The Impact of Sovereign Ratings Changes: A Comparison of the Market Model, Quadratic Market Model and Downside Model

The aim of this paper is to assess the impact of reforms introduced in the operation of Polish open pension funds on management style, risk exposure and related investment performance. The article analyzes the impact of the reformed regulations on the herd behavior of fund managers. In particular, we examined whether the elimination of the internal benchmark for fund evaluation impacts the elimination or reduction of herd behavior. We proposed a multi-factor market model to evaluate the performance of funds investing in various types of instruments. Moreover, we used panel estimation to directly take into account the impact of the internal benchmark on herd behavior. Our results indicate that highly regulated funds may slightly outperform passive benchmarks and their unregulated competitors. In the case of Polish open pension funds, limiting investments in Treasury debt instruments clearly resulted in increased risk and volatility of returns. However, it also raised competition between funds and decreased the herd behavior. Additionally, the withdrawal of the mechanism evaluating funds based on the internal benchmark was also important in reducing herd behavior.

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The impact of qualified audit opinion on stock returns: an empirical study at Amman stock exchange

Journal of Financial Reporting and Accounting ◽

10.1108/jfra-02-2021-0056 ◽

2022 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Rana Bayo Flees ◽

Sulaiman Mouselli

Keyword(s):

Stock Returns ◽

Stock Exchange ◽

Abnormal Returns ◽

Market Model ◽

Content Type ◽

Going Concern ◽

Study Approach ◽

Audit Opinions ◽

The Impact ◽

First Time

Purpose This paper aims to investigate the impact of qualified audit opinions on the returns of stocks listed at Amman Stock Exchange (ASE) after the introduction of the recent amendments by the International Auditing and Assurance Standard Board (IAASB) on audits reporting and conclusions. It further investigates if results differ between first time qualified and sequenced qualifications, and between plain qualified opinion and qualifications with going concern. Design/methodology/approach Audit opinions’ announcements and stock returns data are collected from companies’ annual reports for the fiscal years 2016 to 2019 while stock returns are computed from stock closing prices published at ASE website. The authors apply the event study approach and use the market model to calculate normal returns. Cumulative abnormal returns (CARs) and average abnormal returns (AARs) are computed for all qualified audit opinions’ announcements. Findings The empirical evidence suggests that investors at ASE do not react to qualified audit opinions announcements. That is, the authors find an insignificant impact of qualified audit opinion announcements on stock returns using both CAR and AAR estimates. The results are robust to first time and sequenced qualifications, and for qualifications with going concern. Results are also robust to the use of risk adjusted market model. Research limitations/implications The insignificant impact of qualified audit opinions on stock returns have two potential conflicting research implications. First, the new amendments introduced to auditors’ report made them more informative and reduce the negative signals contained in the qualified opinions. That is, investors are now aware of the real causes of qualifications and not overreacting to the qualified opinion. Second, the documented insignificant impact confirms that ASE is not a semi-strong form efficient. Practical implications The apparent excessive use of qualifications should ring the bell on whether auditors misuse their power or companies are really in trouble. Hence, the Jordanian regulatory bodies need to warn auditors against the excessive use of qualifications on the one hand, and to raise the awareness of investors on the implications of auditors’ opinions on the other hand. Originality/value This study is innovative in twofold. First, it explores the impact of qualified audit opinions on stock returns after the introduction of new amendments by IAASB at ASE. In addition, it uses event study approach and distinguishes between first time qualified and sequenced qualifications, and between plain qualified opinion and qualifications with going concern. The results are consistent with efficient market theory and behavioral finance explanations.

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Do firms harvest from political connections during general elections? Case of Pakistan

Journal of Financial Crime ◽

10.1108/jfc-02-2019-0022 ◽

2020 ◽

Vol 27 (1) ◽

pp. 258-273

Author(s):

Ayesha Ashraf ◽

M. Kabir Hassan ◽

Khurram Abbas ◽

Qamar Uz Zaman

Keyword(s):

Stock Returns ◽

Abnormal Returns ◽

Share Price ◽

Market Model ◽

Political Connections ◽

Content Type ◽

Connected Group ◽

Playing Field ◽

General Elections ◽

The Impact

Purpose This paper aims to examine the impact of general elections on the stock returns of the politically connected group affiliated firms of Pakistan. Design/methodology/approach This study uses the market model to assess the impact of political connections (PCs) on abnormal stock returns, before and after election events. We have used share price data of non-financial firms of Pakistan for the years 2008-2013. Findings It has been found that behavior of cumulative average abnormal returns (CAAR) is significantly different for standalone and politically connected group affiliated firms. The results reveal that CAARs of politically connected group affiliated firms have experienced less deviation as compared to stand alone firms. Therefore, it is argued that politically connected group firms may reduce the impact of political uncertainty on stock returns in comparison to stand alone firms. Practical implications This study is helpful for policy regulators of Pakistan to devise appropriate policies to maintain a level playing field for politically connected and standalone firms. Originality/value This study provides a new dimension to understand the role and association of PCs and general elections with stock markets returns.

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Oligopoly competition on market with food products

Agricultural Economics (Zemědělská ekonomika) ◽

10.17221/107/2010-agricecon ◽

2011 ◽

Vol 57 (No. 12) ◽

pp. 580-588 ◽

Cited By ~ 4

Author(s):

L. Severová ◽

L. Kopecká ◽

R. Svoboda ◽

J. Brčák

Keyword(s):

Imperfect Competition ◽

Market Competition ◽

Market Model ◽

Oligopolistic Competition ◽

Food Sector ◽

Dominant Firm ◽

Dominant Position ◽

Food Market ◽

Oligopoly Competition ◽

The Impact

Oligopoly can be defined as a market model of the imperfect competition type, assuming the existence of only a few companies in a sector or industry, from which at least some have a significant market share and can therefore influence the production prices in the market. Many models of oligopoly that differ from one another mostly in the nature of the competitive companies’ behaviour can be found through the study of oligopolistic structures. Some models describe only the behaviour of two companies in the monitored market (duopoly), others describe several companies of the same power (cartel), still others assume that one of the companies has a dominant position in the market, etc. The text of this article deals with oligopolistic competition in the food market in the terms of the behaviour of grocers and with the impact of this competition upon the market competition in the sector. First, it mentions the agreements on common cooperation and procedure, when cartel market structure originates. It also analyzes the examples of behaviour of oligopoly with a dominant firm on the market with products in the food sector, with the goal of detecting whether the market with these products is significantly influenced by the oligopolistic behaviour of companies.  

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Effects of a Delayed Expansion of Interconnector Capacities in a High RES-E European Electricity System

Energies ◽

10.3390/en12163098 ◽

2019 ◽

Vol 12 (16) ◽

pp. 3098

Author(s):

Ritter ◽

Meyer ◽

Koch ◽

Haller ◽

Bauknecht ◽

...

Keyword(s):

Co2 Emissions ◽

Electricity Market ◽

Electricity Generation ◽

Power Plants ◽

Energy Transition ◽

Market Model ◽

Electricity Trading ◽

Electricity System ◽

System A ◽

The Impact

In order to achieve a high renewable share in the electricity system, a significant expansion of cross-border exchange capacities is planned. Historically, the actual expansion of interconnector capacities has significantly lagged behind the planned expansion. This study examines the impact that such continued delays would have when compared to a strong interconnector expansion in an ambitious energy transition scenario. For this purpose, scenarios for the years 2030, 2040, and 2050 are examined using the electricity market model PowerFlex EU. The analysis reveals that both CO2 emissions and variable costs of electricity generation increase if interconnector expansion is delayed. This effect is most significant in the scenario year 2050, where lower connectivity leads roughly to a doubling of both CO2 emissions and variable costs of electricity generation. This increase results from a lower level of European electricity trading, a curtailment of electricity from a renewable energy source (RES-E), and a corresponding higher level of conventional electricity generation. Most notably, in Southern and Central Europe, less interconnection leads to higher use of natural gas power plants since less renewable electricity from Northern Europe can be integrated into the European grid.

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Impact of Share Splits on Stock Returns: Evidences from India

Vision The Journal of Business Perspective ◽

10.1177/0972262919868130 ◽

2019 ◽

Vol 23 (4) ◽

pp. 432-441

Author(s):

Bilal Ahmad Pandow ◽

Khurshid Ahmad Butt

Keyword(s):

Stock Returns ◽

Impact Analysis ◽

Positive Influence ◽

Market Model ◽

Sign Test ◽

Rank Test ◽

Long Run ◽

Short Run ◽

Study Methodology ◽

The Impact

This article empirically examines the impact of stock splits on the price movements and returns of the scrips listed on the stock market in India. The study makes use of the standard event study methodology to measure the significance of unusual yield associated with the event. To calculate the returns, the study employs market model. Also, it uses parametric tests, such as t-statistic, and non-parametric test, such as Corrado Rank Test, Generalized Rank Test and Sign Test, to check the significance and robustness of abnormal return (AR), average AR, and cumulative average AR. Indisputably, the results are somewhat different from the evidences found in developed markets. Mostly in these countries, the event witnesses unusual optimistic yields. The results suggest that there is a positive AR adjacent to the effective day (ED) of the event in the short run. However, in the long run, negative ARs in the post-effective to ED+90 days window is witnessed. Further, the analysis also suggests that share splits do not have a positive influence on the share capital of the investors. The results are based on the 10-days event and 90-days estimation window and are the main limitation of the study. Hence, the windows can be both expanded and reduced to have a better holistic impact analysis of the share splits and stock returns of the selected firms.

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An Event Study on the Effects of North Korea Risks on South Korea‘s Stock Market

Journal of Derivatives and Quantitative Studies ◽

10.1108/jdqs-02-2014-b0004 ◽

2014 ◽

Vol 22 (2) ◽

pp. 251-284

Author(s):

Inho Lee ◽

Shiyong Yoo

Keyword(s):

Stock Market ◽

Event Study ◽

North Korea ◽

Weighted Average ◽

Efficient Market Hypothesis ◽

Economic Cooperation ◽

Market Model ◽

Substantial Impact ◽

Significant Difference ◽

The Impact

There have always been North Korea Risks in South Korea stock market since its opening. Some studies have concluded that it does not have a substantial impact on South Korea’s economy due to chronic geopolitical risks, while others have argued it has had an impact. However, in light of the Efficient Market Hypothesis (EMH) it can be argued that both opinions view that information about North Korea Risks affects stock markets and that stock prices react to it. This study analyzed the effects of North Korea Risks on South Korea’s stock market using event study methodology empirically, and it tested the semi-strong EMH-a market in which prices always fully reflect available information. The research results are following: First of all, North Korea Risks have an impact on South Korea’s stock market and the data was statistically significant. In particular, stock market already reflected information about the forewarned events like nuclear test. However, market also responded to information about sudden events such as the impact of Kim Jung-il’s death on the South-North economic cooperation stock. Portfolio analysis demonstrated that small capital stocks were affected more than large caps. These results cannot reject the EMH. Also, estimates of market model and that of Fama-French three-factor model did not show a statistically significant difference in different verification. There was no statistically significant difference between growth and value stock in large caps portfolio either. However, there was a statistically significant difference between defense stock and South-North economic cooperation stock, small caps and big caps, and weighted average and simple average. The significance of this study lies in that it conducted the event study by variety estimation model with objective standards for selecting events when measuring the effect of North Korea Risks.

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Insider trading surrounding securities class action litigation and settlement announcements

Managerial Finance ◽

10.1108/mf-05-2016-0129 ◽

2017 ◽

Vol 43 (1) ◽

pp. 124-140 ◽

Cited By ~ 2

Author(s):

Frederick Davis ◽

Behzad Taghipour ◽

Thomas J. Walker

Keyword(s):

Insider Trading ◽

Private Information ◽

Stock Prices ◽

Class Action ◽

Market Model ◽

Trading Activity ◽

Content Type ◽

Sarbanes Oxley ◽

Abnormal Profits ◽

The Impact

Purpose The purpose of this paper is to investigate the trading patterns of corporate insiders, both managing and non-managing, around the announcement dates of securities class action lawsuits and related legal settlements. Design/methodology/approach The authors use market model event study methodology to examine the impact of class action litigation and settlement announcements on the stock prices of sued firms. The authors then determine the extent of abnormal insider trading surrounding such announcements by comparing insider trading activity (volume and transaction counts) to prior insider trading in the same firm, and to a matched sample of firms not experiencing such litigation announcements. A multivariate framework is utilized to provide further insight into the determinants of such abnormal insider trading. Findings The authors establish that class action litigation and settlement announcements have a significant impact on the stock prices of sued firms, and that foreknowledge of these events appears to be used by insiders to earn abnormal profits. Moreover, results indicate that managing insiders exhibit higher opportunistic abnormal trading activity than non-managing insiders. Multivariate analysis shows that size, prior firm returns, and the implementation of the Sarbanes-Oxley Act are important determinants of such insider trading. Originality/value This appears to be the first paper to analyze insider trading surrounding class action settlement announcements, and raises concerns about the ethical conduct of certain insider groups while highlighting the importance of access to private information, even amongst insiders themselves.

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Neural modelling of electricity prices quoted on the Day-Ahead Market of TGE S.A. shaped by environmental and economic factors

Studia Informatica ◽

10.34739/si.2020.24.02 ◽

2021 ◽

Author(s):

Dariusz Ruciński

Keyword(s):

Energy Demand ◽

Evaluation Criteria ◽

Weighted Average ◽

Market Model ◽

Coefficient Of Determination ◽

Economic Factors ◽

Weather Factors ◽

Power Exchange ◽

Number Of Factors ◽

The Impact

The paper contains the results of research on the impact of the number of factors used to build the Day-Ahead Market model at Polish Power Exchange S.A. Five models with a different number of factors influencing the model were tested. To test the quality of models according to the adopted evaluation criteria, i.e., mean square error and the coefficient of determination for the weighted average prices sold in a given hour of the day, the influence of weather factors, socio-economic factors and energy demand were adopted. The results obtained from the analysis show a relatively high correctness of the simplest of the adopted models, which differs slightly from the best model.

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The Impact Of Index Migrations On Share Prices: Evidence From The Johannesburg Stock Exchange

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v29i6.8222 ◽

2013 ◽

Vol 29 (6) ◽

pp. 1861 ◽

Cited By ~ 1

Author(s):

Ryan Kruger ◽

Francois Toerien

Keyword(s):

Stock Exchange ◽

Abnormal Returns ◽

Market Model ◽

International Studies ◽

Share Prices ◽

Johannesburg Stock Exchange ◽

Demand Curves ◽

Study Methodology ◽

Top 40 ◽

The Impact

<p>This article examines the quantum and persistence of abnormal returns (positive and negative) for shares that entered or left the JSE Top 40 Index during quarterly index rebalancing between 2002 and 2013. Using an event study methodology based on the market model, we find evidence of anticipatory trading for both deletions and additions, which is, however, significant only for the former. These abnormal returns are reversed over our window period, which supports international studies indicating downward sloping share demand curves. Our findings imply informational inefficiencies that investors could use to trade profitably in anticipation of index additions or deletions.</p>

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