures and forward contract and what advantages and disadvantages these two important types of derivatives have? It also includes that how futures and forward contacts can be used as hedging tools of risk management.
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BURLACU, RADU, PATRICE FONTAINE, and SONIA JIMENEZ-GARCÈS. "THE "FIRM-SPECIFIC RETURN VARIATION": A MEASURE OF PRICE INFORMATIVENESS OR INFORMATION ASYMMETRY?" Annals of Financial Economics 01, no. 01 (June 2005): 0550004. http://dx.doi.org/10.1142/s2010495205500041.
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This paper investigates the relevancy of the "Firm-Specific Return Variation" (FSRV) as a measure of stock price informativeness. For this purpose, we study the link between FSRV and stock excess returns on the American market over the period 1986–2001. After controlling for size effects, we find a negative and highly significant impact of FSRV on stock returns. The link between FSRV and stock excess returns is robust to asset pricing models and does not capture systematic, size or "book-to-market" (BM) effects. Based on rational expectations equilibrium (REE) models considering asymmetrically informed investors, we suggest that FSRV is a good proxy for price informativeness. Common stocks with higher specific return variation have lower information-risk premium, thus lower expected returns.
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Chee, Chong-Meng, and Nazrul Hisyam Bin Ab Razak. "Effect of Stock Price Information on Timing of Share Repurchases." Journal of Finance and Banking Review Vol. 4 (1) Jan-Mar 2019 4, no. 1 (March 19, 2019): 36–46. http://dx.doi.org/10.35609/jfbr.2019.4.1(5).
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Objective - This study investigates whether private information newly incorporated into stock price enhances performance in timing share repurchases. Methodology/Technique - Cost saving gained in share repurchases is used a proxy for performance of market-timing in share repurchases and firm-specific stock return variation is used to gauge stock price informativeness. A sample of 334 U.S. repurchasing firms are tested using panel data regression. Findings - The paper concludes that managers possess better market timing skill by obtaining more cost saving from their share repurchases when private information is reflected in stock price. Stock price informativeness may be the tool for managers to improve their market timing skill to take advantage of the stock market. Furthermore, firms with smaller size and a higher market-to-book ratios, and firms with higher cash-to-assets ratios are found to achieve more cost saving in buying back their shares indicating that these firms are able to time the market in share repurchasing. Novelty – Despite numerous previous studies focusing solely on using share repurchases announcement for computing cumulative abnormal returns in testing managerial market timing, this study contributes to the literature in several ways: (i) providing evidence relating stock price informativeness and performance of market-timing in share repurchases; (ii) developing a better timing measure constructed using actual repurchasing data; (iii) adopting a cost saving measure as the timing measure instead of cumulative abnormal return. Type of Paper - Empirical. Keywords: Managerial Learning Hypothesis; Market Timing; Stock Repurchase; Stock Price Informativeness; Firm-specific Stock Return Variation. JEL Classification: G12, G13, G14. DOI: https://doi.org/10.35609/jfbr.2019.4.1(5)
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Badu, Bismark, and Kingsley Opoku Appiah. "Value relevance of accounting information: an emerging country perspective." Journal of Accounting & Organizational Change 14, no. 4 (November 5, 2018): 473–91. http://dx.doi.org/10.1108/jaoc-07-2017-0064.
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Purpose This paper aims to examine the value relevance of accounting information from an emerging country perspective. Design/methodology/approach The study adopts Ohlson (1995) Price model to examine the extent to which accounting information explain variation in stock prices of listed firms on the Ghana Stock Exchange. Findings The study reveals that earnings and book value of equity exhibit a positive and significant relationship in stock prices. Earnings explain higher variation in stock market values on the Ghana Stock Exchange compared to book value of equity. The study however finds that despite the introduction of the International Financial Reporting Standards in Ghana, the value relevance of book value and earnings have declined significantly over the period 2005-2014. Research limitations/implications A key implication is that regulators of capital markets, standards setters and accounting practitioners need to consistently improve upon the quality of financial reporting disclosures which will boost the confidence of users in their reliance on financial statements as the basis for choosing among alternative use of scarce resources. The authors adopted only the price model in testing the hypotheses. However, to provide comprehensive understanding of value relevance of accounting information, future studies can combine both the price and the return models. Originality/value The authors extend prior literature in the Ghanaian context with recent data. Finally, the study adds to the efficient market hypothesis by showing how share prices reflect accounting information produced by Ghanaian firms.
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Acharya, Niraj, and Sumit Pradhan. "Relationship between trading volume, stock return and return volatility: A case of Nepalese insurance companies." Nepalese Journal of Insurance and Social Security 2, no. 2 (December 31, 2019): 32–41. http://dx.doi.org/10.3126/njiss.v2i2.31827.
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This study examines the factors affecting the share price of Nepalese non-life insurance companies. The knowledge of the factors and their possible impact on share prices is highly appreciable as it would help investors make wise investment decisions and enable firms to enhance their market value. This study is based on secondary data of 15 non-life insurance companies which are listed in Nepal stock exchange. The study covers seven years period from the fiscal year 2011/12 to 2017/18. The result shows that firm size is positively related to market price of share and price earnings ratio. It indicates that larger firm size leads to increase in market price of share and price earnings ratio. However, the study shows that inflation is negatively related to market price of share and price earnings ratio. The study also shows that dividend per share and return on assets are negatively related to the market price of share and price earnings ratio. Similarly, earnings per share have negative relationship with market price of share and price earnings ratio. The study concludes that the increase in return on assets and earnings per shares do not explain the variation in stock price in Nepalese non-life insurance companies. Nepal is one of the emerging economy; the determinants identified may provide knowledge to the potential investors about the key factors affecting share prices in the country and accordingly assist them in optimizing their investment strategy.
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Lim, Kian-Ping, and Robert D. Brooks. "WHY DO EMERGING STOCK MARKETS EXPERIENCE MORE PERSISTENT PRICE DEVIATIONS FROM A RANDOM WALK OVER TIME? A COUNTRY-LEVEL ANALYSIS." Macroeconomic Dynamics 14, S1 (December 15, 2009): 3–41. http://dx.doi.org/10.1017/s1365100509090397.
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This paper employs the rolling bicorrelation test to measure the degree of nonlinear departures from a random walk for aggregate stock price indices of fifty countries over the sample period 1995–2005. We find that stock markets in economies with low per capita GDP in general experience more frequent price deviations than those in the high-income group. This clustering effect is not due to market liquidity or other structural characteristics, but instead can be explained by cross-country variation in the degree of private property rights protection. Our conjecture is that weak protection deters the participation of informed arbitrageurs, leaving those markets dominated by sentiment-prone noise traders whose correlated trading causes stock prices in emerging markets to deviate from the random walk benchmarks for persistent periods of time.
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Fernández Rafaelly, Rodrigo A. Morales, and Roberto J. Santillán-Salgado. "Oil price effect on sectoral stock returns: A conditional covariance and correlation approach for Mexico." Revista Mexicana de Economía y Finanzas 16, no. 1 (November 12, 2020): 1–15. http://dx.doi.org/10.21919/remef.v16i1.571.
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This paper analyzes the relationship between the volatility of oil price and selected sectoral stock returns in Mexico (industrials, materials, financials and consumer discretionary) by implementing a Diagonal VECH-type bivariate GARCH model in order to estimate conditional covariances and correlations. The econometric results suggest that there exists a statistically significant relationship between sector indices, as well as between Mexico’s aggregate stock exchange returns, and variations in oil prices. Conditional correlations suggest that during most of the analyzed period, the relationship between oil price fluctuations and sectoral stock returns is positive. The recommendation, supported by these results, is that investors should take into consideration the interaction between the analyzed variables in order to generate more robust risk-hedge strategies. An important limitation for this work is information availability at sector level in the country. The original contribution of this paper lies mainly in the analysis of the influence of oil prices over sectoral indices of the Mexican Stock Exchange. These results provide more support to the current that suggests that a price increase in oil has a direct spillover effect on stock market performance.
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Sharma, Neha. "Impact Of Short Selling In Financial Markets." JOURNAL OF SOCIAL SCIENCE RESEARCH 11, no. 3 (December 12, 2017): 2447–81. http://dx.doi.org/10.24297/jssr.v11i3.6470.
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With the financial crisis gripping the stock market worldwide in the last few months of 2008, there have been widespread criticisms on the process of short selling. The opponents have questioned the existence of short selling and argued about the foul play of the short selling. Following such widespread campaigning, in order to boost the investors confidence short selling was either or restricted in most of the Western markets and in the Anglo-Saxon countries. Nevertheless, the financial experts and economists were divided in the opinion of anning short selling. Many argued that such ban will affect the market efficiency and disturb the market from operating freely and fairly. Hence the current research is about the impacts or the effects the ban on short selling have on the financial markets, especially the capital markets. This study focuses on finding such effects in a neutralised approach and free from bias to any side.
The research is compiled in such a way that, the literature review was conducted with an aim of uncovering the loop holes and functioning of short selling experts. Accordingly, the findings of the literature review are in the form of a list of key characteristics short selling possess which increases the efficiency of the system. These key characteristics are evaluated based on the stock price variations in the LSE. The conclusions are drawn based on the findings on the literature review and the analysis done on the stock price movements, crude oil price variation and a survey on the perception of short selling. Based on the findings, a set of commendations are made which will help in the further understanding of the short selling.
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Cheung, William Ming Yan, Adrian Lei, and Libin Tao. "Corporate governance and the divergence of learning channels." Corporate Ownership and Control 8, no. 3 (2011): 9–17. http://dx.doi.org/10.22495/cocv8i3p1.
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We study the relation between corporate governance, market liquidity and stock price informativeness. Firms with more informative stock prices are associated with larger transaction volume, larger bid-ask spread and better corporate governance. Thisliquidity-informativeness relation is significant for firms with high antitakeover provision (bad corporate governance). However, bid-ask spread is insignificantly associated withprice informativeness for firms with less antitakeover provision (good corporate governance). This supports that firm-specific return variation better measures stock price informativeness when firm has strong corporate governance framework. Our results suggest that (i) more (less) informed trading activities associated with weak (strong) corporate governance, and (ii) corporate governance explains the cross-sectional variation in information efficiency of stock prices. Our results are consistent with theories in financial market learning that investor learn from informed trading activities associated with weak governance firms and informative disclosure from strong governance firms.
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Lan, Chunhua. "Stock Price Movements: Business-Cycle and Low-Frequency Perspectives." Review of Asset Pricing Studies 10, no. 2 (March 13, 2020): 335–95. http://dx.doi.org/10.1093/rapstu/raaa002.
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Abstract We find that a business-cycle component of the aggregate dividend yield strongly predicts short-term aggregate dividend growth and consumption growth, whereas its low-frequency counterpart significantly forecasts long-horizon market returns. The dividend yield—the sum of these two components—has difficulty revealing variations in expected cash flow growth, because its low-frequency component tends to disguise such variations. Yet the low-frequency component has significant forecasting power for multiperiod returns at horizons of several years to as long as around 20 years, which is longer than the horizons typically exploited in prior studies that provide weak statistical evidence to challenge multiperiod return predictability. (JEL G12, G17) Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.
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Yuniarsa, Sherlinda Octa, and Jui-Chuan Della Chang. "Exploring the Relationships among Interest Rate, Exchange Rate, and Stock Market in Indonesia." Global Journal of Business and Social Science Review (GJBSSR) Volume 4 (2016: Issue-3) 4, no. 3 (July 17, 2016): 37–43. http://dx.doi.org/10.35609/gjbssr.2016.4.3(6).
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Objective - The purpose of this research is to explore the relationships among interest rate, exchange rate, and stock price in Indonesia. Methodology/Technique - This study used data from the Central Bank of Indonesia to empirically test a proposed model of interest rate, exchange rate, and stock price. Findings - The findings confirmed that there are positive volatilities from exchange rate and negative volatility from interest rate. The relationships among interest rate, exchange rate, and stock market excessive volatility a little bit strengthen during economic crises, a study that allows for structural breaks, to account for the effects of sudden macroeconomic shocks, recessions, and financial crises, would be important to empirical literature on Indonesia. Novelty - This study proved that it is important to point out the variance decomposition results also showed that except for volatility in the exchange rate, interest rate, and stock market volatility also seems to explain quite a high proportion of the some variations of the macroeconomic excessive volatility. Type of Paper - Conceptual Keywords: interest rate volatility, exchange rate volatility, stock market volatility, emerging market, Asymmetric ARCH models
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Cho, Joong-Seok, Hyung Ju Park, and Ji-Hye Park. "Stock Return Synchronicity and Analysts’ Forecast Properties." Gadjah Mada International Journal of Business 18, no. 3 (December 2, 2016): 301. http://dx.doi.org/10.22146/gamaijb.16941.
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Using stock return synchronicity as a measure of a firm’s information environment, our research investigates how the firms’ stock return synchronicity affects analysts’ forecast properties for the accuracy and optimism of the analysts’ annual earnings forecasts. Stock return synchronicity represents the degree to which market and industry information explains firm-level stock return variations. A higher stock return synchronicity indicates the higher quality of a firm’s information environment, because a firm’s stock price reflects more market-level and industry-level information relative to firm-specific information. Our study shows that stock return synchronicity positively affects the forecast properties. Our finding shows that when stock return synchronicity is high, analysts’ annual earnings forecasts are more accurate and less optimistically biased.
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Nyakinda, Joseph Otula. "A LOGISTIC NONLINEAR BLACK-SCHOLES-MERTON PARTIAL DIFFERENTIAL EQUATION: EUROPEAN OPTION." International Journal of Research -GRANTHAALAYAH 6, no. 6 (June 30, 2018): 480–87. http://dx.doi.org/10.29121/granthaalayah.v6.i6.2018.1393.
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Nonlinear Black-Scholes equations provide more accurate values by taking into account more realistic assumptions, such as transaction costs, illiquid markets, risks from an unprotected portfolio or large investor's preferences, which may have an impact on the stock price, the volatility, the drift and the option price itself. Most modern models are represented by nonlinear variations of the well-known Black-Scholes Equation. On the other hand, asset security prices may naturally not shoot up indefinitely (exponentially) leading to the use of Verhulst’s Logistic equation. The objective of this study was to derive a Logistic Nonlinear Black Scholes Merton Partial Differential equation by incorporating the Logistic geometric Brownian motion. The methodology involves, analysis of the geometric Brownian motion, review of logistic models, process and lemma, stochastic volatility models and the derivation of the linear and nonlinear Black-Scholes-Merton partial differential equation. Illiquid markets have also been analyzed alongside stochastic differential equations.
The result of this study may enhance reliable decision making based on a rational prediction of the future asset prices given that in reality the stock market may depict a nonlinear pattern.
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Srinivasan N. and Lakshmi C. "Stock Price Prediction Using Fuzzy Time-Series Population Based Gravity Search Algorithm." International Journal of Software Innovation 7, no. 2 (April 2019): 50–64. http://dx.doi.org/10.4018/ijsi.2019040105.
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The main motive of this research is to predict the future stock value of the particular day with minimum variation from the actual value of stock. In this research, a genetic algorithm-based gravity search algorithm is proposed for stock market prediction. It will be helpful for short-term investors in the National stock market. Some important factors that affect the value of stock are total stocks traded, total turnover of the company, gross domestic product (GDP) of the country, GDP per capita and political or external factors are some of the main factors that affect the stock value of that particular day. Opening and closing values of the stock market were predicted with the help of the above factors. Each factor will be considered as an object with mass, the mass of every object will be based on the importance. With the help of a Gravitational Search Algorithm (GSA) [1], the converging point of the entire object is determined and it is said to be the optimal output of the algorithm. The input considered are opening, closing, low and high values for a period of one year.
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Adams, Andrew, Seth Armitage, and Adrian FitzGerald. "An analysis of stock market volatility." Annals of Actuarial Science 6, no. 1 (December 6, 2011): 153–70. http://dx.doi.org/10.1017/s1748499511000339.
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AbstractThis paper provides a user-friendly approach to explain how variation in fundamental price-determining variables ‘translates into’ variation in the fundamental value of equities, based on the standard dividend-growth model. The analysis is illustrated with UK data using estimates of real interest rate forecasts and real dividend growth rate forecasts in the past. An important application of this approach is that stock market volatility can be analysed in terms of its component parts. Actual market volatility does not appear to be excessive when compared with the notional volatility implied by changes over time in our estimates of forecast real interest rates and forecast real dividend growth rates.
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Dudney, Donna M., Benjamas Jirasakuldech, Thomas Zorn, and Riza Emekter. "Do residual earnings price ratios explain cross-sectional variations in stock returns?" Managerial Finance 41, no. 7 (July 13, 2015): 692–713. http://dx.doi.org/10.1108/mf-07-2013-0179.
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Purpose – Variations in price/earnings (P/E) ratios are explained in a rational expectations framework by a number of fundamental factors, such as differences in growth expectations and risk. The purpose of this paper is to use a regression model and data from four sample periods (1996, 2000, 2001, and 2008) to separate the earnings/price (E/P) ratio into two parts – the portion of E/P that is related to fundamental determinants and a residual portion that cannot be explained by fundamentals. The authors use the residual portion as an indicator of over or undervaluation; a large negative residual is consistent with overvaluation while a large positive residual implies undervaluation. The authors find that stocks with larger negative residuals are associated with lower subsequent returns and reward-to-risk ratio, while stocks with larger positive residuals are associated with higher subsequent returns and reward-to-risk ratio. This pattern persists for both one and two-year holding periods. Design/methodology/approach – This study uses a regression methodology to decompose E/P into two parts – the portion of E/P than is related to fundamental determinants and a residual portion that cannot be explained by fundamentals. Focussing on the second portion allows us to isolate a potential indicator of stock over or undervaluation. Using a sample of stocks from four time periods (1996, 2000, 2001, and 2008, the authors calculate the residuals from a regression model of the fundamental determinants of cross-sectional variation in E/P. These residuals are then ranked and used to divide the stock sample into deciles, with the first decile containing the stocks with the highest negative residuals (indicating overvaluation) and the tenth decile containing stocks with the highest positive residuals (indicating undervaluation). Total returns for subsequent one and two-year holding periods are then calculated for each decile portfolio. Findings – The authors find that high positive residual stocks substantially outperform high negative residual stocks. This is true even after risk adjustments to the portfolio returns. The residual E/P appears to accurately predict relative stock performance with a relatively high degree of accuracy. Research limitations/implications – The findings of this paper provide some important implications for practitioners and investors, particularly for the stock selection, fund allocations, and portfolio strategies. Practitioners can still rely on a valuation measure such as E/P as a useful tool for making successful investment decisions and enhance portfolio performance. Investors can earn abnormal returns by allocating more weights on stocks with high E/P multiples. Portfolios of high E/P multiples or undervalued stocks are found to enjoy higher risk-adjusted returns after controlling for the fundamental factors. The most beneficial performance holding period return will be for a relatively short period of time ranging from one to two years. Relying on the E/P valuation ratios for a long-term investment may add little value. Practical implications – Practitioners and academics have long relied on the P/E ratio as an indicator of relative overvaluation. An increase in the absolute value of P/E, however, does not always indicate overvaluation. Instead, a high P/E ratio can simply reflect changes in the fundamental factors that affect P/E. The authors find that stocks with larger negative residuals are associated with lower subsequent returns and coefficients of variation, while stocks with larger positive residuals are associated with higher subsequent returns and coefficients of variation. This pattern persists for both one and two-year holding periods. Originality/value – The P/E ratio is widely used, particularly by practitioners, as a measure of relative stock valuation. The ratio has been used in both cross-sectional and time series comparisons as a metric for determining whether stocks are under or overvalued. An increase in the absolute value of P/E, however, does not always indicate overvaluation. Instead, a high P/E ratio can simply reflect changes in the fundamental factors that affect P/E. If interest rates are relatively low, for example, the time series P/E should be correspondingly higher. Similarly, if the risk of a stock is low, that stock’s P/E ratio should be higher than the P/E ratios of less risky stocks. The authors examine the cross-sectional behavior of the P/E (the authors actually use the E/P ratio for reasons explained below) after controlling for factors that are likely to fundamentally affect this ratio. These factors include the dividend payout ratio, risk measures, growth measures, and factors such as size and book to market that have been identified by Fama and French (1993) and others as important in explaining the cross-sectional variation in common stock returns. To control for changes in these primary determinants of E/P, the authors use a simple regression model. The residuals from this model represent the unexplained cross-sectional variation in E/P. The authors argue that this unexplained variation is a more reliable indicator than the raw E/P ratio of the relative under or overvaluation of stocks.
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Park, Jinwoo. "A Market Microstructure Explanation for Predictable Variations in Stock Returns following Large Price Changes." Journal of Financial and Quantitative Analysis 30, no. 2 (June 1995): 241. http://dx.doi.org/10.2307/2331119.
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