scholarly journals Financial Crises, Macroeconomic Variables, and Long-Run Risk: An Econometric Analysis of Stock Returns Correlations (2000 to 2019)

2021 ◽  
Vol 14 (3) ◽  
pp. 127
Author(s):  
Marco Tronzano
Keyword(s):  
Stock Returns ◽  
Risk Premium ◽  
Financial Crises ◽  
Stock Price ◽  
Financial Risk ◽  
Swiss Franc ◽  
Chinese Stock Market ◽  
Stock Market Index ◽  
Defensive Role ◽  
Long Run

This paper focuses on four major aggregate stock price indexes (SP 500, Stock Europe 600, Nikkei 225, Shanghai Composite) and two “safe-haven” assets (Gold, Swiss Franc), and explores their return co-movements during the last two decades. Significant contagion effects on stock markets are documented during almost all financial crises; moreover, in line with the recent literature, the defensive role of gold and the Swiss Franc in asset portfolios is highlighted. Focusing on a new set of macroeconomic and financial series, a significant impact of these variables on stock returns correlations is found, notably in the case of the world equity risk premium. Finally, long-run risks are detected in all asset portfolios including the Chinese stock market index. Overall, this empirical evidence is of interest for researchers, financial risk managers and policy makers.

The Impact of Economic Sentiment, Consumer, Producer and Investor's Confidence Indices on Stock Returns of the Listed Companies in FTSE-20 in Greece

2018 ◽  
pp. 162-209
Author(s):  
Constantine Cantzos ◽  
Petros Kalantonis ◽  
Aristidis Papagrigoriou ◽  
Stefanos Theotokas
Keyword(s):  
Stock Returns ◽  
Risk Premium ◽  
Macroeconomic Variables ◽  
Production Index ◽  
Behavioral Indicators ◽  
Portfolio Returns ◽  
Long Run ◽  
Short Run ◽  
The Impact ◽  
The Relationship

This chapter examines the relationship between stock returns of companies listed in the FTSE-20 on the Athens Exchange and behavioral indicators. The research is based on the behavioral APT model, which examines stock returns' risk factors through the involvement of macroeconomic variables and behavioral indicators. The data is the closing price of 17 shares listed in the FTSE-20 index, a number of macroeconomic variables, and a series of behavioral indicators for the period of January 2001-December 2014. Regressions were conducted with dependent variable stock returns of a portfolio invested equally in these 17 stocks. In addition, the research tests the existence of long-run and short-run equilibrium and causality. The change in the industrial production index along with the risk premium have a positive and significant impact on the portfolio returns. Johansen's test showed that there is a long-run equilibrium between stock returns, macroeconomic variables, and behavioral indicators. The VECM and VAR models showed that there is not long and short-run causality, not even Granger causality. No similar research has been conducted in Greece, thus it fills a literature gap.

THE "FIRM-SPECIFIC RETURN VARIATION": A MEASURE OF PRICE INFORMATIVENESS OR INFORMATION ASYMMETRY?

2005 ◽  
Vol 01 (01) ◽  
pp. 0550004
Author(s):  
RADU BURLACU ◽  
PATRICE FONTAINE ◽  
SONIA JIMENEZ-GARCÈS
Keyword(s):  
Stock Returns ◽  
Risk Premium ◽  
Stock Price ◽  
Rational Expectations ◽  
Expected Returns ◽  
Excess Returns ◽  
Price Informativeness ◽  
Common Stocks ◽  
Good Proxy ◽  
Stock Price Informativeness

This paper investigates the relevancy of the "Firm-Specific Return Variation" (FSRV) as a measure of stock price informativeness. For this purpose, we study the link between FSRV and stock excess returns on the American market over the period 1986–2001. After controlling for size effects, we find a negative and highly significant impact of FSRV on stock returns. The link between FSRV and stock excess returns is robust to asset pricing models and does not capture systematic, size or "book-to-market" (BM) effects. Based on rational expectations equilibrium (REE) models considering asymmetrically informed investors, we suggest that FSRV is a good proxy for price informativeness. Common stocks with higher specific return variation have lower information-risk premium, thus lower expected returns.

scholarly journals A Robust Application of the Arbitrage Pricing Theory: Evidence from Nigeria

2017 ◽  
Vol 9 (1) ◽  
pp. 141
Author(s):  
Oyetayo Oluwatosin J. ◽  
Adeyeye Patrick Olufemi
Keyword(s):  
Stock Returns ◽  
Stock Price ◽  
Ordinary Least Squares ◽  
Arbitrage Pricing Theory ◽  
Arbitrage Pricing ◽  
Expected Return ◽  
Long Run ◽  
Short Run ◽  
Pricing Theory ◽  
Relationship Of

Arbitrage pricing theory (APT) is a testable theory based on the idea that in competitive financial markets arbitrage will ensure that riskless assets provide the same expected return. We sought to confirm the relevance of the arbitrage pricing theory in Nigeria. Guided by a good understanding of macroeconomic variables and stock price movements as found in the extant literature on arbitrage pricing theory (APT), we specified our APT equation for estimation. Having satisfied the integration and co-integration issues, we employ the error-correction (ECM) and the fully modified ordinary least squares (FMOLS) methods for the short-run and long-run regressions. Our short-run results seem to agree with existing theories on APT thus confirming that APT is relevant in Nigeria. However, the long-run relationship of stock returns and RGDP was found to be contentious. Even though our result runs contrary to predictions on the relationship between the two, we found peculiar events and circumstances within the Nigerian macroeconomic context that provides logical reasons for the deviation.

scholarly journals EFFECT OF BRAND VALUE ANNOUNCEMENTS ON STOCK RETURNS: EMPIRICAL EVIDENCE FROM TURKEY

2016 ◽  
Vol 17 (6) ◽  
pp. 1252-1269 ◽  
Author(s):  
Pinar BASGOZE ◽  
Yilmaz YILDIZ ◽  
Selin METIN CAMGOZ
Keyword(s):  
Stock Returns ◽  
Stock Price ◽  
Emerging Market ◽  
Abnormal Returns ◽  
Brand Value ◽  
Long Run ◽  
Price Impacts ◽  
Stock Market Performance ◽  
Brand Values ◽  
Turkish Case

This study examines the effects of brand value announcements on stock returns of Turkish firms by using the event study methodology and long-term risk adjusted port-folio returns. We examined the stock-price impacts of 299 brand value announcements on the stock market performance of the firms within the years of 2010–2014 by using BrandFinance Turkey’s 100 ranking list as a data source. The findings indicate that the companies listed in the Turkey Top 100 Brands list earn positive abnormal returns 7 months after the announcement. Similarly, the companies which had greater brand values relative to the previous year, experienced significant positive abnormal returns in the 7-months period. Additional findings suggest that investors are able to beat the market in the long run regarding risk-adjusted returns by consistently investing in the Top Brands. Overall, the study demonstrates new evidence to the marketing-finance interface by focusing on the Turkish case as an important emerging market.

scholarly journals Asymmetric exchange rate exposure of stock returns: empirical evidence from Chinese industries

2017 ◽  
Vol 21 (4) ◽  
Author(s):  
Juan Carlos Cuestas ◽  
Bo Tang
Keyword(s):  
Exchange Rate ◽  
Stock Returns ◽  
Capital Asset Pricing ◽  
Chinese Stock Market ◽  
Exchange Rate Exposure ◽  
Long Run ◽  
Chinese Industry ◽  
Short Run ◽  
Short Time ◽  
Nonlinear Autoregressive

AbstractThis study explores the asymmetric exchange rate exposure of stock returns building upon the capital asset pricing model (CAPM) framework, using monthly returns of Chinese industry indices. We are interested in estimating long run and short run relationships as well as asymmetric effects. In order to do so, we estimate nonlinear autoregressive distributed lags models to (1) obtain the long run or cointegrated effects and dynamics, (2) be able to mix I(1) and I(0) variables and (3) to split the effect of positive and negative changes in the variables, i.e. asymmetries. In accordance with the existing literature, industry returns are subject to lagged exposure effects, but the asymmetries vary across industries, which could be due to the discrepancies in, amongst others, trade balance and ownership of certain industries. Furthermore, the dynamic multipliers depict that industry returns quickly respond to changes in the exchange rate and correct the disequilibrium within a short time, making the long run exposure to be symmetric or very small. The remaining shocks are mainly explained by the return of market portfolios. This implies that the ongoing restrictions on the RMB daily trading band do indeed protect the Chinese stock market against the effects of currency movements.

scholarly journals Examination and Modification of Multi-Factor Model in Explaining Stock Excess Return with Hybrid Approach in Empirical Study of Chinese Stock Market

2019 ◽  
Vol 12 (2) ◽  
pp. 91
Author(s):  
Jian Huang ◽  
Huazhang Liu
Keyword(s):  
Risk Factors ◽  
Stock Market ◽  
Empirical Study ◽  
Risk Premium ◽  
Stock Price ◽  
Factor Model ◽  
Five Factor Model ◽  
Hybrid Approach ◽  
Chinese Stock Market ◽  
Cyclical Pattern

To search significant variables which can illustrate the abnormal return of stock price, this research is generally based on the Fama-French five-factor model to develop a multi-factor model. We evaluated the existing factors in the empirical study of Chinese stock market and examined for new factors to extend the model by OLS and ridge regression model. With data from 2007 to 2018, the regression analysis was conducted on 1097 stocks separately in the market with computer simulation based on Python. Moreover, we conducted research on factor cyclical pattern via chi-square test and developed a corresponding trading strategy with trend analysis. For the results, we found that except market risk premium, each industry corresponds differently to the rest of six risk factors. The factor cyclical pattern can be used to predict the direction of seven risk factors and a simple moving average approach based on the relationships between risk factors and each industry was conducted in back-test which suggested that SMB (size premium), CMA (investment growth premium), CRMHL (momentum premium), and AMLH (asset turnover premium) can gain positive return.

Long-run stock market returns

2021 ◽  
pp. 28-48
Author(s):  
Jesper Rangvid
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Risk Premium ◽  
Historical Data ◽  
Market Returns ◽  
Stock Market Returns ◽  
Long Run ◽  
International Data ◽  
Risk Free Rate ◽  
Free Rate

This chapter presents facts and concepts regarding long-run stock market returns. It starts out briefly defining stock returns.The chapter then looks at the historical data, starting with US data and then turning to international data. It decomposes stock returns into a risk-free rate and a risk premium. The chapter also introduces concepts that will be used repeatedly throughout the book, such as different kinds of averages (arithmetic and geometric), standard deviations, variances, and other important concepts in finance.The chapter presents stylized facts about long-run stock returns. It does not try to explain what generates these returns. This is the topic of subsequent chapters.

Hedge fund stratagems and long-run SEO firm performance

2019 ◽  
Vol 45 (7) ◽  
pp. 886-903
Author(s):  
Robert M. Hull ◽  
Sungkyu Kwak ◽  
Rosemary Walker
Keyword(s):  
Stock Returns ◽  
Hedge Funds ◽  
Stock Price ◽  
Hedge Fund ◽  
Content Type ◽  
Fund Managers ◽  
Long Run ◽  
Short Run ◽  
Price Movements ◽  
Variable Bias

Purpose The purpose of this paper is to explore if hedge fund variables (HFVs) are associated with long-run compounded raw returns (CRRs) for seasoned equity offering (SEO) firms for a six-year window around the offering month for firms undergoing SEOs. Design/methodology/approach The event study methodology is used to calculate long-run CRRs that are used in a regression model as dependent variables. Independent variables include HFVs and nonhedge fund variables (NFVs) with standard errors clustered at the month level. Findings Three new long-run findings, consistent with recent short-run findings, are offered. First, HFVs are significantly associated with long-run CRRs for SEO firms. Second, HFVs perform competitively compared to NFVs. Third, a potential omitted-variable bias results if HFVs are not used. Research limitations/implications This research assumes that hedge fund managers can identify good (poor) performing SEO firm that allow for profitable long (short) positions. The proportion of hedge funds using a strategy will change in the hypothesized manner needed to make profit. Practical implications Hedge fund managers can use long-run strategies to capitalize on price movements around significant corporate events. Social implications Larger institutional traders have investment advantages due to superior knowledge and greater ability to manipulate prices. Originality/value This research is the first study to detail the significant association between hedge fund stratagems and long-run stock returns for firms undergoing key corporate events. This study demonstrates the need to consider hedge fund strategies when trying to understand stock price movements.

scholarly journals Market coupling: an empirical study of the Sino-Korean game industry

2020 ◽  
Vol 17 (1) ◽  
pp. 291-303
Author(s):  
Jung Woon Park ◽  
Seungho Baek ◽  
Mina Glambosky ◽  
Seok Hee Oh
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Stock Price ◽  
Composite Index ◽  
Chinese Stock Market ◽  
Chinese Market ◽  
Korean Economy ◽  
Game Industry ◽  
Korean Market ◽  
The Impact

This study aims to examine the relationship between the Korean and Chinese game industries, and more broadly, the Chinese stock market. Chinese firms are the most important partners and investors in the Korean game industry, which has emerged as a significant component of a thriving Korean economy. The paper examines the impact of growth in the Chinese game industry on the Korean market and the correlation and cointegration between the stock returns of nineteen Korean game companies, the Chinese stock market, and Chinese game companies. A portfolio constructed from Korean game companies listed on the KOSPI and KOSDAQ is analyzed. Variation in the Shanghai Composite Index is shown to significantly influence the performance of Korean game companies. Further, the Korean game industry is sensitive to changes in the stock price of leading Chinese game publishers. The Korean game industry returns more closely mirror the returns of the Chinese stock markets rather than the Korean markets, evidence of the influence of China. As growth and returns in the Korean game industry are closely related to the performance of the Chinese market, future performance is subject to political and economic changes in China.

Advertising, Attention, and Stock Returns

2019 ◽  
Vol 09 (03) ◽  
pp. 1950009 ◽  
Author(s):  
Thomas J. Chemmanur ◽  
An Yan
Keyword(s):  
Stock Returns ◽  
Stock Price ◽  
Stock Return ◽  
Small Firms ◽  
Short Selling ◽  
Investor Attention ◽  
Price Increases ◽  
Long Run ◽  
Negative Effect ◽  
Attention Hypothesis

This paper studies the effect of advertising on stock returns both in the short and in the long run. We find that a greater amount of advertising is associated with a larger stock return in the advertising year but a smaller stock return in the year subsequent to the advertising year, even after we control for other price predictors, such as size, book-to-market, and momentum. We conjecture that advertising affects stock returns by attracting investors’ attention to the firm’s stock. Stock price increases in the advertising year due to the attracted attention, but decreases in the subsequent year as the attracted attention wears out over time. We test this investor attention hypothesis and document consistent findings. We find that advertising increases a firm’s visibility among investors in the advertising year. We further find that the negative effect of advertising on the long-run reversal in stock returns is more pronounced if a firm attracts greater investor attention in the advertising year, or if investors face a larger cost of short selling the firm’s stock. It is also more pronounced for small firms, value firms, and firms with poor ex-ante stock or operating performance. Finally, we find that the effect of advertising on future stock returns is stronger when advertising increases compared to the case when advertising decreases.

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