The connectedness between Sukuk and conventional bond markets and the implications for investors

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Aristeidis Samitas ◽  
Spyros Papathanasiou ◽  
Drosos Koutsokostas
Keyword(s):  
Asset Allocation ◽  
Spillover Effects ◽  
Bond Markets ◽  
Data Set ◽  
Content Type ◽  
Vector Autoregressive ◽  
Volatility Spillovers ◽  
Exogenous Shocks ◽  
Time Varying Parameter ◽  
Optimal Hedge

Purpose The purpose of this paper is to examine the connectedness across a variety of Sukuk and conventional bond indices and the implications for optimal asset allocation for the period January 1, 2010–April 30, 2020. Design/methodology/approach The data set consists of five major Sukuk (Dow Jones Sukuk, Thompson Reuters BPA Malaysia Sukuk, Indonesia Government Sukuk, S&P MENA Sukuk and Tadawul Sukuk and Bonds Index) and five conventional bond indexes, one for developed (USA) and four for emerging markets (Malaysia, Indonesia, Africa and Qatar). This study investigates the connectedness and volatility spillover effects across the aforementioned indices, by following the Diebold and Yilmaz (2012) approach, based on the time-varying parameter vector autoregressive (TVP-VAR) model. In addition, this paper provides optimal hedge ratios and portfolio weights for investors. Findings The empirical results show that Sukuk and conventional bond markets are highly integrated and that total connectedness exhibits sensitivity to exogenous shocks. The Dow Jones and the Malaysian Sukuk indices are the primary shock transmitters to other markets. However, the weak volatility spillovers between the Dow Jones and conventional bonds suggest that opportunities for optimal asset allocation may in fact exist. The highest (lowest) hedging effectiveness can be achieved by taking a short position in Malaysian (Qatarian) bonds. Originality/value To the best of the knowledge, this is the largest sample taken into account to investigate the connectedness between Sukuk and conventional bonds.

Evidence of leverage effects and volatility spillover among exchange rates of selected emerging and growth leading economies

2019 ◽  
Vol 11 (2) ◽  
pp. 174-192 ◽  
Author(s):  
Ajaya Kumar Panda ◽  
Swagatika Nanda ◽  
Vipul Kumar Singh ◽  
Satish Kumar
Keyword(s):  
Exchange Rates ◽  
Asset Management ◽  
Spillover Effects ◽  
International Investment ◽  
Multivariate Garch ◽  
Conditional Volatility ◽  
Substantial Impact ◽  
Content Type ◽  
Volatility Spillovers ◽  
Strongly Connected

Purpose The purpose of this study is to examine the evidences of leverage effects on the conditional volatility of exchange rates because of asymmetric innovations and its spillover effects among the exchange rates of selected emerging and growth-leading economies. Design/methodology/approach The empirical analysis uses the sign bias test and asymmetric generalized autoregressive conditional heteroskedasticity (GARCH) models to capture the leverage effects on conditional volatility of exchange rates and also uses multivariate GARCH (MGARCH) model to address volatility spillovers among the studied exchange rates. Findings The study finds substantial impact of asymmetric innovations (news) on the conditional volatility of exchange rates, where Russian Ruble is showing significant leverage effect followed by Indian Rupee. The exchange rates depict significant mean spillover effects, where Rupee, Peso and Ruble are strongly connected; Real, Rupiah and Lira are moderately connected; and Yuan is the least connected exchange rate within the sample. The study also finds the assimilation of information in foreign exchanges and increased spillover effects in the post 2008 periods. Practical implications The results probably have the implications for international investment and asset management. Portfolio managers could use this research to optimize their international portfolio. Policymakers such as central banks may find the study useful to monitor and design interventions strategies in foreign exchange markets keeping an eye on the nature of movements among these exchange rates. Originality/value This is one of the few empirical research studies that aim to explore the leverage effects on exchange rates and their volatility spillovers among seven emerging and growth-leading economies using advanced econometric methodologies.

How firms borrow in international bond markets

2018 ◽  
Vol 26 (1) ◽  
pp. 135-169
Author(s):  
Alberto Fuertes ◽  
Jose María Serena
Keyword(s):  
Emerging Economies ◽  
Design Methodology ◽  
Choice Behavior ◽  
Global Financial Crisis ◽  
Securities And Exchange Commission ◽  
Bond Markets ◽  
Data Set ◽  
Content Type ◽  
Parametric Analyses ◽  
The Global Financial Crisis

Purpose This paper aims to investigate how firms from emerging economies choose among different international bond markets: global, US144A and Eurobond markets. The authors explore if the ranking in regulatory stringency –global bonds have the most stringent regulations and Eurobonds have the most lenient regulations – leads to a segmentation of borrowers. Design/methodology/approach The authors use a novel data set from emerging economy firms, treating them as consolidated entities. The authors also obtain descriptive evidence and perform univariate non-parametric analyses, conditional and multinomial logit analyses to study firms’ marginal debt choice decisions. Findings The authors show that firms with poorer credit quality, less ability to absorb flotation costs and more informational asymmetries issue debt in US144A and Eurobond markets. On the contrary, firms issuing global bonds – subject to full Securities and Exchange Commission requirements – are financially sounder and larger. This exercise also shows that following the global crisis, firms from emerging economies are more likely to tap less regulated debt markets. Originality/value This is, to the authors’ knowledge, the first study that examines if the ranking in stringency of regulation – global bonds have the most stringent regulations and Eurobonds have the most lenient regulations – is consistent with an ordinal choice by firms. The authors also explore if this ranking is monotonic in all determinants or there are firm-specific features which make firms unlikely to borrow in a given market. Finally, the authors analyze if there are any changes in the debt-choice behavior of firms after the global financial crisis.

scholarly journals An analysis of CEE equity market integration and their volatility spillover effects

2019 ◽  
Vol 29 (1) ◽  
pp. 23-40 ◽  
Author(s):  
Ngo Thai Hung
Keyword(s):  
Market Integration ◽  
Design Methodology ◽  
Spillover Effects ◽  
Equity Market ◽  
Multivariate Garch ◽  
The Czech Republic ◽  
Content Type ◽  
Volatility Spillovers ◽  
Conditional Correlations ◽  
Practical Implications

Purpose The purpose of this paper is to examine the conditional correlations and spillovers of volatilities across CEE markets, namely, Hungary, Poland, the Czech Republic, Romania and Croatia, in the post-2007 financial crisis period. Design/methodology/approach The authors use five-dimensional GARCH-BEKK alongside with the CCC and DCC models. Findings The estimation results of the three models generally demonstrate that the correlations between these markets are particularly significant. Also, own-volatility spillovers are generally lower than cross-volatility spillovers for all markets. Practical implications These results recommend that investors should take caution when investing in the CEE equity markets as well as diversifying their portfolios so as to minimize risk. Originality/value Unlike the previous studies in this field, this paper is the first study using multivariate GARCH-BEKK alongside with CCC and DCC models. The study makes an outstanding contribution to the existing literature on spillover effects and conditional correlations in the CEE financial stock markets.

Do the flipped impacts of hotels matter to the popularity of Airbnb?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Bowen Yi ◽  
Da Shi ◽  
Fangfang Shi ◽  
Liang Zhang
Keyword(s):  
Spillover Effects ◽  
Set Covering ◽  
Negative Effects ◽  
Data Set ◽  
Content Type ◽  
Competitive Effects ◽  
Competition Theory ◽  
Relationship Model ◽  
Hotel Managers ◽  
Multidimensional Effects

Purpose By building on cooperation–competition theory, this study aims to investigate the multidimensional flipped effects of neighborhood hotels on Airbnb listings’ popularity, examining the degree to which such impacts are influenced by hotel types and geographical areas. Design/methodology/approach This study explores the interdependent and competitive relationship between neighborhood hotels and Airbnb from the perspective of effects on Airbnb listings’ popularity by exploring a data set covering 10,492 Airbnb listings and 2,691 hotels from Ctrip. Findings Results reveal that neighborhood hotels’ number of reviews, review ratings and prices each have positive spillover effects on Airbnb listings’ popularity, while quality assurance labels and negative review topic sentiments exert competitive effects on Airbnb popularity. Moreover, the number of budget chain hotels and high-star hotels have positive and negative effects on Airbnb popularity, respectively. Geographical areas also have a moderating effect on the relationship between various hotel-related influencing factors and Airbnb. Practical implications This study can offer hotel managers and Airbnb operators a clearer understanding of these businesses’ coexisting relationship. Findings can also provide Airbnb-specific guidelines for practitioners in terms of site selection, promotional features and development strategies for Airbnb listings. Originality/value This study establishes a cooperation–competition relationship model between hotels and Airbnb and considers the flipped effects of hotels on Airbnb for the first time. It expands previous studies by considering the multidimensional effects of hotels on Airbnb listings’ popularity and by examining the influences of hotel types and geographical areas on hotels’ impacts on Airbnb.

Returns and volatility spillovers among cryptocurrency portfolios

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ismail Olaleke Fasanya ◽  
Oluwatomisin Oyewole ◽  
Temitope Odudu
Keyword(s):  
Design Methodology ◽  
Asset Returns ◽  
Volatility Spillover ◽  
Content Type ◽  
Vector Autoregressive ◽  
Volatility Spillovers ◽  
Dynamic Relationship ◽  
Major Market ◽  
Daily Data ◽  
Variance Decompositions

PurposeThis paper examines the return and volatility spillovers among major cryptocurrency using daily data from 10/08/2015 to 15/04/2018.Design/methodology/approachThe authors employ the Dielbold and Yilmaz (2012) spillover approach and rolling sample analysis to capture the inherent secular and cyclical movements in the cryptocurrency market.FindingsThe authors show that there is substantial difference between the behaviour of the cryptocurrency portfolios return and volatility spillover indices over time. The authors find evidence of interdependence among cryptocurrency portfolios given the spillover indices. While the return spillover index reveals increased integration among the currency portfolios, the volatility spillover index experiences significant bursts during major market crises. Interestingly, return and volatility spillovers exhibit both trends and bursts respectively.Originality/valueThis study makes a methodological contribution by adopting Dielbold and Yilmaz (2012) approach to quantify the returns and volatility transmissions among cryptocurrencies. To the best of our knowledge, little or no study has adopted the Dielbold and Yilmaz (2012) methodology to investigate this dynamic relationship in the cryptocurrencies market. The Dielbold and Yilmaz (2012) approach provides a simple and intuitive measure of interdependence of asset returns and volatilities by exploiting the generalized vector autoregressive framework, which produces variance decompositions that are unaffected by ordering.

M&As in Africa – effects of law and governance

2019 ◽  
Vol 14 (5) ◽  
pp. 873-898
Author(s):  
Alex Lundqvist ◽  
Eva Liljeblom ◽  
Anders Löflund ◽  
Benjamin Maury
Keyword(s):  
Spillover Effects ◽  
Extensive Study ◽  
Foreign Firms ◽  
Partial Control ◽  
Data Set ◽  
Content Type ◽  
Heritage Foundation ◽  
Transparency International ◽  
Shareholder Protection ◽  
And Performance

Purpose The cultural and legal differences between foreign acquirers and African target firms can be substantial. There is also a large variation in cultures and legal systems within Africa. However, there is limited research on merger and acquisition (M&A) performance by foreign firms in Africa. The purpose of this paper is to fill this gap by exploring the “spillover by law” hypothesis (Martynova and Renneboog, 2008) that focuses on the influence of the external environment on the governance and performance of foreign M&As in Africa. Design/methodology/approach The data set covers 415 M&A transactions by foreign firms in Africa during the period of 1999–2016. Dynamic data covering the country’s legal, cultural and political environment are collected from the World Bank, the Heritage Foundation and Transparency International. Findings The authors find that the legal environment significantly affects the returns of bidders on African firms. For complete acquisitions, bidder returns are significantly higher when the bidder’s country has higher shareholder protection and higher creditor protection compared with the target firm’s country. The results show that the effects are significant when there is a full control change (including a change in the target firm’s nationality) but not in the case of partial control transfers. The results are consistent with the “spillover by law” hypothesis. Originality/value The authors contribute to the literature on cross-border M&As by separately studying the valuation effects of full, majority and minority changes in control; by being the first study of the legal spillover effects in Africa; and by being the most extensive study of the legal determinants of the valuations of non-African acquirers of African firms.

scholarly journals Construction of China’s financial conditions index in the post-crisis era

2019 ◽  
Vol 2 (2) ◽  
pp. 258-276
Author(s):  
Nan Li ◽  
Liu Yuanchun
Keyword(s):  
Financial Stability ◽  
Design Methodology ◽  
Predictive Power ◽  
Time Varying ◽  
Content Type ◽  
Vector Autoregressive ◽  
Financial Variables ◽  
Financial Conditions ◽  
Time Varying Parameter ◽  
Better Than

Purpose The purpose of this paper is to summarize different methods of constructing the financial conditions index (FCI) and analyze current studies on constructing FCI for China. Due to shifts of China’s financial mechanisms in the post-crisis era, conventional ways of FCI construction have their limitations. Design/methodology/approach The paper suggests improvements in two aspects, i.e. using time-varying weights and introducing non-financial variables. In the empirical study, the author first develops an FCI with fixed weights for comparison, constructs a post-crisis FCI based on time-varying parameter vector autoregressive model and finally examines the FCI with time-varying weights concerning its explanatory and predictive power for inflation. Findings Results suggest that the FCI with time-varying weights performs better than one with fixed weights and the former better reflects China’s financial conditions. Furthermore, introduction of credit availability improves the FCI. Originality/value FCI constructed in this paper goes ahead of inflation by about 11 months, and it has strong explanatory and predictive power for inflation. Constructing an appropriate FCI is important for improving the effectiveness and predictive power of the post-crisis monetary policy and foe achieving both economic and financial stability.

scholarly journals KiwiSaver fund performance and asset allocation policy

2019 ◽  
Vol 31 (2) ◽  
pp. 232-257
Author(s):  
Huong Dieu Dang
Keyword(s):  
Asset Allocation ◽  
Tracking Error ◽  
Excess Return ◽  
Superior Performance ◽  
Data Set ◽  
Content Type ◽  
Allocation Policy ◽  
Holding Period ◽  
Management Fees ◽  
The Impact

Purpose This paper aims to examine the performance and benchmark asset allocation policy of 70 KiwiSaver funds catergorised as growth, balanced or conservative over the period October 2007-June 2016. The study focuses on the sources for returns variability across time and returns variation among funds. Design/methodology/approach Each fund is benchmarked against a portfolio of eight indices representing eight invested asset classes. Three measures were used to examine the after-fee benchmark-adjusted performance of each fund: excess return, cumulative abnormal return and holding period returns difference. Tracking error and active share were used to capture manager’s benchmark deviation. Findings On average, funds underperform their respective benchmarks, with the mean quarterly excess return (after management fees) of −0.15 per cent (growth), −0.63 per cent (balanced) and −0.83 per cent (conservative). Benchmark returns variability, on average, explains 43-78 per cent of fund’s across-time returns variability, and this is primarily driven by fund’s exposures to global capital markets. Differences in benchmark policies, on average, account for 18.8-39.3 per cent of among-fund returns variation, while differences in fees and security selection may explain the rest. About 61 per cent of balanced and 47 per cent of Growth funds’ managers make selection bets against their benchmarks. There is no consistent evidence that more actively managed funds deliver higher after-fee risk-adjusted performance. Superior performance is often due to randomness. Originality/value This study makes use of a unique data set gathered directly from KiwiSaver managers and captures the long-term strategic asset allocation target which underlines the investment management process in reality. The study represents the first attempt to examine the impact of benchmark asset allocation policy on KiwiSaver fund’s returns variability across time and returns variation among funds.

The dynamics of return co-movements and volatility spillover effects in Greater China public property markets and international linkages

2014 ◽  
Vol 32 (6) ◽  
pp. 610-641 ◽  
Author(s):  
Kim Hiang Liow
Keyword(s):  
Real Estate ◽  
Spillover Effects ◽  
Real Estate Market ◽  
Market Volatility ◽  
Volatility Spillover ◽  
Content Type ◽  
Real Estate Markets ◽  
Volatility Spillovers ◽  
Public Property ◽  
Property Markets

Purpose – The purpose of this paper is to examine weekly dynamic conditional correlations (DCC) and vector autoregressive (VAR)-based volatility spillover effects within the three Greater China (GC) public property markets, as well as across the GC property markets, three Asian emerging markets and two developed markets of the USA and Japan over the period from January 1999 through December 2013. Design/methodology/approach – First, the author employ the DCC methodology proposed by Engle (2002) to examine the time-varying nature in return co-movements among the public property markets. Second, the author appeal to the generalized VAR methodology, variance decomposition and the generalized spillover index of Diebold and Yilmaz (2012) to investigate the volatility spillover effects across the real estate markets. Finally, the spillover framework is able to combine with recent developments in time series econometrics to provide a comprehensive analysis of the dynamic volatility co-movements regionally and globally. The author also examine whether there are volatility spillover regimes, as well as explore the relationship between the volatility spillover cycles and the correlation spillover cycles. Findings – Results indicate moderate return co-movements and volatility spillover effects within and across the GC region. Cross-market volatility spillovers are bidirectional with the highest spillovers occur during the global financial crisis (GFC) period. Comparatively, the Chinese public property market's volatility is more exogenous and less influenced by other markets. The volatility spillover effects are subject to regime switching with two structural breaks detected for the five sub-groups of markets examined. There is evidence of significant dependence between the volatility spillover cycles across stock and public real estate, due to the presence of unobserved common shocks. Research limitations/implications – Because international investors incorporate into their portfolio allocation not only the long-term price relationship but also the short-term market volatility interaction and return correlation structure, the results of this study can shed more light on the extent to which investors can benefit from regional and international diversification in the long run and short-term within and across the GC securitized property sector, with Asian emerging market and global developed markets of Japan and USA. Although it is beyond the scope of this paper, it would be interesting to examine how the two co-movement measures (volatility spillovers and correlation spillovers) can be combined in optimal covariance forecasting in global investing that includes stock and public real estate markets. Originality/value – This is one of very few papers that comprehensively analyze the dynamic return correlations and conditional volatility spillover effects among the three GC public property markets, as well as with their selected emerging and developed partners over the last decade and during the GFC period, which is the main contribution of the study. The specific contribution is to characterize and measure cross-public real estate market volatility transmission in asset pricing through estimates of several conditional “volatility spillover” indices. In this case, a volatility spillover index is defined as share of total return variability in one public real estate market attributable to volatility surprises in another public real estate market.

Long-run relationship between investment and maintenance in local governments

Facilities ◽  
2016 ◽  
Vol 34 (11/12) ◽  
pp. 703-722 ◽  
Author(s):  
Arnt O. Hopland
Keyword(s):  
Local Governments ◽  
Reduced Form ◽  
Public Infrastructure ◽  
Data Set ◽  
Content Type ◽  
Vector Autoregressive ◽  
The Past ◽  
Long Run ◽  
The Relationship ◽  
New Infrastructure

Purpose The purpose of the paper is to analyze the relationship between maintenance of existent and investment in new infrastructure in Norwegian local governments. Design/methodology/approach A reduced form vector autoregressive system is estimated using a 29-year-long panel data set for the Norwegian local governments. Findings The data reveal that increased investment in new infrastructure sparks little, if any, increase in maintenance. The results also indicate that increased maintenance expenditures spark new investments. Because more investments mean more infrastructure and adequate maintenance should give that investments are not caused by maintenance, the results suggest that the local governments have not optimized their maintenance scheduling in this period. Originality/value Even though maintenance and investment are large expenditures that both serve as inputs to the stock of infrastructure, little is known about the relationship between the two. The findings in this paper suggests that Norwegian local governments have not planned their maintenance and investments well in the past, and this can be part of the explanation as to why local public infrastructure in Norway is presently in poor condition.

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