scholarly journals Global Equity Markets and International Diversification

2011 ◽  
Vol 2 (9) ◽  
Author(s):  
Javad Kashefi ◽  
Gilbert J. McKee
Keyword(s):  
Stock Market ◽  
Risk Reduction ◽  
Stock Markets ◽  
Equity Markets ◽  
International Diversification ◽  
Equity Returns ◽  
Efficient Frontiers ◽  
Risk Return ◽  
Coefficients Of Variation ◽  
Market Indexes

Interest in global investing has increased tremendously over the last several years. U.S. investors seek to reduce risk by diversifying globally. The risk reduction benefits hinge upon the relationships between U.S. stock market indexes and other international stock market indexes. Portfolio research studies have shown that adding new assets that have low correlation with those already held will enhance the risk to return ratio for the new portfolio. Global diversification may provide a similar risk reduction when an investors portfolio is expanded to include foreign securities. This study examines relationships between U.S. stock markets and world equity markets to investigate whether international diversification provides additional diversification benefits to U.S. investors.The data for this study include the annualized equity returns and standard deviations computed for 61 indexes (11 Morgan Stanley Capital International (MSCI) Indexes and 50 national market indexes that were calculated for the period January 1988 to November 2001. Nine portfolio diversification strategies are examined to obtain efficient frontiers. These portfolios are constructed based upon risk-reward ratios (coefficients of variation), systematic risk (beta) and using different MSCI International Market Indexes.Our analysis suggests that: (1) a portfolio constructed based on coefficients of variation of less than 2 (no index had a ratio of less than 1) as a criterion had the best result; (2) the domestic portfolio (S&P500) provided the second best risk-return to the investors; (3) among MSCI Indexes, FAREAST indexes had the worst performance as did China among the 50 countries; (4) the presumption that low correlations (less than 0.5) would be an attractive means of reducing the portfolio risk did not produce the best risk-return trade off; and (5) the size of the coefficients and long-term stability of the correlations between country indexes have increased.Finally, the efficient frontiers point of inflection for this study (January 1988-November 2001) for most of the portfolios occurred at more than 45 percent investment in U.S. market. This result is consistent with prior studies that found the point of inflection for a portfolio consisting of U.S. and foreign stock markets generally occurs at about 40 percent. Our result is dramatically different from the Sharma, Obar, and Moser (1996) study that concluded the point of inflection for their four portfolios occurred with only 10 percent invested in the U.S. market.

scholarly journals The Early Impact of Government Financial Intervention Policies and Cultural Secrecy on Stock Market Returns During the COVID-19 Pandemic: Evidence From Developing Countries

2021 ◽  
Vol 12 (2) ◽  
pp. 401
Author(s):  
Fouad Jamaani ◽  
Manal Alidarous ◽  
Abdullah Al-Awadh
Keyword(s):  
Developing Countries ◽  
Stock Market ◽  
Stock Markets ◽  
Equity Markets ◽  
Equity Market ◽  
Equity Returns ◽  
Market Returns ◽  
Daily Growth ◽  
Role Of Government ◽  
Stock Market Returns

This paper examines the role of government financial intervention policies and cultural secrecy on equity market returns during the start of the COVID-19 pandemic in developing countries’ stock markets. We employ global data including 939 observations across 32 developing countries (23 emerging and 9 frontier stock markets) from December 1 to April 28, 2020. Our results show that the above-mentioned policies that set out to curb the COVID-19 pandemic succeed in increasing equity returns. It reflects investors’ improved perceptions of governments’ commitment to stabilizing the economy during the pandemic in developing, emerging, and frontier equity markets. Results show that investors in all equity markets discount differences in cultural secrecy in processing market information when investing in stock markets. We find that equity market investors in developing and emerging countries truly react negatively to the rise in the number of confirmed COVID-19 cases reported. Yet, we find that COVID-19 wields no influence on equity market returns in frontier equity markets. This presents frontier equity markets as a safe-haven investment destination during a global health outbreak. Our work helps investors during such events to identify the best and worst investment destinations in developing, emerging, and frontier stock markets. At the same time, it is important to understand the critical roles of: firstly, the introduced government financial intervention policies; and secondly, the daily growth in reported COVID-19 cases on stock market returns.

scholarly journals Risk Diversification Between Stock Markets In Germany And Bosnia And Herzegovina

2015 ◽  
Vol 9 (1) ◽  
pp. 30-36 ◽  
Author(s):  
Azra Zaimović ◽  
Almira Arnaut Berilo
Keyword(s):  
Stock Market ◽  
Portfolio Management ◽  
Stock Prices ◽  
Stock Markets ◽  
Western Europe ◽  
Academic Research ◽  
Equity Markets ◽  
International Diversification ◽  
Information Costs ◽  
Risk Diversification

Abstract The integration of global equity markets has been a well-studied topic in the last few decades, particularly after stock market crashes. Most studies have focused on developed markets such as the US, Western Europe and Japan. The findings were that the degree of international co-movements among stock prices has substantially increased in the post-crash regime. In this paper we research the co-movements of German and Bosnian stock markets during and after the recent economic and financial crisis. International market integration means that assets of equal risk provide the same expected returns across integrated markets. This means fewer opportunities for risk diversification if the markets are integrated. It is also believed that stock market indices of integrated markets move together over the long run with the possibility of short-run divergence. There is considerable academic research on the benefits of international diversification. Investors who buy stocks in domestic as well in foreign markets seek to reduce risk through international diversification. The risk reduction takes place if the various markets are not perfectly correlated. The increasing correlation among markets during and after the crises has restricted the scope for international diversification. International stock market linkages are the subject of extensive research due to rapid capital flows between countries because of financial deregulation, lower transaction and information costs, and the potential benefits from international diversification. Most stock markets in the world tend to move together, in the same direction, implying positive correlation. In and after crises they tend to move together even more strongly. Thus, this paper aims to research if there are any diversification opportunities by spreading out investments across developed and underdeveloped capital markets. This research attempts to examine the scope of international diversification between German and Bosnian equity markets during the 6-year period from 2006 to 2011. We test the hypothesis of whether there are any risk diversification possibilities by spreading out the investments between German and Bosnian equity markets. In order to determine the mean-variance efficiency of portfolios we use the method of convex (quadratic and linear) programming. The hypothesis is tested with the Markowitz portfolio optimization method using our own software. The results of this research might enhance the efficiency of portfolio management for both types of capital market under analysis, and prove especially useful for institutional investors such as investment funds.

scholarly journals Predicting Stock Market Indexes, Two Days In Advance, Using NewsInn Algorithm

2015 ◽  
Vol 5 (2) ◽  
pp. 308
Author(s):  
Radu Nicoara
Keyword(s):  
Stock Market ◽  
Sentiment Analysis ◽  
Stock Markets ◽  
News Article ◽  
World News ◽  
Opinion Extraction ◽  
Extraction Algorithm ◽  
Market Indexes

<p class="ber"><span lang="EN-GB">NewsInn is an A.I. Driven Algorithm that processes and conglomerates news from major news publications. It uses an opinion extraction algorithm to do a sentiment analysis on every news article. </span></p><p class="ber"><span lang="EN-GB">Considering that stock markets are heavily influenced be world news, we conducted a study to show the link between the detected sentiment inside the news, and the most used Stock Market Indexes: S&amp;P 500, Dow Jones and NASDAQ. Results showed an almost 70.00% accuracy in predicting market fluctuation two days in advance.</span></p>

scholarly journals Financial contagion and 2016 oil crisis: a factor analysis

2020 ◽  
Author(s):  
Turki Maya
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Principal Component ◽  
Financial Contagion ◽  
Market Returns ◽  
Component Structure ◽  
Stock Market Returns ◽  
Oil Crisis ◽  
Market Indexes ◽  
Variance Explained

<p>The paper tries to answer the following question: could the 2016 oil price crisis generate financial contagion among stock markets? </p> <p>The study period is composed of two sub-periods; a quiet one from 3/01/2012 to 01/08/2014 and turbulent one from 04/08/2014 to 25/05/2016. Raw data consists of daily international stock market indexes prices. The co-movements of the stock market returns are analyzed through a principal component analysis (PCA).</p> <p>The results revealed that the <em>KMO</em> index (Kaiser-Mayer-Olkin) is higher during the turbulent period than during the quiet one and that the proportion of variance explained by the first component during the turbulent period reached 35% while during the quiet one it represented only 26,7%.Regarding the component structure, for the turbulent period, three factors are able to explain the stock markets indexes movements while for the quiet period four factors are required. </p> <p>The findings give more credit to the thesis supporting the linkage between cross correlation and financial contagion and classify the 2016 oil crisis, as just a coupling episode and not an extreme one.</p>

scholarly journals A study of co-movements between U.S. and Latin American stock markets: A cross-bicorrelations perspective

DYNA ◽  
2016 ◽  
Vol 83 (196) ◽  
pp. 143-148 ◽  
Author(s):  
Semei Coronado-Ramirez ◽  
Omar Rojas-Altamirano ◽  
Rafael Romero-Meza ◽  
Francisco Venegas-Martínez
Keyword(s):  
Stock Market ◽  
Latin American ◽  
Stock Markets ◽  
Nonlinear Dependence ◽  
Standard And Poor's ◽  
Non Linear ◽  
Market Indexes

<p>This work applies a test that detects dependence between pairs of variables. The kind of dependence is a non-linear one, and the test is known as cross-bicorrelation, which is associated with Brooks and Hinich [1]. We study dependence periods between U.S. Standard and Poor's 500 (SP500), used as a benchmark, and six Latin American stock market indexes: Mexico (BMV), Brazil (BOVESPA), Chile (IPSA), Colombia (COLCAP), Peru (IGBVL) and Argentina (MERVAL). We have found windows of nonlinear dependence and comovement between the SP500 and the Latin American stock markets, some of which coincide with periods of crisis, leading to an interpretation of a possible contagion or interdependence.</p>

scholarly journals "The Components Of Stock Prices: Evidence From The Japanese Stock Markets"

2011 ◽  
Vol 16 (1) ◽  
Author(s):  
Dimitrios K. Tsoukalas
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Stock Markets ◽  
Equity Markets ◽  
Equity Returns ◽  
Font Size ◽  
Data Set ◽  
Explanatory Variables ◽  
Information Hypothesis ◽  
Structural Vector

<p class="MsoNormal" style="margin: 0in 0.5in 0pt;"><span style="font-family: &quot;CG Times&quot;,&quot;serif&quot;; font-size: 11pt; mso-bidi-font-size: 10.0pt;">This study establishes permanent and temporary components of equity returns in the Japanese equity markets using, as explanatory variables, the fundamentals of stock prices.<span style="mso-spacerun: yes;">&nbsp; </span>We employ the structural Vector Auregression Approach (VAR) to a data set for the period January 1955 to December 1997.<span style="mso-spacerun: yes;">&nbsp; </span>We consider the "information" hypothesis of dividends to justify the components of stock returns.<span style="mso-spacerun: yes;">&nbsp; </span></span></p>

scholarly journals On the hedging benefits of REITs: The role of risk aversion and market states

2021 ◽  
Vol 10 (2) ◽  
pp. 126-132
Author(s):  
Riza Demirer ◽  
Asli Yuksel ◽  
Aydin Yuksel
Keyword(s):  
Stock Market ◽  
Risk Aversion ◽  
Risk Reduction ◽  
Significant Risk ◽  
Time Varying ◽  
Hedging Strategy ◽  
Risk Return ◽  
Market Risks ◽  
The U.S

We propose a dynamic, forward-looking hedging strategy to manage stock market risks via positions in REITs, conditional on the level of risk aversion. Our findings show that REITs do not only offer significant risk reduction for passive portfolios, but also offer much improved risk-adjusted returns with the greatest benefits observed for Australia, Canada and the U.S. Overall, our findings suggest that time-varying risk aversion can be utilized to (i) establish effective hedges against stock market risks via positions in REITS, and (ii) improve the risk-return profile of passive portfolios.

scholarly journals The (lack of) momentum effect in the UAE stock market

2019 ◽  
Vol 1 (3) ◽  
pp. 1-7
Author(s):  
Mateusz Mikutowski ◽  
Marina Arnaut ◽  
Adam Zaremba
Keyword(s):  
Stock Market ◽  
United Arab Emirates ◽  
Stock Markets ◽  
Equity Returns ◽  
Global Markets ◽  
Momentum Effect ◽  
Momentum Strategies ◽  
Market Portfolio

We investigate the momentum effect in the United Arab Emirates equity returns. Using a dataset of 124 firms listed in the UAE stock markets in the period January 2004 – March 2019, we form portfolios from one-way sorts on past returns ranging from 3 to 12 months. Contrary to the evidence from global markets, we have found that the momentum effect in the UAE is weak, unreliable, and insignificant. Under realistic trading assumptions, the momentum strategies cannot outperform a diversified market portfolio.

ASIAN EMERGING ECONOMIES AND UNITED STATES OF AMERICA: DO THEY OFFER A DIVERSIFICATION BENEFIT?

2011 ◽  
Vol 01 (04) ◽  
pp. 85-92
Author(s):  
Preeti Sharma
Keyword(s):  
United States ◽  
Stock Market ◽  
United States Of America ◽  
Stock Markets ◽  
International Diversification ◽  
Stock Market Crash ◽  
Investment Bankers ◽  
Developed Economies ◽  
Emerging Stock Markets ◽  
Diversification Benefit

With the emergence of new capital markets and liberalization of stock markets in recent years, there has been an increase in investors' interest in international diversification. This is so because international diversification allows investors to have a larger basket of foreign securities to choose from as part of their portfolio assets, so as to enhance the reward-to-volatility ratio. This paper, thus, studies the issue of co-movement between Asian emerging stock markets and developed economies using the concept of co-integration. Furthermore, it has been observed that there has been increasing interdependence between most of the developed and emerging markets since the 1987 Stock Market Crash. This interdependence intensified after the 1997 Asian Financial Crisis. With this phenomenon of increasing co-movement between developed and emerging stock markets, the benefits of international diversification become limited. We have seen that stock markets behavior is random. Several researches have shown that stock markets moves in random and does not affected by any fundamentals. Some authors describe that global sentiments and fundamentals does not prove fruitful in studying the movement of stock markets. Several investment bankers and speculators daily predict the stock market movements of one economy on the basis of stock market movements of another economy. Researches have been conducted with the purpose of finding out the potential for investors to gain from investments in different economies. The paper analyzes the interdependence (if any) of developing or emerging Asian economies and United States of America. And, thus these trends can help the investors to diversify their portfolios. This study is conducted with the objective of finding out the potential for diversification in selected Asian countries and United States of America by studying correlations in the index returns.

Sign in / Sign up

Export Citation Format

Share Document