scholarly journals Country Risk Ratings and Stock Market Returns in Brazil, Russia, India, and China (BRICS) Countries: A Nonlinear Dynamic Approach

Risks ◽  
2018 ◽  
Vol 6 (3) ◽  
pp. 94 ◽  
Author(s):  
Adnen Ben Nasr ◽  
Juncal Cunado ◽  
Rıza Demirer ◽  
Rangan Gupta
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Commodity Price ◽  
Global Market ◽  
Country Risk ◽  
Market Returns ◽  
Stock Market Returns ◽  
Brics Countries ◽  
Long Run ◽  
India And China

This study examines the linkages between Brazil, Russia, India, and China (BRICS) stock market returns, country risk ratings, and international factors via Non-linear Auto Regressive Distributed Lags models (NARDL) that allow for testing the asymmetric effects of changes in country risk ratings on stock market returns. We show that BRICS countries exhibit quite a degree of heterogeneity in the interaction of their stock market returns with country-specific political, financial, and economic risk ratings. Positive and negative rating changes in some BRICS countries are found to have significant implications for both local stock market returns, as well as commodity price dynamics. While the commodity market acts as a catalyst for these emerging stock markets in the long-run, we also observe that negative changes in the country risk ratings generally command a higher impact on stock returns, implying the greater impact of bad news on market dynamics. Our findings suggest that not all BRICS nations are the same in terms of how they react to ratings changes and how they interact with global market variables.

scholarly journals Reaction of stock market returns to COVID-19 pandemic and lockdown policy: evidence from Nigerian firms stock returns

2021 ◽  
Vol 7 (1) ◽  
Author(s):  
Isiaka Akande Raifu ◽  
Terver Theophilus Kumeka ◽  
Alarudeen Aminu
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Stock Exchange ◽  
Estimation Methods ◽  
Panel Var ◽  
Impulse Response Functions ◽  
Market Returns ◽  
Stock Market Returns ◽  
Long Run ◽  
Policy Shocks

AbstractGiven the effects COVID-19 pandemic on the financial sectors across the world, this study examined the reaction of stock returns of 201 firms listed in the Nigerian Stock Exchange to the COVID-19 pandemic and lockdown policy. We deployed both Pooled OLS and Panel VAR as estimation methods. Generally, the results from POLS show the stock market returns of the Nigerian firms reacted negatively more to the global COVID-19 confirmed cases and deaths than the domestic COVID-19 confirmed cases and deaths and lockdown policy. The results of the impulse response functions revealed that the effects of COVID-19 confirmed cases and deaths and lockdown policy shocks on stock returns oscillate between negative and positive before the stock market returns converge to the equilibrium in the long run. The FEVD results showed that growth in the COVID-19 confirmed cases, deaths and lockdown policy shocks explained little variations in stock market returns. Given our finding, we advocate for the relaxation of policy of lockdown and the combine use of monetary and fiscal policies to mitigate the negative effect of COVID-19 pandemic on stock market returns in Nigeria.

scholarly journals Are Kuwaiti Stock Returns Affected by Fluctuations in Oil Prices?

2020 ◽  
Vol 11 (6) ◽  
pp. 1
Author(s):  
Salem Alshihab ◽  
Nayef AlShammari
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Oil Prices ◽  
Market Returns ◽  
Macroeconomic Factors ◽  
Stock Market Returns ◽  
Long Run ◽  
Short Run ◽  
The Impact ◽  
Adf Test

This paper examines the impact of fluctuations in the price of oil on Kuwaiti stock market returns for the month-to-month period of 2000 to 2020. The Augmented Dickey-Fuller (ADF) test for stationarity, the error correction model (ECM), and various cointegration test techniques were used to examine the estimated model. In an oil-based economy like Kuwait, the exposure to oil prices seems to affect the performance of the country’s stock market. Our main findings related to the long run showed that the price of oil is cointegrated with stock market returns. Interestingly, our ECM examination confirmed that changes in Kuwaiti stock market returns are only affected by oil price fluctuations in the short run. Further strategies are needed to better stabilize Kuwait’s capital market. This equilibrium can be achieved by pursuing more stability in other macroeconomic factors and providing a solid legal independence for the country’s financial market.

scholarly journals Demographic Trends, the Dividend-Price Ratio, and the Predictability of Long-Run Stock Market Returns

2011 ◽  
Vol 46 (5) ◽  
pp. 1493-1520 ◽  
Author(s):  
Carlo A. Favero ◽  
Arie E. Gozluklu ◽  
Andrea Tamoni
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Demographic Variable ◽  
Generation Model ◽  
Price Ratio ◽  
Market Returns ◽  
Stock Market Returns ◽  
Financial Ratio ◽  
Overlapping Generation ◽  
Long Run

AbstractThis paper documents the existence of a slowly evolving trend in the log dividend-price ratio, DPt, determined by a demographic variable, MYt: the middle-aged to young ratio. Deviations of DPtfrom this long-run component explain transitory but persistent fluctuations in stock market returns. The relation between MYtand DPtis a prediction of an overlapping generation model. The joint significance of MY and DPtin long-horizon forecasting regressions for market returns explains the mixed evidence on the ability of DPtto predict stock returns and provide a model-based interpretation of statistical corrections for breaks in the mean of this financial ratio.

Volatility and cross correlations of stock markets in SAARC nations

2014 ◽  
Vol 3 (2) ◽  
pp. 154-169 ◽  
Author(s):  
Monica Singhania ◽  
Shachi Prakash
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Stock Prices ◽  
Stock Markets ◽  
Cross Correlation ◽  
Global Market ◽  
Market Returns ◽  
Stock Market Returns ◽  
Content Type ◽  
Stock Indices

Purpose – The purpose of this paper is to examine cross-correlation in stock returns of SAARC countries, conditional and unconditional volatility of stock markets and to test efficient market hypothesis (EMH). Design/methodology/approach – Stock indices of India, Bangladesh, Sri Lanka and Pakistan are considered to serve as proxy for stock markets in SAARC countries. Data consist of daily closing price of stock indices from 2000 to 2011. Since preliminary testing indicated presence of serial autocorrelation and volatility clustering, family of GARCH models is selected. Findings – Results indicate presence of serial autocorrelation in stock market returns, implying dependence of current stock prices on stock prices of previous times and leads to rejection of EMH. Significant relationship between stock market returns and unconditional volatility indicates investors’ expectation of extra risk premium for exposing their portfolios to unexpected variations in stock markets. Cross-correlation revealed level of integration of South Asian economies with global market to be high. Research limitations/implications – Business cycles and other macroeconomic developments affect most companies and lead to unexplained relationships. The paper finds stock markets to exist at different levels of development as economic liberalization started at different points of time in SAARC countries. Practical implications – Correlation between stock indices of SAARC economies are found to be low which is in line with intra-regional trade being one of lowest as compared to other regional groups. Results point towards greater need for economic cooperation and integration between SAARC countries. Greater financial integration leads to development of markets and institutions, effective price discovery, higher savings and greater economic progress. Originality/value – The paper focuses on EMH and risk return relation for SAARC nations.

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.

scholarly journals U.S. STOCK MARKET P/E RATIOS, STRUCTURAL BREAKS, AND LONG-TERM STOCK RETURNS

2018 ◽  
Vol 19 (1) ◽  
pp. 110-123 ◽  
Author(s):  
Chung BAEK ◽  
Ingyu LEE
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Structural Breaks ◽  
Structural Changes ◽  
Market Returns ◽  
Stock Market Returns ◽  
Long Run ◽  
Cumulative Sum Control ◽  
The Relationship

Our study investigates structural changes in the market P/E ratio and shows how structural changes affect long-term stock market returns. Using the cumulative sum control chart and the Bai-Perron algorithm, we identify multiple structural breakpoints in the market P/E ratio and find that those structural changes are significantly perceived over the long run. Unlike previous studies that do not consider structural changes, our study is the first one that shows how structural changes asymmetrically influence long-term stock returns depending on the high or low P/E period. This implies that structural changes in the market P/E ratio play an important role in explaining long-term stock returns. We propose that structural changes should be taken into account in some manner to establish the relationship between P/E ratios and long-term stock returns.

Globalization and Stock Market Returns

2006 ◽  
Vol 6 (1) ◽  
pp. 1850082 ◽  
Author(s):  
Swee Sum Lam ◽  
William Wee-Lian Ang
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Emerging Economies ◽  
Explanatory Power ◽  
Global Market ◽  
State Variables ◽  
Market Returns ◽  
Macroeconomic Factors ◽  
Stock Market Returns ◽  
The Relationship

With increasing globalization, to what extent do stock market returns reflect global or domestic risk factors? We find a significant relationship between stock market returns and the global market risk factor and macroeconomic factors respectively. In particular, global factors offer four times more explanatory power than domestic factors for developed market stock returns. Yet domestic factors are as important as global ones in emerging economies. Our method allows for the proxies of the state variables to be endogenously determined. The relationship between macroeconomy and stock market returns is robust after accounting for the market factor, firm size and book-to-market characteristics.

A quantile regression approach to evaluate the relative impact of global and local factors on the MENA stock markets

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Slah Bahloul ◽  
Nawel Ben Amor
Keyword(s):  
Stock Market ◽  
Quantile Regression ◽  
Stock Returns ◽  
Stock Markets ◽  
Financial Integration ◽  
Ordinary Least Squares ◽  
Market Returns ◽  
Stock Market Returns ◽  
Content Type ◽  
The Impact

PurposeThis paper investigates the relative importance of local macroeconomic and global factors in the explanation of twelve MENA (Middle East and North Africa) stock market returns across the different quantiles in order to determine their degree of international financial integration.Design/methodology/approachThe authors use both ordinary least squares and quantile regressions from January 2007 to January 2018. Quantile regression permits to know how the effects of explanatory variables vary across the different states of the market.FindingsThe results of this paper indicate that the impact of local macroeconomic and global factors differs across the quantiles and markets. Generally, there are wide ranges in degree of international integration and most of MENA stock markets appear to be weakly integrated. This reveals that the portfolio diversification within the stock markets in this region is still beneficial.Originality/valueThis paper is original for two reasons. First, it emphasizes, over a fairly long period, the impact of a large number of macroeconomic and global variables on the MENA stock market returns. Second, it examines if the relative effects of these factors on MENA stock returns vary or not across the market states and MENA countries.

Weather, investor psychology and stock returns: evidence from Fiji's stock market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Janesh Sami
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Sunshine Duration ◽  
Market Returns ◽  
Modeling Framework ◽  
Stock Market Returns ◽  
Content Type ◽  
Asset Pricing Models ◽  
Weather Changes ◽  
Practical Implications

PurposeThis paper investigates whether weather affects stock market returns in Fiji's stock market.Design/methodology/approachThe author employed an exponential general autoregressive conditional heteroskedastic (EGARCH) modeling framework to examine the effect of weather changes on stock market returns over the sample period 9/02/2000–31/12/2020.FindingsThe results show that weather (temperature, rain, humidity and sunshine duration) have robust but heterogenous effects on stock market returns in Fiji.Research limitations/implicationsIt is useful for scholars to modify asset pricing models to include weather-related variables (temperature, rain, humidity and sunshine duration) to better understand Fiji's stock market dynamics (even though they are often viewed as economically neutral variables).Practical implicationsInvestors and traders should consider their mood while making stock market decisions to lessen mood-induced errors.Originality/valueThis is the first attempt to examine the effect of weather (temperature, rain, humidity and sunshine duration) on stock market returns in Fiji's stock market.

scholarly journals Effect Of Macroeconomic Variables On Stock Market Returns For Four Emerging Economies: Brazil, Russia, India, And China

2011 ◽  
Vol 7 (3) ◽  
Author(s):  
Robert D. Gay, Jr.
Keyword(s):  
Stock Market ◽  
Emerging Economies ◽  
Stock Market Index ◽  
Market Returns ◽  
Stock Market Returns ◽  
Macroeconomic Variables ◽  
Share Prices ◽  
Market Index ◽  
The Relationship ◽  
India And China

The relationship between share prices and macroeconomic variables is well documented for the United States and other major economies. However, what is the relationship between share prices and economic activity in emerging economies? The goal of this study is to investigate the time-series relationship between stock market index prices and the macroeconomic variables of exchange rate and oil price for Brazil, Russia, India, and China (BRIC) using the Box-Jenkins ARIMA model. Although no significant relationship was found between respective exchange rate and oil price on the stock market index prices of either BRIC country, this may be due to the influence other domestic and international macroeconomic factors on stock market returns, warranting further research. Also, there was no significant relationship found between present and past stock market returns, suggesting the markets of Brazil, Russia, India, and China exhibit the weak-form of market efficiency.

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