Do Short-Selling and Margin Trading Impact the Replication of Emerging Market Indexes?

2006 ◽  
Vol 32 (3) ◽  
pp. 92-99 ◽  
Author(s):  
Roger P. Bey ◽  
Larry J. Johnson
Keyword(s):  
Emerging Market ◽  
Short Selling ◽  
Market Indexes

Impact of short selling activity on market dynamics: Evidence from an emerging market

2014 ◽  
Vol 15 ◽  
pp. 53-62 ◽  
Author(s):  
Cihat Sobaci ◽  
Ahmet Sensoy ◽  
Mutahhar Erturk
Keyword(s):  
Emerging Market ◽  
Short Selling ◽  
Market Dynamics

Short-sale refinancing and earnings response coefficient: evidence from China

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tingli Liu ◽  
Ying Jiang ◽  
Lizhong Hao
Keyword(s):  
Corporate Governance ◽  
Property Rights ◽  
Emerging Market ◽  
Earnings Quality ◽  
Sample Selection ◽  
Short Selling ◽  
Content Type ◽  
Short Sale ◽  
Earnings Response ◽  
The Impact

Purpose Although short selling has been legalized in China for nearly 10 years, due to the existence of short-sale constraints, its impact on corporate governance of listed companies remains unclear. This paper aims to examine the impact of short-sale refinancing on earnings quality after the short-selling constraints have been released. The authors further explore whether this impact is subject to the nature of property rights and shareholding structures. Design/methodology/approach This study is based on a sample of A-share firms in China for the period 2014–2016. The authors use earnings response coefficients (ERC) as a proxy for earnings quality. To empirically examine this issue, a matching sample is generated by using propensity score matching method (PSM) to reduce sample selection bias. Findings This study provides evidence that deregulation of short selling has positive external effect on corporate governance. The results indicate that the potential short-selling opportunities can effectively suppress earnings manipulation and improve earnings quality. However, the impact of short selling on earnings quality varies for companies with different nature of property rights and shareholding structure. Originality/value To the best of the authors’ knowledge, this is the first study to investigate the relationship between short selling and earnings quality in the unique setting of short-sale refinancing. This study provides new evidence on the impact of short selling at the micro level and calls for further deregulation of short selling. In addition, this study contributes to existing studies on short-sale refinancing by examining an emerging market.

Predicting equity premium with adjusted dividend-price ratio: the USA and international evidence

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mahtab Athari ◽  
Atsuyuki Naka ◽  
Abdullah Noman
Keyword(s):  
Structural Breaks ◽  
Emerging Market ◽  
Equity Premium ◽  
Predictive Ability ◽  
Predictive Performance ◽  
Price Ratio ◽  
Content Type ◽  
The Usa ◽  
Market Indexes ◽  
The Impact

Purpose This paper aims to achieve two main objectives. The first is to introduce a suitable adjustment to the conventional dividend-price ratio, which would address econometric concerns and improve the predictability of the equity premium. The second is to compare the predictive performance of the newly introduced adjusted dividend-price ratio with the conventional dividend-price ratio. Design/methodology/approach The authors hypothesize that the adjusted dividend-price ratio will have better predictive power and forecasting quality for equity premium compared to the conventional dividend-price ratio. To test the hypothesis, the authors predict equity premium with both variables on a sample of 11 developed and emerging market indexes over a period spanning June 1995 to March 2017. To accommodate time variation in parameter values or structural breaks in the data, the authors conducted a fixed window rolling regressions using both variables. A variety of forecast techniques including magnitude and sign accuracy measures are applied to compare the performance of forecasts. Findings The adjusted dividend-price ratio is shown to be stationary and has both lower persistence and variability compared with the conventional dividend-price ratio. The authors find that the adjusted dividend-price ratio provides superior out-of-sample (OOS) performance compared to the conventional dividend-price ratio, for both size and sign accuracy, in forecasting equity premium for the majority of the countries in the sample. Research limitations/implications This paper introduces an easy-to-follow modification in the conventional dividend-price ratio that can be replicated by researchers and practitioners alike. However, the study has a limitation in that it does not capture the impact of dividend-paying firms within each index on the predictive ability of the adjusted dividend-price ratio. Practical implications The knowledge of equity premium predictability is important in implementing market-timing strategies and could be beneficial for portfolio and risk management. The newly introduced variable is easy to construct using widely available data without the need for complex econometric estimation. Investors can use this variable to predict equity premiums in international markets, both developed and emerging. The findings of this paper will be relevant to financial analysts, portfolio managers, investors and researchers in international finance. For example, by using the adjusted dividend-price ratio, investors would see up to 0.5% improvement in their OOS monthly forecasts of the equity premium. Originality/value To the best of the authors’ knowledge, this is the first paper that proposes adjustment in the conventional dividend-price ratio based on the past observations of the most recent quarter. In this way, the paper offers fresh insight that dividend-price ratio is still useful to predict equity premium albeit, after some adjustments and modifications. The findings of the paper would result in renewed interest in using the dividend-price ratio as a predictor of the equity premium.

Can Technical Indicators Provide Information for Future Volatility: International Evidence

2020 ◽  
Vol 8 (1) ◽  
pp. 53-66
Author(s):  
Yafeng Shi ◽  
Xiangxing Tao ◽  
Yanlong Shi ◽  
Nenghui Zhu ◽  
Tingting Ying ◽  
...  
Keyword(s):  
Moving Average ◽  
Emerging Market ◽  
Tail Dependence ◽  
Dependence Structure ◽  
Copula Models ◽  
Technical Indicators ◽  
International Evidence ◽  
Dynamic Copula ◽  
Market Indexes ◽  
Stock Indexes

AbstractWe employ the static and dynamic copula models to investigate whether technical indicators provide information on volatility in the next trading day, where the volatility is measured by daily realized volatility. Our empirical results, based on long samples of 8 well-known stock indexes, suggest that a significant and asymmetric tail dependence between the technical indicators based on moving average and the next day volatility. The level of dependence change over time in a persistent manner. And the dependence structure presents some distinct differences between emerging market indexes and developed market indexes. These results indicate that the technical indicators can provide information on the next day volatility at extremes, and are less informative at normal market.

How to Outperform Emerging Market Indexes Using Passive Indexation

2016 ◽  
Vol 25 (5) ◽  
pp. 501-508
Author(s):  
Nipun Agarwal ◽  
Omar Al Farooque
Keyword(s):  
Emerging Market ◽  
Market Indexes

scholarly journals An empirical comparison of stock market bubbles

2021 ◽  
Vol 9 (4) ◽  
pp. 1286-1299
Author(s):  
Özge Korkmaz ◽  
Bilgin Bari ◽  
Zafer Adalı
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Emerging Market ◽  
High Growth ◽  
Capital Inflows ◽  
Market Values ◽  
Stock Market Bubbles ◽  
Foreign Capital Inflows ◽  
Rational Bubble ◽  
Market Indexes

Financial asset bubbles occur due to systematic and continuous differences between fundamental and market values. Due to high growth periods and foreign capital inflows, bubbles are also seen in stock market indexes, especially in emerging market economies. This study analyzes the existence of bubbles in BIST100, IDX COMPOSITE, BOVESPA, MDEX, NIFTY 50, SHANGAI, and S&P 500 stock markets for the period 2009:01-2021:06.  RADF, SADF, and GSADF tests are applied to detect bubbles on stock market closing prices. In addition, the emergence and demise dates of the bubbles are determined by employing the date-stamping method. The GSADF test gives more effective results and determines bubbles with different durations in all stock markets, except the S&P 500. The results reveal that the most inefficient market is IDX COMPOSITE, and S&P 500is the most efficient market. The analysis includes the S&P 500, the world's most liquid and most prominent stock market, for comparison. In this respect, bubbles occur more in emerging market exchanges. The findings also confirm the validity of the rational bubble law.

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