scholarly journals Asymmetric Price Adjustment: Are IPO Prices too "Sticky"?

2011 ◽  
Vol 7 (5) ◽  
Author(s):  
Michael Adams ◽  
Barry Thornton ◽  
Russ Baker
Keyword(s):  
Market Efficiency ◽  
Stock Prices ◽  
Stock Price ◽  
Investor Sentiment ◽  
Relevant Information ◽  
Price Adjustment ◽  
Informational Efficiency ◽  
Long Run ◽  
New Information ◽  
Short Run

The study of IPO mispricing is salient because it raises important questions concerning market efficiency and the existence of systematic stock patterns that can be employed by investors to generate excess market returns. The purpose of this paper is to investigate the informational efficiency of IPO market prices with respect to the first 3 trading day’s return and to examine the effect of varying investor sentiment on this information efficiency.  Under traditional definitions of market efficiency, asset prices, including IPO prices should fully reflect all available and relevant information (Fama 1970).  An increasing body of empirical evidence, however, suggests that IPO prices are not efficient as evidenced both in the short run and the long run.  The speed of incorporation of new information into stock prices is critical to many central issues in financial research, such as market efficiency, arbitrage, and market structure. This paper analyzes the speed of price adjustment to information events for IPOs. The setting of the immediate aftermarket presents an opportunity to investigate the issue when little or no trading history exists. In such a setting, investors are more exposed to new information because they cannot observe the stock price behavior or the reactions to previous information signals.

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 Reaksi saham perbankan terhadap penurunan BI rate April 2016 dan implikasinya terhadap strategi investasi: pengujian terhadap hipotesis pasar efisien

2018 ◽  
Vol 6 (1) ◽  
pp. 9
Author(s):  
Triyaryati N ◽  
Kusumadewi NMW
Keyword(s):  
Interest Rate ◽  
Market Efficiency ◽  
Stock Prices ◽  
Stock Price ◽  
Abnormal Return ◽  
Banking Sector ◽  
Relevant Information ◽  
Investment Strategy ◽  
Rate Policy ◽  
Efficiency Theory

Stagnation of BI Rate during year 2015 on 7.5% level, causing a profit growth deceleration and stock price compulsion in banking sector. BI rate and BI 7-Day Repo Rate policy announcement on April 21st 2016 is a new relevant information for banking sector in Indonesia. Because both are as an interest rate reference for determining deposit and landing interest rate, which directly related to banking sector profit and expenses. This study verify an abnormal return existence during the announcement, in order to observe the market ability to directly absorb the relevant information and reflected in the stock price of the banking sector. The procedures which run in this study is also to test the market efficiency theory in the semi strong form.This study indicate that during the observation period there is no existence of abnormal return, which is show that the market are directly absorb the new relevant information and reflected it in the stock prices. Thus the market indicate as semi strong efficient.Investor decision making implication refer to this study result is there will not be an optimal return for them if they applied an active investment strategy during this period.So, in this semi strong market efficiency situation, it is better for the investor not to apply the active investment strategy.

scholarly journals THE LONG-RUN RELATIONSHIP BETWEEN INFLATION AND REAL STOCK PRICES: EMPIRICAL EVIDENCE FROM SOUTH AFRICA

2012 ◽  
Vol 13 (4) ◽  
pp. 600-613 ◽  
Author(s):  
Riona Arjoon ◽  
Mariëtte Botes ◽  
Laban K. Chesang ◽  
Rangan Gupta
Keyword(s):  
South Africa ◽  
South African ◽  
Stock Prices ◽  
Stock Price ◽  
Positive Real ◽  
Vector Autoregressive ◽  
Price Response ◽  
Long Run ◽  
Short Run ◽  
Real Value

The existing literature on the theoretical relationship between the rate of inflation and real stock prices in an economy has shown varied predictions about the long run effects of inflation on real stock prices. In this paper, we present some time series evidence on this issue using South African data, by applying the structural bivariate vector autoregressive (VAR) methodology proposed by King and Watson (1997). Our empirical results provide considerable support of the view that, in the long run real stock prices are invariant to permanent changes in the rate of inflation. The impulse responses reveal a positive real stock price response to a permanent inflation shock in the long run, indicating that any deviations in short run real stock prices will be corrected towards the long run value. It is therefore concluded that inflation does not lower the real value of stocks in South Africa, at least in the long run.

Dynamic Interaction Between Macroeconomic Fundamentals and Stock Prices in Bangladesh

2018 ◽  
Vol 1 (1) ◽  
pp. 66
Author(s):  
Mostafa Ali ◽  
Gang Sun ◽  
Mohammed Ali Arshad Chowdhury
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Negative Relationship ◽  
Decomposition Analysis ◽  
Variance Decomposition ◽  
Cointegration Test ◽  
Response Analysis ◽  
Macroeconomic Variables ◽  
Long Run ◽  
Short Run

This study attempts to investigate whether dynamics in fundamental macroeconomic factors significantly influence the stock prices of Bangladesh by applying cointegration test, Granger causality test based on the Vector Error Correction Model (VECM), Variance Decomposition and Impulse Response Analysis. Johansen and Juselius cointegration test detect six cointegrating vectors and a short-run and long-run relationship is investigated by normalizing the first cointegrating vector corresponding to the largest Eigen-value. We find a long-run positive relationship between stock price and IP, CPI, EX, and RT but a negative relationship between stock price and M2 and interest rate (both TB & GB). Empirical findings of this study reveal that no macroeconomic variables except TB Granger cause stock price in short run. Variance Decomposition analysis shows that most of the stock price variance can be explained by its own shocks in the shorter horizon but its magnitude diminishes over the long horizon which is about 26.77% after 24 months.  Therefore, empirical results suggest that stock prices are weakly exogenous relative to the macroeconomic variables. Findings of the study have important implications to market participants and financial analysts when they have chosen to invest in Bangladesh stock market.

scholarly journals Portfolio Returns of Islamic Indices and Stock Prices in GCC Countries: Empirical Evidence From the ARDL Model

SAGE Open ◽  
2021 ◽  
Vol 11 (2) ◽  
pp. 215824402110184
Author(s):  
Faris Alshubiri
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Price Index ◽  
Ardl Model ◽  
Portfolio Returns ◽  
Distributed Lag ◽  
Gcc Countries ◽  
Long Run ◽  
Short Run ◽  
Stock Price Index

This study aimed to analyze four portfolio returns of Islamic indices to determine the potential of attracting investments in the Islamic Stock Price Index of the six Gulf Cooperation Council (GCC) countries. Monthly data were collected from S&P Dow Jones Indices LLC reports covering the period from December 31, 2010 to December 31, 2019. The study applied the autoregressive distributed lag (ARDL) method for estimation. The findings show that the S&P GCC Composite Shariah, the S&P GCC Composite Shariah Dividend, and the S&P Shariah Domestic Total Return Index are positively related in the long run to the Islamic Stock Price Index but S&P GCC Investable Shariah is negatively related to the Islamic Stock Price Index. The error correction model (ECM) results for the short-run ARDL model indicate that the S&P GCC Composite Shariah and the S&P GCC Investable Shariah are positively related to the Islamic Stock Price Index but S&P Shariah Domestic Total Return Index is negatively related to the Islamic Stock Price Index. The main conclusion is that positive growth in the price of Islamic stocks depends on diversifying the Islamic investment portfolio to hedge against unexpected risks.

scholarly journals Co-Integration between Stock Prices and Exchange Rate of Selected SAARC Countries: An Empirical Study

2016 ◽  
Vol 3 (1) ◽  
pp. 82
Author(s):  
Sumaira Channa ◽  
Pervaiz Ahmed Memon ◽  
Muhammad Ramzan Kalhoro
Keyword(s):  
Exchange Rates ◽  
Stock Prices ◽  
Stock Price ◽  
Policy Implications ◽  
Feedback Effects ◽  
Long Run ◽  
Integration Test ◽  
Augmented Dickey Fuller ◽  
Short Run ◽  
The Relationship

This study examines the relationship between stock prices and exchange rates of three selected SAARC countries including Pakistan, India and Srilanka; using monthly data from period of January 1999 to December 2015. This study employs statistical techniques of Augmented Dickey Fuller (ADF), Phillips Perron (PP), unit root tests, and Johansen’s Co-integration test to determine long run equilibrium association ship between stock price indices and exchange rates. The study finds out no Co-integration between the two variables, hence no long run association is existing between them. This finding implies that investors in these markets are having more opportunities for diversifying their portfolios. However, using Granger Causality and impulse response tests, it finds significant short-run feedback effects, as stock prices Granger cause exchange rates in case of Pakistan and unidirectional causality flows from exchange rates to stock prices in case of Srilanka but no proof of causality running in either direction in case of India. Hence the findings for Pakistan and Srilanka have crucial policy implications.

scholarly journals The Impact of Macroeconomic Indicators on Indian Stock Prices: An Empirical Analysis

2017 ◽  
Vol 12 (1) ◽  
pp. 61-78 ◽  
Author(s):  
A. K. Giri ◽  
Pooja Joshi
Keyword(s):  
Economic Growth ◽  
Crude Oil ◽  
Stock Prices ◽  
Stock Price ◽  
Variance Decomposition ◽  
Oil Price ◽  
Crude Oil Price ◽  
Long Run ◽  
Short Run ◽  
The Impact

AbstractThe purpose of the present study is to examine the long run and the short run relationship between stock price and a set of macroeconomic variables for Indian economy using annual data from 1979 to 2014. The long run relationship is examined by implementing the ARDL bounds testing approach to co-integration. VECM method is used to test the short and long run causality and variance decomposition is used to predict long run exogenous shocks of the variables. The results confirm a long run relationship among the variables. Evidence suggests that Economic growth, inflation and exchange rate influence stock prices positively. However, crude oil price influences the stock price negatively. This implies that the increase in oil price induces inflationary expectation in the mind of investors and hence stock prices are adversely affected. The VECM result indicates that short run and long run unidirectional causality running from economic growth and FDI to stock prices in India. The result of the variance decomposition shows that stock market development in India is mostly explained by its own shocks. The Government can take steps to control the crude oil price in India and Investors’ confidence has to be gained by boosting the economic growth of the economy through appropriate policy tools.

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”.

scholarly journals Financial Markets’ Governance, Transparency and Informational Efficiency: Role of IfRS Norms, Auditors and Financial Analysts

2016 ◽  
Vol 9 (5) ◽  
pp. 100
Author(s):  
Imen Lamiri ◽  
Adel Boubaker
Keyword(s):  
Financial Markets ◽  
Stock Prices ◽  
Stock Price ◽  
Financial Analysts ◽  
Negative Relationship ◽  
Developed Countries ◽  
Coefficient Of Determination ◽  
Specific Information ◽  
Informational Efficiency

<p>This article explores the informational role of three essential modern financial markets actors such IFRS norms, the Big”4” and the financial analysts for a panel of emergent and developed countries during the period from 2001 to 2010. We hypothesis that these mechanisms help improving the quality of specific information incorporated into stock prices measured by the stock price synchronicity (SPS). The main result is that both financial analyst’s coverage and IFRS adoption's effects seem to be stronger for emerging than developed markets. The results also show a negative relationship between auditors’ opinion and coefficient of determination (R<sup>2</sup>).</p>

scholarly journals The Relationships between Exchange Rates and Stock Prices: Empirical Investigation from Johannesburg Stock Exchange

2019 ◽  
Author(s):  
Md. Mahmudul Alam ◽  
Gazi Salah Uddin ◽  
Khan Md. Raziuddin Taufique
Keyword(s):  
Exchange Rate ◽  
Market Efficiency ◽  
Stock Prices ◽  
Stock Exchange ◽  
Unit Root Test ◽  
Rate Sensitivity ◽  
Causality Test ◽  
Johannesburg Stock Exchange ◽  
Long Run ◽  
Adf Test

This study seeks evidence supporting the existence of market efficiency and exchange rate sensitivity on stock prices in the Johannesburg stock exchange (JSE). The sample includes the daily price indices of all securities listed on the JSE, and the exchange rate of the USD/Rand for the period since January 2000 to December 2004. The results from the unit root test, the ADF test and the causality test at the Granger sense provide evidence that the Johannesburg stock exchange (JSE) is informationally efficient. It has a long run comovement with exchange rate, and long run equilibrium or steady state. Hence, in JSE there is a strong possibility that foreign direct investors and forex market traders cannot influence and gain abnormal extra benefits by using exchange rate mechanism or by using exchange rate to forecast stock prices in the market. So, JSE is semi-strong form efficient. Through cointegration test, this paper gives more insight on the concept of market efficiency and the reliability of the results. These results are important to security analysts, investors, and security regulatory exchange bodies in policy making decision to improve the market conditions

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