Portfolio Investment in Malaysia and Saudi Arabia

2022 ◽  
pp. 155-175
Author(s):  
Fariza Hashim ◽  
Nadisah Zakaria ◽  
Abdul Rahim Abu Bakar ◽  
Kamilah Kamaludin
Keyword(s):  
Saudi Arabia ◽  
Stock Market ◽  
Emerging Markets ◽  
Financial Markets ◽  
Selection Criteria ◽  
Abnormal Returns ◽  
Emerging Countries ◽  
Portfolio Investment ◽  
Stock Selection ◽  
Portfolio Returns

Several strategies are adopted by investors in lowering the risk of investment while maximising its return. Graham's stock selection criteria are noted as one of the best strategies in selecting portfolios by investors. Although the model is universally accepted, it is less commonly practised and examined in emerging markets. Considering the growth of these emerging countries' financial markets, it is worthwhile to investigate the doctrine's effect on investment in these countries. This study endeavours to review the consequence of Graham's stock selection criteria on portfolio returns in the Malaysian and Saudi Arabian stock markets. Each country represents the fastest growing market in their region which justifies this study. The study found that the Malaysian stock market is capable of proffering abnormal returns to investors while the Saudi stock market is capable to offer abnormal returns to investors despite being an undeveloped and immature stock market. The study concludes that the model of stock selection remains beneficial and indeed valuable to regional investments.

The Effect of Short Sale Ban on the Relation between Disagreement and Stock Returns

2015 ◽  
Vol 23 (2) ◽  
pp. 155-182 ◽  
Author(s):  
Jun Sik Kim ◽  
Sung Won Seo
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Abnormal Returns ◽  
The Other ◽  
Exogenous Shock ◽  
Short Sale Constraints ◽  
Short Sale ◽  
Portfolio Returns ◽  
The Future ◽  
The Relationship

This paper investigates the effect of the short sale ban by the Korean government on the relationship between the disagreement among investors and the future stock returns. Short selling in Korean stock market was banned twice in 2008 and 2011. The short sale ban provides a natural experiment environment to study the effect of the short sale constraints on the relationship between the disagreement among investors and the future stock returns. Furthermore, it is an exogenous shock in the point of individual stocks. Thus, this paper focus on short sale ban periods to analyzes the stock return predictability of the disagreement among investors’ opinions about analysts’ earnings forecasts. Main results of this paper are as follows: First, the portfolio within the top 30% of the disagreement among investors experiences the significantly higher returns than that within the bottom 30% of the disagreement only during short sale ban periods. However, the two portfolio returns are not significantly different during the other periods excluding the short sale ban periods. These results are robust even after controlling for firm sizes, boot to market ratios, and the momentum effects. Second, a portfolio with higher the disagreement among investors presents significantly positive abnormal returns estimated by Fama-French’s three factor model during short sale ban periods. On the other hand, the abnormal returns of the portfolio with lower the disagreement among investors are not significantly different from zero. Furthermore, those returns of the portfolio with lower disagreement are not affected by the short sale ban. Finally, our findings show that individual stock returns are positively related to disagreement after controlling for the characteristics of individual stocks. Consequentially, the stocks with higher disagreement are overvalued during the short sale ban periods according to our robust empirical analyses with various control variables. According to our findings, we conclude that the short sale constraints are important factors to determine the predictability of disagreement on future stock returns. These are consistent with the results of short sale ban on the U.S. stock market from Autore, Billingsley, and Kovacs (2011).

scholarly journals Enterprise Multiple and Future Returns of the Brazilian Stock Market

2017 ◽  
Vol 10 (3) ◽  
pp. 431
Author(s):  
Rafael Igrejas ◽  
Raphael Braga Da Silva ◽  
Marcelo Cabus Klotzle ◽  
Antonio Carlos Figueiredo Pinto ◽  
Paulo Vitor Jordão da Gama Silva
Keyword(s):  
Risk Factors ◽  
Stock Market ◽  
Cross Section ◽  
Predictive Power ◽  
Abnormal Returns ◽  
Strong Relationship ◽  
Investment Strategy ◽  
Emerging Countries ◽  
Investment Strategies ◽  
Developed Markets

The estimation of cross-section returns for defining investment strategies based on financial multiples has been proven to be relevant following Fama and French’s (1992) research. One of the challenges for such studies is to identify the main variables that are suitable for explaining the returns in a particular context because the variables that are widely used in developed markets behave differently in emerging countries. In this study, we analyze the predictive power of the EV/EBITDA multiple in the context of the Brazilian stock market. The results show that the analyzed multiple has a strong relationship with the future returns of companies listed on the BM&F BOVESPA index between 2005 and 2013. For the period under review, the investment strategy of purchasing stocks when EV/EBITDA was low and selling stocks when EV/EBITDA was high showed abnormal returns of 15.94% per year, even after controlling for risk factors.

scholarly journals Earnings announcements, stock price reaction and market efficiency – the case of Saudi Arabia

2018 ◽  
Vol 11 (3) ◽  
pp. 416-431 ◽  
Author(s):  
Ali Murad Syed ◽  
Ishtiaq Ahmad Bajwa
Keyword(s):  
Saudi Arabia ◽  
Stock Market ◽  
Capital Market ◽  
Earnings Announcements ◽  
Abnormal Returns ◽  
Share Price ◽  
Market Model ◽  
Foreign Investors ◽  
Content Type ◽  
Quarterly Earnings

PurposeThis study aims to find the response by stock market against the announcements of quarterly earnings is empirically tested by exploiting event study methodology. Efficient market hypothesis (EMH) on Saudi stock exchange is also tried on.Design/methodology/approachThe market model is applied to help gauge the expected returns and to illustrate abnormal returns around the event date.FindingsThe results established that Saudi Stock Market does not bear semi-strong form of EMH. How efficient is the Saudi market is also reflected through evidence of significant abnormal returns and post-earnings announcement drift around earning announcements dates.Research limitations/implicationsThe authors have not used analysts’ forecast as the expected earnings which are the limitation. As mentioned earlier, the authors used the quarterly earnings of the previous year as a proxy and that proxy could have been replaced by analysts’ forecast. Another limitation is that the trading volume in the event window is not considered.Practical implicationsThe behavior of Saudi capital market is of much concern, and the study of this with a perspective of EMH is the significance of this paper.Social implicationsAll stakeholders closely watch earnings announcements and its share price movement around the announcement date. Recently, Saudi Arabia has opened its doors to foreign investors, and big foreign investors are going to enter into Saudi capital market, and after their entry, the behavior of market could be different. In the authors’ opinion, this is the right time to study the efficiency of Saudi market before the entry of foreign investors.Originality/valueThis study is based on the gap created by EMH of Saudi market using event methodology, observed in the existing literature, and it will be a contribution to literature.

scholarly journals Factors Influencing IPOs Pricing and Performance in Saudi Arabia: A Halal and Haram Perspective

2018 ◽  
Vol 7 (4) ◽  
pp. 78
Author(s):  
Ali Alnodel ◽  
Muhammad Junaid Khawaja
Keyword(s):  
Saudi Arabia ◽  
Stock Market ◽  
Abnormal Returns ◽  
Stock Market Index ◽  
Ipo Underpricing ◽  
Factors Affecting ◽  
Market Index ◽  
Audit Firms ◽  
Overwhelming Evidence ◽  
And Performance

The objective of the study is to determine the factors affecting underpricing behaviour of  IPOs in Saudi stock market. A special interest is to study the effect of Shariah compliance of Saudi investors on the extent IPO underpricing. The paper uses multiple regression analysis on the IPOs data for Saudi Stock market from 2004 to 2017 with a total of 105 observations.The results show overwhelming evidence of underpricing of IPOs during the first day trading. The most important result of this piece of research is that investors positively respond to the IPOs with Shariah compliance and return is negatively affected by Shariah board. The results also show that the abnormal returns are driven by the demand side factors like oversubscription. Other findings of the study show that premium to face value, type of audit firms and underwriters, and Saudi stock market index are significant determinants of the underpricing of IPOs.The most important implication of this paper is that the existence of abnormal first day return in Saudi stock market shows the existence of market imperfections. By motivating the investors to invest in Shariah compliant IPOs, decreasing the element of uncertainty and ensuring information symmetry these abnormal returns can be normalized. The results show that Saudi society is partial towards Shariah compliant investment opportunities and the investors’ desire to avoid investments involving Haram activities can be used to reduce market imperfections.This paper identifies the important determinants of IPOs underpricing in Saudi stock market and sheds light on the effect of Shariah compliant firms on IPO underpricing. Keywords – IPOs, Underpricing, Shariah Compliance, Auditor, Stock Market, Saudi Arabia

Global financial crisis, foreign portfolio investment and volatility

2020 ◽  
Vol 32 (2) ◽  
pp. 177-195
Author(s):  
Abdelkader Derbali ◽  
Ali Lamouchi
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Emerging Markets ◽  
Global Financial Crisis ◽  
Portfolio Investment ◽  
Content Type ◽  
Foreign Portfolio Investment ◽  
Crisis Period ◽  
Asian Emerging Markets ◽  
The Impact

Purpose The purpose of this paper is to understand and compare the extent and nature of the impact of foreign portfolio investment (FPI) on the stock market volatility, particularly in the Southeast Asian emerging markets, and compare that against the corresponding experience of Indian economy, in the context of a global financial crisis of the recent past. Design/methodology/approach The Asian emerging markets are now being perceived as becoming financially more and more vulnerable to international events because of their growing exposure to unstable foreign investment flows. The daily net FPI inflow and the daily leading stock market composite index of four countries, namely, Thailand, the Philippines, Indonesia and India, have been analyzed using autoregressive conditional heteroscedasticity (ARCH)-generalized ARCH group of models dividing the study period from 2000 to 2014 among pre-crisis, crisis and post-crisis period separately. Findings The study reveals that the net inflow of FPI has been a significant determinant of stock market returns in all countries. The impact of volatility spillover from the FPI market to the stock market in the sample countries has been found to be different under different market conditions. The past information and volatility clustering have been significantly influencing the stock market return volatilities of all these Southeast Asian countries on average. Originality/value However, there are significant country-wise differences in the relative importance and direction of the relationship of each of these effects with the volatility of the FPI and the stock markets. These effects have been different in these four different markets and they have significantly altered in strength and significance during the global financial crisis and in the post-financial crisis period.

Quality investing in the Indian stock market

2018 ◽  
Vol 44 (2) ◽  
pp. 127-141 ◽  
Author(s):  
Vaibhav Lalwani ◽  
Madhumita Chakraborty
Keyword(s):  
Stock Market ◽  
Quality Indicators ◽  
Quality Indicator ◽  
Emerging Market ◽  
Stock Selection ◽  
Content Type ◽  
Portfolio Returns ◽  
Long Run ◽  
Out Of Sample ◽  
Indian Stock Market

Purpose The purpose of this paper is to explore whether stock selection strategies based on four fundamental quality indicators can generate superior returns compared to overall market. Design/methodology/approach The sample of stocks comprises the constituents of BSE-500 index, which is a broad based index consisting of highly liquid stocks from all 20 major industries of the Indian economy. Portfolios are constructed on the basis of quality indicator rankings of companies and the returns of these portfolios are compared with the overall market. Excess returns on quality based portfolios are also determined using OLS regressions of quality portfolio returns on market, size, value and momentum factor returns. Findings The results suggest that two of the four quality strategies, namely Grantham Quality indicator and Gross Profitability have generated superior returns after controlling for market returns as well as common anomalies such as size, value and momentum. Combining value strategies with quality strategies do not yield any significant gains relative to quality only strategies. Practical implications For investors looking to invest in the Indian stock market for a long term, this study provides evidence on the performance of some fundamental indicators that can help predict long run stock performance. The findings suggest that investors can distinguish between high-performing and low-performing stocks based on stock quality indicators. Originality/value This is the first such study to look into the performance of quality investing in the Indian stock market. As most quality investing studies have been focussed on developed economies, this paper provides out-of-sample evidence for quality investing in the context of an emerging market.

Brand equity, risk and return in Latin America

2018 ◽  
Vol 27 (5) ◽  
pp. 557-572 ◽  
Author(s):  
Marta Olivia Rovedder de Oliveira ◽  
Aline Armanini Stefanan ◽  
Mauri Leodir Lobler
Keyword(s):  
Latin America ◽  
Stock Market ◽  
Emerging Markets ◽  
Latin American ◽  
Brand Equity ◽  
Factor Model ◽  
Total Sample ◽  
Emerging Countries ◽  
Content Type ◽  
Stock Market Performance

Purpose This study aims to compare the performance of stocks of companies with high brand equity with the stocks of other companies listed on the stock market of emerging countries of Latin America: Brazil, Chile, Colombia, Mexico and Peru. Design/methodology/approach The valuable brands (brands with high brand equity) considered were the most valuable Latin America brands according to the Millward Brown reports. Carhart four-factor model was used to analyze performance and the total sample included 732 stocks in the Latin American market collected at Economatica, monthly, for a period of 10 years. Findings The Valuable Brands Portfolio presents the lowest investment risk, suggesting that stocks of companies with valuable brands ensure lower risk investment to shareholders in these emerging markets. Originality/value This study is the first to associate brand equity with the creation of shareholder value in the context of emerging Latin American countries. In addition, the proposed method has also not been used previously to study emerging countries. The association found between a marketing asset (brand equity) and stock market performance contributes to improve the relationship between marketing and finance areas. The results of this study in emerging markets corroborate previous studies in developed markets, strongly suggesting the confirmation of the effect of brand equity on the reduction of risk stock.

scholarly journals Is Sentiment Risk Priced By Stock Market?

2012 ◽  
Vol 28 (4) ◽  
pp. 683 ◽  
Author(s):  
Francisca Beer ◽  
Mohamad Watfa ◽  
Mohamed Zouaoui
Keyword(s):  
Risk Factors ◽  
Stock Market ◽  
Financial Markets ◽  
Stock Returns ◽  
Risk Premium ◽  
Portfolio Returns ◽  
Traditional Risk Factors

This study tests if the financial markets price the investors sentiment risk. We construct portfolios based upon the stock returns exposure to sentiment. Our results show that the portfolio returns are positively correlated with the exposure of stocks to sentiment. The strategy that consists of buying stocks with the highest exposure to sentiment and selling stocks with the lowest exposure to sentiment generates a significant raw profit. Exploring the sources of profit, we find that neither the traditional risk factors nor the momentum factor can account for the profit. However, we find that the addition of the sentiment risk premium contributes to explain the profit.

scholarly journals An Analysis of Anomalies Split To Examine Efficiency in the Saudi Arabia Stock Market

2013 ◽  
Vol 3 (1) ◽  
pp. 268
Author(s):  
Mohammed Hokroh
Keyword(s):  
Saudi Arabia ◽  
Stock Market ◽  
Stock Price ◽  
Abnormal Returns ◽  
Market Information ◽  
Before And After ◽  
Over Time

This research continues the investigation of Hokroh (2013) whose work examined the Saudi Stock Market (SSM) efficiency before and after the formation of Tadawul Company (the entity responsible for operating the SSM). The SSM stock price returns index before Tadawul (January 1st 2007 to March 18th2007) and after Tadawul (March 19th 2007 to May 29th2007) in addition to 52 days split of returns from 5/30/2007 to 11/11/2008 were examined to test if anomalies split assumption holds over time. The data was analyzed using: regression, abnormal returns calculation, T-statics test and correlation. The results indicate that the SSM has become informationally more efficient after the formation of “Tadawul” and that the SSM adjust slowly to market information.

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