Stock Return Predictability and Market Efficiency in Pakistan; A Role of Asian Growing Economies of India and Malaysia

The purpose of this study is to determine the predictability of the Pakistani stock market's one-day forward returns by utilizing lagged daily returns for Pakistan, India, and Malaysia from 2006 to 2016. The findings indicate that lagged Pakistani market returns significantly predict Pakistani one-day ahead market returns. However, the other two growing stock markets, India and Malaysia, show no association with one-day ahead market returns. Mostly, stock market behavior in the pre-2008 and post-2008 eras was the same, although industry return behaviour was different due to the economic crisis of 2008. However, the Pakistani stock market one-day ahead returns predict the own Pakistani lag returns due to an inefficient market and prices do not follow a random walk. As a result, investors and financial analysts can foresee and generate anomalous returns by using previous data and information. Key words: Stock Market Returns Predictability, Stock Market crash, Market efficiency

Repercussions of COVID-19 on the Indian stock market

The present paper determines the repercussions of the coronavirus on the Indian financial markets by taking the eight sectoral indices into account. By taking the sectoral indices into account, the study deduces the impact of virus outbreak on the various sectoral indices of the Indian stock market. Employing Welch's t-test and Non-parametric Mann-Whitney U test, we empirically analysed the daily returns of eight sectoral indices: Nifty Auto, Nifty FMCG, Nifty IT, Nifty Media, Nifty Metal, Nifty Oil and Gas, Nifty Pharma, and Nifty Bank. The results unveiled that pandemic had a negative impact on the automobile, FMCG, pharmaceuticals, and oil and gas sectors in the short run. In the long run, automobile, oil and gas, metals, and the banking sector have suffered enormously. The results further unveiled that no selected indices underperformed the domestic average, except NIFTY Auto.

The Differences in Mean and Volatility Shock Transmission among Bitcoin, Currencies from Developed Countries, and Currencies from Emerging Countries

This paper studied the mean and volatility transmission among Bitcoin as the most prominent cryptocurrency, exchange rates from developed countries/regions, and exchange rates from emerging countries/regions. Using daily returns between January 1, 2015, and December 31, 2018, and Bivariate VAR - Diagonal VECH models. The empirical results suggest there was no mean transmission between USD/EUR and USD/BTC. However, there was a unidirectional mean shock transmission link from USD/CNH, USD/MAD, and USD/IDR to USD/BTC. The results also suggested the existence of a bidirectional cross-volatility persistence link between bitcoin and all the exchange rates, except for USD/IDR and a bidirectional cross-volatility spillover link between USD/BTC and USD/CNH. A critical implication of these results is that they will be of use to investors, speculators, risk managers, and policymakers in understanding the degree of integration in terms of volatility and return among Bitcoin, currencies from developed, and currencies from emerging countries.

Socially Responsible Funds and Traditional Energy Commodities: A Diversification Perspective for Investments

Our work examines the relationship between socially responsible funds and the traditional energy market over daily returns data ranging from December 2015 to April 2019. We apply quantile cross-spectral analysis to measure returns correlation under different market conditions in the short, medium, and long run to measure the connectedness between both markets. Our results highlight that correlation based on different quantile distributions yields different investment opportunities. In the short run, investors can benefit from diversifying assets under extreme market conditions. No significant diversification opportunities are available in the medium- and long-run periods. Our findings provide implications for individual investors making investments under different horizons and dynamic market conditions.

Analysis of diversification benefits for cryptocurrency portfolios before and during the COVID-19 pandemic

Purpose This study aims to investigate the diversification benefits attached to the crypto portfolios when combined with stocks, Forex instruments and commodity assets. Design/methodology/approach Markowitz diversification techniques have been used to analyze the risk-return tradeoffs of the individual portfolios. Daily prices on cryptocurrencies and the selected asset classes, cover the period before and during the pandemic COVID-19. The portfolio risk of the portfolios was calculated by identical techniques and analyzed with equal criteria. Findings The results with 270 trails indicate that stocks on average reduce the portfolio risk of crypto portfolios by 36% followed by fiat currency with 30.9% and commodities by 20.8%. Average daily returns stand in line with the standard portfolio theories where riskier portfolios offer higher returns and the other way around. Originality/value The authors contribute to the current literature by investigating the portfolio risk attached to the crypto portfolios when stocks, commodities and Forex instruments were added separately. To this end, results inform not only retail investors but also portfolio managers on the asset classes that generate better optimization for crypto portfolios.

Does The Efficient Market Theory In The Weak Form Exist? Evidence From Indonesia

In the weak-form market efficiency theory, investors cannot predict the movement of all prices because of randomness. This circumstance happens because of a quick market reaction to new information. Conversely, suppose the market is not efficient in this shape; in that case, the investors can obtain an abnormal return. One of the reasons is the thin market, where many inactive stocks to be traded are available. Based on these issues, this research intends to examine this theory by employing runs testing on the daily returns of the Indonesia Composite Index (ICI) between January 2014 and December 2018 for each year and a whole. Once performing this test, this research demonstrates that the daily returns of the ICI are random for both situations. By denoting these facts, this research concludes that the capital market in Indonesia is efficient in a weak form and experiences a decrease in the thin level, reflected by the escalation in trading frequency, volume, and value, as well as the number of dynamic shares transacted. This research suggests that investors without sufficient information should utilize the service of the securities analysts to select the stocks they buy and sell to get the capital gain. Keywords – an efficient market in the weak form; market index return; runs test; thin market

The Impact of the Introduction of Index Futures on the Daily Returns Anomaly in the Ho Chi Minh Stock Exchange

This study investigated the impact of the introduction of the VN30-Index futures contract on the daily returns anomaly for the Ho Chi Minh Stock Exchange (HOSE). Daily returns of the VN30-Index for the period 6 February 2012 through 31 December 2019 are used in this study to ascertain the new VN30-Index futures contract influence on the day-of-the-week anomaly observed in the HOSE. To test this effect, ordinary least square (OLS), generalized autoregressive conditional heteroskedasticity [GARCH (1,1)] and exponential generalized autoregressive conditional heteroskedasticity [EGARCH (1,1)] regression models were employed. The empirical results obtained from the models support the presence of the day-of-the-week effect for the HOSE during the study period. Specifically, a negative effect was observed for Monday. However, the analysis revealed that the day-of-the-week effect was only present in stock returns for the pre-index futures period, not for the post-index futures period. These findings suggest that the introduction of the VN30-Index futures contract had a significant impact on the daily returns anomaly in Vietnam’s HOSE, providing evidence that the introduction of the index futures contract facilitated market efficiency.