scholarly journals Market frictions and the geographical location of global stock exchanges. Evidence from the S&P Global Index

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Andros Gregoriou ◽  
Robert Hudson
Keyword(s):  
Latin America ◽  
Generalized Method Of Moments ◽  
Portfolio Diversification ◽  
Market Frictions ◽  
Trading Costs ◽  
Content Type ◽  
International Portfolio Diversification ◽  
International Portfolio ◽  
The Usa ◽  
The Impact

PurposeWe examine the impact of market frictions in the form of trading costs on investor average holding periods for stocks in the S&P global 1200 index to examine constraints on international portfolio diversification.Design/methodology/approachWe determine whether it is appropriate to pool stocks listed in the USA, Canada, Latin America, Europe, Japan, Asia and Australia into investigations using the same empirical specification. This is very important because the pooled effects may not provide consistent estimates of the average.FindingsWe report overwhelming econometric evidence that it is not valid to pool stocks in all the underlying regional equity indices for our investigation, indicating that the effect of frictions varies between markets.Research limitations/implicationsWhen we pool the stocks within markets, we discover that for companies listed in the USA, Europe, Canada and Australia, market frictions do not significantly influence holding periods and hence are not a barrier to portfolio rebalancing. However, companies listed in Latin America and Asia face market frictions, which are significant in terms of increasing holding periods.Practical implicationsWe ascertain that taking into account the properties of stock markets in different geographical locations is vital for understanding the limits on achieving international portfolio diversification.Originality/valueUnlike prior research, we overcome the problems caused by contemporaneous correlation, endogeneity and joint determination of investor average holding periods and trading costs by employing the Generalized Method of Moments (GMM) system panel estimator. This makes our empirical estimates robust and more reliable than the previous empirical research in this area.

International Diversification with Large- and Small-Cap Stocks

2008 ◽  
Vol 43 (2) ◽  
pp. 489-524 ◽  
Author(s):  
Cheol S. Eun ◽  
Wei Huang ◽  
Sandy Lai
Keyword(s):  
Stock Market ◽  
International Diversification ◽  
Portfolio Diversification ◽  
Market Frictions ◽  
Small Companies ◽  
Fund Allocation ◽  
International Portfolio Diversification ◽  
International Portfolio ◽  
Out Of Sample

AbstractTo the extent that investors diversify internationally, large-cap stocks receive the dominant share of fund allocation. Increasingly, however, returns to large-cap stocks or stock market indices tend to comove, mitigating the benefits from international diversification. In contrast, stocks of locally oriented, small companies do not exhibit the same tendency. In this paper, we assess the potential of small-cap stocks as a vehicle for international portfolio diversification during the period 1980–1999. We show that the extra gains from the augmented diversification with small-cap funds are statistically significant for both in-sample and out-of-sample periods and remain robust to the consideration of market frictions.

Co-movement dynamics of sustainability indices: investigating the diversification opportunities through FTSE4Good index family and Borsa Istanbul sustainability index

2019 ◽  
Vol 16 (8) ◽  
pp. 1475-1487 ◽  
Author(s):  
Ibrahim Yasar Gok ◽  
Serhat Duranay ◽  
Hande Uzunoglu Unlu
Keyword(s):  
Portfolio Diversification ◽  
Stock Index ◽  
Socially Responsible ◽  
Content Type ◽  
Sustainability Index ◽  
International Portfolio Diversification ◽  
Socially Responsible Investments ◽  
International Portfolio ◽  
Index Family ◽  
Sustainability Indices

Purpose This study aims to investigate the international portfolio diversification opportunities provided by Turkish sustainable firms to international socially responsible investors. Design/methodology/approach The Borsa Istanbul Sustainability Index (XUSRD) and FTSE4Good index family daily data for the period of 11/04/2014-12/31/2017 is used and the DCC-GARCH model is applied to explore the dynamic correlation linkages. Findings The results indicate that co-movements between XUSRD and FTSE4Good indices are time-varying and generally display a low level. While the highest average conditional correlation value was observed between XUSRD and Developed 100 index, the lowest one was between XUSRD and FTSE4Good Japan index. Research limitations/implications Since XUSRD was launched on 11/04/2014, there is no available data before this date. Additionally, because the study includes indices from the USA to Japan, it is not possible to use high-frequency stock index data due to lack of overlapping time series. Practical implications This study contributes implications for investors of sustainability assets to improve their diversification. Especially, it is identified that the diversification opportunities provided by Turkish sustainable firms are largely possible for Japanese and Australian socially responsible investors. Additionally, this research has contributions for policymakers. Originality/value Although the conventional stock market indices are widely examined in terms of their time-variant relationship, there are only a few studies in the literature focusing on sustainability indices. Socially responsible investments (SRI) are emerging as a new trend, and these investments are also in need of international portfolio diversification. Therefore, this study is expected to fill a gap in the SRI literature.

Sustainability engagement in Latin America firms and cost of equity

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Renato Garzón Jiménez ◽  
Ana Zorio-Grima
Keyword(s):  
Latin America ◽  
Positive Impact ◽  
Generalized Method Of Moments ◽  
Negative Relationship ◽  
Agency Conflicts ◽  
Cost Of Equity ◽  
Content Type ◽  
Sustainable Behavior ◽  
The Cost ◽  
The Impact

PurposeCorporate social responsibility (CSR) actions are expected to reduce information asymmetries and increase legitimacy among the stakeholders of the company, which consequently should have a positive impact on the financial conditions of the firm. Hence, the objective of this paper is to find empirical evidence on the negative relationship between sustainable behavior and the cost of equity, in the specific context of Latin America. To address this issue, some proxies and moderating variables for sustainability are used in our study.Design/methodology/approachThe regression model considers a sample with 252 publicly trading firms and 2,772 firm-year observations, from 2008 to 2018. The generalized method of moments is used to avoid endogeneity problems.FindingsThe study finds evidence that firms with higher environmental, social and governance activities disclosed by sustainability reports and assured by external providers decrease their cost of equity, especially if they are in an integrated market as MILA. This finding confirms that agency conflicts between firm's management and stakeholders diminish with higher CSR transparency, leading to a lower cost of capital.Originality/valueOur research is unique and valuable as, to our knowledge, it is the first study to analyze the impact of sustainable behavior and the cost of equity from companies operating in Latin America.

Comparison of practitioners' views on managing equity investments

2014 ◽  
Vol 9 (2) ◽  
pp. 153-167 ◽  
Author(s):  
Lukasz Prorokowski ◽  
Paulina Roszkowska
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Stock Markets ◽  
Portfolio Diversification ◽  
Content Type ◽  
Central European ◽  
Emerging Stock Markets ◽  
International Portfolio Diversification ◽  
International Portfolio ◽  
Equity Investments

Purpose – The purpose of this paper is to examine the extent to which Central European emerging stock markets (focusing on Poland) have been affected by the recent international financial crisis, and how the current investment climate (barriers, risks, challenges and opportunities) influences appetite for investments in Polish equities. In doing so, the study aims to report timely findings in relation to the determinants of the safety and profitability of international portfolio diversification to the Polish stock market. Design/methodology/approach – Based on qualitative empirical research, the authors analyse the differences between the foreign (UK) and domestic (Poland) investors' views on equity investments in Poland. The study builds on questionnaires and interviews with practitioners associated with the Polish stock market. Findings – The authors report that the global financial crisis influenced changes to domestic and international investors' appetite for risk related to equity investments in emerging stock markets: investors are more prudent about emerging markets but the Polish stock market has shown substantial growth potential and positively distinguished itself from other Central European stock exchanges; particular types of investment risks associated with equity investments in the Polish stock market have abated. Polish equities are an attractive component of the international portfolio diversification, provided that trading strategies are adjusted to the contemporary investment environment. Originality/value – This paper addresses the absence of the academic literature devoted to the analysis of equity investments in the contemporary Central European emerging stock markets. The authors discuss the differences in appetite for risk between the UK and Polish investors and assumptions about investments in Poland. The authors also contribute to the international debate on investor protection and regulations that can improve investment processes.

Economic performance, export, systemic barriers and equity investments in innovative companies

2014 ◽  
Vol 6 (1) ◽  
pp. 33-65
Author(s):  
Lukasz Prorokowski
Keyword(s):  
Financial Crisis ◽  
Economic Performance ◽  
Global Financial Crisis ◽  
Portfolio Diversification ◽  
Content Type ◽  
International Portfolio Diversification ◽  
International Portfolio ◽  
Equity Investments ◽  
The Global Financial Crisis ◽  
Practical Implications

Purpose – This paper attempts to provide insights into the functioning of innovative companies in times of the global financial crisis. In doing so, the following study investigates whether innovations protected companies from the adverse effects of the global recession. On this occasion, the paper analyzes the economic performance of innovative industries in Poland, highlighting institutional and systemic barriers that curb their development. The main purpose of this paper is to clarify whether targeting innovative companies for equity investments proved beneficial during the global financial crisis. Design/methodology/approach – This paper employs the mean return per unit of risk (MRPUR) analysis in order to investigate international portfolio diversification opportunities delivered by targeting innovative companies for equity investments in times of the global financial crisis. The paper also uses interviews and questionnaires to broaden the knowledge about issues related to the functioning of innovative companies. This is motivated by the fact that the research remains under-researched by the reviewed studies. Findings – The paper links innovations in business strategy and production to the ability of companies to resist the global financial crisis. This paper argues that innovative approach to business strategies proved far more profitable for companies than relying on novelties in production. Furthermore, the paper provides strong evidence that innovative companies could contribute to mitigation of the global economic downturn by stimulating the sustainable economic growth in Poland. As far as the main purpose of this paper is concerned, the current study delivers useful and informative insights into the international portfolio diversification processes that assume targeting innovative investees. Practical implications – This paper delivers practical implications for innovative companies, market regulators, policymakers and international investors. Originality/value – The current paper addresses the absence of the academic literature devoted to the analysis of financial performance of the Polish investee companies representing innovative industries. In doing so, this paper advises on changes in regulations that would facilitate further development of innovative companies. Moreover, the paper paints the picture of the investment environment prevailing in the Central European emerging stock market of Poland. Hereto, delivering general insights into the functioning and regulatory framework of the Polish stock market proves useful in assessing the economic and financial development of Poland.

Sign in / Sign up

Export Citation Format

Share Document