Uncertainty assessment in socially responsible and Islamic stock markets in the short and long terms: an ARDL approach

This study measures financial uncertainty for two classes of alternative financial assets (Dow Jones Islamic and Dow Jones Sustainability Indexes) and the conventional US stock market (Dow Jones Industrial Index) for the period of 1999–2017, using an asymmetric exponential GARCH model. Using an ARDL model, we propose an intertemporal dynamic analysis of uncertainty for Islamic and socially responsible stock markets. Our findings show that, first, conventional and ethical investments present high comparable levels of uncertainty for which the dynamics is time-varying. Second, uncertainty in the conventional US stock market has a significant and positive effect on the uncertainty in alternative stock markets. Thus, uncertainty characterizes conventional and ethical stock markets both in the short and long terms. In particular, while the short-term uncertainty of ethical markets might be associated with their characteristics, the long-term aspect of uncertainty for ethical funds is rather associated with the effect of the conventional stock market environment. Although these findings show mean-reversion and uncertainty spillovers from the alternative stock markets to the conventional US one, they suggest lack of safety and certainty for investments in ethic markets, which remain fragile and closely dependent on the conventional market.     

Are Islamic stock markets efficient? A time-series analysis

This article investigates the weak-form informational efficient hypothesis for three major Islamic stock markets (world, emerging and developed). Unlike previous studies, we applied different parametric and nonparametric tests to investigate efficiency in the short and long horizons. Using recent data over the period May 2002–June 2012, we developed a time-series analysis of Islamic stock price dynamics in the context of the recent global financial crisis (2008–2009). Our analysis offers two interesting results. First, emerging Islamic stock markets seem to be less efficient than developed Islamic markets, suggesting interesting investment opportunities and diversification benefits from this region in both the short run and the long run. Second, nonrejection of the cointegration hypothesis for developed Islamic markets and the global conventional stock market point to efficiency for the former in the long term, even if it is inefficient in the short term. This finding has at least two economic and political implications: (i) investors who seek moderate risk would do well to opt for Islamic funds in developed countries, particularly as they share the same tendency and provide similar expected returns in the long term as conventional funds, (ii) Islamic financial systems can offer a useful model that can help to reform and remodel conventional financial institutions.     

The static and dynamic connectedness of environmental,social, and governance investments: International evidence

We investigate the connectedness of the most significant global equity indices that comprise companies with the highest environmental, social, and governance (ESG) performance. Motivated by the rapid growth of socially responsible investing during the last two decades, we examine whether these investments are prone to similar exogenous economic and financial shocks as their conventional counterparts. Employing a variety of influential macroeconomic and financial variables over the period 10/1/2007–4/15/2020, we document statistically significant and consistent transmissions between the employed equity indices throughout the sample period. In particular, the connectedness exhibits dynamic patterns during three periods: the European sovereign debt crisis, the systemic Greek problems, and the outbreak of the coronavirus pandemic. We also find that developed equity markets are the shock transmitters to Asian and other emerging markets. Our results highlight the risk of contagion and the diminishing portfolio diversification benefits of these equity indices during turbulent periods.     

Volatility transmission between Islamic and conventional equity markets: evidence from causality-in-variance test

This study examines whether a volatility/risk transmission exists between the Dow Jones Islamic stock and three conventional stock markets for the United States, Europe and Asia during the pre- and the in- and post-2008 crisis periods. It also explores the volatility spillover dynamics between those markets and US Monetary policy, oil prices, global financial risk and uncertainty factors. The recently developed Hafner and Herwartz (2006)’s causality-in-variance test provides evidence of risk transfers between these seemingly different equity markets, indicating a contagion between them during the full sample and the subperiods. The volatility structure of these markets is dominated by short-run volatility in the first period and by high long-run volatility in the second period. The volatility impulse response analysis indicates a similar volatility transmission pattern although it is characterized by a more volatile and short-lived structure in the second period. It also appears that the Islamic equity market responds to shocks from the risk factors and not from the oil price and the US economic policy uncertainty index during both periods.     

FINANCIAL CRISES AND INTERNATIONAL STOCK MARKET VOLATILITY TRANSMISSION

This paper examines the interplay between stock market returns and their volatility, focusing on the Asian and global financial crises of 1997–98 and 2008–09 for Australia, Singapore, the UK, and the US. We use a multivariate generalised autoregressive conditional heteroskedasticity (MGARCH) model and weekly data (January 1992–June 2009). Based on the results obtained from the mean return equations, we could not find any significant impact on returns arising from the Asian crisis and more recent global financial crises across these four markets. However, both crises significantly increased the stock return volatilities across all of the four markets. Not surprisingly, it is also found that the US stock market is the most crucial market impacting on the volatilities of smaller economies such as Australia. Our results provide evidence of own and cross ARCH and GARCH effects among all four markets, suggesting the existence of significant volatility and cross volatility spillovers across all four markets. A high degree of time‐varying co‐volatility among these markets indicates that investors will be highly unlikely to benefit from diversifying their financial portfolio by acquiring stocks within these four countries only.     

Analysing Systemic Risk in the Chinese Banking System

We examine systemic risk in the Chinese banking system by estimating the conditional value at risk (CoVaR), the marginal expected shortfall (MES), the systemic impact index (SII) and the vulnerability index (VI) for 16 listed banks in China for the 2007–2014 period. We find that these measures show different patterns, capturing different aspects of systemic risk of Chinese banks. However, rankings of banks based on these measures are significantly correlated. The time‐series results for the CoVaR and MES measures suggest that systemic risk in the Chinese banking system decreased after the global financial crisis but started rising in 2014.     

Regional spillovers across transitioning emerging and frontier equity markets: A multi-time scale wavelet analysis

The episodic wave of crises experienced across the global financial markets over the past two decades has raised questions surrounding the vulnerability of transitioning emerging and frontier equity markets to exogenous shocks. These markets, by design, have lacked the institutional or financial architecture supporting their capital base compared to more established markets. We make the initial attempt to examine four such stock markets (Saudi Arabia, UAE, South Africa and Israel). We perform multi-timescale analysis using wavelet-based time and frequency decompositions in order to investigate (i) whether the shocks transmitted were pure contagion or fundamental-based and (ii) also whether the dynamic evolution of stock market integration was mainly short-term or long-term. We find that prior to the 2008/09 US subprime crisis, the shocks generated pure contagion in contrast to the subprime crisis that reveals evidence supportive of fundamental-based contagion. Further, when exploring the dynamics of market integration, we find that integration strengthens over time as opposed to any immediate short-term outcome. This supports policies engendered to promote stock market resiliency and stability.     

The impact of subprime mortgage on correlation between stock and FX markets

Our researching period contains the American subprime mortgage crisis, an insignificant financial crisis and the Asian financial crisis periods. We analyse and compare the interrelations between the stock and Foreign Exchange (FX) markets in Taiwan by the daily data of stock prices and NTD/US exchange rates. The empirical results found that there is no effect on the long-term equilibrium between the stock and FX markets during the American subprime mortgage crisis. It also shows that, whether financial crisis occurs or not, there is no cointegration between the stock and FX markets. Furthermore, the results find that there exists bidirectional causality between the stock and FX markets among the American subprime mortgage crisis and the Asian financial crisis period. However, there is only unidirectional relationship from stock prices to exchange rates during insignificant financial crisis period. Such results imply that two financial crises do significantly affect the short-term interrelationships between the stock and FX markets and lead to more importance for the connection between two markets.     

Regional Liquidity Risk and Covered Interest Parity During the Global Financial Crisis: Evidence from Tokyo,London, and New York*

ABSTRACT

During the global financial crisis, there were substantial deviations from covered interest parity (CIP) condition. In particular, in the post-Lehman period, the US dollar interest rate became very low on the forward market. However, the deviations from the CIP condition varied across markets. After presenting a simple model, the following analysis examines how the CIP condition between the Japanese yen and the US dollar was violated in Tokyo, London, and New York markets. We show that the CIP deviations became largest in the New York market soon after the Lehman shock but were largest in the Tokyo market in the rest of the turmoil period. The regressions suggest that market-specific credit risks and central banks’ liquidity provisions explained the difference across the markets. In particular, they indicate that larger dollar-specific risk and smaller yen-specific risk caused larger deviations in the Tokyo market.     

金融市场系统风险与资产证券化的相关性

美国金融市场的资产证券化使金融市场的系统风险陡增,并引发了席卷全球的金融危机。资产证券化增加金融市场系统风险的主要原因在于倒买倒卖的市场运作模式、资产支持的证券流动性不足以及资产证券化交易的复杂性所产生的负面效应。金融危机后应加强我国资产证券化金融监管工作,坚持以有限管制和间接管制为原则,减少直接干预;坚持慎重选择资产证券化类型,逐步推进资产证券化原则;坚持以规范的信息披露为原则,防范系统风险。     

中国商业银行系统性风险溢价实证研究

全球金融危机的爆发使得系统性风险的溢出效应受到普遍关注,同时也暴露出主流的风险度量方法VAR存在重大缺陷。论文借鉴最新的CoVaR方法以及分位数回归技术,衡量了我国商业银行的系统性风险溢价,实证研究发现：第一,国有银行的系统性风险溢价大于股份制商业银行;第二,无条件风险价值VaR和条件风险价值之间没有必然关联,以VaR为核心指标的现行监管政策不能有效防范系统性风险溢价;第三,银行的值不仅受金融体系共同风险冲击的影响,还受银行自身特质的影响。     

Financial market development,global financial crisis and economic growth: evidence from developing nations

Emerging and frontier markets in Africa have witnessed various economic and financial reforms aimed at integrating the domestic markets into the global financial market to attract investment. Whether these reforms promote high economic growth remains inconclusive. The paper applies the pooled mean group estimation technique to empirically re-investigate the link between financial market development, global financial crisis, and economic growth in selected African economies. The results strongly support our hypotheses that stock market and banking sector development promotes economic growth in the selected countries. Moreover, financial crisis reduce the positive effects of both the stock market and banking sector developments on economic growth. The study suggests that both the banking sector and stock market are important to deliver the long-run economic growth that the African region desired. Moreover, effort should be made to enact policy measures that would ensure development of the stock market which has received inadequate attention.     

美国次级房货危机对中国房货和金融市场的影响

美国次级房贷危机已对全球股市和美国经济产生较大影响。分析美国次级房贷危机产生的背景和原因,并指出中国的抵押贷款市场存在的重大风险。我们应该以美国次级债危机为借鉴,为中国房地产市场发展和金融市场的健康发展获得一些启示,并做好风险防范措施。     

Structural change and international stock market interdependence: Evidence from Asian emerging markets

This study investigates the evolving pattern of the interdependence among selected Asian emerging markets and three major stock markets (Japan, UK and US). Using rolling cointegration methods and the recently developed algorithms of inductive causation, we found that time-varying cointegration relationships exist among these stock markets. The results indicate that the wave of financial liberalization policies in the early 1990s led to a significant increase in market linkages which was later weakened during the 1997 Asian financial crisis. Furthermore, the data indicate that Japan and the US have the greatest influence on the emerging markets while the influence of Singapore and Thailand has increased since the Asian financial crisis.     

美国次级房贷危机对中国房贷和金融市场的影响

美国次级房贷危机已对全球股市和美国经济产生较大影响。分析美国次级房贷危机产生的背景和原因,并指出中国的抵押贷款市场存在的重大风险。我们应该以美国次级债危机为借鉴,为中国房地产市场发展和金融市场的健康发展获得一些启示,并做好风险防范措施。     

Dynamic correlation and equicorrelation analysis of global financial turmoil: evidence from emerging East Asian stock markets

This study investigates the dynamic conditional correlations (DCCs) between eight emerging East Asian stock markets and the US stock market and analyses the dynamic equicorrelation among these nine stock markets. We find a significant increase in the conditional correlations and equicorrelation in the first phase of the global financial crisis. We refer to this finding as contagion from the US stock market to the emerging East Asian markets. We also find an additional significant process of increasing correlations and equicorrelation (herding) in the second phase of the global financial crisis. Further, we employ two new models, namely DCCX-MGARCH (a DCC Multivariate GARCH model with exogenous variables) and DECOX-MGARCH (a dynamic equicorrelation multivariate GARCH model with exogenous variables), to identify the channels of contagion. We find that an increase in the VIX Index increases the conditional correlations and equicorrelation, while increases in TED spreads decrease the conditional correlations of six emerging East Asian countries with the USA. We compare the accuracy of the conditional correlation estimates of the DCC and DCCX models (or DECO and DECOX models) by constructing a loss function. We find that the DCCX (DECOX) model provides more accurate conditional correlation estimates than the DCC (DECO) model by extracting additional information from exogenous variables.     

Co-movements of Shanghai and New York stock prices by time-varying regressions

We use time-varying regression to model the relationship between returns in the Shanghai and New York stock markets, with possible inclusion of lagged returns. The parameters of the regressions reveal that the effect of current stock return of New York on Shanghai steadily increases after the 1997 Asian financial crisis and turns significantly and persistently positive after 2002 when China entered WTO. The effect of current return of Shanghai on New York also becomes significantly positive and increasing after 2002. The upward trend has been interrupted during the recent global financial crisis, but reaches the level of about 0.4–0.5 in 2010 for both markets. Our results show that China’s stock market has become more and more integrated to the world market in the past twenty years with interruptions occurring during the recent global economic downturn.     

Stock market integration of emerging Asian economies: Patterns and causes

In this study, we examine the patterns and causes of stock market integration of selected emerging Asian nations against the US, Australia, China, and India for the period 1 January 2001 to 31 March 2012. We compare patterns of market integration for countries on a daily, weekly, or monthly basis using the time-varying correlation technique, namely, GARCH-dynamic conditional correlations (DCCs). In doing so, we suggest that opportunities in cross border investment vary by frequencies. We also divide daily data into subsamples and find that correlations were strongest during the global financial crisis (GFC) of 2007–09. The time varying bilateral correlations are found to be highly volatile. We also investigate the causes of identified correlations and find that apart from the GFC, the underlying economic and financial conditions have also been responsible for the higher correlations between these stock markets.     

迪拜债务危机:原因、影响及启示

2009年11月25日,迪拜政府宣布将重组旗下最大的主权投资公司迪拜世界,延迟6个月偿还其即将到期的约600亿美元债务。此事引起全球金融市场对迪拜未来偿还能力的担忧,多国股市出现下跌。迪拜债务危机的爆发主要是迪拜的发展模式出现问题,导致在金融危机冲击下房地产价格大幅度下跌。欧洲银行业在此次危机中风险敞口最大。此次事件会使新兴市场资金流向和美元汇率短期受到影响,但对世界经济的长期影响有限。迪拜危机对中国影响较小,但其所暴露的问题值得我们关注。     

Capital flows to an emerging financial market in Turkey

Increased globalization in financial markets implies that the percentage of all shares under foreign ownership in domestic stock markets has been rising. Speculative attacks on the foreign exchange market in February 2001 led to deep economic crisis in Turkey. This article will explore various indicators of the financial crisis in Turkey based on a macro-model. The foreign share of the domestic economy is a key variable to establish the degree of vulnerability during a financial crisis. An empirical investigation shows that the percentage of shares owned by foreigners on the Istanbul Stock Exchange (ISE) has been increasing since 1995 and is currently about 50 percent of the total. Furthermore, the general index of stock market prices in 1999 was at its highest level since 1995. This would imply that the general price index of the stock market is another strong indicator of an impending financial crisis. An empirical investigation of Turkish data based on a theoretical model is presented in this paper. An unexpected capital outflow would certainly cause exchange rate fluctuations, balance of payments problems, and international debt crisis. Hot money inflows boost share prices and keep the real exchange rate high. However, short-term stay of capital implies a sudden capital outflow that creates financial crisis, which results in international debt crisis. This in turn leads to a further increase in loans from the International Monetary Fund (IMF). Relatively high stock market prices may suggest an impending financial crisis. Using Turkish stock market price data, an impending financial crisis can be statistically predicted.