Adaptive Market Hypothesis and Time-varying Contrarian Effect: Evidence From Emerging Stock Markets of South Asia

This study contributes to the growing debate on the relation between varying stock market conditions and the profitability of stock market anomalies. We investigate the effect of changed market conditions on time-varying contrarian profitability in order to examine the presence of the Adaptive Market Hypothesis (AMH) in South Asian emerging stock markets. The empirical findings reveal that a strong contrarian effect holds in all the emerging markets. We also find the stock return opportunities vary over time based on contrarian portfolios. We show that contrarian returns strengthen during the down state of market, higher volatility and crises periods, particularly during the Asian financial crisis. Interestingly, the market state instead of market volatility is the primary predictor of contrarian payoffs, which contradicts the findings of developed markets. We argue that the linkage arises from structural and psychological differences in emerging markets that produce unique intuitions regarding stock market anomalies returns. The overall findings on the time-varying contrarian returns in this study provide partial support to AMH. Another significant outcome of this study implies that investors in South Asian emerging markets, like investors in the developed markets, could not adapt to evolving market conditions. Therefore, contrarian profits often exist, and persistent weak-form market inefficiencies prevail in these markets.

Calendar anomalies in the stock markets: conventional vs Islamic stock indices

PurposeIn this study, the authors evaluate seven calendar anomalies’–the day of the week, weekend, the month of the year, January, the turn of the month (TOM), Ramadan and Eid festivals–effects in both the conventional and Islamic stock indices of Bangladesh. Also, the authors examine whether these anomalies differ between the two indices.Design/methodology/approachThe authors select the Dhaka Stock Exchange (DSE) Broad Index (DSEX) and the DSEX Shariah Index (DSES) of the DSE as representatives of the conventional and Islamic stock indices respectively. To carry out the investigation, the authors employ the generalized autoregressive conditional heteroskedasticity (GARCH) typed models from January 25, 2011, to March 25, 2020.FindingsThe study’s results indicate the presence of all these calendar anomalies in either conventional or Islamic indices or both, except for the Ramadan effect. Some significant differences in the anomalies between the two indices (excluding the Ramadan effect) are detected in both return and volatility, with the differences being somewhat more pronounced in volatility. The existence of these calendar anomalies argues against the efficient market hypothesis of the stock markets of Bangladesh.Practical implicationsThe study’s results can benefit investors and portfolio managers to comprehend different market anomalies and make investment strategies to beat the market for abnormal gains. Foreign investors can also be benefited from cross-border diversifications with DSE.Originality/valueTo the authors’ knowledge, first the calendar anomalies in the context of both conventional and Islamic stock indices for comparison purposes are evaluated, which is the novel contribution of this study. Unlike previous studies, the authors have explored seven calendar anomalies in the Bangladesh stock market's context with different indices and data sets. Importantly, no study in Bangladesh has analyzed calendar anomalies as comprehensively as the authors’.

The calendar anomalies on Warsaw Stock Exchange in 2015-2020

The article is devoted to the subject of popular calendar anomalies. According to the theory of finance, if investors act rationally, the market can be considered efficient. In such a situation, achieving an above-average rate of return is impossible, as securities reflect all available information about them. However, on the basis of many studies and assumptions of behavioral economics, numerous exceptions to this rule have been discovered, which have been called market anomalies or stock anomalies. Such a deviation is the "January effect" and "January barometer" described in this work. The aim of the article is to investigate whether there is a deviation on the Warsaw Stock Exchange in 2015-2020 called the "January effect" and also whether the return rate in January can be a good prognosis for the rest of the year. In the results of the analysis, the occurrence of the title calendar effects in the studied sample was not unequivocally stated.

Common risk factors in the returns on digital assets: evidence from cryptocurrency market

Introduction. Digital financial assets are a relatively new phenomenon. More and more, they include virtual currencies, and in particular cryptocurrencies. Both regulators and financial market players are becoming increasingly interested in such assets. Cryptocurrencies have no intrinsic value, and this encourages scientific studies on the problem of price formation and risk management associated with cryptocurrency operations. Most papers on the problem lack a systematic ap-proach and do not provide solutions to a large number of fundamental issues. Purpose. The purpose of our study was to develop a method for the risk analysis of operations with digital financial assets, namely cryptocurrencies. Methodology. In our study, we used parametric methods of data analysis and ma-chine learning methods, description, analysis, synthesis, induction, deduction, comparison, and grouping method. The sample was accumulated between April 2013 and April 2021 and included cryptocurrencies with the market capitalization of over 1 million USD. Results. The study determined the common risk factors for the cryptocurrency market. The risk factors are presented as linear combinations of returns of subsets of cryptocurrencies with dynamically changing weight coefficients. The risk factors were formed based on the market information, which included the price of the cryptocurrency, the trading volume, and its market capitalization. Conclusions. The study demonstrated that the cryptocurrency market is suscepti-ble to market anomalies common to traditional financial asset markets. In addition to the risk factors based on the market capitalization of cryptocurrencies (the size) and their aggregate profitability (the momentum), the article presents statistically relevant risk factors which reflect the growth rate of the market capitalization and the level of illiquidity of cryptocurrencies. In order to explain the market anomalies and the arbitrary strategies based on them, the article presents several factor models of cryptocurrency price formation. These models can be used to develop an in-tegrated approach to the risks associated with operations with digital financial as-sets.

Asymmetric information in IPO underpricing — literature review

Market anomalies after initial public offerings are a subject of extensive scientific research. One of such anomalies is underpricing, which refers to an increase of stock price in relation to the offering price shortly after stock issue. The occurrence of underpricing has been verified in many markets; however, the reasons for this phenomenon have not been yet conclusively established. The existence of information asymmetry in the capital market is one of the most popular assumptions applied in the studies in an attempt to explain the reasons why issuers discount the price of their offers. The purpose of this paper is to present the explanatory underpricing theories which are based on the asymmetry of information present between market participants, and to summarize the explanatory variables of underpricing that stem from the theory.

System Mapping as a Service for Post-COVID Regional Transition

The COVID-19 pandemic brought about a devastating economic and social disruption. The virus outbreak was possibly triggered in Wuhan, in the Chinese province of Hubei. In a few weeks it escalated to a global pandemic. In an intensely connected global economy the disease left contractions in demand and supply. Consumer and organisational purchasing patterns were distorted and created market anomalies. The global financial markets plunged. The restricted mobility among countries slowed drastically the global economic activities, especially in territories whose main source of revenue is related to tourism. In this context, a consortium of ten partners from nine European countries embarked on a collaborative research project, funded by EIT Climate-KIC. The project aims to provide policymakers and decision-makers with an innovative qualitative research tool that will aid a resilient recovery from COVID-19. Complex challenges, such as the COVID pandemic, require a systems approach to decision-making rather than linear models of decision-making.

Post-Earning Announcement Drift and Value-Glamour Anomalies in NSE Listed Firms

Purpose of the article: Of the various market anomalies, the Value-Glamour anomaly and Post-Earnings Announcement Drifts (PEAD) have consistently attracted the attention of researchers. Prior studies have established that the reaction of value stocks and glamour stocks to the earnings announcement differs significantly and there is a close relationship between the PEAD and abnormal returns arising due to earning announcement surprises. We have studied the drift patterns of various value and glamour portfolios and tested whether the direction of the earnings announcement abnormal return is opposite to that of earnings surprise in the Indian market.Methodology: We use the statistics of 100 firms listed on the NSE for a sample period of 2014–2018. We use a set of 1130 observations analysed using the expectations formation approach around earnings and evaluate the post earnings announcement drift. We use the Earnings Response Coefficients to find the association between abnormal stock returns and earnings surprises.Scientific aim: The aim of this research is to improve the knowledge of market anomalies in developing markets such as India focusing on the impact of earnings announcement on growth and value stocks.Findings: We find that a negative association of abnormal stock returns with surprise in accounting earnings announcements. The stocks, which are overvalued or undervalued, are properly priced after the earnings announcements. Our results refute the earlier studies evidencing the strong support in favour of market inefficiency in the Indian context, particularly with respect to publicly available earnings information.Conclusions: The Indian stock market tends to be efficient with respect to earnings announcements and therefore does not produce excessive returns. However, a heterogeneity with respect to earnings announcement may exist among the category of stocks depending upon liquidity position. Superior returns cannot be derived by traders and investors on a consistent basis from value-glamour anomaly.