scholarly journals DYNAMICS OF CONSUMER EXPENDITURE AND STOCK MARKET PRICES AND UNCERTAINTY: MALAYSIAN EVIDENCE

2013 ◽  
Vol 58 (04) ◽  
pp. 1350025
Author(s):  
MANSOR H. IBRAHIM ◽  
SIONG HOOK LAW
Keyword(s):  
Stock Market ◽  
Stock Prices ◽  
Stock Price ◽  
Private Consumption ◽  
Emerging Market ◽  
Market Volatility ◽  
Stock Market Volatility ◽  
Consumer Expenditure ◽  
Market Uncertainty ◽  
Long Run

The present paper analyzes the role of stock market, more specifically real stock prices and stock market uncertainty/volatility, on private consumption behavior for an emerging market, Malaysia, using quarterly data from 1991 to 2009. Employing the autoregressive distributed lag approach to cointegration test, the paper establishes a long-run equilibrium that ties private consumption to its determinants — real income, real stock prices, real lending rate, and stock market volatility. In the long run, the presence of the stock market wealth effect is documented. At the same time, the stock market volatility is also noted to depress private consumption particularly when the volatility is at the degree as observed during the Asian crisis. The authors further note the short-run influences of real stock price changes on consumption growth and the adjustment of private consumption to the long-run level when it is modeled in an error-correction setting. Our simple simulation indicates that the drop in the private consumption due to the decline in stock market wealth post-crisis is substantial, amounting to 2.7% of average post-crisis gross domestic product.

Exploring the Relationships among Interest Rate, Exchange Rate, and Stock Market in Indonesia

2016 ◽  
Vol 4 (3) ◽  
pp. 37-43
Author(s):  
Sherlinda Octa Yuniarsa ◽  
Jui-Chuan Della Chang
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Stock Market ◽  
Stock Price ◽  
Structural Breaks ◽  
Emerging Market ◽  
Exchange Rate Volatility ◽  
Market Volatility ◽  
Empirical Literature ◽  
Stock Market Volatility

Objective - The purpose of this research is to explore the relationships among interest rate, exchange rate, and stock price in Indonesia. Methodology/Technique - This study used data from the Central Bank of Indonesia to empirically test a proposed model of interest rate, exchange rate, and stock price. Findings - The findings confirmed that there are positive volatilities from exchange rate and negative volatility from interest rate. The relationships among interest rate, exchange rate, and stock market excessive volatility a little bit strengthen during economic crises, a study that allows for structural breaks, to account for the effects of sudden macroeconomic shocks, recessions, and financial crises, would be important to empirical literature on Indonesia. Novelty - This study proved that it is important to point out the variance decomposition results also showed that except for volatility in the exchange rate, interest rate, and stock market volatility also seems to explain quite a high proportion of the some variations of the macroeconomic excessive volatility. Type of Paper - Conceptual Keywords: interest rate volatility, exchange rate volatility, stock market volatility, emerging market, Asymmetric ARCH models

scholarly journals Stock Market Volatility and Weak-form Efficiency: Evidence from an Emerging Market

2006 ◽  
Vol 45 (4II) ◽  
pp. 1029-1040 ◽  
Author(s):  
Abid Hameed ◽  
Hammad Ashraf
Keyword(s):  
Stock Market ◽  
Stock Prices ◽  
Value At Risk ◽  
Emerging Market ◽  
Weak Form ◽  
Market Volatility ◽  
Stock Market Volatility ◽  
Economic Fundamentals ◽  
Hedging Strategies ◽  
New Information

There exists a vast literature on modeling and estimating aggregate stock market volatility over the past decade [e.g., Choudhry (1996); Mecagni and Sourial (1999) and Kabir, et al. (2000)]. Motivations for undertaking this exercise have been varied. Many value-at-risk models for measuring market risk require the estimation of volatility parameter. Portfolio diversifications and hedging strategies also require information on volatility as a key input. Volatility is defined as tendency of the assets price to fluctuate either up or down. Increased volatility is perceived as indicating a rise in financial risk which can adversely affect investor assets and wealth. It is observed that when stock market exhibit increased volatility there is a tendency on part of the investors to lose confidence in the market and they tend to exit the market. The nexus between volatility and economic fundamentals is still a moot point. Stock prices reflect information and quicker they are in absorbing accurately new information, more efficient is the stock market in allocating resources. The increase in volatility can be attributed to absorption of new information about economic fundamentals or some expectations about them. This kind of volatility is not harmful as there is no social cost associated with it. But if increased volatility is not explained by the level indicated by the fundamental economic factors, there is a tendency that stocks will be mispriced and this will lead to misallocation of resources [Karmaka (2006)].

scholarly journals Disposition Effect and Return Predictability in the Tunisian Stock Market

2017 ◽  
Vol 4 (1) ◽  
pp. 1
Author(s):  
Cheïma Hmida ◽  
Ramzi Boussaidi
Keyword(s):  
Stock Market ◽  
Behavioral Finance ◽  
Stock Prices ◽  
Stock Price ◽  
Return Predictability ◽  
Capital Gains ◽  
Disposition Effect ◽  
Individual Investors ◽  
Long Run ◽  
Return Reversal

The behavioral finance literature has documented that individual investors tend to sell winning stocks more quickly than losing stocks, a phenomenon known as the disposition effect, and that such a behavior has an impact on stock prices. We examined this effect in the Tunisian stock market using the unrealized capital gains/losses of Grinblatt & Han (2005) to measure the disposition effect. We find that the Tunisian investors exhibit a disposition effect in the long-run horizon but not in the short and the intermediate horizons. Moreover, the disposition effect predicts a stock price continuation (momentum) for the whole sample. However this impact varies from an industry to another. It predicts a momentum for “manufacturing” but a return reversal for “financial” and “services”.

A Sectoral Analysis of the Role of Stock Market Development on Economic Growth: Empirical Evidence from Indian Economy

2017 ◽  
Vol 18 (4) ◽  
pp. 911-923 ◽  
Author(s):  
Madhu Sehrawat ◽  
A.K. Giri
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Stock Prices ◽  
Stock Price ◽  
Time Series Data ◽  
Trade Openness ◽  
Series Data ◽  
Causality Test ◽  
Long Run ◽  
Short Run

The present study examines the relationship between Indian stock market and economic growth from a sectoral perspective using quarterly time-series data from 2003:Q4 to 2014:Q4. The results of the autoregressive distributed lag (ARDL) approach bounds test confirm the existence of a cointegrating relationship between sector-specific gross domestic product (GDP) and sector-specific stock indices. The empirical results reveal that sector-specific economic growth are significantly influenced by changes in the respective sector-specific stock price indices in the long run as well as in the short run. Apart from that, the control variables, such as trade openness and inflation, act as the instrument variables in explaining the variations in the sector-specific GDP of the economy. The results of Granger causality test demonstrate unidirectional long-run as well as short-run causality running from sector specific stock prices to respective sector GDP. The findings suggest that economic growth of the country is sensitive to respective sub-sector stock market investments. The findings highlight the reasons for cyclical and counter-cyclical business phase for the overall economy.

scholarly journals Sub-prime Crisis or COVID-19: A Comparative Analysis of Volatility in Indian Banking Sectoral Indices

2020 ◽  
Vol 9 (4) ◽  
pp. 286-299
Author(s):  
Parul Bhatia ◽  
Priya Gupta
Keyword(s):  
Comparative Analysis ◽  
Public Sector ◽  
Stock Market ◽  
Private Sector ◽  
Market Volatility ◽  
Leverage Effect ◽  
Stock Market Volatility ◽  
Long Run ◽  
Global Shocks

Stock market volatility may be a function of company, industry, or world over information made public. The present study has investigated the volatility of Indian banking sectoral indices with the general banking index for two shocking events: the Sub-prime crisis and COVID-19. A comparative analysis of both the shocks leading to these indices’ volatility has been conducted using symmetric and asymmetric models. This study’s findings show that these indices’ volatile behaviour has been strong enough to persist in the market with the leverage effect present during the sub-prime crisis. This effect disappeared for Nifty Bank Indices and Private Sector Bank Indices as compared to Public Sector Undertaking Bank Indices during COVID-19 (probably because the pandemic is not over yet). With GARCH and EGARCH models, the study suggests that the investors may use the diversification approach, in the long run, to safeguard their portfolio values to survive from global shocks.

Day Of The Week And Its Effect On Stock Market Volatility: Evidence From An Emerging Market

2013 ◽  
Vol 29 (6) ◽  
pp. 1727 ◽  
Author(s):  
Omar Farooq ◽  
Mohammed Bouaddi ◽  
Neveen Ahmed
Keyword(s):  
Stock Market ◽  
Stock Exchange ◽  
Emerging Market ◽  
International Markets ◽  
Conditional Variance ◽  
Market Volatility ◽  
Stock Market Volatility ◽  
Foreign Investors ◽  
High Volatility ◽  
Day Of The Week

This paper investigates the day of the week effect in the volatility of the Saudi Stock Exchange during the period between January 7, 2007 and April 1, 2013. Using a conditional variance framework, we find that the day of the week effect is present in the volatility. Our results show that the lowest volatility occurs on Saturdays and Sundays. We argue that due to the closure of international markets on Saturdays and Sundays, there is not enough activity in the Saudi Stock Exchange. As a result, the volatility is the lowest on these days. Our results also show that the highest volatility occurs on Wednesdays. We argue Wednesday, being the last trading day of the week, corresponds with the start of four non-trading days (Thursday through Sunday) for foreign investors. Fearing that they will be stuck up with stocks in case some unfavorable information enters the market, foreign investors tend to exit the market on Wednesdays. As a result of excessive trading, there is high volatility on Wednesdays.

Forecasting Stock Market Volatility: Evidence from Six Emerging Markets

2013 ◽  
Vol 14 (2) ◽  
pp. 68-93
Author(s):  
Naliniprava Tripathy ◽  
Ashish Garg
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Stock Markets ◽  
Stock Price ◽  
Market Volatility ◽  
Future Market ◽  
Investment Strategies ◽  
Stock Market Volatility ◽  
Efficient Management ◽  
Asymmetric Garch

This paper forecasts the stock market volatility of six emerging countries by using daily observations of indices over the period of January 1999 to May 2010 by using ARCH, GARCH, GARCH-M, EGARCH and TGARCH models. The study reveals the positive relationship between stock return and risk only in Brazilian stock market. The analysis exhibits that the volatility shocks are quite persistent in all country’s stock market. Further the asymmetric GARCH models find a significant evidence of asymmetry in stock returns in all six country’s stock markets. This study confirms the presence of leverage effect in the returns series and indicates that bad news generate more impact on the volatility of the stock price in the market. The study concludes that volatility increases disproportionately with negative shocks in stock returns. Hence investors are advised to use investment strategies by analyzing recent and historical news and forecast the future market movement while selecting portfolio for efficient management of financial risks to reap benefits in the stock markets.

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