Approaches to examination of Liquidity and Volatility Risk Pricing in Stock Markets–Implications for Indian Case

2017 ◽  
Vol 4 (2) ◽  
pp. 1-9
Author(s):  
Neha Bansal ◽  
Ved Prakash Bansal
Keyword(s):  
Asset Pricing ◽  
Emerging Markets ◽  
Conceptual Framework ◽  
Stock Markets ◽  
Developed Countries ◽  
Volatility Risk ◽  
Uncertain Factor ◽  
Risk Pricing

Liquidity and Volatility Risks is twin asset pricing issues that altogether affect the operational functioning and pricing in stock markets all over the globe. In developed countries as well in emerging markets, the researchers have put in large efforts to find the liquidity and volatility risk structures in individual stocks and well as market as a whole. There is also an on-going research to explore whether there is a common uncertain factor across these risk classes. In this paper we provide a conceptual framework of the issue of liquidity and volatility and also the approaches used by researchers to measure the liquidity and volatility risk.

scholarly journals The relationship between stock markets of major developed countries and Asian emerging markets

2004 ◽  
Vol 8 (4) ◽  
pp. 201-218 ◽  
Author(s):  
Wing-Keung Wong ◽  
Jack Penm ◽  
Richard Deane Terrell ◽  
Karen Yann Ching Lim
Keyword(s):  
Emerging Markets ◽  
Stock Markets ◽  
International Diversification ◽  
Developed Countries ◽  
Stock Market Crash ◽  
Emerging Stock Markets ◽  
Long Run ◽  
Equilibrium Relationship ◽  
Asian Emerging Markets ◽  
The Relationship

With the emergence of new capital markets and liberalization of stock markets in recent years, there has been an increase in investors' interest in international diversification. This is so because international diversification allows investors to have a larger basket of foreign securities to choose from as part of their portfolio assets, so as to enhance the reward-to-volatility ratio. This benefit would be limited if national equity markets tend to move together in the long run. This paper thus studies the issue of co-movement between stock markets in major developed countries and those in Asian emerging markets using the concept of cointegration. We find that there is co-movement between some of the developed and emerging markets, but some emerging markets do differ from the developed markets with which they share a long-run equilibrium relationship. Furthermore, it has been observed that there has been increasing interdependence between most of the developed and emerging markets since the 1987 Stock Market Crash. This interdependence intensified after the 1997 Asian Financial Crisis. With this phenomenon of increasing co-movement between developed and emerging stock markets, the benefits of international diversification become limited.

scholarly journals Institutional Environment and IPO Strategy: A Study of ChiNext in China

2017 ◽  
Vol 13 (2) ◽  
pp. 399-430 ◽  
Author(s):  
Jing Zhang ◽  
Wei Zhang ◽  
Andreas Schwab ◽  
Sipei Zhang
Keyword(s):  
Emerging Markets ◽  
Stock Markets ◽  
Institutional Environment ◽  
Developed Countries ◽  
Investment Timing ◽  
Risk Return ◽  
Developed Markets ◽  
Investment Returns ◽  
Using Data ◽  
Public Offering

ABSTRACTTaking an institution-based view, we investigate how entrepreneurs respond to immature regulatory environments in order to be listed on stock markets in countries with an emerging economy. Unlike stock markets in developed countries, in emerging markets, gaining government approval for listing is a critical and more unpredictable process for entrepreneurs. Hence, entrepreneurs who are preparing for a public offering might give substantially discounted shares to venture capital (VC) investors. This will lead to higher investment returns in pre-IPO deals than those at earlier stages, which distorts the risk-return tradeoff found in developed markets. In particular, the VC investors affiliated with powerful organizations that can promise entrepreneurs preferential access to stock market gatekeepers will gain even higher pre-IPO investment returns. The associated additional institutional rents earned by VC investors, however, are expected to decrease over time, as the stock markets mature. Related hypotheses with regard to the investment timing, VC firm affiliations with government agencies, securities traders, and universities are tested using data from ChiNext in China (2009–2013). This study highlights that institutional factors impact the behavior of participants in emerging markets. It extends current theories derived almost exclusively from developed markets.

Testing the weak-form efficiency of stock markets

2015 ◽  
Vol 10 (3) ◽  
pp. 409-426 ◽  
Author(s):  
Jacinta Chikaodi Nwachukwu ◽  
Omowunmi Shitta
Keyword(s):  
Emerging Markets ◽  
Stock Prices ◽  
Stock Markets ◽  
Weak Form ◽  
Developed Countries ◽  
Risk Diversification ◽  
Content Type ◽  
Year Effect ◽  
Trade Offs ◽  
Weak Form Efficiency

Purpose – The purpose of this paper is to focus on the weak-form efficiency of 24 emerging and nine industrial stock market indices around the world. It tests for the predictability and the presence of seasonal patterns in rates of return from January 2000 to December 2010. Design/methodology/approach – It reports on the descriptive statistics for estimated monthly percentage returns. This is complemented by the use of both parametric and non-parametric techniques to test for abnormal return behaviour in stock markets. Findings – The results show that: first, emerging economies which persisted with market-oriented reforms had higher returns relative to risk, indicating their attractiveness for risk diversification; second, successive changes in stock prices were interrelated with each other and therefore contained information for predicting future prices in two-thirds of the emerging markets compared to one-third of industrial economies; and third, the turn-of-the calendar year effect was present for half of the emerging markets vis-à-vis one-quarter of the developed countries. The authors found limited support for the tax-loss selling hypothesis for both the emerging and industrial economies. Research limitations/implications – The paper fails to specifically analyse the implications for security returns of changes in technology, institutions, volume of trading and regulations in the different stock markets. Practical implications – The results should be particularly informative for foreign investors with regard to the risk diversification benefits of the various emerging and industrialised stock markets and the expected risk-return trade-offs. Originality/value – The paper provides a more powerful explanation for the role of institutional arrangements, infrastructure, culture and other country-specific risk factors in asset pricing compared to disparate case studies.

scholarly journals SOCIAL MEDIA AND THE STOCK MARKETS: AN EMERGING MARKET PERSPECTIVE

2021 ◽  
Vol 22 (6) ◽  
pp. 1614-1632
Author(s):  
Shweta Agarwal ◽  
Shailendra Kumar ◽  
Utkarsh Goel
Keyword(s):  
Social Media ◽  
Stock Market ◽  
Emerging Markets ◽  
Stock Markets ◽  
Emerging Market ◽  
Impulse Response Function ◽  
Developed Countries ◽  
Stock Market Development ◽  
Stock Market Performance ◽  
The Impact

There are numerous studies that examine the impact of social media on the stock market performance but there is a paucity of such evidences from the emerging economies. Today many multinational banks and other financial conglomerates from the developed countries are expanding their operations to the emerging markets, known for their rapid growth. The businesses in developed countries prefer using social media to reach out to their stakeholders. This might be a challenge as emerging markets are very different from the developed markets in terms of infrastructure and stock market development. This study performs the sentiment analysis of the tweets about the Indian companies that are a part of Nifty50 or any sectorial index, for a period of 15 months. The results from the Granger-causalty tests indicate that the Twitter sentiments have a significant relationship with the indices related to the banking and financial sectors of the Indian stock markets. Results from the Impulse Response Function reveal that, on the index returns, the impact of the negative sentiments stays for a longer period of time than the positive sentiments. This study would help businesses use social media effectively for information sharing and dissemination in the new environment.

R&D effects, risks and strategic decisions: evidence from listed firms in R&D-intensive countries

foresight ◽  
2017 ◽  
Vol 19 (6) ◽  
pp. 615-627
Author(s):  
Yury Dranev ◽  
Albert Levin ◽  
Ilia Kuchin
Keyword(s):  
Asset Pricing ◽  
Stock Returns ◽  
Risk Premium ◽  
Stock Markets ◽  
Empirical Studies ◽  
Developed Countries ◽  
Strategic Decisions ◽  
Content Type ◽  
Publicly Traded Companies ◽  
Corporate Strategies

Purpose The purpose of this research is to look at the effects of research and development expenditures (R&D) on value and risks of publicly traded companies by studying returns on stock exchanges of R&D-intensive economies (Republic of Korea, Finland and Israel). Design/methodology/approach Empirical tests of multifactor asset pricing models were applied to demonstrate that R&D intensity could be considered as a pricing factor and affect investors’ risk premiums on those markets. To discover the reasons behind the asset pricing R&D anomaly, this study investigated the nature of R&D risk further by looking into the interactions of R&D and currency risks. Findings This study discovered that investors in stock markets of R&D-intensive countries should require a positive equity risk premium. However, the reduction of R&D intensity may increase firms’ risks and firms with higher R&D-intensity are less exposed to currency risks in R&D-intensive economies. Originality/value Many researchers have investigated the relationship between a firm’s R&D and stock returns. But nearly all of them focus on the US Stock Market and attempt to determine the reasons for R&D’s impact on firms’ risks and market value. Meanwhile, the role of R&D and related risks for investors could be even more prominent for stock markets in R&D-intensive countries. To bridge this gap, this research studied stock returns on exchanges of three developed countries where the ratio of gross domestic expenditure on R&D (GERD) to GDP is among the highest worldwide. In this study, the methodology of asset pricing empirical studies was adopted and it was further developed to analyze the causes of R&D risks. The new methodology was applied to discover relationship between R&D intensity and currency risk exposure. The interesting findings could be used for development of firms’ corporate strategies in those countries and for elaboration of policy decisions.

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