scholarly journals Demographic Trends, the Dividend-Price Ratio, and the Predictability of Long-Run Stock Market Returns

2011 ◽  
Vol 46 (5) ◽  
pp. 1493-1520 ◽  
Author(s):  
Carlo A. Favero ◽  
Arie E. Gozluklu ◽  
Andrea Tamoni
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Demographic Variable ◽  
Generation Model ◽  
Price Ratio ◽  
Market Returns ◽  
Stock Market Returns ◽  
Financial Ratio ◽  
Overlapping Generation ◽  
Long Run

AbstractThis paper documents the existence of a slowly evolving trend in the log dividend-price ratio, DPt, determined by a demographic variable, MYt: the middle-aged to young ratio. Deviations of DPtfrom this long-run component explain transitory but persistent fluctuations in stock market returns. The relation between MYtand DPtis a prediction of an overlapping generation model. The joint significance of MY and DPtin long-horizon forecasting regressions for market returns explains the mixed evidence on the ability of DPtto predict stock returns and provide a model-based interpretation of statistical corrections for breaks in the mean of this financial ratio.

scholarly journals Reaction of stock market returns to COVID-19 pandemic and lockdown policy: evidence from Nigerian firms stock returns

2021 ◽  
Vol 7 (1) ◽  
Author(s):  
Isiaka Akande Raifu ◽  
Terver Theophilus Kumeka ◽  
Alarudeen Aminu
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Stock Exchange ◽  
Estimation Methods ◽  
Panel Var ◽  
Impulse Response Functions ◽  
Market Returns ◽  
Stock Market Returns ◽  
Long Run ◽  
Policy Shocks

AbstractGiven the effects COVID-19 pandemic on the financial sectors across the world, this study examined the reaction of stock returns of 201 firms listed in the Nigerian Stock Exchange to the COVID-19 pandemic and lockdown policy. We deployed both Pooled OLS and Panel VAR as estimation methods. Generally, the results from POLS show the stock market returns of the Nigerian firms reacted negatively more to the global COVID-19 confirmed cases and deaths than the domestic COVID-19 confirmed cases and deaths and lockdown policy. The results of the impulse response functions revealed that the effects of COVID-19 confirmed cases and deaths and lockdown policy shocks on stock returns oscillate between negative and positive before the stock market returns converge to the equilibrium in the long run. The FEVD results showed that growth in the COVID-19 confirmed cases, deaths and lockdown policy shocks explained little variations in stock market returns. Given our finding, we advocate for the relaxation of policy of lockdown and the combine use of monetary and fiscal policies to mitigate the negative effect of COVID-19 pandemic on stock market returns in Nigeria.

scholarly journals Are Kuwaiti Stock Returns Affected by Fluctuations in Oil Prices?

2020 ◽  
Vol 11 (6) ◽  
pp. 1
Author(s):  
Salem Alshihab ◽  
Nayef AlShammari
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Oil Prices ◽  
Market Returns ◽  
Macroeconomic Factors ◽  
Stock Market Returns ◽  
Long Run ◽  
Short Run ◽  
The Impact ◽  
Adf Test

This paper examines the impact of fluctuations in the price of oil on Kuwaiti stock market returns for the month-to-month period of 2000 to 2020. The Augmented Dickey-Fuller (ADF) test for stationarity, the error correction model (ECM), and various cointegration test techniques were used to examine the estimated model. In an oil-based economy like Kuwait, the exposure to oil prices seems to affect the performance of the country’s stock market. Our main findings related to the long run showed that the price of oil is cointegrated with stock market returns. Interestingly, our ECM examination confirmed that changes in Kuwaiti stock market returns are only affected by oil price fluctuations in the short run. Further strategies are needed to better stabilize Kuwait’s capital market. This equilibrium can be achieved by pursuing more stability in other macroeconomic factors and providing a solid legal independence for the country’s financial market.

scholarly journals Country Risk Ratings and Stock Market Returns in Brazil, Russia, India, and China (BRICS) Countries: A Nonlinear Dynamic Approach

Risks ◽  
2018 ◽  
Vol 6 (3) ◽  
pp. 94 ◽  
Author(s):  
Adnen Ben Nasr ◽  
Juncal Cunado ◽  
Rıza Demirer ◽  
Rangan Gupta
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Commodity Price ◽  
Global Market ◽  
Country Risk ◽  
Market Returns ◽  
Stock Market Returns ◽  
Brics Countries ◽  
Long Run ◽  
India And China

This study examines the linkages between Brazil, Russia, India, and China (BRICS) stock market returns, country risk ratings, and international factors via Non-linear Auto Regressive Distributed Lags models (NARDL) that allow for testing the asymmetric effects of changes in country risk ratings on stock market returns. We show that BRICS countries exhibit quite a degree of heterogeneity in the interaction of their stock market returns with country-specific political, financial, and economic risk ratings. Positive and negative rating changes in some BRICS countries are found to have significant implications for both local stock market returns, as well as commodity price dynamics. While the commodity market acts as a catalyst for these emerging stock markets in the long-run, we also observe that negative changes in the country risk ratings generally command a higher impact on stock returns, implying the greater impact of bad news on market dynamics. Our findings suggest that not all BRICS nations are the same in terms of how they react to ratings changes and how they interact with global market variables.

Long-run stock market returns

2021 ◽  
pp. 28-48
Author(s):  
Jesper Rangvid
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Risk Premium ◽  
Historical Data ◽  
Market Returns ◽  
Stock Market Returns ◽  
Long Run ◽  
International Data ◽  
Risk Free Rate ◽  
Free Rate

This chapter presents facts and concepts regarding long-run stock market returns. It starts out briefly defining stock returns.The chapter then looks at the historical data, starting with US data and then turning to international data. It decomposes stock returns into a risk-free rate and a risk premium. The chapter also introduces concepts that will be used repeatedly throughout the book, such as different kinds of averages (arithmetic and geometric), standard deviations, variances, and other important concepts in finance.The chapter presents stylized facts about long-run stock returns. It does not try to explain what generates these returns. This is the topic of subsequent chapters.

scholarly journals U.S. STOCK MARKET P/E RATIOS, STRUCTURAL BREAKS, AND LONG-TERM STOCK RETURNS

2018 ◽  
Vol 19 (1) ◽  
pp. 110-123 ◽  
Author(s):  
Chung BAEK ◽  
Ingyu LEE
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Structural Breaks ◽  
Structural Changes ◽  
Market Returns ◽  
Stock Market Returns ◽  
Long Run ◽  
Cumulative Sum Control ◽  
The Relationship

Our study investigates structural changes in the market P/E ratio and shows how structural changes affect long-term stock market returns. Using the cumulative sum control chart and the Bai-Perron algorithm, we identify multiple structural breakpoints in the market P/E ratio and find that those structural changes are significantly perceived over the long run. Unlike previous studies that do not consider structural changes, our study is the first one that shows how structural changes asymmetrically influence long-term stock returns depending on the high or low P/E period. This implies that structural changes in the market P/E ratio play an important role in explaining long-term stock returns. We propose that structural changes should be taken into account in some manner to establish the relationship between P/E ratios and long-term stock returns.

A quantile regression approach to evaluate the relative impact of global and local factors on the MENA stock markets

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Slah Bahloul ◽  
Nawel Ben Amor
Keyword(s):  
Stock Market ◽  
Quantile Regression ◽  
Stock Returns ◽  
Stock Markets ◽  
Financial Integration ◽  
Ordinary Least Squares ◽  
Market Returns ◽  
Stock Market Returns ◽  
Content Type ◽  
The Impact

PurposeThis paper investigates the relative importance of local macroeconomic and global factors in the explanation of twelve MENA (Middle East and North Africa) stock market returns across the different quantiles in order to determine their degree of international financial integration.Design/methodology/approachThe authors use both ordinary least squares and quantile regressions from January 2007 to January 2018. Quantile regression permits to know how the effects of explanatory variables vary across the different states of the market.FindingsThe results of this paper indicate that the impact of local macroeconomic and global factors differs across the quantiles and markets. Generally, there are wide ranges in degree of international integration and most of MENA stock markets appear to be weakly integrated. This reveals that the portfolio diversification within the stock markets in this region is still beneficial.Originality/valueThis paper is original for two reasons. First, it emphasizes, over a fairly long period, the impact of a large number of macroeconomic and global variables on the MENA stock market returns. Second, it examines if the relative effects of these factors on MENA stock returns vary or not across the market states and MENA countries.

Weather, investor psychology and stock returns: evidence from Fiji's stock market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Janesh Sami
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Sunshine Duration ◽  
Market Returns ◽  
Modeling Framework ◽  
Stock Market Returns ◽  
Content Type ◽  
Asset Pricing Models ◽  
Weather Changes ◽  
Practical Implications

PurposeThis paper investigates whether weather affects stock market returns in Fiji's stock market.Design/methodology/approachThe author employed an exponential general autoregressive conditional heteroskedastic (EGARCH) modeling framework to examine the effect of weather changes on stock market returns over the sample period 9/02/2000–31/12/2020.FindingsThe results show that weather (temperature, rain, humidity and sunshine duration) have robust but heterogenous effects on stock market returns in Fiji.Research limitations/implicationsIt is useful for scholars to modify asset pricing models to include weather-related variables (temperature, rain, humidity and sunshine duration) to better understand Fiji's stock market dynamics (even though they are often viewed as economically neutral variables).Practical implicationsInvestors and traders should consider their mood while making stock market decisions to lessen mood-induced errors.Originality/valueThis is the first attempt to examine the effect of weather (temperature, rain, humidity and sunshine duration) on stock market returns in Fiji's stock market.

scholarly journals Effects of Exchange Rate and Inflation Rate on Stock Market Returns Volatility in India.

2020 ◽  
Author(s):  
Nenavath Sre ◽  
Suresh Naik
Keyword(s):  
Exchange Rate ◽  
Stock Market ◽  
Error Correction ◽  
Inflation Rate ◽  
Market Returns ◽  
Stock Market Returns ◽  
Positive Effects ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run

Abstract The paper investigates the effect of exchange and inflation rate on stock market returns in India. The study uses monthly, quarterly and annual inflation and exchange rate data obtained from the RBI and market returns computed from the Indian share market index from January, 2000 to June, 2020.The paper uses the autoregressive distributed lag (ARDL) co-integration technique and the error correction parametization of the ARDL model for investigating the effect on Indian Stock markets. The GARCH and its corresponding Error Correction Model (ECM) were used to explore the long- and short-run relationship between the India Stock market returns, inflation, and exchange rate. The paper shows that there exists a long term relationship but there is no short-run relationship between Indian market returns and inflation. But, there is periodicity of inflation monthly considerable long run and short-run relationship between them existed. The outcome also illustrates a significant short-run relationship between NSE market returns and exchange rate. The variables were tested for short run and it was significantly shown the positive effects on the stock market returns and making it a desirable attribute of which investors can take advantage of. This is due to the establishment of long-run effect of inflation and exchange rate on stock market returns.

Stock Market Responses to Monetary and Fiscal Policies

2022 ◽  
pp. 266-282
Author(s):  
Elif Erer ◽  
Deniz Erer
Keyword(s):  
Stock Market ◽  
Fiscal Policies ◽  
Market Returns ◽  
Monetary Policies ◽  
Stock Market Returns ◽  
Long Run ◽  
Stock Market Performance ◽  
Short Run ◽  
Effect Hypothesis ◽  
Positive Effect

This study analyzes the short-run and long-run effects of interaction between fiscal and monetary policies on stock market performance in four emerging Asian economies, which are China, India, Indonesia, and Malaysia, by using ARDL model. The study covers the period of 2003:Q1-2020:Q1. The findings from this study show monetary and fiscal policies play an important role in determining stock market returns. Also, the results theoretically support Richardian neutrality hypothesis for China and Indonesia, Keynesian positive effect hypothesis for India, and classical crowding out effect hypothesis for Malaysia, and interest channel of monetary transmission mechanism only for China.

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