scholarly journals How to Measure Illiquidity on European Emerging Stock Markets?

2014 ◽  
Vol 5 (3) ◽  
pp. 67-81
Author(s):  
Jelena Vidović ◽  
Tea Poklepović ◽  
Zdravka Aljinović
Keyword(s):  
Emerging Markets ◽  
Stock Markets ◽  
Portfolio Investment ◽  
Turn On ◽  
Emerging Stock Markets ◽  
Illiquid Markets ◽  
Developed Stock Markets ◽  
Relative Change ◽  
Real Challenge ◽  
Daily Returns

Abstract Background: Liquidity is, in practice of portfolio investment, an important attribute of stocks and measuring illiquidity presents a real challenge for researchers, primarily on developed stock markets. Moreover, there is a lack of research dealing with (il)liquidity on emerging markets. In the paper, the problem of applicability and validity of two well-known illiquidity measures, ILLIQ and TURN, on European emerging markets is observed. Objectives: The paper has two main purposes. The first is to test the relative performance of the two selected illiquidity measures in terms of their validity on European emerging stock markets. The second is to propose a new and improved illiquidity measure named Relative Change in Volume (RCV). Methods/Approach: Using daily returns and traded volumes for 12 stocks which are constituents of stock indices on seven observed markets, ILLIQ and TURN along with the new proposed measure are calculated and tested based on correlation with return. All measures are tested and proposed using the single stock approach. Results: It is shown that ILLIQ and TURN are not appropriate for seven observed markets. The measures do not follow the obligatory request that returns increase in illiquidity while RCV has the ability of taking into account the pressure of big differences in volume on return. RCV gives satisfactory results, making clear the distinction between liquid and illiquid stocks and between liquid and illiquid markets. Conclusions: The proposed measure potentially has important implications in illiquidity measurement in general, and not only for investors on emerging stock markets.

Emerging Markets: A Disaggregated Perspective on the Gains from Investing Internationally

1999 ◽  
Vol 02 (01) ◽  
pp. 99-124 ◽  
Author(s):  
S. G. M. Fifield ◽  
A. A. Lonie ◽  
D. M. Power ◽  
C. D. Sinclair
Keyword(s):  
Emerging Markets ◽  
Stock Returns ◽  
Stock Markets ◽  
Emerging Market ◽  
Market Value ◽  
International Diversification ◽  
Emerging Stock Markets ◽  
Geographical Spread ◽  
Ex Ante ◽  
Industrial Mix

Using weekly disaggregated returns data for the top twenty shares, by market value, from seventeen emerging markets over the period 1991–1996, this paper investigates the potential gains from international diversification into these markets. The paper also assesses whether these gains could have been achieved on an ex-ante basis. Finally, the paper quantifies the importance of country and industry factors in emerging market stock returns. The findings suggest that (i) substantial benefits exist from investing in emerging stock markets and (ii) these gains accrue more from the geographical spread than from the industrial mix of the equities included in the portfolio.

scholarly journals AN ANALYSIS OF STOCK MARKET INTEGRATION IN THE ASIAN DEVELOPED AND EMERGING MARKETS

2021 ◽  
Vol 9 (3) ◽  
pp. 1175-1190
Author(s):  
Sadiq Rehman ◽  
Asif Ali Abro ◽  
Ahmed Raza Ul Mustafa ◽  
Najeeb Ullah ◽  
Sanam Wagma Khattak
Keyword(s):  
Stock Market ◽  
Emerging Markets ◽  
Stock Markets ◽  
Impulse Response Function ◽  
Variance Decomposition ◽  
Short Term ◽  
Emerging Stock Markets ◽  
Long Run ◽  
Integration Test ◽  
Short Run

Purpose of the study: This study investigates Short-run, Long-run, and Casual relationships in the Asian Developed and Emerging stock market indices for the period of 19 years weekly data of stock market indices of Asian Developed and Emerging Markets which are Japan (Nikkei 225), South Korea (KOSPI), Pakistan (KSE 100), China (SSE Composite), Sri Lanka (ASPI), India (BSE 200) and Malaysia (KLSE composite) from January 2001 to December 2019. Methodology: To analyze long-run and short-run relationships among the Asian developed and emerging stock markets, this study practices Descriptive Statistics, Correlation Matrix, Unit Root Test, Johansen Co-Integration Test, Vector Error Correction Model, Granger Causality test, Variance Decomposition and Impulse Response Function (IRF). Main findings: By employing the ADF and P.P. tests, the results specify that the entire variables' data are non-stationary and stationary in exact order, which is 1st difference. The Johnson Co-integration test found one cointegration relationship, where the results are consistent with Granger causality, Variance Decomposition, and Impulse Response Function (IRF). Application of the study: As the current research has focused on finding out the comovements in the Asian developed and emerging markets. So, the applications are that the survey found short-run and long-run relationships in these countries' stock markets. The study's originality: The current study has selected seven Asian developed and emerging stock markets and weekly updated time series data to investigate short-term and long-term linkages. So, this study found long-run comovements in these stock indices, which contributes to the literature. In addition, these stock markets have limited diversification benefits for international investors, while short-term diversification benefits may exist.

scholarly journals The relationship between stock markets of major developed countries and Asian emerging markets

2004 ◽  
Vol 8 (4) ◽  
pp. 201-218 ◽  
Author(s):  
Wing-Keung Wong ◽  
Jack Penm ◽  
Richard Deane Terrell ◽  
Karen Yann Ching Lim
Keyword(s):  
Emerging Markets ◽  
Stock Markets ◽  
International Diversification ◽  
Developed Countries ◽  
Stock Market Crash ◽  
Emerging Stock Markets ◽  
Long Run ◽  
Equilibrium Relationship ◽  
Asian Emerging Markets ◽  
The Relationship

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 benefit would be limited if national equity markets tend to move together in the long run. This paper thus studies the issue of co-movement between stock markets in major developed countries and those in Asian emerging markets using the concept of cointegration. We find that there is co-movement between some of the developed and emerging markets, but some emerging markets do differ from the developed markets with which they share a long-run equilibrium relationship. 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.

scholarly journals Capital Markets and Foreign Ownership Restrictions: An Empirical Analysis of Emerging Stock Markets

2000 ◽  
Vol 39 (4II) ◽  
pp. 933-950
Author(s):  
Javed Anwar ◽  
Tariq Javed
Keyword(s):  
Emerging Markets ◽  
Capital Markets ◽  
Stock Markets ◽  
Financial Assets ◽  
Global Trends ◽  
Capital Movements ◽  
Emerging Stock Markets ◽  
Risk Characteristics ◽  
Portfolio Managers ◽  
International Investors

In the 1990s, the hot issue in international finance was the growing interest of portfolio managers in the emerging stock markets. The interest in the emerging markets gained rapid attention, which is evident from the global trends, towards the opening up of economies and financial markets, free capital flow and the privatisation of financial institutions. Earlier the emerging markets were isolated due to several factors that had posed serious problems for international investors. These markets lacked the depth, regulatory framework, and structural safeguards that had characterised the equity markets in the developed world. Capital markets are called integrated, if assets with perfectly correlated rates of returns have the same price regardless of the location in which they are traded. Alternatively, capital market are called segmented, if financial assets traded in different markets “with identical risk characteristics” have different returns due to different investment restrictions.1 Segmentation may be due to individuals’ attitudes, government restrictions over capital movements or irrationality.

scholarly journals The Impact of Downside Risk on Expected Return: Evidence from Emerging Economies

2019 ◽  
Vol 8 (1) ◽  
pp. 91-106
Author(s):  
Hassan Raza ◽  
Arshad Hasan ◽  
Abdul Rashid
Keyword(s):  
Emerging Markets ◽  
Emerging Economies ◽  
Stock Markets ◽  
Explanatory Power ◽  
Downside Risk ◽  
Expected Return ◽  
Risk And Return ◽  
Emerging Stock Markets ◽  
High Volatility ◽  
The Impact

This paper investigates the comparative relationship between the downside risk adjusted CAPM and traditional CAPM. The premise of the traditional CAPM is that the expected return is based on the incidence of systematic risk (beta), which has been assumed to be homogenous for both the developed, and the emerging stock markets. However, empirical results are not aligned with this assumption, as the basic risk and return relationship happens to be negative, and insignificant in the case of emerging markets. This may be due to the emerging stock markets’ distinct characteristics (i.e. high volatility, low liquidity, and less availability of historical data). To deal with the said issue, extent literature supports the use of the semi-variance methodology (SV-M) for emerging markets, instead of the mean-variance (M-V) method. Therefore, this study referred to the Fama and Macbeth (1973) methodology that was applied over monthly data ranging from June, 2000 to June, 2018. Results indicate that there is a positive relationship between the risks (downside and traditional beta) and the expected return. Moreover, results also reveal that downside risk has more significance and explanatory power as compared to the traditional beta. Hence, as per the above findings, the study suggests using the semi-variance methodology for the calculation of the expected returns in emerging economies. However, the significance of the residuals, and beta square terms in both methodologies clearly indicate that there is a need to adjust and incorporate more risk factors, as well as an element of non-linearity while arriving at a probable risk and return relationship.

scholarly journals STOCK RETURNS, VOLATILITY AND MEAN REVERSION IN EMERGING AND DEVELOPED FINANCIAL MARKETS

2018 ◽  
Vol 24 (3) ◽  
pp. 1149-1177 ◽  
Author(s):  
Rizwan Raheem AHMED ◽  
Jolita VVEINHARDT ◽  
Dalia ŠTREIMIKIENĖ ◽  
Saghir Pervaiz GHAURI
Keyword(s):  
Emerging Markets ◽  
Stock Returns ◽  
Stock Markets ◽  
Mean Reversion ◽  
Conditional Variance ◽  
Trade Off ◽  
Risk Return ◽  
Developed Markets ◽  
The Mean ◽  
Developed Stock Markets

The objective of this research is to measure and examine volatilities between important emerging and developed stock markets and to ascertain a relationship between volatilities and stock returns. This research paper also analyses the Mean reversion phenomenon in emerging and developed stock markets. For this purpose, seven emerging markets and five developed markets were considered. Descriptive statistics showed that the emerging markets have higher returns with the higher risk-return trade-off. In contrast, developed markets have low annual returns with a low risk-return trade-off. Correlation analysis indicated the significant positive correlation among the developed markets, but emerging and developed markets have shown relatively insignificant correlation. Results of ARCH and GARCH revealed that the value of likelihood statistics ratio is large, that entails the GARCH (1,1) model is a lucrative depiction of daily return pattern, that effectively and efficiently capturing the orderly reliance of volatility. The findings of the study showed that the estimate ‘β’ coefficients given in conditional variance equation are significantly higher than the ‘α’, this state of affair entails that bigger market surprises tempt comparatively small revision in future volatility. Lastly, the diligence of the conditional variance estimated by α + β is significant and proximate to integrated GARCH (1,1) model, thus, this indicates, the existing evidence is also pertinent in order to forecast the future volatility. The results signified that the sum of GARCH (1,1) coefficients for all the equity returns’ is less than 1 that is an important condition for mean reversion, as the sum gets closer to 1, hence the Mean reversion process gets slower for all the emerging and developed stock markets.

scholarly journals Adaptive Market Hypothesis and Time-varying Contrarian Effect: Evidence From Emerging Stock Markets of South Asia

SAGE Open ◽  
2022 ◽  
Vol 12 (1) ◽  
pp. 215824402110684
Author(s):  
Ali Fayyaz Munir ◽  
Mohd Edil Abd. Sukor ◽  
Shahrin Saaid Shaharuddin
Keyword(s):  
Stock Market ◽  
Emerging Markets ◽  
South Asian ◽  
Stock Markets ◽  
Time Varying ◽  
Market Conditions ◽  
Market Anomalies ◽  
Developed Markets ◽  
Emerging Stock Markets ◽  
Stock Market Anomalies

This study contributes to the growing debate on the relation between varying stock market conditions and the profitability of stock market anomalies. We investigate the effect of changed market conditions on time-varying contrarian profitability in order to examine the presence of the Adaptive Market Hypothesis (AMH) in South Asian emerging stock markets. The empirical findings reveal that a strong contrarian effect holds in all the emerging markets. We also find the stock return opportunities vary over time based on contrarian portfolios. We show that contrarian returns strengthen during the down state of market, higher volatility and crises periods, particularly during the Asian financial crisis. Interestingly, the market state instead of market volatility is the primary predictor of contrarian payoffs, which contradicts the findings of developed markets. We argue that the linkage arises from structural and psychological differences in emerging markets that produce unique intuitions regarding stock market anomalies returns. The overall findings on the time-varying contrarian returns in this study provide partial support to AMH. Another significant outcome of this study implies that investors in South Asian emerging markets, like investors in the developed markets, could not adapt to evolving market conditions. Therefore, contrarian profits often exist, and persistent weak-form market inefficiencies prevail in these markets.

scholarly journals Stocks Abnormal Returns and Rate of Dividend Announcements

2021 ◽  
Vol 16 (11) ◽  
pp. 33
Author(s):  
Nagendra Marisetty ◽  
M. Suresh Babu
Keyword(s):  
Stock Markets ◽  
Abnormal Returns ◽  
Market Model ◽  
Cash Dividend ◽  
Market Capitalization ◽  
Emerging Stock Markets ◽  
Dividend Announcements ◽  
Developed Stock Markets ◽  
Indian Stock Market ◽  
The Impact

The present research study examined the impact of different dividend rate announcements on stocks prices in the Indian stock market. Stocks selected from S&P BSE 500 index and study period from 2008 – 2017. The sample used for this study is 1755 pure cash dividend announcements (492 large-caps, 425 mid-caps, and 838 small-caps). Dividend rates are classified into six classifications to test the stocks' abnormal returns to different dividend classifications. Event methodology market model used to calculate Average Abnormal Returns (AAR) and Cumulative Average Abnormal Returns (CAAR). The results were observed twenty-one times based on market capitalization and dividend rate wise for a final dividend announcement. The results of the study are not the same for different dividend rate classifications and different market capitalizations. The study found positive abnormal returns on event day in most of the classifications, and it is similar to Litzenberger and Ramaswamy (1982), Asquith and Mullins Jr (1983), Grinblatt, Masulis and Titman (1984), Chen, Nieh, Da Chen, and Tang (2009) and many previous research results studied in major developed stock markets and emerging stock markets. Full sample and small-cap final dividend rate 100 percent to 199 percent average abnormal returns are positively significant, and other final dividend rate classification abnormal returns are positive in most of the observations, but returns are not significant. Large-cap average abnormal returns are more sensitive to different dividend rates, and small-cap reacts positively in all classifications. So, different market capitalization final dividend actions impact on stocks in India varies in different dividend rate classifications.

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