On extreme value theory in the presence of technical trend: pre and post Covid-19 analysis of cryptocurrency markets

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Saji Thazhungal Govindan Nair
Keyword(s):  
Market Efficiency ◽  
Explanatory Power ◽  
Price Volatility ◽  
Value Theory ◽  
Extreme Value ◽  
Technical Trading ◽  
Content Type ◽  
Before And After ◽  
Gains And Losses ◽  
Potential Maximum

Purpose Research on price extremes and overreactions as potential violations of market efficiency has a long tradition in investment literature. Arguably, very few studies to date have addressed this issue in cryptocurrencies trading. The purpose of this paper is to consider the extreme value modelling for forecasting COVID-19 effects on cryptocoin markets. Additionally, this paper examines the importance of technical trading indicators in predicting the extreme price behaviour of cryptocurrencies. Design/methodology/approach This paper decomposes the daily-time series returns of four cryptocurrency returns into potential maximum gains (PMGs) and potential maximum losses (PMLs) at first and then tests their lead–lag relations under an econometric framework. This paper also investigates the non-random properties of cryptocoins by computing the incremental explanatory power of PML–PMG modelling with technical trading indicators controlled. Besides, this paper executes an event study to identify significant changes caused by COVID-19-related events, which is capable of analysing the cryptocoin market overreactions. Findings The findings of this paper produce the evidence of both market overreactions and trend persistence in the potential gains and losses from coins trading. Extreme price behaviour explains volatility and price trends in crypto markets before and after the outbreak of a pandemic that substantiate the non-random walk behaviour of crypto returns. The presence of technical trading indicators as control variables in the extreme value regressions significantly improves the predictive power of models. COVID-19 crisis affects the market efficiency of cryptocurrencies that improves the usefulness of extreme value predictions with technical analysis. Research limitations/implications This paper strongly supports for the robustness of technical trading strategies in cryptocurrency markets. However, the “beast is moving quick” and uncertainty as to the new normalcy about the post-COVID-19 world puts constraint on making best predictions. Practical implications The paper contributes substantially to our understanding of the pricing efficiency of cryptocurrency markets after the COVID-19 outbreak. The findings of continuing return predictability and price volatility during COVID-19 show that profitable investment opportunities for cryptocoin traders are prevailing in pandemic times. Originality/value The paper is unique to understand extreme return reversals behaviour of cryptocurrency markets regarding events related to COVID-19 breakout.

A multifractal detrended fluctuation analysis of housing market: a role of financial crises in developed economies

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Syed Ali Raza ◽  
Nida Shah ◽  
Muhammad Tahir Suleman ◽  
Md Al Mamun
Keyword(s):  
Financial Crisis ◽  
Housing Market ◽  
Market Efficiency ◽  
House Price ◽  
Fluctuation Analysis ◽  
Content Type ◽  
Multifractal Detrended Fluctuation Analysis ◽  
Long Run ◽  
Before And After

Purpose This study aims to examine the house price fluctuations in G7 countries by using the multifractal detrended fluctuation analysis (MF-DFA) for the years 1970–2019. The study examined the market efficiency between the short-term and long-term in the full sample period, before and after the global financial crisis period. Design/methodology/approach This study uses the MF-DFA to analyze house price fluctuations. Findings The findings confirmed that the housing market series are multifractal. Furthermore, all the markets showed long-term persistence in both the short and long-term. The USA is identified as the most persistent house market in the short run and Japan in the long run. Moreover, in terms of efficiency, Canada is identified as the most efficient house market in the long run and the UK in the short run. Finally, the result of before and after the financial crisis period is consistent with the full sample result. Originality/value The contribution of this study in the literature is fourfold. This is the first study that has examined the house prices efficiency by using the MF-DFA technique given by Kantelhardt et al. (2002). Previously, the house market prices and efficiency has been investigated using generalized Hurst exponent (Liu et al., 2019), Quantile Regression Approach (Chae and Bera, 2019; Tiwari et al., 2019) but no study to the best of the knowledge has been done that has used the MF-DFA technique on the housing market. Second, this is the first study that has focused on the house markets of G7 countries. Third, this study explores the house market efficiency by dividing the market into two periods i.e. before and after the financial crisis. The study strives to investigate if the financial crisis determines the change in the degree of market efficiency or not. Finally, the study gives valuable insights to the investors that will help them in their investment decisions.

Determinants of telecommunication stock prices

2015 ◽  
Vol 42 (4) ◽  
pp. 534-548 ◽  
Author(s):  
Andros Gregoriou ◽  
Jerome Healy ◽  
Jairaj Gupta
Keyword(s):  
Developing Countries ◽  
Stock Prices ◽  
Capital Expenditure ◽  
Explanatory Power ◽  
Price Volatility ◽  
Mobile Internet ◽  
Cross Sectional ◽  
Content Type ◽  
The World ◽  
Significant Factors

Purpose – The purpose of this paper is to analyze the determinants affecting the stock prices of telecommunications firms in both developed and developing countries around the world. Design/methodology/approach – The empirical analysis is performed using panel data from 160 countries and 45 companies, covering the time period from 2000 to 2011. To identify the significant factors, company level firm-specific financial and non-financial factors have been analyzed that are expected to bear significant impact on price volatility of telecommunications stock. Findings – The test results reveal that capital expenditure and book value are the most significant factors. Dividends and debt levels only affect prices significantly in specification tests with either time-series or cross-sectional effects, whereas firms’ earnings and numbers of mobile internet subscribers do not contribute to the explanatory power of telecommunication stock price variability. Practical implications – The study sheds light to the potential investors in evaluating the risk associated with investment in stocks of telecommunications firms and take informed investment decisions. Originality/value – This is the first study that presents a comprehensive analysis of determinants affecting the stock prices of telecommunications firms in both developed and developing countries around the world.

scholarly journals The effectiveness of technical strategies in Malaysian Sharīʿah vs conventional stocks

2020 ◽  
Vol 12 (2) ◽  
pp. 195-215
Author(s):  
Pick-Soon Ling ◽  
Ruzita Abdul-Rahim ◽  
Fathin Faizah Said
Keyword(s):  
Stock Market ◽  
Market Efficiency ◽  
Moving Average ◽  
Abnormal Returns ◽  
Total Sample ◽  
Relative Strength ◽  
Trading Strategies ◽  
Technical Trading ◽  
Content Type ◽  
Stock Market Efficiency

Purpose This study aims to investigate Malaysian stock market efficiency from the view of Sharīʿah-compliant and conventional stocks based on the effectiveness of technical trading strategies. Design/methodology/approach This study uses unconventional trading strategies that mix buy recommendations of Bursa Malaysia analysts with sell signals generated from 10 selected technical trading strategies (simple moving average, moving average envelopes, Bollinger Bands, momentum, commodity channel index, relative strength index, stochastic, Williams percentage range, moving average convergence divergence oscillator and shooting star) that are detected using ChartNexus. The period from 1 January 2013 until 31 December 2015 produces a total sample consisting of 1,265 buy recommendations of 125 Sharīʿah-compliant stocks and 400 buy recommendations of conventional stocks. The study period is extended until 31 March 2016 to provide an ample time for detecting the sell signal especially for buy recommendations that are released towards the end of 2015. Findings The resulting Jensen’s alpha show 8 out of 10 strategies are effective in generating abnormal returns in Sharīʿah-compliant samples while only 3 out of 10 strategies are effective in conventional samples. Prominent effectiveness of technical trading strategies in Sharīʿah-compliant stocks implies clear inefficiency in that stock market segment as opposed to those of the conventional stocks. Originality/value The results based on unconventional trading strategies provide new insights of Malaysian stock market efficiency especially in Sharīʿah-compliant and conventional stocks. The paper provides more robust findings on market efficiency as firms’ equity level data were focussed together with analysts’ buy recommendations from Bursa Malaysia.

Relevance of fair value of Brazilian banks securities in the financial crisis

2015 ◽  
Vol 10 (4) ◽  
pp. 684-696 ◽  
Author(s):  
Fernando Chiqueto ◽  
Ricardo Luiz Menezes Silva ◽  
Guilherme Colossal ◽  
L. Nelson G. Carvalho
Keyword(s):  
Financial Crisis ◽  
Financial Reporting ◽  
Explanatory Power ◽  
Fair Value ◽  
Cross Sectional ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Sfas 157 ◽  
Ifrs 7 ◽  
Gains And Losses

Purpose – The purpose of this paper is to seek to clarify whether the fair value (FV) of Brazilian banks securities is relevant for investors in times of crisis. Design/methodology/approach – The information gathered for 14 quarters, 2007-2010, of a cross-sectional sample of banks was used for the purpose of explaining the value of shares based on amortized cost and the FV of securities, the book value of equity and the financial crisis. The return on shares was regressed based on the realized and unrealized gains and losses on securities, adjusted income and the crisis. Findings – The results indicated that the FV is relevant. The results also corroborated the hypothesis that, during the crisis, there was a decrease in the relevance of the FV of securities since the accounting practices adopted in Brazil did not specify how to estimate FV, as required by SFAS 157, neither did they require disclosure of the FV hierarchy, as established International Financial Reporting Standards (IFRS) 7. It was concluded that FV has incremental explanatory power over equity, but not over amortized cost. Furthermore it possible to conclude that quarterly unrealized gains and losses on securities are not relevant, which could be explained by possible tax planning practices, since, in Brazil, the mark-to-market adjustment of securities is only deductible, or taxable, when settled. However, the realized and unrealized gains and losses are value-relevant during the period of financial crisis. Originality/value – This study provides empirical evidence about the relevance of FV during the financial crisis in Brazil.

Contagion risk: cases of Islamic and emerging market banks

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Da-Eun Yoon ◽  
Tonmoy Choudhury ◽  
Anup Kumar Saha ◽  
Mamunur Rashid
Keyword(s):  
Middle East ◽  
Extreme Value Theory ◽  
Emerging Market ◽  
Value Theory ◽  
Extreme Value ◽  
The Other ◽  
Islamic Banks ◽  
Content Type ◽  
China And India ◽  
India And China

Purpose Globally influential Islamic banks from the Middle East and Southeast Asia carry voluminous correspondence banking with banks from China and India, leading to potential spillover effect of contagion among the banks from these regions. This study aims to investigate the Islamic banks systemic risk contagion with major banks from China and India. Design/methodology/approach Having the option pricing theory in the backdrop, the authors calculated three different distance to risk measurements (default, insolvency and capital). The authors have included top six listed globally influential Islamic banks, top seven Indian banks and top eight Chinese banks based on their net asset value. They then measured the banks’ extreme shocks based on the extreme value theory by using the logistic regression model. These extreme shocks helped the authors to map the spillover among the selected banks from multiple regions. Findings The authors have found strong evidences of directional risk spillover among the banks in this sample. Islamic banks are receiving a significant risk spillover from the other sample banks but transmitting less toward the other banks from India and China. Hence, there is strong one-directional risk contagion toward the Islamic banks in the study sample. Practical implications This research would be particularly useful to the regulators and bankers from emerging and Islamic markets to understand the conniving nature of the crisis by effectively mapping the source, destination and implementation of the shock transmission mechanism of the potential financial contagion. Originality/value Even though the corresponding banking among the top Islamic banks from the Middle East and Southeast Asian countries, and banks from India and China, is on the rise, the assessment of risk among these banks has been limited. In particular, the authors extended on the extreme value theory to focus on the wider impact of spillover, including significant direction of contagion from non-Islamic banks to Islamic banks.

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