Empirical Investigation of the Causal Relationships Among Herding, Stock Market Returns, and Illiquidity: Evidence from Major Asian Markets

2014 ◽  
Vol 17 (03) ◽  
pp. 1450018 ◽  
Author(s):  
Zhuo Qiao ◽  
Thomas C. Chiang ◽  
Lin Tan
Keyword(s):  
Stock Returns ◽  
Stock Return ◽  
Empirical Investigation ◽  
Filter Method ◽  
Time Varying ◽  
Herding Behavior ◽  
Market Returns ◽  
Stock Market Returns ◽  
Causality Tests ◽  
Kalman Filter Method

We apply the Kalman filter method to estimate nine Asian markets and find evidence that stock return dispersions decline as markets experience stress conditions, supporting the existence of herding. This paper finds that herding behavior is time-varying and comoving across markets. Both linear and nonlinear Granger causality tests conclude that there is strong bilateral causality between herding and returns for all nine Asian markets. For markets in Japan, South Korea, and Thailand, we consistently find strong two-way causality exists in pairwise variables among herding, stock returns, and illiquidity. No consistent evidence can be drawn from other markets for other pairwise variables.

scholarly journals Prediction of Stock Returns: Sum-of-the-Parts Method and Economic Constraint Method

2020 ◽  
Vol 12 (2) ◽  
pp. 541 ◽  
Author(s):  
Zhifeng Dai ◽  
Huiting Zhou
Keyword(s):  
Stock Returns ◽  
Asset Allocation ◽  
Stock Return ◽  
Prediction Performance ◽  
Market Returns ◽  
Stock Market Returns ◽  
Stock Return Prediction ◽  
Price Earnings Ratio ◽  
Constraint Method ◽  
Prediction Strategy

Forecasting stock market returns has great significance to asset allocation, risk management, and asset pricing, but stock return prediction is notoriously difficult. In this paper, we combine the sum-of-the-parts (SOP) method and three kinds of economic constraint methods: non-negative economic constraint strategy, momentum of return prediction strategy, and three-sigma strategy to improve prediction performance of stock returns, in which the price-earnings ratio growth rate (gm) is predicted by economic constraint methods. Empirical results suggest that the stock return forecasts by proposed models are both statistically and economically significant. The predictions of proposed models are robust to various robustness tests.

Stock Return Extrapolation, Option Prices, and Variance Risk Premium

2021 ◽  
Author(s):  
Adem Atmaz
Keyword(s):  
Stock Returns ◽  
Risk Premium ◽  
Stock Return ◽  
Dynamic Equilibrium ◽  
Investor Sentiment ◽  
Option Prices ◽  
Market Returns ◽  
Stock Market Returns ◽  
Variance Risk Premium ◽  
Variance Risk

Abstract This paper presents a tractable dynamic equilibrium model of stock return extrapolation in the presence of stochastic volatility. In the model, consistent with survey evidence, investors expect future returns to be higher (lower) but also less (more) volatile following positive (negative) stock returns. The biased volatility expectation introduces a new channel through which past returns and investor sentiment affect derivative prices. In particular, through this novel channel, the model reconciles the otherwise puzzling evidence of past returns affecting option prices and the evidence of variance risk premium predicting future stock market returns even after controlling for the realized variance.

A quantile regression approach to evaluate the relative impact of global and local factors on the MENA stock markets

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Slah Bahloul ◽  
Nawel Ben Amor
Keyword(s):  
Stock Market ◽  
Quantile Regression ◽  
Stock Returns ◽  
Stock Markets ◽  
Financial Integration ◽  
Ordinary Least Squares ◽  
Market Returns ◽  
Stock Market Returns ◽  
Content Type ◽  
The Impact

PurposeThis paper investigates the relative importance of local macroeconomic and global factors in the explanation of twelve MENA (Middle East and North Africa) stock market returns across the different quantiles in order to determine their degree of international financial integration.Design/methodology/approachThe authors use both ordinary least squares and quantile regressions from January 2007 to January 2018. Quantile regression permits to know how the effects of explanatory variables vary across the different states of the market.FindingsThe results of this paper indicate that the impact of local macroeconomic and global factors differs across the quantiles and markets. Generally, there are wide ranges in degree of international integration and most of MENA stock markets appear to be weakly integrated. This reveals that the portfolio diversification within the stock markets in this region is still beneficial.Originality/valueThis paper is original for two reasons. First, it emphasizes, over a fairly long period, the impact of a large number of macroeconomic and global variables on the MENA stock market returns. Second, it examines if the relative effects of these factors on MENA stock returns vary or not across the market states and MENA countries.

Weather, investor psychology and stock returns: evidence from Fiji's stock market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Janesh Sami
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Sunshine Duration ◽  
Market Returns ◽  
Modeling Framework ◽  
Stock Market Returns ◽  
Content Type ◽  
Asset Pricing Models ◽  
Weather Changes ◽  
Practical Implications

PurposeThis paper investigates whether weather affects stock market returns in Fiji's stock market.Design/methodology/approachThe author employed an exponential general autoregressive conditional heteroskedastic (EGARCH) modeling framework to examine the effect of weather changes on stock market returns over the sample period 9/02/2000–31/12/2020.FindingsThe results show that weather (temperature, rain, humidity and sunshine duration) have robust but heterogenous effects on stock market returns in Fiji.Research limitations/implicationsIt is useful for scholars to modify asset pricing models to include weather-related variables (temperature, rain, humidity and sunshine duration) to better understand Fiji's stock market dynamics (even though they are often viewed as economically neutral variables).Practical implicationsInvestors and traders should consider their mood while making stock market decisions to lessen mood-induced errors.Originality/valueThis is the first attempt to examine the effect of weather (temperature, rain, humidity and sunshine duration) on stock market returns in Fiji's stock market.

Effects of Daylight-Saving Time Changes on Stock Market Returns and Stock Market Volatility: Rebuttal

2013 ◽  
Vol 112 (1) ◽  
pp. 89-99 ◽  
Author(s):  
Mark J. Kamstra ◽  
Lisa A. Kramer ◽  
Maurice D. Levi
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Market Volatility ◽  
Stock Market Volatility ◽  
Market Returns ◽  
Stock Market Returns ◽  
Daylight Saving Time ◽  
Daylight Saving ◽  
Time Changes ◽  
Saving Effect

In a 2011 reply to our 2010 comment in this journal, Berument and Dogen maintained their challenge to the existence of the negative daylight-saving effect in stock returns reported by Kamstra, Kramer, and Levi in 2000. Unfortunately, in their reply, Berument and Dogen ignored all of the points raised in the comment, failing even to cite the Kamstra, et al. comment. Berument and Dogen continued to use inappropriate estimation techniques, over-parameterized models, and low-power tests and perhaps most surprisingly even failed to replicate results they themselves reported in their previous paper, written by Berument, Dogen, and Onar in 2010. The findings reported by Berument and Dogen, as well as by Berument, Dogen, and Onar, are neither well-supported nor well-reasoned. We maintain our original objections to their analysis, highlight new serious empirical and theoretical problems, and emphasize that there remains statistically significant evidence of an economically large negative daylight-saving effect in U.S. stock returns. The issues raised in this rebuttal extend beyond the daylight-saving effect itself, touching on methodological points that arise more generally when deciding how to model financial returns data.

scholarly journals The Sensitivity of Central Bank Interest Rate on Commercial Banks’ Stock Market Returns in Kenya

2021 ◽  
Vol 7 (5) ◽  
pp. p72
Author(s):  
Micah Odhiambo Nyamita ◽  
Martine Ogola Dima
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Stock Returns ◽  
Commercial Banks ◽  
Secondary Data ◽  
Market Returns ◽  
Cross Sectional ◽  
Stock Market Returns ◽  
Panel Data Regression

Commercial banks occupy a significant position in the transmission of monetary policy through the financial market. Furthermore, commercial banks have assets and liabilities which are interest rate sensitive, and their stock returns are believed to be particularly responsive to changes in the central bank base lending rates. Therefore, this study investigated the sensitivity of central bank interest rate changes on stock returns of listed commercial banks in Kenya for nine year period, from 2006 to 2014. The study used a hybrid of cross sectional and longitudinal quantitative surveys method, applying GMM panel data regression model on the secondary data from the 11 listed commercial banks in Kenya. The study found out that there is a significant strong positive sensitivity of average annual changes in central bank interest rates (CBR) on the stock returns of the listed commercial banks in Kenya, from 2006 to 2014, measured using CAPM. Hence, listed commercial banks’ managers in Kenya should monitor, keenly, the changes in the central bank interest rates and make investor related decisions accordingly.

scholarly journals Reaction of stock market returns to COVID-19 pandemic and lockdown policy: evidence from Nigerian firms stock returns

2021 ◽  
Vol 7 (1) ◽  
Author(s):  
Isiaka Akande Raifu ◽  
Terver Theophilus Kumeka ◽  
Alarudeen Aminu
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Stock Exchange ◽  
Estimation Methods ◽  
Panel Var ◽  
Impulse Response Functions ◽  
Market Returns ◽  
Stock Market Returns ◽  
Long Run ◽  
Policy Shocks

AbstractGiven the effects COVID-19 pandemic on the financial sectors across the world, this study examined the reaction of stock returns of 201 firms listed in the Nigerian Stock Exchange to the COVID-19 pandemic and lockdown policy. We deployed both Pooled OLS and Panel VAR as estimation methods. Generally, the results from POLS show the stock market returns of the Nigerian firms reacted negatively more to the global COVID-19 confirmed cases and deaths than the domestic COVID-19 confirmed cases and deaths and lockdown policy. The results of the impulse response functions revealed that the effects of COVID-19 confirmed cases and deaths and lockdown policy shocks on stock returns oscillate between negative and positive before the stock market returns converge to the equilibrium in the long run. The FEVD results showed that growth in the COVID-19 confirmed cases, deaths and lockdown policy shocks explained little variations in stock market returns. Given our finding, we advocate for the relaxation of policy of lockdown and the combine use of monetary and fiscal policies to mitigate the negative effect of COVID-19 pandemic on stock market returns in Nigeria.

Sign in / Sign up

Export Citation Format

Share Document