Impact Of Financial Market Uncertainty On Market Returns
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Impact Of Financial Market Uncertainty On Market Returns
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Author : Maryam Abid
language : en
Publisher:
Release Date : 2020
Impact Of Financial Market Uncertainty On Market Returns written by Maryam Abid and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
This paper examines the effect of financial market uncertainty on market returns of different countries of the world. The effect of other macroeconomic factors on the world's Equity Market Indices was also explored. These factors included Consumer Price Index (CPI), Real Interest Rates (R.IR), Market Capitalization (MCAP), and Gross Domestic Product per capita growth (GDPPCG).For analyzing this relationship, around 40 countries data including developed and developing countries, over the period of 10 years from 2009-2018 which included major ups and downs occurred in the Equity markets of the world. To calculate financial market uncertainty, we followed Chang et al. (2000) methodology, involving cross-sectional absolute standard deviations (CSAD) among individual Countries returns, to define non-linear relations between equity return dispersions and market returns. For analysis, Panel Least Square (PLS) was used. Fixed Effect Model (FEM) is used to check the overall strength of the model, and checking heterogeneity of different countries. Group correlation was also performed on overall variables to check the causal relationship between all the variables and individual regression tests are also conducted country wise to explore that how much this model is applicable in selected countries and individual countries descriptive analysis for market return and uncertainty to check the moments of these variables. The overall results concluded that market returns are affected by the uncertainty of the financial markets in the long run and it is a significant variable in explaining market returns while overall test results proved a positive relationship with market returns but individual testing of this model on each country shows, more than half countries in the study have a negative relationship of financial market uncertainty with market returns. Along with this, other macro-economic variables impact is also measured over market returns of the world which shows all variables Consumer Price Index, Real Interest Rates, and Market Capitalization except Gross Domestic Product per capita growth have a negative relationship with the Market returns.
Geopolitical Risk On Stock Returns Evidence From Inter Korea Geopolitics
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Author : Seungho Jung
language : en
Publisher: International Monetary Fund
Release Date : 2021-10-22
Geopolitical Risk On Stock Returns Evidence From Inter Korea Geopolitics written by Seungho Jung and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-10-22 with Business & Economics categories.
We investigate how corporate stock returns respond to geopolitical risk in the case of South Korea, which has experienced large and unpredictable geopolitical swings that originate from North Korea. To do so, a monthly index of geopolitical risk from North Korea (the GPRNK index) is constructed using automated keyword searches in South Korean media. The GPRNK index, designed to capture both upside and downside risk, corroborates that geopolitical risk sharply increases with the occurrence of nuclear tests, missile launches, or military confrontations, and decreases significantly around the times of summit meetings or multilateral talks. Using firm-level data, we find that heightened geopolitical risk reduces stock returns, and that the reductions in stock returns are greater especially for large firms, firms with a higher share of domestic investors, and for firms with a higher ratio of fixed assets to total assets. These results suggest that international portfolio diversification and investment irreversibility are important channels through which geopolitical risk affects stock returns.
Essays On Risk And Uncertainty In Economics And Finance
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Author : Jorge Mario Uribe Gil
language : en
Publisher: Ed. Universidad de Cantabria
Release Date : 2022-11-22
Essays On Risk And Uncertainty In Economics And Finance written by Jorge Mario Uribe Gil and has been published by Ed. Universidad de Cantabria this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022-11-22 with Business & Economics categories.
This book adds to the resolution of two problems in finance and economics: i) what is macro-financial uncertainty? : How to measure it? How is it different from risk? How important is it for the financial markets? And ii) what sort of asymmetries underlie financial risk and uncertainty propagation across the global financial markets? That is, how risk and uncertainty change according to factors such as market states or market participants. In Chapter 2, which is entitled “Momentum Uncertainties”, the relationship between macroeconomic uncertainty and the abnormal returns of a momentum trading strategy in the stock market is studies. We show that high levels of uncertainty in the economy impact negatively and significantly the returns of a portfolio of stocks that consist of buying past winners and selling past losers. High uncertainty reduces below zero the abnormal returns of momentum, extinguishes the Sharpe ratio of the momentum strategy, while increases the probability of momentum crashes both by increasing the skewness and the kurtosis of the momentum return distribution. Uncertainty acts as an economic regime that underlies abrupt changes over time of the returns generated by momentum strategies. In Chapter 3, “Measuring Uncertainty in the Stock Market”, a new index for measuring stock market uncertainty on a daily basis is proposed. The index considers the inherent differentiation between uncertainty and the common variations between the series. The second contribution of chapter 3 is to show how this financial uncertainty index can also serve as an indicator of macroeconomic uncertainty. Finally, the dynamic relationship between uncertainty and the series of consumption, interest rates, production and stock market prices, among others, is analized. In chapter 4: “Uncertainty, Systemic Shocks and the Global Banking Sector: Has the Crisis Modified their Relationship?” we explore the stability of systemic risk and uncertainty propagation among financial institutions in the global economy, and show that it has remained stable over the last decade. Additionally, a new simple tool for measuring the resilience of financial institutions to these systemic shocks is provided. We examine the characteristics and stability of systemic risk and uncertainty, in relation to the dynamics of the banking sector stock returns. This sort of evidence is supportive of past claims, made in the field of macroeconomics, which hold that during the global financial crisis the financial system may have faced stronger versions of traditional shocks rather than a new type of shock. In chapter 5, “Currency downside risk, liquidity, and financial stability”, downside risk propagation across global currency markets and the ways in which it is related to liquidity is analyzed. Two primary contributions to the literature follow. First, tail-spillovers between currencies in the global FX market are estimated. This index is easy to build and does not require intraday data, which constitutes an important advantage. Second, we show that turnover is related to risk spillovers in global currency markets. Chapter 6 is entitled “Spillovers from the United States to Latin American and G7 Stock Markets: A VAR-Quantile Analysis”. This chapter contributes to the studies of contagion, market integration and cross-border spillovers during both regular and crisis episodes by carrying out a multivariate quantile analysis. It focuses on Latin American stock markets, which have been characterized by a highly positive dynamic in recent decades, in terms of market capitalization and liquidity ratios, after a far-reaching process of market liberalization and reforms to pension funds across the continent during the 80s and 90s. We document smaller dependences between the LA markets and the US market than those between the US and the developed economies, especially in the highest and lowest quantiles.
The Era Of Uncertainty
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Author : Francois Trahan
language : en
Publisher: John Wiley & Sons
Release Date : 2011-07-13
The Era Of Uncertainty written by Francois Trahan and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-07-13 with Business & Economics categories.
Macroeconomic Investment Strategies for an Era of Economic Uncertainty “Over the years, François’ insightful analyses of the business cycle has led to market calls that have both benefitted investors on the upside and (more important to many) protected them from losses on the downside. François’ incredible track record in successfully interpreting the trends that can be found in leading indicators and other macroeconomic data have also led to his well deserved reputation as an expert in sector rotation - providing investors on both the long and short side of the market opportunities to profit from his ideas. In my opinion, his most important and influential macro prediction to date was his call in the middle of the last decade when he predicted that the worst housing crisis in American history would soon be upon us, and that it would have far-ranging implications for both the global economy and world financial markets.”
Investment Capital Market Imperfections And Uncertainty
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Author : Robert Lensink
language : en
Publisher: Edward Elgar Publishing
Release Date : 2001-01-01
Investment Capital Market Imperfections And Uncertainty written by Robert Lensink and has been published by Edward Elgar Publishing this book supported file pdf, txt, epub, kindle and other format this book has been release on 2001-01-01 with Business & Economics categories.
This book presents an up-to-date overview of the theory as well as the empirics of the relationship between investment, financial imperfections and uncertainty. After reviewing the capital market imperfections literature and the empirical results, the authors discuss both traditional investment models with uncertainty and the more modern option based models. They present an overview of empirical results of the modelling of investment under uncertainty. In these examples the effects of capital market imperfections on investment are carefully considered. The authors conclude that there is overwhelming empirical support for a negative uncertainty-investment relationship. This book should appeal to academics with an interest in investment theory, professionals in the financial sector and students of macroeconomics and finance. "Investment, Capital Market Imperfections, and Uncertainty" assumes only a basic knowledge of mathematics and is easily accessible.
Crises And Uncertainty In The Economy
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Author : Hachmi BEN AMEUR
language : en
Publisher: Springer Nature
Release Date : 2023-01-13
Crises And Uncertainty In The Economy written by Hachmi BEN AMEUR and has been published by Springer Nature this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023-01-13 with Business & Economics categories.
This book explores how the economic sphere has experienced an ultimate shape after the occurrence of several crises, since 2000s. The subprime crisis has trigged the transition from conventional to unconventional frameworks in most industrialised and emerging economies. This book highlights how the sovereign debt crisis has exacerbated the economic environment and raised economic uncertainty. This book asserts that markets integration have boosted contagion and risk spillovers among financial markets. Moreover, the Brexit and US-China trade tension has intensified uncertainty and the economic challenges. This book examines in recent times how humanity has experienced the most dramatic health crisis and their economic effects. This pandemic lockdowns several countries and caused an economic and financial collapse. This book expands on these crises, with different origins and mechanisms, have shaped the economic systems in several ways: monetary policy, macroeconomic imbalance, economic growth, economic integration, financial risk, volatility and trade effects. The main aims of this book cover the topical issues related to crises and uncertainty and the economic consequences. This book is drawn from academics and practitioners presenting high-quality original research papers, presented in the Financial and Economic Meeting conference 2021.
Financial Market Volatility And The Implications For Market Regulation
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Author : Louis O. Scott
language : en
Publisher: International Monetary Fund
Release Date : 1990-11
Financial Market Volatility And The Implications For Market Regulation written by Louis O. Scott and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1990-11 with Business & Economics categories.
Volatility in financial markets has forced economists to reexamine the validity of the efficient markets hypothesis, and new empirical approaches have been applied to the study of this important issue in recent years. Many of the recent studies have found evidence of excessive volatility. In the aftermath of the stock market crash of 1987 and the perceived increase in market volatility, some economists have advocated additional market regulations. Are these proposed regulations necessary and would they serve to reduce market volatility? This paper presents a review of recent studies on financial market volatility and examines the proposed regulations.
The Impact Of Political Uncertainty On Stock Markets And Politically Connected Firms An Italian Case Study
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Author : Jessica Bormetti
language : en
Publisher:
Release Date : 2022
The Impact Of Political Uncertainty On Stock Markets And Politically Connected Firms An Italian Case Study written by Jessica Bormetti and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022 with categories.
The link between finance and politics always existed, but the interest in that topic appears to be growing as also more research is been performed in that regard. Different political events - from elections to legislation changes, or specific events like Brexit can lead to a state of instability and insecurity, which consequently influences negatively the financial markets. Such effects are mainly due to decreasing investors confidence and a more risk-averse approach towards financial decisions, which leads to an overall fall in investment activities. This thesis examines the impact of political uncertainty in Italy on the countrys stock market, as well as on companies specific features (such as stock performance, market power and riskiness). The analysis differentiates the Italian companies into two groups: those that are politically connected and those that are not linked to any political counterparty, with the aim to study if those two groups behave differently during times of political turmoil. The key findings show that political uncertainty affects Italian politically connected firms (PCFs) stronger than their non-connected peers, in terms of stock performance and riskiness. During political distress, PCFs are more exposed to the financial market, but are also more protected by their political relations.*****The link between finance and politics always existed, but the interest in that topic appears to be growing as also more research is been performed in that regard. Different political events - from elections to legislation changes, or specific events like Brexit can lead to a state of instability and insecurity, which consequently influences negatively the financial markets. Such effects are mainly due to decreasing investors confidence and a more risk-averse approach towards financial decisions, which leads to an overall fall in investment activities. This thesis examines the impact of political uncertainty in Italy on the countrys stock market, as well as
Financial Market Imperfections And Productivity Growth
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Author : Bruce C. Greenwald
language : en
Publisher:
Release Date : 1989
Financial Market Imperfections And Productivity Growth written by Bruce C. Greenwald and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1989 with Business enterprises categories.
This paper examines the impact of financial market imperfections on long-term productivity growth. It focuses on failures in markets for the sale of equity securities and hence on the failure of markets which help firms diversify the risks of real investment. The paper examines separately situations in which productivity growth is driven by learning-by-doing and where it results from the cumulative impact of explicit investments in technology by firms, In general, a multiplicity of steady-state growth paths exists with different growth rates along each path. The particular path followed by any single economy (and hence the growth rate of that economy) will depend significantly on policy interventions which mitigate effects of financial markets.
Good And Bad Uncertainty
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Author : Gill Segal
language : en
Publisher:
Release Date : 2020
Good And Bad Uncertainty written by Gill Segal and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
Does macroeconomic uncertainty increase or decrease aggregate growth and asset prices? To address this question, we decompose aggregate uncertainty into 'good' and 'bad' volatility components, associated with positive and negative innovations to macroeconomic growth. We document that in line with our theoretical framework, these two uncertainties have opposite impact on aggregate growth and asset prices. Good uncertainty predicts an increase in future economic activity, such as consumption, output, and investment, and is positively related to valuation ratios, while bad uncertainty forecasts a decline in economic growth and depresses asset prices. Further, the market price of risk and equity beta of good uncertainty are positive, while negative for bad uncertainty. Hence, both uncertainty risks contribute positively to risk premia, and help explain the cross-section of expected returns beyond cash flow risk.
