Asymmetric effect of oil prices on herding in commodity markets

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mouna Youssef ◽  
Khaled Mokni
Keyword(s):  
Global Financial Crisis ◽  
Commodity Markets ◽  
Oil Price ◽  
Herd Behavior ◽  
Asymmetric Effect ◽  
Herding Behavior ◽  
Absolute Deviation ◽  
Content Type ◽  
Normal Period ◽  
The Impact

PurposeThis study aims to test the presence of herding behavior in commodity markets, including energy, metals and agriculture. Additionally, the authors investigate the possible asymmetric effect of oil price changes on the herding behavior in these markets.Design/methodology/approachThe authors examine herding based on the cross-sectional absolute deviation (CSAD) model in a static and time-varying perspective.FindingsBy using daily data over the period 2003–2017, the authors’ findings firstly support the dynamic nature of investor behavior in commodity markets, which oscillates between antiherding during the normal period and herding during and after the global financial crisis of 2008. Furthermore, results highlight that the asymmetric impact of oil shocks on herding differs across commodity sectors and periods. Additionally, herding seems to be more pronounced when the oil market declines, which may be due to the pessimistic investors' sentiments.Practical implicationsThis study provides insight into what factors influence herd behavior in commodity markets. The understanding of factors driving herding aids investors to avoid the impact of this behavior and its consequencesOriginality/valueTo the authors’ knowledge, this study is the first to examine whether the level of herding depends on the oil price fluctuations, as well as the asymmetric effect of the oil price on herding behavior in commodity markets.

scholarly journals Herding behavior and stock market conditions

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Abdollah Ah Mand ◽  
Hawati Janor ◽  
Ruzita Abdul Rahim ◽  
Tamat Sarmidi
Keyword(s):  
Stock Market ◽  
Global Financial Crisis ◽  
Emerging Market ◽  
Developed Countries ◽  
Herding Behavior ◽  
Market Conditions ◽  
Absolute Deviation ◽  
Cross Sectional ◽  
Content Type ◽  
Market Return

Purpose The purpose of this paper is to investigate whether market conditions have an effect on investors’ propensity to herd in an emerging economy’s stock market. Additionally, given the lack of research on Islamic behavioral finance, the authors further investigate if the herding phenomenon is distinct in Islamic versus conventional stocks. Design/methodology/approach The authors used daily data for the period of 1995–2016 according to the herding behavior model of Chang et al. (2000), which relies on cross-sectional absolute deviation of returns. Findings Findings reveal the herding behavior of investors among Shariah-compliant during up and down market exits with non-linear relationship to the market return, while for conventional stocks herding behavior does not exist with linear nor nonlinear relationships during the up and down market. Furthermore, for the whole market, herding behavior only exists during upmarket with a nonlinear relationship to the market return. However, this relationship is not significant. Moreover, the results of this study are robust with respect to the effect of the Asian and global financial crisis. Practical implications The findings are useful for investors to identify which market conditions are associated with rational and irrational behavior of investors. Originality/value Most of the theoretical and empirical studies on herding behavior have focused on developed countries. Only a few studies have paid attention to the herding behavior in Islamic financial markets, particularly in the context of an emerging market such as Malaysia. This study fills this void.

Herd behavior in the French stock market

2017 ◽  
Vol 16 (4) ◽  
pp. 497-515 ◽  
Author(s):  
Houda Litimi
Keyword(s):  
Stock Market ◽  
Trading Volume ◽  
Design Methodology ◽  
Garch Model ◽  
Herd Behavior ◽  
Conditional Volatility ◽  
Herding Behavior ◽  
Absolute Deviation ◽  
Cross Sectional ◽  
Content Type

Purpose This paper aims to investigate the herding behavior in the French stock market and its effect on the idiosyncratic conditional volatility at a sectoral level. Design/methodology/approach This sample covers all the listed companies in the French stock market, classified by sector, over four major crisis periods. The author modifies the cross-sectional absolute deviation (CSAD) model to include trading volume and investors sentiment as herding triggers. Furthermore, the author uses a modified GARCH model to investigate the effect of herding on conditional volatility. Findings Herding is present in the French market during crises, and it is present in only some sectors during the entire period. The main trigger for investors to embark into a collective herding movement differs from one sector to another. Furthermore, herding behavior has an inhibiting effect on market conditional volatility. Originality/value The author modifies the CSAD model to investigate the presence of herding in the French stock market at a sectoral level during turmoil periods. Furthermore, the particularly designed GARCH model provides new insights on the effect of herding and volume turnover on the conditional volatility.

The evolution of herd behavior: Will herding disappear over time?

2019 ◽  
Vol 36 (4) ◽  
pp. 637-661 ◽  
Author(s):  
Kalugala Vidanalage Aruna Shantha
Keyword(s):  
Civil War ◽  
Quantile Regression ◽  
Political Instability ◽  
Political Stability ◽  
Ordinary Least Squares ◽  
Least Square ◽  
Herd Behavior ◽  
Absolute Deviation ◽  
Content Type ◽  
The Impact

Purpose The purpose of this paper is to examine the evolutionary nature of herding phenomenon in the context of a frontier stock market, the Colombo Stock Exchange of Sri Lanka. Design/methodology/approach This study applies the cross-sectional absolute deviation methodology for daily frequencies of data of all the common stocks listed during the period from April 2000 to March 2018. The regression coefficients are estimated by using both the ordinary least square and the quantile regression procedures. Findings The findings reveal significant changes to the pattern of herding over different market periods, each with specific characteristics. Herding is strongly evident in up and down market days in the 2000-2009 period, during which the market was highly uncertain with the impact of the political instability of the country due to the Civil War on the stock trading. Even after this Civil War period, herd tendency is strongly manifested toward the up market direction as a result of the investors’ optimism about the country’s economy and political stability, which caused to a speculative bubble in the market. After that, it is turned into negative herding due to the panic selling occurred in view of the uncertainty of the inflated prices, which led to a market crash. Notably, herding appears to be consistently absent over the period after the crash, despite the presence of herd motives such as high market uncertainties triggered by political instability and economic crisis during that period. Research limitations/implications The findings suggest that herd behavior is an evolving phenomenon in financial markets. Consistent with the adaptive market hypothesis, the absence of herding evident after the market crash could be attributed to the investors’ learning of the irrationality of herding/negative herding for adapting to market conditions. As a result, herding and negative herding tendencies declined and disappeared at the aggregate market level. Originality/value This study contributes to the literature by providing novel evidence on the evolutionary nature of behavioral biases, particularly herding, as predicted by the adaptive market hypothesis. With the application of the quantile regression procedure, in addition to customary used ordinary least squares approach, it also provides robust evidence on this phenomenon.

Managers ability and investment dynamics during the global financial crisis: an emerging market context

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Rehana Naheed ◽  
Bushra Sarwar ◽  
Rukhsana Naheed
Keyword(s):  
Global Financial Crisis ◽  
Stock Exchange ◽  
Emerging Market ◽  
Investment Policy ◽  
Managerial Ability ◽  
Content Type ◽  
Crisis Period ◽  
Managerial Talent ◽  
The Impact

Purpose Many scholars have developed several theories and empirics to study issues related to investment policy. However, there are still some unexplored issues in the field of finance that require further analysis and investigation, particularly in the corporate governance literature such as the role of managerial talent in the firms. This study investigated the impact of managerial ability on investment decisions of the firms. Design/methodology/approach The study first uses firm efficiency and managerial ability by using data envelope analysis (DEA) proposed by Demerjian, Lev and McVay, 2012. Data is collected for the firms listed in Shenzhen and Shanghai stock exchange for an emerging market of China during the crisis period with 1,640 number of observations. Findings The study reveals that the presence of more managerial talent in a firm is significant for the strategic decisions of the firms. Findings follow a resource-based view and identify that more talented managers help the firms in the acquisition of resources specifically during financial distress. The study subdivides the firms based on: ownership structures and financial constraints. Results generated from propensity score matching imply that the role of high-talented managers is significantly different from that of low-talented managers. Originality/value The study reveals managerial ability as a determinant of investment policy. To the researchers’ best knowledge, none of the previous studies have been conducted in emerging market literature during the crisis period.

Sovereign credit ratings, relative risk ratings and private capital flows: evidence from emerging and frontier markets

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Supriyo De ◽  
Sanket Mohapatra ◽  
Dilip Ratha
Keyword(s):  
Relative Risk ◽  
Capital Flows ◽  
Global Financial Crisis ◽  
Credit Ratings ◽  
Private Capital ◽  
Content Type ◽  
Sovereign Credit ◽  
Sovereign Credit Ratings ◽  
Private Capital Flows ◽  
The Impact

Purpose Relative risk ratings measure the degree by which a country’s sovereign rating is better or worse than other countries (Basu et al., 2013). However, the literature on the impacts of sovereign ratings on capital flows has not covered the role of relative risk ratings. This paper aims to examine the effect of relative risk ratings on private capital flows to emerging and frontier market economies is filled. In the analysis, the effect of relative risk ratings to that of absolute sovereign ratings in influencing private capital flows are compared. Design/methodology/approach This paper examines the influence of sovereign credit ratings and relative risk ratings on private capital flows to 26 emerging and frontier market economies using quarterly data for a 20-year period between 1998 and 2017. A dynamic panel regression model is used to estimate the relationship between ratings and capital flows after controlling for other factors that can influence capital flows such as growth and interest rate differentials and global risk conditions. Findings The analysis finds that while absolute sovereign credit ratings were an important determinant of net capital inflows prior to the global financial crisis in 2008, the influence of relative risk ratings increased in the post-crisis period. The post-crisis effect of relative ratings appears to be driven mostly by portfolio flows. The main results are robust to an alternate measure of capital flows (gross capital flows instead of net capital flows), to the use of fixed gross domestic product weights in calculating relative risk ratings and to the potential endogeneity of absolute and relative ratings. Originality/value This study advances the literature on being the first attempt to understand the impact of relative risk ratings on capital flows and also comparing the impact of absolute sovereign ratings and relative risk ratings on capital flows in the pre- and post-global financial crisis periods. The findings imply that emerging and frontier markets need to pay greater attention to their relative economic performance and not just their sovereign ratings.

Bank mergers and acquisitions in Greece: the financial crisis and its effect on shareholder wealth

2019 ◽  
Vol 16 (2) ◽  
pp. 273-296 ◽  
Author(s):  
Ioannis Tampakoudis ◽  
Michail Nerantzidis ◽  
Demetres Subeniotis ◽  
Apostolos Soutsas ◽  
Nikolaos Kiosses
Keyword(s):  
Financial Crisis ◽  
Mergers And Acquisitions ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Shareholder Wealth ◽  
Conclusive Evidence ◽  
Wealth Effects ◽  
Bank Mergers ◽  
Content Type ◽  
The Impact

Purpose The purpose of this paper is to investigate the wealth implications of bank mergers and acquisitions (M&As) in the unique Greek setting given the triple crisis phenomenon – banking, sovereign debt and economic crises – that prevailed after the global financial crisis. Design/methodology/approach The study examines bank M&As and bank transactions over the period from 1997 to 2018, as well as government-assisted M&As during the crisis. The wealth effects of bank M&As are assessed using both univariate and multivariate frameworks. Findings Findings show a neutral crisis effect on the valuation of M&As upon their announcement. However, the authors provide conclusive evidence that M&A completions are value-destroying events for acquiring banks during the crisis, far worse than in the pre-crisis period. Greek banks also fail to create value from government-assisted mergers. The results suggest that the financial stability and the prevention of further deepening of the Greek crisis with possible contagion effects were achieved at the expense of shareholders and taxpayers. Originality/value To the authors’ knowledge, this is the first study that examines the impact of the Greek triple crisis on the wealth effects of bank M&As and bank transactions. Also, the study provides first evidence with regard to the economic impact of government-assisted M&As in the European context.

Non-Financial Determinants and economic fluctuations – evidence from Yemen

2019 ◽  
Vol 35 (3) ◽  
pp. 376-391
Author(s):  
Sulaiman Abdullah Saif Alnasser Mohammed
Keyword(s):  
Economic Growth ◽  
Arab World ◽  
Economic Status ◽  
Oil Price ◽  
Research Review ◽  
Content Type ◽  
Before And After ◽  
Additional Reference ◽  
The Arab Spring ◽  
The Impact

Purpose This paper aims to examine, by way of an analytical research review, the reasons for the fluctuations in the economic growth of the country of Yemen during the period from 2000 to 2014. The authors are trying to generate the answers to the following questions: Has tourism, oil price, politically instability improved? What is the impact of tourism, oil price and politically instability on economic growth before and after turbulence time? We have found that very low number of papers have written about the topic. Yemen, as a developing country, has been under the influence of an turbulence time. The term “turbulence time” refers to the series of independent uprisings that occurred in 2010 across the Arab world. There is a lack of understanding concerning the economic growth status in the existing literature during this period. Design/methodology/approach The authors use vector error-correction model to examine the impact of candidate variables .This review and analysis could provide an additional understanding in terms of the factors contributing to economic growth in Yemen; particularly before and after the turbulence time. Findings Despite oil prices having appreciated and the unemployment rate having improved, particularly after the Arab Spring, political instability has dominated the scope of determinants for economic growth in Yemen. To address the objective of this study. Originality/value This paper provides an additional reference about the economic status of Yemen.

Does macroeconomic uncertainty really matter in predicting stock market behavior? A comparative study on China and USA

2020 ◽  
Vol 10 (4) ◽  
pp. 393-427 ◽  
Author(s):  
Ghulam Abbas ◽  
Shouyang Wang
Keyword(s):  
Risk Factors ◽  
Financial Crisis ◽  
Stock Market ◽  
Global Financial Crisis ◽  
Content Type ◽  
Macroeconomic Variables ◽  
Macroeconomic Risk ◽  
Stock Market Return ◽  
Macroeconomic Uncertainty ◽  
The Impact

PurposeThe study aims to analyze the interaction between macroeconomic uncertainty and stock market return and volatility for China and USA and tries to draw some invaluable inferences for the investors, portfolio managers and policy analysts.Design/methodology/approachEmpirically the study uses GARCH family models to capture the time-varying volatility of stock market and macroeconomic risk factors by using monthly data ranging from 1995:M7 to 2018:M6. Then, these volatility series are further used in the multivariate VAR model to analyze the feedback interaction between stock market and macroeconomic risk factors for China and USA. The study also incorporates the impact of Asian financial crisis of 1997–1998 and the global financial crisis of 2007–2008 by using dummy variables in the GARCH model analysis.FindingsThe empirical results of GARCH models indicate volatility persistence in the stock markets and the macroeconomic variables of both countries. The study finds relatively weak and inconsistent unidirectional causality for China mainly running from the stock market to the macroeconomic variables; however, the volatility spillover transmission reciprocates when the impact of Asian financial crisis and Global financial crisis is incorporated. For USA, the contemporaneous relationship between stock market and macroeconomic risk factors is quite strong and bidirectional both at first and second moment level.Originality/valueThis study investigates the interaction between stock market and macroeconomic uncertainty for China and USA. The researchers believe that none of the prior studies has made such rigorous comparison of two of the big and diverse economies (China and USA) which are quite contrasting in terms of political, economic and social background. Therefore, this study also tries to test the presumed conception that macroeconomic uncertainty in China may have different impact on the stock market return and volatility than in USA.

scholarly journals The Basel accords, capital reserves, and agricultural lending

2019 ◽  
Vol 79 (1) ◽  
pp. 27-47 ◽  
Author(s):  
Gary W. Brester ◽  
Myles J. Watts
Keyword(s):  
Financial Crisis ◽  
Global Financial Crisis ◽  
Capital Requirements ◽  
Unintended Consequences ◽  
Portfolio Diversification ◽  
Content Type ◽  
Return On Equity ◽  
Reserve Requirements ◽  
The Impact ◽  
Capital Reserves

Purpose The safety and soundness of financial institutions has become a leading worldwide issue because of the recent global financial crisis. Historically, financial crises have occurred approximately every 20 years. The worst financial crisis in the last 75 years occurred in 2008–2009. US regulatory efforts with respect to capital reserve requirements are likely to have several unintended consequences for the agricultural lending sector—especially for smaller, less-diversified (and often, rural agricultural) lenders. The paper discusses these issues. Design/methodology/approach Simulation models and value-at-risk (VaR) criteria are used to evaluate the impact of capital reserve requirements on lending return on equity. In addition, simulations are used to calculate the effects of loan numbers and portfolio diversification on capital reserve requirements. Findings This paper illustrates that increasing capital reserve requirements reduces lending return on equity. Furthermore, increases in the number of loans and portfolio diversification reduce capital reserve requirements. Research limitations/implications The simulation methods are a simplification of complex lending practices and VaR calculations. Lenders use these and other procedures for managing capital reserves than those modeled in this paper. Practical implications Smaller lending institutions will be pressured to increase loan sector diversification. In addition, traditional agricultural lenders will likely be under increased pressure to diversify portfolios. Because agricultural loan losses have relatively low correlations with other sectors, traditional agricultural lenders can expect increased competition for agricultural loans from non-traditional agricultural lenders. Originality/value This paper is novel in that the authors illustrate how lender capital requirements change in response to loan payment correlations both within and across lending sectors.

Market efficiency and the global financial crisis: evidence from developed markets

2018 ◽  
Vol 35 (3) ◽  
pp. 362-385 ◽  
Author(s):  
Omid Sabbaghi ◽  
Navid Sabbaghi
Keyword(s):  
Financial Crisis ◽  
Market Efficiency ◽  
Global Financial Crisis ◽  
Weak Form ◽  
Content Type ◽  
Developed Markets ◽  
The Usa ◽  
Econometric Tests ◽  
The Impact ◽  
Empirical Investigations

Purpose This study aims to provide one of the first empirical investigations of market efficiency for developed markets during the recent global financial crisis. Design/methodology/approach Using the Morgan Stanley Capital International (MSCI) country indices as proxies for national stock markets, the study conducts a battery of econometric tests in assessing weak-form market efficiency for the developed markets. Findings The inferential outcomes are consistent among the different tests. Specifically, the study finds that the majority of developed markets are weak-form efficient while the USA is the sole equity market to be commonly diagnosed as weak-form inefficient across the different tests when using full period data spanning the January 2008-November 2011 period. However, when basing the analysis on one-year subsamples over the identical time period, this study fails to reject weak-form market efficiency for all of the developed markets and presents evidence consistent with the Adaptive Market Hypothesis as described by Urquhart and Hudson (2013). When applying technical analysis for the case of the USA over the full study period, the results indicate that the return predictabilities can be exploited for some horizon of variable length moving average (VMA) trading rules. Originality/value This study provides one of the first empirical investigations of market efficiency for developed markets during the recent global financial crisis using an extended set of econometric tests. The study contributes to the existing body of empirical research that formally assesses the impact of a financial crisis on stock market efficiency and underlines the significance and relevance of examining market efficiency through subsample analysis.

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