Search results for: stock market investors
Commenced in January 2007
Frequency: Monthly
Edition: International
Paper Count: 3930

Search results for: stock market investors

3930 Stock Characteristics and Herding Formation: Evidence from the United States Equity Market

Authors: Chih-Hsiang Chang, Fang-Jyun Su

Abstract:

This paper explores whether stock characteristics influence the herding formation among investors in the US equity market. To extend the research scope of the existing literature, this paper further examines the role that stock risk characteristics play in the US equity market, and the way they influence investors’ decision-making. First, empirical results show that whether general stocks or high-risk stocks, there are no herding behaviors among the investors in the US equity market during the whole research period or during four great events. Moreover, stock characteristics have great influence on investors’ trading decisions. Finally, there is a bidirectional lead-lag relationship of the herding formation between high-risk stocks and low-risk stocks, but the influence of high-risk stocks on the low-risk stocks is stronger than that of low-risk stocks on the high-risk stocks.

Keywords: stock characteristics, herding formation, investment decision, US equity market, lead-lag relationship

Procedia PDF Downloads 239
3929 The Potential Dark and Bright Part of Behavioral Biases in Investor’s Investment Decisions: Mediated Moderation of Stock Market Anomalies and Financial Literacy

Authors: Zain Ul Abideen

Abstract:

The study examines the potentially dark and bright parts of behavioral biases in investors’ investment decisions in the Pakistani equity market. These biases, directly and indirectly, play a comprehensive role in controlling and deciding the investor’s investment decisions. Stock market anomalies are used as a mediator, while financial literacy is used as a moderator to check the mentioned relationship. The sample consisted of investors who have trading experience of more than two years in the stock market. The result indicates that calendar anomalies do not mediate between overconfidence bias and investment decisions. However, the study investigates the mediating role of fundamental and technical anomalies between overconfidence bias and investment decisions. Furthermore, calendar anomalies play a significant role between the disposition effect and investment decisions. Calendar anomalies also mediate between herding bias and investment decisions. Financial literacy significantly moderates between behavioral biases and stock market anomalies. This research would be beneficial for individual and professional investors in their investment decisions. They should be financially literate, consequently less biased and have no market anomalies. Investors in emerging and developed economies can make optimal decisions in their respective stock markets.

Keywords: behavioral biases, financial literacy, stock market anomalies, investment decision

Procedia PDF Downloads 39
3928 Investment Trend Analysis of Dhaka Stock Exchange: A Comparative Study

Authors: Azaz Zaman, Mirazur Rahman

Abstract:

Capital market is a crucial financial market place where companies and the government can raise long-term funds and, at the same time, investors get the opportunity to invest in the listed companies. Capital markets play a vital role not only in shifting the funds from surplus entity to deficit for investment, but also in the overall economic development of any developing country like Bangladesh. Being the first and biggest capital market of Bangladesh, Dhaka Stock Exchange (DSE) is the prime bourse of the country. The differences in the investment preference— among three broad categories of investors in DSE including individual investors, institutional investors, and government— are easily observed. Authors of this article have used five categories of investors such as sponsors or directors of the company, institutional investors, foreign investors, government, and the general public in order to present a comparative analysis of their investment patterns. Obtaining data on the percentage of investment by these five types of investors in different sectors from the DSE website, this study aims to analyze the sector-wise investment preference of these investors using August 2018 data. The study has found that the sponsors or directors of the company have the highest percentage of investment in the textile industry which is close to 16%. The Bangladesh government, as an investor, has the highest percentage of investment in the fuel & power sector, approximately 32%. It has also found that the mutual funds' sector is mostly financed by institutional investors, nearly 28%. Foreign investors have their most investments in the banking sector, which is close to 22%. It has also revealed that the textile sector is mostly financed by the general public, close to 17%. Nevertheless, general public, surprisingly, has the lowest percentage of investment in the telecommunication sector, which is 0.10%.

Keywords: stock market investment, Dhaka stock exchange, capital market, Bangladesh

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3927 Testing the Weak Form Efficiency of Islamic Stock Market: Empirical Evidence from Indonesia

Authors: Herjuno Bagus Wicaksono, Emma Almira Fauni, Salma Amelia Dina

Abstract:

The Efficient Market Hypothesis (EMH) states that, in an efficient capital market, price fully reflects the information available in the market. This theory has influenced many investors behavior in trading in the stock market. Advanced researches have been conducted to test the efficiency of the stock market in particular countries. Indonesia, as one of the emerging countries, has performed substantial growth in the past years. Hence, this paper aims to examine the efficiency of Islamic stock market in Indonesia in its weak form. The daily stock price data from Indonesia Sharia Stock Index (ISSI) for the period October 2015 to October 2016 were used to do the statistical tests: Run Test and Serial Correlation Test. The results show that there is no serial correlation between the current price with the past prices and the market follows the random walk. This research concludes that Indonesia Islamic stock market is weak form efficient.

Keywords: efficient market hypothesis, Indonesia sharia stock index, random walk, weak form efficiency

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3926 On the Influence of the Covid-19 Pandemic on Tunisian Stock Market: By Sector Analysis

Authors: Nadia Sghaier

Abstract:

In this paper, we examine the influence of the COVID-19 pandemic on the performance of the Tunisian stock market and 12 sectors over a recent period from 23 March 2020 to 18 August 2021, including several waves and the introduction of vaccination. The empirical study is conducted using cointegration techniques which allows for long and short-run relationships. The obtained results indicate that both daily growth in confirmed cases and deaths have a negative and significant effect on the stock market returns. In particular, this effect differs across sectors. It seems more pronounced in financial, consumer goods and industrials sectors. These findings have important implications for investors to predict the behavior of the stock market or sectors returns and to implement hedging strategies during the COVID-19 pandemic.

Keywords: Tunisian stock market, sectors, COVID-19 pandemic, cointegration techniques

Procedia PDF Downloads 157
3925 Financial Instrument with High Investment Risk on the Warsaw Stock Exchange

Authors: Piotr Prewysz-Kwinto

Abstract:

The market of financial instruments with high risk is developing very dynamically in recent years and attracts more and more interest of investors. It consists essentially of two groups of instruments, i.e. derivatives and exchange traded product (ETP), and each year new types are introduced and offered to investors. The aim of this paper is to present the principles concerning financial instruments with high investment risk available on the Warsaw Stock Exchange (WSE), because they have quite complex constructions, and to evaluate the development of this market. In order to achieve this aim, statistical data from 2014-2016 was analyzed. The results confirm that the financial instruments with high investment risk available on the WSE constitute a diversified and the most numerous group of financial instruments and attract the most interest of investors. Responsible investing requires, however, a good knowledge of how they work and how they can generate profit to not expose oneself to unexpected losses.

Keywords: derivatives, exchange traded products (ETP), financial instruments, financial market, risk, stock exchange

Procedia PDF Downloads 337
3924 Trading Volume on the Tunisian Financial Market: An Approach Explaining the Hypothesis of Investors Overconfidence

Authors: Fatma Ismailia, Malek Saihi

Abstract:

This research provides an explanation of exchange incentives on the Tunis stock market from a behavioural point of view. The elucidation of the anomalies of excessive volume of transactions and that of excessive volatility cannot be done without the recourse to the psychological aspects of investors. The excessive confidence has been given the predominant role for the explanation of these phenomena. Indeed, when investors store increments, they become more confident about the precision of their private information and their exchange activities then become more aggressive on the subsequent periods. These overconfident investors carry out the intensive exchanges leading to an increase of securities volatility. The objective of this research is to identify whether the trading volume and the excessive volatility of securities observed on the Tunisian stock market come from the excessive exchange of overconfident investors. We use a sample of daily observations over the period January 1999 - October 2007 and we relied on various econometric tests including the VAR model. Our results provide evidence on the importance to consider the bias of overconfidence in the analysis of Tunis stock exchange specificities. The results reveal that the excess of confidence has a major impact on the trading volume while using daily temporal intervals.

Keywords: overconfidence, trading volume, efficiency, rationality, anomalies, behavioural finance, cognitive biases

Procedia PDF Downloads 376
3923 The Effect of COVID-19 Transmission, Lockdown Measures, and Vaccination on Stock Market Returns

Authors: Belhouchet Selma, Ben Amar Anis

Abstract:

We examine the impact of COVID-19 transmission, containment measures, and vaccination growth on daily stock market returns for the G7 countries (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) from January 22, 2020, to August 31, 2021, more than a year and a half after COVID-19. For this objective, we use panel pooled ordinary least squares regressions. Our findings indicate that the spread of the pandemic has a negative impact on the daily performance of the world's seven main stock markets. Government measures to improve stock market returns are no longer successful. Furthermore, our findings demonstrate that immunization efforts in G7 nations do not increase stock market performance in these countries. A variety of robustness tests back up our conclusions. Our findings have far-reaching implications for investors, governments, and regulators not only in the G7 countries but also in all developed countries and all countries globally.

Keywords: COVID-19, G7 stock market, containment measures, vaccination

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3922 Combined Effect of Heat Stimulation and Delay Addition of Superplasticizer with Slag on Fresh and Hardened Property of Mortar

Authors: Antoni Wibowo, Harry Pujianto, Dewi Retno Sari Saputro

Abstract:

The stock market can provide huge profits in a relatively short time in financial sector; however, it also has a high risk for investors and traders if they are not careful to look the factors that affect the stock market. Therefore, they should give attention to the dynamic fluctuations and movements of the stock market to optimize profits from their investment. In this paper, we present a nonlinear autoregressive exogenous model (NARX) to predict the movements of stock market; especially, the movements of the closing price index. As case study, we consider to predict the movement of the closing price in Indonesia composite index (IHSG) and choose the best structures of NARX for IHSG’s prediction.

Keywords: NARX (Nonlinear Autoregressive Exogenous Model), prediction, stock market, time series

Procedia PDF Downloads 207
3921 Financial Ethics: A Review of 2010 Flash Crash

Authors: Omer Farooq, Salman Ahmed Khan, Sadaf Khalid

Abstract:

Modern day stock markets have almost entirely became automated. Even though it means increased profits for the investors by algorithms acting upon the slightest price change in order of microseconds, it also has given birth to many ethical dilemmas in the sense that slightest mistake can cause people to lose all of their livelihoods. This paper reviews one such event that happened on May 06, 2010 in which $1 trillion dollars disappeared from the Dow Jones Industrial Average. We are going to discuss its various aspects and the ethical dilemmas that have arisen due to it.

Keywords: flash crash, market crash, stock market, stock market crash

Procedia PDF Downloads 476
3920 Investors' Ratio Analysis and the Profitability of Listed Firms: Evidence from Nigeria

Authors: Abisola Akinola, Akinsulere Femi

Abstract:

The stock market has continually been a source of economic development in most developing countries. This study examined the relationship between investors’ ratio analysis and profitability of quoted companies in Nigeria using secondary data obtained from the annual reports of forty-two (42) companies. The study employed the multiple regression technique to analyze the relationship between investors’ ratio analysis (measured by dividend per share and earning per share) and profitability (measured by the return on equity). The results from the analysis show that investors’ ratio analysis, when measured by earnings per share, have a positive and significant impact on profitability. However, the study noted that investors’ ratio analysis, when measured by dividend per share, tend to have a positive impact on profitability but it is statistically insignificant. By implication, investors and other stakeholders that are interested in investing in stocks can predict the earning capacity of listed firms in the stock market.

Keywords: dividend per share, earnings per share, profitability, return on equity

Procedia PDF Downloads 96
3919 Earnings-Related Information, Cognitive Bias, and the Disposition Effect

Authors: Chih-Hsiang Chang, Pei-Shan Kao

Abstract:

This paper discusses the reaction of investors in the Taiwan stock market to the most probable unknown earnings-related information and the most probable known earnings-related information. As compared with the previous literature regarding the effect of an official announcement of earnings forecast revision, this paper further analyzes investors’ cognitive bias toward the unknown and known earnings-related information, and the role of media during the investors' reactions to the foresaid information shocks. The empirical results show that both the unknown and known earnings-related information provides useful information content for a stock market. In addition, cognitive bias and disposition effect are the behavioral pitfalls that commonly occur in the process of the investors' reactions to the earnings-related information. Finally, media coverage has a remarkable influence upon the investors' trading decisions.

Keywords: cognitive bias, role of media, disposition effect, earnings-related information, behavioral pitfall

Procedia PDF Downloads 185
3918 Outlier Detection in Stock Market Data using Tukey Method and Wavelet Transform

Authors: Sadam Alwadi

Abstract:

Outlier values become a problem that frequently occurs in the data observation or recording process. Thus, the need for data imputation has become an essential matter. In this work, it will make use of the methods described in the prior work to detect the outlier values based on a collection of stock market data. In order to implement the detection and find some solutions that maybe helpful for investors, real closed price data were obtained from the Amman Stock Exchange (ASE). Tukey and Maximum Overlapping Discrete Wavelet Transform (MODWT) methods will be used to impute the detect the outlier values.

Keywords: outlier values, imputation, stock market data, detecting, estimation

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3917 Exchange Traded Products on the Warsaw Stock Exchange

Authors: Piotr Prewysz-Kwinto

Abstract:

A dynamic development of financial market is accompanied by the emergence of new products on stock exchanges which give absolutely new possibilities of investing money. Currently, the most innovative financial instruments offered to investors are exchange traded products (ETP). They can be defined as financial instruments whose price depends on the value of the underlying instrument. Thus, they offer investors a possibility of making a profit that results from the change in value of the underlying instrument without having to buy it. Currently, the Warsaw Stock Exchange offers many types of ETPs. They are investment products with full or partial capital protection, products without capital protection as well as leverage products, issued on such underlying instruments as indices, sector indices, commodity indices, prices of energy commodities, precious metals, agricultural produce or prices of shares of domestic and foreign companies. This paper presents the mechanism of functioning of ETP available on the Warsaw Stock Exchange and the results of the analysis of statistical data on these financial instruments.

Keywords: exchange traded products, financial market, investment, stock exchange

Procedia PDF Downloads 300
3916 The Effect of the Enterprises Being Classified as Socially Responsible on Their Stock Returns

Authors: Chih-Hsiang Chang, Chia-Ching Tsai

Abstract:

The aim of this study is to examine the stock price effect of the enterprises being classified as socially responsible. We explore the stock price response to the announcement that an enterprise is selected for the Taiwan Corporate Sustainability Awards. Empirical results indicate that the announcements of the Taiwan Corporate Sustainability Awards provide useful informational content to stock market. We find the evidence of insignificantly positive short-term and significantly positive long-term price reaction to the enterprises being classified as socially responsible. This study concludes that investors in the Taiwan stock market tend to view an enterprise being selected for the Taiwan Corporate Sustainability Awards as one with superior quality and long-term price potential.

Keywords: corporate social responsibility, stock price effect, Taiwan stock market, investments

Procedia PDF Downloads 118
3915 Impact of Regulation on Trading in Financial Derivatives in Europe

Authors: H. Florianová, J. Nešleha

Abstract:

Financial derivatives are considered to be risky investment instruments which could possibly bring another financial crisis. As prevention, European Union and its member states have released new legal acts adjusting this area of law in recent years. There have been several cases in history of capital markets worldwide where it was shown that legislature may affect behavior of subjects on capital markets. In our paper we analyze main events on selected European stock exchanges in order to apply them on three chosen markets - Czech capital market represented by Prague Stock Exchange, German capital market represented by Deutsche Börse and Polish capital market represented by Warsaw Stock Exchange. We follow time series of development of the sum of listed derivatives on these three stock exchanges in order to evaluate popularity of those exchanges. Afterwards we compare newly listed derivatives in relation to the speed of development of these exchanges. We also make a comparison between trends in derivatives and shares development. We explain how a legal regulation may affect situation on capital markets. If the regulation is too strict, potential investors or traders are not willing to undertake it and move to other markets. On the other hand, if the regulation is too vague, trading scandals occur and the market is not reliable from the prospect of potential investors or issuers. We see that making the regulation stricter usually discourages subjects to stay on the market immediately although making the regulation vaguer to interest more subjects is usually much slower process.

Keywords: capital markets, financial derivatives, investors' behavior, regulation

Procedia PDF Downloads 232
3914 Investor Psychology, Housing Prices, and Stock Market Response to Policy Decisions During the Covid-19 Recession in the United States

Authors: Ly Nguyen, Vidit Munshi

Abstract:

During the Covid-19 recession, the United States government has implemented several instruments to mitigate the impacts and revitalize the economy. This paper explores the effects of the various government policy decisions on stock returns, housing prices, and investor psychology during the pandemic in the United States. A numerous previous literature studies on this subject, yet very few focus on the context similar to what we are currently experiencing. Our monthly data covering the period from January 2019 through July 2021 were collected from Datastream. Utilizing the VAR model, we document a dynamic relationship between the market and policy actions throughout the period. In particular, the movements of Unemployment, Stock returns, and Housing prices are strongly sensitive to changes in government policies. Our results also indicate that changes in production level, stock returns, and interest rates decisions influence how investors perceived future market risk and expectations. We do not find any significant nexus between monetary and fiscal policy. Our findings imply that information on government policy and stock market performance provide useful feedback to one another in order to make better decisions in the current and future pandemic. Understanding how the market responds to a shift in government practices has important implications for authorities in implementing policy to avoid assets bubbles and market overreactions. The paper also provides useful implications for investors in evaluating the effectiveness of different policies and diversifying portfolios to minimize systematic risk and maximize returns.

Keywords: Covid-19 recession, United States, government policies, investor psychology, housing prices, stock market returns

Procedia PDF Downloads 138
3913 Buy-and-Hold versus Alternative Strategies: A Comparison of Market-Timing Techniques

Authors: Jonathan J. Burson

Abstract:

With the rise of virtually costless, mobile-based trading platforms, stock market trading activity has increased significantly over the past decade, particularly for the millennial generation. This increased stock market attention, combined with the recent market turmoil due to the economic upset caused by COVID-19, make the topics of market-timing and forecasting particularly relevant. While the overall stock market saw an unprecedented, historically-long bull market from March 2009 to February 2020, the end of that bull market reignited a search by investors for a way to reduce risk and increase return. Similar searches for outperformance occurred in the early, and late 2000’s as the Dotcom bubble burst and the Great Recession led to years of negative returns for mean-variance, index investors. Extensive research has been conducted on fundamental analysis, technical analysis, macroeconomic indicators, microeconomic indicators, and other techniques—all using different methodologies and investment periods—in pursuit of higher returns with lower risk. The enormous variety of timeframes, data, and methodologies used by the diverse forecasting methods makes it difficult to compare the outcome of each method directly to other methods. This paper establishes a process to evaluate the market-timing methods in an apples-to-apples manner based on simplicity, performance, and feasibility. Preliminary findings show that certain technical analysis models provide a higher return with lower risk when compared to the buy-and-hold method and to other market-timing strategies. Furthermore, technical analysis models tend to be easier for individual investors both in terms of acquiring the data and in analyzing it, making technical analysis-based market-timing methods the preferred choice for retail investors.

Keywords: buy-and-hold, forecast, market-timing, probit, technical analysis

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3912 Estimating the Volatilite of Stock Markets in Case of Financial Crisis

Authors: Gultekin Gurcay

Abstract:

In this paper, effects and responses of stock were analyzed. This analysis was done periodically. The dimensions of the financial crisis impact on the stock market were investigated by GARCH model. In this context, S&P 500 stock market is modeled with DAX, NIKKEI and BIST100. In this way, The effects of the changing in S&P 500 stock market were examined on European and Asian stock markets. Conditional variance coefficient will be calculated through garch model. The scope of the crisis period, the conditional covariance coefficient will be analyzed comparatively.

Keywords: conditional variance coefficient, financial crisis, garch model, stock market

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3911 Use of Fuzzy Logic in the Corporate Reputation Assessment: Stock Market Investors’ Perspective

Authors: Tomasz L. Nawrocki, Danuta Szwajca

Abstract:

The growing importance of reputation in building enterprise value and achieving long-term competitive advantage creates the need for its measurement and evaluation for the management purposes (effective reputation and its risk management). The paper presents practical application of self-developed corporate reputation assessment model from the viewpoint of stock market investors. The model has a pioneer character and example analysis performed for selected industry is a form of specific test for this tool. In the proposed solution, three aspects - informational, financial and development, as well as social ones - were considered. It was also assumed that the individual sub-criteria will be based on public sources of information, and as the calculation apparatus, capable of obtaining synthetic final assessment, fuzzy logic will be used. The main reason for developing this model was to fulfill the gap in the scope of synthetic measure of corporate reputation that would provide higher degree of objectivity by relying on "hard" (not from surveys) and publicly available data. It should be also noted that results obtained on the basis of proposed corporate reputation assessment method give possibilities of various internal as well as inter-branch comparisons and analysis of corporate reputation impact.

Keywords: corporate reputation, fuzzy logic, fuzzy model, stock market investors

Procedia PDF Downloads 200
3910 Applying Hybrid Graph Drawing and Clustering Methods on Stock Investment Analysis

Authors: Mouataz Zreika, Maria Estela Varua

Abstract:

Stock investment decisions are often made based on current events of the global economy and the analysis of historical data. Conversely, visual representation could assist investors’ gain deeper understanding and better insight on stock market trends more efficiently. The trend analysis is based on long-term data collection. The study adopts a hybrid method that combines the Clustering algorithm and Force-directed algorithm to overcome the scalability problem when visualizing large data. This method exemplifies the potential relationships between each stock, as well as determining the degree of strength and connectivity, which will provide investors another understanding of the stock relationship for reference. Information derived from visualization will also help them make an informed decision. The results of the experiments show that the proposed method is able to produced visualized data aesthetically by providing clearer views for connectivity and edge weights.

Keywords: clustering, force-directed, graph drawing, stock investment analysis

Procedia PDF Downloads 270
3909 Analyzing the Impact of Global Financial Crisis on Interconnectedness of Asian Stock Markets Using Network Science

Authors: Jitendra Aswani

Abstract:

In the first section of this study, impact of Global Financial Crisis (GFC) on the synchronization of fourteen Asian Stock Markets (ASM’s) of countries like Hong Kong, India, Thailand, Singapore, Taiwan, Pakistan, Bangladesh, South Korea, Malaysia, Indonesia, Japan, China, Philippines and Sri Lanka, has been analysed using the network science and its metrics like degree of node, clustering coefficient and network density. Then in the second section of this study by introducing the US stock market in existing network and developing a Minimum Spanning Tree (MST) spread of crisis from the US stock market to Asian Stock Markets (ASM) has been explained. Data used for this study is adjusted the closing price of these indices from 6th January, 2000 to 15th September, 2013 which further divided into three sub-periods: Pre, during and post-crisis. Using network analysis, it is found that Asian stock markets become more interdependent during the crisis than pre and post crisis, and also Hong Kong, India, South Korea and Japan are systemic important stock markets in the Asian region. Therefore, failure or shock to any of these systemic important stock markets can cause contagion to another stock market of this region. This study is useful for global investors’ in portfolio management especially during the crisis period and also for policy makers in formulating the financial regulation norms by knowing the connections between the stock markets and how the system of these stock markets changes in crisis period and after that.

Keywords: global financial crisis, Asian stock markets, network science, Kruskal algorithm

Procedia PDF Downloads 383
3908 Causality between Stock Indices and Cryptocurrencies during the Russia-Ukraine War

Authors: Nidhal Mgadmi, Abdelhafidh Othmani

Abstract:

This article examines the causal relationship between stock indices and cryptocurrencies during the current war between Russia and Ukraine. The econometric investigation runs from February 24, 2022, to April 12, 2023, focusing on seven stock market indices (S&P500, DAX, CAC40, Nikkei, TSX, MOEX, and PFTS) and seven cryptocurrencies (Bitcoin, Ethereum, Litcoin, Dash, Ripple, DigiByte and XEM). In this article, we try to understand how investors react to fluctuations in financial assets to seek safe havens in cryptocurrencies. We used dynamic causality to detect a possible causal relationship in the short term and seven models to estimate the long-term relationship between cryptocurrencies and financial assets. The causal relationship between financial market indexes and cryptocurrency coins in the short run indicates that three famous cryptocurrencies (BITCOIN, ETHEREUM, RIPPLE) and the two digital assets with minor popularity (XEM, Digibyte) are impacted by the German, Russian, and Ukrainian stock markets. In the long run, we found a positive and significate effect of the American, Canadian, French, and Ukrainian stock market indexes on Bitcoin. Thus, the stability of the traditional financial markets during the current war period can be explained on the one hand by investors’ fears of an unstable business climate, and on the other hand, by speculators’ sentiment towards new electronic products, which are perceived as hedging instruments and a safe haven in the face of the conflict between Ukraine and Russia.

Keywords: causality, stock indices, cryptocurrency, war, Russia, Ukraine

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3907 On the Importance of Quality, Liquidity Level and Liquidity Risk: A Markov-Switching Regime Approach

Authors: Tarik Bazgour, Cedric Heuchenne, Danielle Sougne

Abstract:

We examine time variation in the market beta of portfolios sorted on quality, liquidity level and liquidity beta characteristics across stock market phases. Using US stock market data for the period 1970-2010, we find, first, the US stock market was driven by four regimes. Second, during the crisis regime, low (high) quality, high (low) liquidity beta and illiquid (liquid) stocks exhibit an increase (a decrease) in their market betas. This finding is consistent with the flight-to-quality and liquidity phenomena. Third, we document the same pattern across stocks when the market volatility is low. We argue that, during low volatility times, investors shift their portfolios towards low quality and illiquid stocks to seek portfolio gains. The pattern observed in the tranquil regime can be, therefore, explained by a flight-to-low-quality and to illiquidity. Finally, our results reveal that liquidity level is more important than liquidity beta during the crisis regime.

Keywords: financial crises, quality, liquidity, liquidity risk, regime-switching models

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3906 Measures of Corporate Governance Efficiency on the Quality Level of Value Relevance Using IFRS and Corporate Governance Acts: Evidence from African Stock Exchanges

Authors: Tchapo Tchaga Sophia, Cai Chun

Abstract:

This study measures the efficiency level of corporate governance to improve the quality level of value relevance in the resolution of market value efficiency increase issues, transparency problems, risk frauds, agency problems, investors' confidence, and decision-making issues using IFRS and Corporate Governance Acts (CGA). The final sample of this study contains 3660 firms from ten countries' stock markets from 2010 to 2020. Based on the efficiency market theory and the positive accounting theory, this paper uses multiple econometrical methods (DID method, multivariate and univariate regression methods) and models (Ohlson model and compliance index model) regression to see the incidence results of corporate governance mechanisms on the value relevance level under the influence of IFRS and corporate governance regulations act framework in Africa's stock exchanges for non-financial firms. The results on value relevance show that the corporate governance system, strengthened by the adoption of IFRS and enforcement of new corporate governance regulations, produces better financial statement information when its compliance level is high. And that is both value-relevant and comparable to results in more developed markets. Similar positive and significant results were obtained when predicting future book value per share and earnings per share through the determination of stock price and stock return. The findings of this study have important implications for regulators, academics, investors, and other users regarding the effects of IFRS and the Corporate Governance Act (CGA) on the relationship between corporate governance and accounting information relevance in the African stock market. The contributions of this paper are also based on the uniqueness of the data used in this study. The unique data is from Africa, and not all existing findings provide evidence for Africa and of the DID method used to examine the relationship between corporate governance and value relevance on African stock exchanges.

Keywords: corporate governance value, market efficiency value, value relevance, African stock market, stock return-stock price

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3905 Using Deep Learning Neural Networks and Candlestick Chart Representation to Predict Stock Market

Authors: Rosdyana Mangir Irawan Kusuma, Wei-Chun Kao, Ho-Thi Trang, Yu-Yen Ou, Kai-Lung Hua

Abstract:

Stock market prediction is still a challenging problem because there are many factors that affect the stock market price such as company news and performance, industry performance, investor sentiment, social media sentiment, and economic factors. This work explores the predictability in the stock market using deep convolutional network and candlestick charts. The outcome is utilized to design a decision support framework that can be used by traders to provide suggested indications of future stock price direction. We perform this work using various types of neural networks like convolutional neural network, residual network and visual geometry group network. From stock market historical data, we converted it to candlestick charts. Finally, these candlestick charts will be feed as input for training a convolutional neural network model. This convolutional neural network model will help us to analyze the patterns inside the candlestick chart and predict the future movements of the stock market. The effectiveness of our method is evaluated in stock market prediction with promising results; 92.2% and 92.1 % accuracy for Taiwan and Indonesian stock market dataset respectively.

Keywords: candlestick chart, deep learning, neural network, stock market prediction

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3904 Stock Market Developments, Income Inequality, Wealth Inequality

Authors: Quang Dong Dang

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This paper examines the possible effects of stock market developments by channels on income and wealth inequality. We use the Bayesian Multilevel Model with the explanatory variables of the market’s channels, such as accessibility, efficiency, and market health in six selected countries: the US, UK, Japan, Vietnam, Thailand, and Malaysia. We found that generally, the improvements in the stock market alleviate income inequality. However, stock market expansions in higher-income countries are likely to trigger income inequality. We also found that while enhancing the quality of channels of the stock market has counter-effects on wealth equality distributions, open accessibilities help reduce wealth inequality distributions within the scope of the study. In addition, the inverted U-shaped hypothesis seems not to be valid in six selected countries between the period from 2006 to 2020.

Keywords: Bayesian multilevel model, income inequality, inverted u-shaped hypothesis, stock market development, wealth inequality

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3903 Seeking Safe Haven: An Analysis of Gold Performance during Periods of High Volatility

Authors: Gerald Abdesaken, Thomas O. Miller

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This paper analyzes the performance of gold as a safe-haven investment. Assuming high market volatility as an impetus to seek a safe haven in gold, the return of gold relative to the stock market, as measured by the S&P 500, is tracked. Using the Chicago Board Options Exchange (CBOE) volatility index (VIX) as a measure of stock market volatility, various criteria are established for when an investor would seek a safe haven to avoid high levels of risk. The results show that in a vast majority of cases, the S&P 500 outperforms gold during these periods of high volatility and suggests investors who seek safe haven are underperforming the market.

Keywords: gold, portfolio management, safe haven, VIX

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3902 Building and Development of the Stock Market Institutional Infrastructure in Russia

Authors: Irina Bondarenko, Olga Vandina

Abstract:

The theory of evolutionary economics is the basis for preparation and application of methods forming the stock market infrastructure development concept. The authors believe that the basis for the process of formation and development of the stock market model infrastructure in Russia is the theory of large systems. This theory considers the financial market infrastructure as a whole on the basis of macroeconomic approach with the further definition of its aims and objectives. Evaluation of the prospects for interaction of securities market institutions will enable identifying the problems associated with the development of this system. The interaction of elements of the stock market infrastructure allows to reduce the costs and time of transactions, thereby freeing up resources of market participants for more efficient operation. Thus, methodology of the transaction analysis allows to determine the financial infrastructure as a set of specialized institutions that form a modern quasi-stable system. The financial infrastructure, based on international standards, should include trading systems, regulatory and supervisory bodies, rating agencies, settlement, clearing and depository organizations. Distribution of financial assets, reducing the magnitude of transaction costs, increased transparency of the market are promising tasks in the solution for questions of services level and quality increase provided by institutions of the securities market financial infrastructure. In order to improve the efficiency of the regulatory system, it is necessary to provide "standards" for all market participants. The development of a clear regulation for the barrier to the stock market entry and exit, provision of conditions for the development and implementation of new laws regulating the activities of participants in the securities market, as well as formulation of proposals aimed at minimizing risks and costs, will enable the achievement of positive results. The latter will be manifested in increasing the level of market participant security and, accordingly, the attractiveness of this market for investors and issuers.

Keywords: institutional infrastructure, financial assets, regulatory system, stock market, transparency of the market

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3901 Value Relevance of Accounting Information: Empirical Evidence from China

Authors: Ying Guo, Miaochan Li, David Yang, Xiao-Yan Li

Abstract:

This paper examines the relevance of accounting information to stock prices at different periods using manufacturing companies listed in China’s Growth Enterprise Market (GEM). We find that both the average stock price at fiscal year-end and the average stock price one month after fiscal year-end are more relevant to the accounting information than the closing stock price four months after fiscal year-end. This implies that Chinese stock markets react before the public disclosure of accounting information, which may be due to information leak before official announcements. Our findings confirm that accounting information is relevant to stock prices for Chinese listed manufacturing companies, which is a critical question to answer for investors who have interest in Chinese companies.

Keywords: accounting information, response time, value relevance, stock price

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