The importance of analysing the effects of changes in liquidity spreads for long maturities on both costs and wealth increases with the increasing importance of capital market-based refinancing by banks. The present study proposes a present value based approach for middle-sized banks. It enables to measure the impact of the extreme change in the institution’s own liquidity and spreads on the current liquidity situation by investigating the entire maturity horizon to a dangerous extent. Different scenarios for refinancing alternatives due to the different developments of the liquidity spreads can be analysed straightforwardly. This enables a rapid assessment of the risk situation over the modelled time. In the dynamized version, which covers the planning horizon, the interest rate effects arising over time are also made visible. The result of the model approach is suitable for strategic decisions in planning the refinancing structure under alternative conditions.
Day: June 24, 2019
Is International Investment Diversification Prudent for the Individual or Corporate Investor
This paper examines the benefits of international diversification for the individual and corporate investor and attempts to determine whether international diversification is prudent. Although research supports as well as refutes the claim that international diversification improves performance, results vary due to the non-static nature of national markets’ returns, standard deviations, and correlations. As a result, data for the research are dependent on the period of study. As global markets have become more synchronized and US equities have had an unusual increase in value recently, studies relying on newer data argue against the benefits. However, because domestic investing limits diversification potential, international diversification is prudent for long-term investors.
Empirical Evidences on Structure-Conduct-Performance Relationship in Banking Sector: A Literature Review
A detailed review of existing literature on the structure-conduct-performance (SCP) relationship indicates that the empirical divergence between SCP and competing hypothesis is still not conclusive which is attracting many research works across the world, and recently in Africa. Studies on SCP are dominated by quantitative analysis with exclusion of non-quantifiable variables such as related to conduct and/or those lack data (regulation). The majority of studies employ a multiple linear regression model where a measure of bank performance (mostly profit) is regressed on market concentration variables (such as k-firm, Herfindahl-Hirschman Index, etc.) along with some control variables. Studies that used the structure model have limited focus on other key variables like regulation, macroeconomic, and industry factors. They have also applied a quantitative approach and assumed conduct as being a derivative of the market structure. Hence, there was no attempt to explore the behavior of banks within the given structure, banking, and macro environment. Few studies have explicitly considered Ethiopia’s banking performance using the structural approach (SCP or ESH). Nevertheless, the existing bank performance studies were not analyzed incorporating big banks in the industry, with long period observation of banks, using parametric and non-parametric methods, which are scarce in the Ethiopian context.
Impact of Dividend Announcements on Stock Prices of UK Firms Listed in London Stock Exchange
The aim of this paper is to explore the possible relationship between dividend announcement and stock price reactions upon announcements by the quoted firms in London Stock Exchange (LSE). For the sake of this study, an event-study methodology was employed to calculate any abnormal or excess returns around dividend announcements for 100 firms listed in the LSE over a period of 5 years (2010-2014). The result of the event study indicates that dividend announcements do not convey information to investors (Khan, 2011). The researcher concludes by saying that dividend announcements do not convey any information to share prices, which is in consonance with the M-M Dividend Irrelevance Theory.
Impact of Risk Tolerance and Demographic Factors on Financial Investment Decision
Risk tolerance is popularly used in the personal financial planning industry to understand an investor’s attitude towards risk. In the twenty-first century, it is very important for the various investment firms, fund managers, financial planners to understand financial investment decisions of an investor for developing a strategy for the sale of their investment products in market. However, financial decisions of an individual not only depend on financial risk-tolerance level, but also upon different demographic factors. Thus, this study is undertaken to develop a model that helps in understanding impact of risk tolerance and demographic factors jointly on investment decision, especially, a decision related to level of investment. Also, investor may be having higher risk tolerance for the calculative investment but may be having lover risk tolerance in speculative investment. So, based on extensive literature support, this research has tried to propose a model for understanding the impact of investment risk tolerance, capital risk tolerance, speculative risk tolerance, and six important demographic variables jointly on investment decision. Thus, this study would be helpful to investment firms in understanding impact of risk tolerances and demographic variables jointly on level of investment of investors, which can be used for designing a strategy or investment product to offer to the investors with different levels of financial risk tolerance and different demographic profiles.
An Econometric Analysis of Linkages between Macroeconomic Variables and Stock Markets: Evidence from Asian Emerging Markets
The purpose of this paper is to investigate impact of macroeconomic variables on stock markets of India and Indonesia. This paper also attempts to identify linkages between markets and macroeconomic variables. The rationale behind selecting these countries for the present study is MSCI emerging markets index of Asia, which comprises emerging economies with huge return potential for prospective investors. This study will help investors and researchers to understand dynamics of linkages between markets and macroeconomic variables. Augmented Dickey-Fuller (ADF) unit root test is used to assess the stationary of time series, Johansen test co-integration is applied to examine long-term integration among variables, Granger causality test is used to examine the causality relationship between macroeconomic variables and stock returns. The monthly data are taken for the study which ranges from July 1997 to July 2017. Currency exchange rates, interest rates, money supply, and inflation are the macroeconomic variables for the current study. Results revealed that there is one co-integrating equation of long-run equilibrium between the variables for both countries. Granger causality test reveals that there exists unidirectional and bidirectional relationship between the variables.
Conceptualising the Linkages between Financial Development, Human Development, and Income Inequality: Cross-Country Evidences
In the present era of finance capitalism, it is a great challenge for any country to strengthen its financial sector so as to realise the vision of financial inclusive society. Beside this major challenge, the government has to ensure the well-being of the society. Well-being of the society is not only indicated by the income level of an individual, but also by the noneconomic factors like health and education level of the people. But now-a-days, more and more emphasis is given on the concept of well-being of the population in the context of limiting role of GDP in ensuring equitable distribution of wealth. Formulation of a policy in achieving both the policy objectives (i.e., development of financial sector and ensuring well-being of the population) essentially calls for an understanding on the linkages between financial development and well-being of the population. In this context, this paper attempts to develop a conceptual framework on the linkages between the financial development and the human well-being in the context of inclusive development paradigm. In addition, this paper also tries to conceptualise the theoretical framework on the implications of financial development and/or human well-being on the level of income inequality or the other way round. The empirical analysis in this paper shows that there is positive and significant bidirectional relationship between the financial development and human development across selected countries of the world. Government intervention in the development in the financial sector (or achieving a higher level of well-being of the population) can also reduce the extent of inequality in the distribution of income.
Are Regulatory Measures Influencing Bank Performances: The Ethiopian Case
The study has explored the impact of selected regulatory variables on performances applying a panel regression on 18 commercial banks in Ethiopia for the period 1999-2015. The variables used in the model are directly derived from the extant regulatory approach used by the Central Bank to regulate the banking business. The literature review also shows that most of them are enacted in other countries with few exceptions and mainly related to bill purchase requirements. The model constructed, therefore, has established and finds a statistically significant relationship in some of the regulatory variables with performance measures. The most important findings of this study relate to the negative affect of some of the recent policy directions from the regulator on performances. For instance, branch growth and bill purchases have a statistically significant negative relationship with bank performances. This should be one of the areas requiring policy flexing from the regulatory side in the future. Nevertheless, other policy direction such as capital growth requirement remains a positive contributor to performances. More specifically, the study finds that exchange rate has a positive and statistically significant relationship with the profit models. Despite the benefit of a depreciating local currency and a stable foreign currency type to shield them from currency fluctuation, it allowed banks to earn a policy profit. The depreciation of Birr permitted banks to enjoy a profit from their foreign currency holdings in the form of daily asset revaluations. Nevertheless, many of the variables (prudential regulatory variables) used in this study (interest rate, reserve rate, number of new entrant banks, and level of entry capital) are not statistically significant to influence on bank performances.
Explicit time discretization programming approach to risk modelling
Abstract
In this paper we formulate an explicit time discretization model for modeling risk by establishing an initial value problem as a function of time. The model is proved stable and the scaled-stability regions can encapsulated the volatile macroeconomic condition pertaining to financial risk. The model is extended to multistage schemes where we test for convergence under higher-order difference equations. Further, for addressing advection problems we have used Runge-Kutta method to propose a multistep model and have shown its stability patterns against general and absolute stability conditions. The paper also provides second-order and forth-order algorithm for computational programming of the models in practice. We conclude by stating that explicit time discretization models are stable and adequate for changing business environment. Keywords: Explicit time discretization; Runge-Kutta Method; algorithms; computational programming; risk modeling.
Long Memory of NSE Indices
Abstract
Long range memory in share indices show temporal dependence between observations spaced by long intervals of time and has distinct non-periodic cycles. This paper examines the presence of long memory of various indices of National Stock Exchange (NSE). The data consists of closing values of indices over different periods of time. The tests applied to examine long memory are Hurst exponent, Manderbolt-Hurst exponent, Lo’s rescaled-range analysis and Geweke and Porter-Hudak (GPH) test. The results of the estimated Hurst exponent, Manderbolt-Hurst exponent and GPH test show that invariably all NSE indices series have long memory. However, the results of Lo’s rescaled-range analysis indicate the absence of long memory for all indices. Key words: Long memory, rescaled range analysis, fractional dimension, Hurst exponent, GPH test, NSE indices
Price Discovery in precious metals market: A study of Gold
Abstract
Gold is the oldest known precious metal on this earth and for a long time it has been used as a standard currency. The present study has been undertaken with an attempt to analyze whether Indian futures market is playing its role of price discovery in case of gold or not. For the purpose of study, data for spot and futures prices for a period of four and a half years starting from June 2005 to December 2009 has been collected from the website of Multi Commodity Exchange of India Limited, India’s largest commodity exchange in terms of value of trading on commodity exchanges in India. Data has been tested for statioanrity and was found non stationary. It was then transformed to make it stationary. On the basis of Johansen’s cointegration test, series of spot and futures prices were found cointgrated. Granger Causality test was applied on stationary data. The results of the study show that futures market in India is performing its role of price discovery in case of Gold. Keywords: Price Discovery, Commodity Market, Granger Causality, Cointegration.
Heuristic selection of portfolio based on coefficient of optimism
Abstract
The mean-variance method developed by Markowitz (1959) was aimed at obtaining optimizing portfolios. But selection of portfolio in the real world mostly deviates from this optimal criterion. In this paper we have considered this issue from an altogether different aspect and developed means for aiming at nearly optimum portfolio. We considered the risk taking propensity as the main driving force and presented a heuristic method to reach the near to the optimal state. For doing so, we have introduced the coefficient of optimism in the decision making process and simultaneously considered conditional optimum portfolio and corresponding heuristic portfolio. In the extreme situations three different human value systems can be considered as optimistic, pessimistic and risk planner. To examine the closeness between the heuristic and optimum portfolios we have carried out empirical analysis covering ten years data of fifteen companies from Nifty (2000-09). Regarding the choice of companies we have adopted random selection technique. From empirical study we have found that for moderate values of the coefficient of optimism a heuristic investor’s decision nearly coincides with the corresponding optimum portfolio. However, for extreme situations i.e. optimistic and pessimistic situations heuristic portfolio differs from optimum portfolio. Keywords: Expected return, risk, optimum portfolio, heuristic portfolio, coefficient of optimism.
Adoption and Diffusion of Electronic Banking by Customers: Critical Analysis of Empirical Evidences
Electronic banking is the new trend significantly adopted by banking sector worldwide due to its wider scope for the customers as well as banks at large. It has potential to hold great promises for bankers to grab huge business opportunities. In the present study, the diverse literature available worldwide on the adoption and diffusion of e banking has been explored to identify the significant constructs which enable innovation to diffuse among the customers and ultimately lead to its adoption. Its main purpose is to understand the trend of various research aspects prevailing in the field of banking and related to the adoption of innovative services by customers. In order to review the relevant literature, research papers have been collected from the referred journals related to innovation, marketing and banking. Qualitative approaches have been used in order to analyse and compare the main findings as well as applicability of the research papers. Hence, using an interpretative and critical approach through content analysis of the studies reviewed, the important measures viz. Research Methodology, Sample size, Respondents’ profile, Model applied and Significant Constructs have been taken into account for further inquiry. This study builds up a strong conceptual framework for the researchers by thoroughly analyzing the empirical studies of last 11 years i.e. from 1999 to 2009 which further links the consumers’ perceptions and orientation to practical implications. Keywords: Adoption and Diffusion Models, Electronic banking, Technology, Literature Review, Content Analysis.
Multivariate Causal Estimates of Dividend Yields, Price Earning Ratio and Expected Stock Returns: Malaysian Evidence
The study examines the relationship among Malaysian’s market stock return, dividend yields and price earnings ratio. Specifically, it examines the existence of long-run and short-run relationship and also their predictive power (causality) between and among market stock return, dividend yields and price earnings. Using the monthly data from 1989-2005, the study finds that all these fundamental variables have a strong long run relationship. As for the short run relationship, the results show significant positive predictive power from dividend yield to stock return and significant negative relation from stock returns to price earning ratios. In addition, applying multivariate causality test, the results show that both dividend yields and price earning ratio Granger cause (predict) the stock return. Similar results are found from stock returns and P/E ratio to dividend yield, as well as from dividend yield and stock returns to P/E ration but with lesser magnitude. Thus, fundamental variables are an important source of information in determining stock market returns and useful to investors and other market participants in deciding their investment strategies. Keywords: Stock return, dividend yield, price earning ratio, Malaysian market.
Effect of Financial Crisis in Efficiency and Strategic Homogeneity of Indian Commercial Banks: An Empirical Investigation
The mean-variance method developed by Markowitz (1959) was aimed at obtaining optimizing portfolios. But selection of portfolio in the real world mostly deviates from this optimal criterion. In this paper we have considered this issue from an altogether different aspect and developed means for aiming at nearly optimum portfolio. We considered the risk taking propensity as the main driving force and presented a heuristic method to reach the near to the optimal state. For doing so, we have introduced the coefficient of optimism in the decision making process and simultaneously considered conditional optimum portfolio and corresponding heuristic portfolio. In the extreme situations three different human value systems can be considered as optimistic, pessimistic and risk planner. To examine the closeness between the heuristic and optimum portfolios we have carried out empirical analysis covering ten years data of fifteen companies from Nifty (2000-09). Regarding the choice of companies we have adopted random selection technique. From empirical study we have found that for moderate values of the coefficient of optimism a heuristic investor’s decision nearly coincides with the corresponding optimum portfolio. However, for extreme situations i.e. optimistic and pessimistic situations heuristic portfolio differs from optimum portfolio. Keywords: Expected return, risk, optimum portfolio, heuristic portfolio, coefficient of optimism.
Eduindex News 
You must be logged in to post a comment.