scholarly journals Using Unconventional Wisdom to Re-Assess and Rebuild the BRICS

2019 ◽  
Vol 12 (1) ◽  
pp. 8
Author(s):  
Bertrand Guillotin
Keyword(s):  
South Africa ◽  
Emerging Markets ◽  
Global Economy ◽  
Global Financial Crisis ◽  
Housing Prices ◽  
Analytical Framework ◽  
Conventional Wisdom ◽  
New Approach ◽  
Developed Markets ◽  
Basic Assumptions

In 2015, Goldman Sachs closed its BRIC (Brazil, Russia, India, China) fund after years of losses and plummeting assets. Emerging markets had, once again, turned into submerging markets. Their dependence on “developed” markets and established institutions had failed them in a post-Global Financial Crisis (GFC) era, anchored in protectionism, risks, volatility, and uncertainty. The once commonly-accepted wisdom that called for US housing prices to always increase was part of the problem and contagion. Rebuilding the BRICS (S for South Africa) using conventional wisdom would probably not work. A new approach is necessary, especially since the last key contributions to show the inadequacy of a conventional wisdom-based strategy in emerging markets are more than ten years old. To help fill this gap, this paper proposes a holistic analytical framework for strategists to re-assess risks and opportunities in the BRICS. We illustrate how five basic assumptions can be proven wrong and lead to the creation of unconventional wisdom that can help derive some strategic insights. We find that rebuilding the BRICS for them to be more resilient is possible, if not vital, for the health of the global economy.

Multi-Asset Value Payoff: Is Recent Underperformance Cyclical?

2021 ◽  
Vol 14 (10) ◽  
pp. 477
Author(s):  
Yesim Tokat-Acikel ◽  
Marco Aiolfi ◽  
Yiwen Jin
Keyword(s):  
Global Financial Crisis ◽  
Inflation Expectations ◽  
Global Business ◽  
Relative Growth ◽  
New Approach ◽  
Developed Markets ◽  
Asset Value ◽  
Asset Class ◽  
The Global Financial Crisis ◽  
Global Growth

Recent value factor underperformance has called into question whether the value factor payoff is cyclically low, or if there are more structural challenges. We use a new approach to explore a link between the well-known macroeconomic exposures of traditional asset classes and those of value premia in a multi-asset context, focusing on country equities, bonds, and currencies in developed markets. Taking advantage of the cross-country inflation and growth expectations implicit in every value portfolio, we derive the net inflation and real growth characteristics embedded in each asset class carry portfolio at each point in time. Our analysis provides several insights: (1) Multi-asset value payoff is only weakly related to the global business cycle. (2) However, we find that the payoff to value portfolios is strongly linked to relative growth and inflation expectations across countries. (3) Over the last decade, we find that cheaper assets have had much lower net relative macro exposures compared to earlier time periods. This characteristic coincides with the period of unconventional central bank policies designed to lift global growth after the Global Financial Crisis (GFC).

scholarly journals On the Elicitability and Risk Model Comparison of Emerging Markets Equities

2021 ◽  
Vol 26 (3) ◽  
pp. 63
Author(s):  
Peterson Owusu Junior ◽  
Imhotep Paul Alagidede ◽  
Aviral Kumar Tiwari
Keyword(s):  
South Africa ◽  
Emerging Markets ◽  
Value At Risk ◽  
Risk Model ◽  
Global Financial Crisis ◽  
Risk Models ◽  
Market Conditions ◽  
Tail Risk ◽  
Risk Modelling ◽  
Model Confidence Set

The need for comparative backtesting in the Basel III framework presents the challenge for ranking of internal value-at-risk (VaR) and expected shortfall (ES) models. We use a joint loss function to score the elicitable joint VaR and ES models to select competing tail risk models for the top 9 emerging markets equities and the emerging markets composite index. We achieve this with the model confidence set (MCS) procedure. Our analysis span two sub-sample periods representing turbulent (Eurozone and Global Financial crises periods) and tranquil (post-Global Financial crisis period) market conditions. We find that many of the markets risk models are time-invariant and independent of market conditions. But for China and South Africa this is not true because their risk models are time-varying, market conditions-dependent, percentile-dependent and heterogeneous. Tail risk modelling may be difficult compared to other markets. The resemblance between China and South Africa can stem from the closeness between their equities composition. However, generally, there is evidence of more homogeneity than heterogeneity in risk models. This is indicated by a minimum of three models (out of six) per equity in most of the countries. This may ease the burden for risk managers to find the optimal set of models. Our study is important for internal risk modelling, regulatory oversight, reduce regulatory arbitrage and may bolster confidence in international investors with respect to emerging markets equities.

Structural Breaks in Volatility Transmission from Developed Markets to Major Asian Emerging Markets

2019 ◽  
Vol 18 (2) ◽  
pp. 172-209 ◽  
Author(s):  
Dilip Kumar
Keyword(s):  
Emerging Markets ◽  
Structural Breaks ◽  
Global Financial Crisis ◽  
Spillover Effect ◽  
Spillover Effects ◽  
The United States ◽  
Jel Classification ◽  
Volatility Transmission ◽  
Developed Markets ◽  
Asian Emerging Markets

The study investigates the volatility transmission from developed markets (the United States [US], the United Kingdom [UK] and Japan) to the major Asian emerging markets (India, China, Malaysia, Thailand and Indonesia) during a period from 1996 to 2015. We make use of the opening, high, low and closing prices to estimate unbiased extreme value volatility estimator and implement heterogeneous autoregressive distributed lag (HAR-DL) framework to study the spillover effects. Based on time-varying spillover analysis, we observe sudden changes in the spillover effect during the periods of major crises. Initially, we find evidence of contagion during the period of global financial crisis of 2007–2009. However, after accounting for conditional heteroscedasticity, we observe a decline in the strength of volatility transmission from developed markets to the Asian emerging markets. Moreover, the initial evidence of contagion is not detectable anymore. We also test the economic significance of the findings by implementing three trading strategies based on risk averse and risk-taking investors that make use of the forecasted variance based on HAR-DL specification. Our findings indicate that substantial average annualised gains in returns can be earned based on the lagged volatility components of the USA and the UK. JEL Classification: C32, C58, G01, G15

Market reaction to the COVID-19 pandemic: evidence from emerging markets

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Maretno Agus Harjoto ◽  
Fabrizio Rossi
Keyword(s):  
Financial Crisis ◽  
Emerging Markets ◽  
Global Financial Crisis ◽  
Market Reaction ◽  
Negative Impact ◽  
Equity Markets ◽  
Developed Countries ◽  
Market Reactions ◽  
Content Type ◽  
Developed Markets

PurposeThis study examines the market reaction to the World Health Organization (WHO) announcement of the novel coronavirus disease 2019 (COVID-19) as a global pandemic on the emerging equity markets and compares the reaction with developed markets. This study also compares the market reactions to the COVID-19 pandemic with the market reactions to the 2008 global financial crisis.Design/methodology/approachUsing the Morgan Stanley Capital International daily stock indices data and the Carhart and the GARCH(1,1) models for an event study, the authors examine the cumulative abnormal returns during 30 and 10 trading days and the extended 60 days before and after the WHO pandemic announcement. It also compares the market reactions during the COVID-19 pandemic with the reactions to the Lehman Brothers' bankruptcy announcement during the 2008 global financial crisis.FindingsThis study finds that the COVID-19 pandemic had a significantly greater negative impact to the stock markets in emerging countries than in the developed countries. The negative impact on the emerging markets is more pronounced for firms with small market capitalizations and for growth stocks. The negative impact of the COVID-19 pandemic is stronger in the energy and financial sectors in both emerging and developed markets. The positive impact of the COVID-19 pandemic occurred in healthcare and telecommunications for the emerging markets and information technology for the developed markets. This study also finds that the equity markets in both emerging and developed countries recovered faster from the COVID-19 pandemic relative to the 2008 global financial crisis.Social implicationsInvestors' desire to diversify their risks across different countries and sectors in the emerging markets could bring superior returns. The diversification strategies bring critical financial supports to forestall the contagion of COVID-19, to protect lives, and to save the emerging economies, especially for those financially constrained countries that are facing twin health and economic shocks by channeling their investments to countries with weak healthcare systems.Originality/valueThis study extends the literature that examines market reactions to stock market shocks by examining the market reactions to the COVID-19 outbreak on the emerging and developed equity markets across different market capitalizations, valuation and sectors. This study also finds that the markets recovered quicker from the COVID-19 pandemic announcement than during the 2008 global financial crisis.

Investor behavior in ETF markets: a comparative study between the US and emerging markets

2019 ◽  
Vol 14 (5) ◽  
pp. 944-966 ◽  
Author(s):  
Augusto Ferreira da Costa Neto ◽  
Marcelo Cabus Klotzle ◽  
Antonio Carlos Figueiredo Pinto
Keyword(s):  
South Africa ◽  
Emerging Markets ◽  
Investor Behavior ◽  
Investment Strategies ◽  
Content Type ◽  
Start Date ◽  
Developed Markets ◽  
Thomson Reuters ◽  
The Us ◽  
Feedback Trading

Purpose The purpose of this paper is to present the results of a study on investor behavior in exchange-traded fund (ETF) markets. The standard feedback trading model of Sentana and Wadhwani (1992) is used in a sample of 18 ETFs contracts in Brazil, China, South Africa, Korea, Mexico and India, as well as three ETFs contracts in the US market. Design/methodology/approach The sample includes data on daily closing prices and net asset values (NAVs) for three ETFs from each of the emerging markets of Brazil, China, Mexico, Korea and India, as well as on three ETFs from the US market. The authors used the earliest start date available in the Thomson Reuters database pertaining to all of the ETFs, and all series ended on May 5, 2017, and applied the well-established Santana and Wadhwani (1992) seminal model to evaluate evidence of feedback trading in the sample. Findings The empirical analysis suggests that there is evidence of feedback trading in emerging markets such as Brazil, Korea, Mexico and India, while there is no such evidence for the US market. The results are consistent with the view that developed markets investors are prone to pursue fundamental-driven investment strategies, while emerging markets investors appear to have informational guided behavior. Research limitations/implications Emerging markets still make up a very small part of the global ETF market, led by the USA. Nevertheless, it is extremely important that studies of this nature be gradually expanded as these markets grow, in order to verify how emerging markets compare to their developed counterparts in terms of the efficiency of information sharing and rationalization of its operations. Practical implications Emerging markets policy makers could benefit from these findings by stimulating new mechanisms that could minimize informational asymmetry and the persistence of so-called noise traders, a phenomenon observed recently in studies regarding ETF markets (Brown, Davies and Ringgenberg, 2018). Originality/value The behavior of investors was investigated by analyzing a sample of 18 ETFs from the emerging markets of Brazil, China, South Africa, Korea, India and Mexico, as well as three ETFs from the US market. Despite of being investigated separately both emerging (Charteris et al., 2014) and developed markets (Chau et al., 2011), the innovation consists in comparing those markets in a single study, pursuing to explain potential reasons for the differences observed between developed and emerging markets.

scholarly journals In search of developmental capitalism institutions:

2021 ◽  
Vol 9 (22) ◽  
pp. 45-74
Author(s):  
Moises Balestro ◽  
Antonio Junqueira Botelho
Keyword(s):  
Emerging Markets ◽  
Growth Model ◽  
Global Economy ◽  
Growth Models ◽  
Analytical Framework ◽  
Sustainable Growth ◽  
Middle Income ◽  
Positive Externalities ◽  
Comparative Capitalism ◽  
Path Dependent

How can we explain that some emerging economies grow faster than others? What explains the sustainability of their growth? Not all types of capitalism in emerging markets contribute equally to sustainable growth rates that undergird development. Comparative capitalism research on European economies temporary growth models aims to more properly grasp change in the varieties of capitalism approach. Adoption of the growth models in emerging markets capitalism research requires attention to integration into the global economy and to political coalitions, and the need to deal with the methodological challenges, given high labor market informality and political instability. This article seeks to make sense of changes in the components of successive growth models throughout a path-dependent capitalist variety, expand the growth model analytical framework by testing elements alongside demand (and supply) based on a case study of Brazil, and explore coalitions in economic reform to identify growth model’s social blocs. The article’s results unveil challenges to the employment of existing concepts and analytical framework; the need to build bridges between growth models and the political economy of development; and an exploratory assessment of growth model contributions to Brazil's postwar development. Thereof, in the long term, interest shifts of economic elites between liberal and non-liberal economic regimes suggest a fragility of repeated attempts to form a durable developmental coalition, a process dynamic that frays state-permeated capitalism positive externalities. It concludes that both path dependent developmental institutions, which hinder change, and growth instability limit the possibilities of designing institutional reforms out of the middle-income trap.

Reframing Xenophobia in South Africa as Colour-Blind: The Limits of the Afro Phobia Thesis

2020 ◽  
Vol 17 (3) ◽  
pp. 433-444
Author(s):  
Amanuel Isak Tewolde
Keyword(s):  
South Africa ◽  
South African ◽  
Analytical Framework ◽  
Conflict Theory ◽  
Black African ◽  
South Africans ◽  
Theoretical Perspectives ◽  
Online Newspaper ◽  
Close Proximity ◽  
Realistic Conflict Theory

Many scholars and South African politicians characterize the widespread anti-foreigner sentiment and violence in South Africa as dislike against migrants and refugees of African origin which they named ‘Afro-phobia’. Drawing on online newspaper reports and academic sources, this paper rejects the Afro-phobia thesis and argues that other non-African migrants such as Asians (Pakistanis, Indians, Bangladeshis and Chinese) are also on the receiving end of xenophobia in post-apartheid South Africa. I contend that any ‘outsider’ (White, Asian or Black African) who lives and trades in South African townships and informal settlements is scapegoated and attacked. I term this phenomenon ‘colour-blind xenophobia’. By proposing this analytical framework and integrating two theoretical perspectives — proximity-based ‘Realistic Conflict Theory (RCT)’ and Neocosmos’ exclusivist citizenship model — I contend that xenophobia in South Africa targets those who are in close proximity to disadvantaged Black South Africans and who are deemed outsiders (e.g., Asian, African even White residents and traders) and reject arguments that describe xenophobia in South Africa as targeting Black African refugees and migrants.

Challenges on digital economy in sample of various income economies as an development instrument in Uzbekistan

2019 ◽  
Vol 2 (2) ◽  
pp. 41-53
Author(s):  
Ibragimova Gulirano ◽  
Husnuddinova Dilorom ◽  
Akhmatova Khurshida ◽  
Shodibekova Dildor
Keyword(s):  
Global Economy ◽  
Global Financial Crisis ◽  
Digital Economy ◽  
Main Role ◽  
Average Income ◽  
Economic Changes ◽  
Key Characteristics ◽  
Gradual Introduction ◽  
The Global Financial Crisis ◽  
Further Development

Recent economic changes have developed via modern technological prospective. Consistent measures for the development of digital economy are being implemented gradual introduction of e-commerce systems for electronic document flows and service of individuals. However, find solutions for the lack of a unified information and technology platform, which integrates the centralized information by just one digital economic reform in world regions. After the global financial crisis of 2001–2009 years, digital industries have been amid the most dynamic and promising in the global economy. However, equilibrium is lacked of benefits and risks in the digital economy around the world, which explains the need for global governance in this sphere. In this article authors analyzed main role and characteristics of digital economy around average income countries. Generally, reviewing define the key characteristics of this sector, as well as highlight the challenges to international cooperation. Modern approaches on legal entities is being implemented in Uzbekistan for further development.

Ocena antykryzysowej polityki gospodarczej Stanów Zjednoczonych i wybranych państw członkowskich Unii Europejskiej w latach 2005–2014

2016 ◽  
pp. 26-46
Author(s):  
Marcin Jan Flotyński
Keyword(s):  
United States ◽  
European Union ◽  
Financial Markets ◽  
Global Economy ◽  
Global Financial Crisis ◽  
The United States ◽  
The European Union ◽  
High Volatility ◽  
The Global Financial Crisis ◽  
Domestic Products

The global financial crisis in 2007–2009 began a period of high volatility on the financial markets. Specifically, it caused an increased amplitude of fluctuations of the level of gross domestic products, the level of investment and consumption and exchange rates in particular countries. To address the adverse market circumstances, governments and central banks took actions in order to bolster the weakening global economy. The aim of this article is to present the anti-crisis actions in the United States and selected member states of the European Union, including Poland, and an assessment of their efficiency. The analysis conducted indicates that generally the actions taken in the United States in response to the crisis were faster and more adequate to the existing circumstances than in the European Union.

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