Mobile money in Zimbabwe has extensively extended the frontiers of financial inclusion to reach millions who were earlier excluded within a relatively short space of time. The growing use of mobile phones in transferring money and making payments has significantly altered the countrys financial inclusion landscape as millions who had been hitherto excluded can now perform financial transactions in a relatively cheap, reliable and secure way. The FinScope results found out that 45% of the adult population use mobile money services. Of those using mobile money, 65% mentioned that is convenient, while 36% mentioned that it is cheap. Mobile money is accessible. These drivers are in the backdrop of few or no bank branches in rural communities as well as time and cost of accessing the bank branches. In Zimbabwe, mobile money is mostly used as a vehicle for remittances. While some people are enjoying mobile money services, it is important to mention that there are still people who are excluded from the formal financial system. The reasons why people do not use mobile money are mainly related to poverty issues. Mobile money remains a viable option to push the landscape of financial inclusion in Zimbabwe and other emerging markets where the formal financial system might not be strong.
Tag: Economics
Are Stock Markets Interdependent? An Empirical Study of Selected Market Indices
It has been acclaimed by various researchers that international diversification has reduced its charm as return-risk of the world markets are highly correlated due to information spillover effect and globalization. This study examines inter linkages and interactions, if any, among the selected twelve indices of developed and emerging economies. The study applies descriptive statistics, correlation coefficients and Granger Causality test to check basic characteristics of each indices and their correlation and impact on each other. Granger Causality test for some indices shows that return of one market index had causal influence on return in other market index. The finding of this paper gives good insights to the international investors who are looking to reduce risk for a given level of return.
Are Indian Investors Return Chasers? An Anatomy of their Trading Behavior
Momentum has remained an unanswered anomaly in finance literature. Researchers have pointed out two arguments, whether the source of prior return anomalies are rational or behavioral. In this paper, we examined return chasing tendency investors and the profitability of probable price momentum strategy in Indian equity market using the monthly return data of equities represented in BSE-500 index encompassing the time period from July 2004 to Jun 2014. Study is an attempt to analyze momentum effect before, during and after the financial crisis of 2007–2009 to check whether investors continue to follow the same strategy during crisis or their behavior undergoes any change. Also study examined the adequacy of rational CAPM models to explain momentum profits. The result evidenced a strong presence of economically and statistically significant momentum profit in Indian stock market equity returns. Therefore return chasing tendency of Indian investors is found to be persistent in the intermediate horizon in Indian context. Closer observation of the results reveals that, Indian investors are winners chasers rather than investor in past losers. Study also confirmed that investors sentiments are volatile according to general market environment and inadequacy of rationalist equilibrium model to explain momentum profits.
Multi-Index Conditional Investment Performance Measure: An Empirical Analysis
The present study seeks to examine the mutual fund performance of the open-ended selected equity schemes of UTI based on multi-index measures as well as conditional multi-index measure. It is observed from the analysis that multi-index measure is able to capture the beta and alpha effects on market adjusted basis and the estimated coefficients is a better representative as compared to the single index measure. When time lagged (lagged at 1 month, 2 months, quarterly and yearly) multi-index measures are applied then the estimated coefficients (alpha & beta) which are market adjusted and time adjusted look more representative than the multi-index measure (without lagged effect). Finally, when we extended the time lagged multi-index measure on a conditional way (conditional on public information variables) then we observe that conditional multi-index lagged measure provides much more representative results in all respects as compared to the all measures after conditioning public information effects.
CEO Compensation and Acquired and Acquiring Companies in Large Corporate Acquisitions
This paper examines the relative sensitivity of CEO compensation of both acquiring and acquired firms in the top 30 U.S. largest corporate acquisitions in each year for the period of 2003 to 2012. We find that total compensation and bonus granted to executive compensation for acquired companies, not acquiring companies, are significantly related to the amount of acquisition deal even after the size and firm performance are controlled for. Both acquiring and acquired CEOs are found to make the significantly higher compensation than the matched sample firms in the same industry and calendar year. We also find that executives with higher managerial power, as measured by a lower salary-based compensation mix, prior to a corporate acquisition are more likely to receive a higher executive pay in the year of acquisition. The association between executive compensation and managerial power seems to be stronger for acquired firms than for acquiring firms in corporate acquisition. Overall, our findings suggest that corporate acquisition has higher impacts on executive compensation for acquired firm CEOs than for acquiring firm CEOs.
Benchmarking of Indian Sectoral Mutual Funds – A Non-Separable Undesirable Output Model
Performance analysis of mutual funds is usually made on the basis of return-risk framework where return is considered an output indicator and risk is considered as an input indicator. However, portfolio risk in actuality is a non-separable undesirable output and any effort to reduce it also causes a reduction in portfolio return. In view of this, the present paper uses a non-parametric non-separable undesirable output model to evaluate the performance of 27 sectoral mutual fund schemes based on observations for the period July 2010 to June 2013. The USP of the present study is that return and risk are considered as both non-separable outcome of the process of investment. The results exhibit stability of mean efficiency scores across the observed years. Further, fund inefficiency mostly emerged from the input side and not from the output side.
Determinants of Cumulative Abnormal Return: A Dynamic Approach
There is a large body of finance literature that has tested and validated dividend policy decisions mainly focused on the effect of the dividend announcement and the impact it has on the post announcement drift. But very few studies have tested the determinants of the cumulative abnormal return (CAR) surrounding the dividend announcement and to find the role of economic adversity in explaining the change in CAR. The present study investigates the role of change in dividend under both adverse and favorable market conditions. Using the data of S&P CNX 500 companies the study examines the role of dividend yield and EPS in explaining cumulative abnormal return over a period of seven years. Using VAR methodology the study examined the determinants of CAR surrounding the dividend announcement and the dynamic relationship between the variables. The results of the study showed that during adversity, dividend yield is the major factor explaining CAR. Variables like EPS, volume and price explain the CAR when there is no economic adversity. The study found that there is a significant relationship between abnormal return and its determinants.
Mobile Money Landscape in the 12 SADC Countries using FinScope Survey Data
There is no doubt that mobile money is bringing the under-served and the excluded population into the main stream financial services corridors. Based on the FinScope surveys, mobile money is becoming one of the enablers of financial inclusion. In an increasing number of developing countries, a number of poor people are using basic mobile phones to transfer money, paying for goods and accessing some basic financial services. According to the World Bank, mobile financial services are amongst the most promising mobile applications in the developing world. Although FinScope results show that mobile money usage is relatively low (23%) in the SADC region, the trend of usage is coming up fast. FinScope results show that close to 7 in 10 mobile money users are using it as a remittances/money transfer vehicle while 54% for buying airtime. It is encouraging that about 7 million adults (24% of mobile money) store value or save money in their mobile money accounts. Some barriers to mobile money relate to: affordability, perceived cost of mobile money, lack of understanding of mobile money/lack of awareness and no access to cell phones. Besides these barriers, mobile money is becoming a game changer for the landscape of financial inclusion in the SADC region.
Monthly Patterns in Egyptian Stock Market
In this paper, monthly effect in Egyptian stock market is investigated for the period January 2007 to July 2015. After examining the random walk hypothesis of the return series, a Seasonal Auto regressive Moving Average (SARMA) model is specified to test the monthly effect in Egyptian Stock market. The results of the study imply that the banking sector of stock market is information ally efficient and does not confirm to the existence of seasonality in stock returns.
Study and Analysis of Dividend Policies, Practice and Its Application in Mumbai based Corporate Houses
In the present paper an attempt has been made to study dividend policy of Mumbai based companies of India. The study tries to assess the level of perceived awareness about models and use of dividends policies, analyses the factors affecting dividend distribution decisions and evaluates the impact of the same on the financial decision-making of companies. In addition the paper tries to understand the correlation between size of companies and distribution of dividend policies. The results of the research paper show that a majority of the fifty respondent Companies follow a policy of consistent dividend rate which is influenced by profit after tax, and finally the legal requirements. It is further observed that generous dividend or erratic divided policies are not popular choice among fifty respondent companies. The use of traditional method of dividend policies which suggests that market price increases with declaration of dividend is strong and dominant. Followed by the Modiglani Miller Method which indicates that dividend distribution has no impact on valuation. On the contrary it is found that Investment decisions influence share valuation. This is further followed by Walter Model where impact of dividend on share price depends on the IRR visa-a-vis cost of capital) and Gordon Method in which dividend policy has an impact on share valuation. Statistical tests such as Friedmans ANOVA test, Kruskal-Wallis ANOVA, and, Karl Pearsons Coefficient of Correlation analysis are used for analysis and the validity of the collected data is checked by using Cronbachs alpha.
Impact of Corporate Governance on the Cash Holding of the Firms: An Empirical Study of Indian Manufacturing Sector
The paper empirically examines the impact of corporate governance on the cash holding of the firms. The components of corporate governance are measured by board size, board meeting, audit committee members, directors remuneration and non executive directors and the cash holding is measured with the log of average cash and size is taken as control variable for the control effect on the dependent variables. Moreover, correlation and panel regression model were employed to examine the relationship between the corporate governance and cash holding. Empirical data was collected from 96 firms over the period of 2004-05 to 2013-14. The results show that directors remuneration and the number of audit committee members positively influence the cash holding and the board size also positively influences the cash holding whereas, the non executive directors and the board meetings do not play any role in enhancing the cash holding.
An Analytical Approximation for Option Price under the Affine GARCH Model – A Comparison with the Closed-Form Solution of Heston-Nandi
In the option pricing theory, two important approaches have been developed to evaluate the prices of a European option. The first approach develops an almost closed-form option pricing formula under a specific GARCH process (Heston & Nandi, 2000). The second approach develops an analytical approximation for computing European option prices with more widespread NGARCH models (Duan, Gauthier & Simonato, 1999). The analytical approximation was also developed under GJR-GARCH and EGARCH models by Duan, Gauthier, Sasseville & Simonato (2006). However, no empirical work was performed to study the comparative performance of these two formulas (closed-form solution and analytical approximation). Also, it is possible to develop an analytical approximation under the specific GARCH model of Heston & Nandi (2000). In this paper, we have filled up those gaps. We started with the development of an analytical approximation, for computing European option prices, under Heston-Nandis GARCH model. In the second step, we carried out a comparative analysis of the three formulas using CAC 40 index returns from 31 December 1987 to 31 December 2013.
On Volatility Trading & Option Greeks
Commensurate with this exponential growth in the depth and breadth of derivative markets and the range of financial products traded therein, there needs to be developed a comprehensive mathematical framework to support the, hitherto, empirically established features of trading strategies involving these instruments. It is the objective of this article, to provide a mathematical backup for the various properties of volatility trading strategy using call options. Additionally, an attempt is made to elucidate the implications of behavior of various option Greeks on volatility trading.
Evaluation of Value at Risk in Emerging Markets
Financial institutions have witnessed numerous episodes of financial crises all over the world during the last four decades. The researchers, academicians and policy makers in the field of finance studied these episodes extensively and to mitigate the risk involved in these crises have proposed several measures in the financial literature, but Value at Risk (VaR) has emerged as a more popular risk measurement technique. Although a number of studies have been undertaken in this area of research for developed markets but very few studies have been conducted in developing and emerging market economies. This study makes an attempt to evaluate the performance of VaR in emerging markets namely Brazil, Russia, India and China by considering Historical, Monte Carlo and GARCH Simulations to calculate VaR for the period 1998 to 2015. The study found that GJRGARCH Simulation is more suitable for Brazil and China while Historical Simulation for Russian and Indian Stock Markets based on the back-testing experiment.
Relationship between Code of Corporate Governance and Corporate Financial Performance (An Empirical Study of Food Companies Listed on KSE)
The crucial role that implementation of Code of Corporate Governance plays on protecting the rights of minorities, shareholders, local as well as foreign investors cannot be denied. Companies all over the world are required to implement their respective Code of Corporate Governance for avoiding agency conflicts between companies management and stakeholders and for assuring transparency in accountability. This paper aims at exploring the impact of implementation of corporate governance practices (designed by Securities and Exchange Commission of Pakistan) have on the financial position of companies. For explanatory variables of the study, composition of the board as per the Code of Corporate Governance that comprises of presence of independent, executive and non-executive directors has been taken into consideration. Return on equity has been taken as an indicator of firms profitability i.e. the dependent variable. For this study, companies listed on food producing sector of Karachi Stock Exchange have been screened for excogitation of the relationship. It is an empirical research based on nine years data from 2007–2015. Using Hausman Test for selecting the data analysis technique between Fixed or Random, Fixed Cross Sectional Panel Analysis has been used for analysis of the data collected. Findings indicate that presence of independent, executive and non-executive directors as per the code requirements levies a significant impact on the profitability of companies indicated by return on equity. It is, thus concluded that companies should ensure compliance with code of governance practices to reduce not only the agency issues but also to increase their profitability.
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