Islamic Equity Market consist the companies which follow the Shariah norms in their business activities to be Shariah compliant. The objectives of this study are to examine the performance of select Shariah-compliant shares listed in BSE (Bombay Stock Exchange), India and to compare the performance of Shariah-compliant stocks with select conventional stocks. The study reveals that the performance of Shariah-compliant stocks is better than conventional stocks during the select period of study and the return of Shariah-compliant securities is less volatile than the conventional securities.
Day: June 25, 2019
Determinants of Trading Decision: An Experiential Examination
In the midst of increasing globalization, the past two decades have observed huge inflow of outside capital in the shape of direct and portfolio investment. The increase in capital mobility is due to contact between the different economies across the globe. The growing liberalization in the capital market leads to the growth of various financial products and services. Over the past decade, the Indian capital market has witnessed numerous changes in the direction of developing the capital markets more robust. With the growing Indian economy, the larger inflow of funds has been fetched into the capital markets. The government is continuously working on investor’s education in order to increase retail participation in the Indian stock market. The habits of the risk-averse middle class have been changing where these investors started participating in the Indian stock market. It is an explored fact that human beings are irrational and considering this fact becomes imperative to investigate factors that influence the trading decisions. In this research, ‘an attempt has been made to investigate various factors that affect the individual trading decision’. The data has been collected from various stockbroking firms and from clients of those stockbroking firms their opinions were recorded by means of a questionnaire. Data collected through the structured questionnaire, 33 questions were prepared which was given to the 330 respondents on the basis of convenience sampling out of which 220 individuals filled questionnaire, the total of 200 questionnaires was included in the study after eliminating the incomplete questionnaire. Various factors are being explored from the literature and then with the help of factor analysis some of the most influential factors have been explored. Factors like overconfidence, optimism, cognitive bias, herd behavior, advisory effect, and idealism are the factors which influenced the trading decision of the investors the most. Such kind of a study is contributing in the area of behavioral finance as a trading decision is an important aspect while investing in the stock market. And this kind of study would be helping and assisting financial advisors to strategies for their clients in making the right allocation and also the policy maker and market regulators to come up with better reforms for the Indian stock markets.
Effect of Enterprise Risk Management on Firm Value: Empirical Evidence from Non-Financial Firms in Pakistan
This research examines the effect of enterprise risk management on firm value in Pakistan. Further, this study empirically examines company characteristics that establish the execution of an enterprise risk management system. Using a sample of final dataset of 83 non-financial firms located in Pakistan. The sample included non-financial firms from the year 1999 to 2015 and so up to seventeen observation years per company. As in context of Pakistan, most of the organizations are already implement an ERM programs and establish specialized ERM departments because the ERM is now a global term and has become increasingly relevant because of the growing difficulty of risk and an additional development of regulatory frame works. For the empirical evidences, data collected from non-financial firms listed at the Pakistan Stock Exchange (PSX). Results of logistic regression shows that Capital Opacity, Profitability, Financial Leverage, Firm Size and Slack have positive impact on the implementation of an ERM system but Industrial diversification, Industry and Return on Equity are negatively related to an ERM engagement. The results of ordinary least square regression finds positive relationship between use of an ERM and firm value.
A Study on Unfolding Volatility and Leverage Effect in Indian Stock Market
Return is the major attribute of an investment asset that can be considered as a random variable. The variability in return can be expressed as volatility. Forecasting volatility and modelling are the most prolific areas for the research. Volatility and Leverage effect are the two crucial stipulations to study market contradictions and trends that prevail for a drawn-out period. It is observed that when volatility beams the markets soar and when markets roar the volatility fades away. Leverage has a larger scope in managing volatility when investors tend to shuffle their positions. This literature aims to identify the volatility clustering and leverage effect caused to NSE NIFTY 50 index. The study contrasts volatility clustering using symmetric model of i.e., GARCH (1,1). Leverage effects is studied and compared using TGARCH and EGARCH models.
Stock Market Modeling in the Langevin Formalism
A Langevin formalism is proposed for stock market dynamics with modeling of various economic market features from first principles. Various processes and effects that occur in the stock market are mathematically incorporated in the said formulation. The Fokker Planck equation corresponding to the Langevin equation so obtained is solved and shows deviation from Gaussian behavior of the rate of change of stock price PDF. The deviation relates to factors such as market efficiency, market depth, liquidity of the relevant stock and informational asymmetries.
A Precisely Practical Measure of the Total Cost of Debt for Determining the Optimal Capital Structure and the Weighted Average Cost of Capital
This paper develops a precise method of estimating the cost of debt to a firm that is based on standard financial theories and empirical evidence on default risk and financial distress costs. An analysis with current data on the S&P 500 demonstrates that the capital structures of large firms are consistent with the model’s simple implications.
Testing the Relationship between Liquidity and Stock Returns in the Palestinian Banks Listed in the Palestine Exchange
This study examines the relationship between liquidity and stock returns in the Palestinian banks listed in the Palestine Exchange over the period July 2009–July 2018. The study uses three liquidity measures: trading probability (TP), turnover rate (TR), and the measure of Amihud (2002), ILLIQ. The results of Pearson’s correlation test showed a positive correlation between tow liquidity measures (TP and ILLIQ) and stock returns, and the results of fixed-effect model showed a significant effect for the same tow liquidity measures (TP and ILLIQ) on stock returns. So, in the context of Palestine, TP and ILLIQ seem to appear better measures for liquidity; thus, the investors can use these two measures of liquidity to predict the stock returns of the Palestinian banks.
Using VIX to Dynamically Hedge Portfolio Risk
Many investors accept buy and hold as their long-term investment strategy. However, during periods of heightened risk, staying disciplined can be problematic. Alternatively, market timing appeals to our emotions but is very difficult to employ successfully. Between these two extremes lies tactical asset allocation, where limited variances are allowed to take advantage of market conditions. Dynamic hedging is a form of tactical asset allocation. Instead of relying on future predictions of asset class returns, dynamic hedging strives to reduce portfolio risk when market risk is elevated. This paper presents a dynamic hedging strategy developed to accomplish this goal. It uses VIXs normal trading range to assess market risk. When VIX trades above its normal trading range and the upper Bollinger band, the dynamic hedging strategy is applied. The result is that portfolio risk is lowered when market risk is extreme. The application of this strategy provides better returns, lower volatility, and better downside protection than a strategic buy and hold allocation. It also avoids the deployment problems associated with market timing strategies.
Empirical Evidence of the Impact of Bank-Specific Factors on the Commercial Banks Performance: The CAMEL Model and the case of Ethiopian Banks
The study has investigated one of the key research questions: how bank-specific factors are related to bank performance? The model constructed is framed based on the commonly used supervisory tool to monitor bank performance: CAMEL. This consists of elements such as Capital Adequacy, Asset Quality, Management, Earning and Liquidity. It has used six variables representing each of the components and runs a regression model based on fixed and random models. The outcome shows that many of the bank-specific factors have a significant statistical relationship with performance measures. Despite the mixed result in the various models, the study explored that a bank’s capital holding, asset quality and business diversification, cost control and liquidity positions are important parts of the management decisions that have a significant influence on its performance.
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