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Stock Returns and Cash Flows: A New Asset Pricing Approach
Get PDFThis study is focused on a non-conventional profitability measure, at least in terms of assets pricing models, where dividends or profits are widely used. The attention is focused on a proxy measure of Operating Cash Flows: the "Ebitda after Capex". The relationship returns – cash flows' volatility has been examined through an empirical analysis conducted on the stocks of the S&P500 Index combining the main quantitative and statistical approach with a qualitative overview respect the macroeconomic background. Starting from a correlation rolling window approach, three different regressions techniques have been implemented; the simple Ordinary Least Squares regressions (OLS), the linear Quantile (LQR) regression and the Multiple regression model (MLR), all performed at different levels in terms of stocks (QoQ and YoY) and sectors (MoM, QoQ, YoY).
The cross-sectional and time-series results support the effects of cash flow volatility on the stocks' performance and highlighted its sensitivity respect not only the different short-term and long-term horizons, but also in terms of sector' exposure
Country Risk Dynamics and Stock Market Volatility: Evidence from the JSE Cross-Sector Analysis
Get PDFThe rapid integration of the global markets and financial system has increased stock market volatility due to the increased exposure to various risks. Using different GARCH family models, this study investigates the impact of country risk components shocks on stock market return volatility of the Johannesburg Stock Exchange (JSE) and its sectors for the 1996-2018 period. High positive correlations were found among the sectors, which potentially erodes diversification benefits. The research found that the South African stock market volatility is mainly driven by own/internal shocks, while the effect of county risk shocks on stock return volatility differs across the JSE sectors. We found that financial risk shocks negatively transmit to the volatility of oil and gas sector returns, leading to an increase in conditional volatility. Regarding economic risk, we found a statistically significant relationship between economic risk shocks and the entire JSE and financial and oil and gas sectors. The results show that political risk shocks negatively transmit to stock return volatility in the industrial sector, basic materials, consumer goods, financial, and the oil and gas sectors, leading to higher conditional volatility. Thus, the return volatility of most of the JSE sectors is primarily affected by political dynamics, emphasising the role of political instability in destabilising stock market volatility
Are Frontier African Markets Inefficient or Adaptive? Application of Rolling GARCH Models
Get PDFTime-varying calendar anomaly is thinly investigated in frontier stock markets. This study evaluates the day-of-the-week (DOW) calendar effects within the adaptive market hypothesis framework in frontier African stock markets. The study applies rolling analyses of the various GARCH family models to estimate daily stock indices return of Ghana stock exchange, Nairobi securities exchange, Botswana stock exchange and Bourse Regionale des Valeurs Mobilieres (BRVM) for 2000:1-2020:6 periods. The results show changing DOW effects in Kenya and Botswana which is consistent with the AMH. However, DOW effects cannot be validated in BRVM and Ghana. It suggests that each market must be treated with their own peculiarity even though they are ranked as frontier markets. We conclude that the changing DOW effects in the AMH context cannot be generalised in the frontier African markets and the existence of DOW effects must be treated with caution in BRVM and Ghana
Social Influence and Saving Behavior among small business owners in Uganda: The mediating role of Financial Literacy
Get PDFThe aim of this study was to examine the direct and indirect effect of social influence and financial literacy on saving behavior Explanatory research design and systematic sampling technique was used to collect data with the aid of a questionnaire from a sample size of 430 micro and small enterprise owners in Kampala, Uganda. Reliability test of the research instrument was done by the use of Cronbach alpha. In order to test the hypothesis, and the mediation effect, bootstrapping procedure was followed by testing the direct and indirect effect. The findings show that the connection between social impact and saving behavior is mediated by financial literacy, thus providing new information in research literature on emerging economies where social influence does not encourage saving behavior, hence a need for these economies to adopt financial literacy. Finance scholars have to recognize the central role of financial literacy through financial workshops/seminars, trainings in order to nurture individuals into appropriate saving instruments
Determinants of Corporate Risk Management: Does Board Size and Tenure Matter? Panel Data Approach from Kenyan Publicly Listed Firms
Get PDFThe investors' weakening confidence towards corporate risk management particularly after the crisis has made corporate governance a top priority for the board. The awareness of risk is growing and firm practices have increasingly become organized around risk. The purpose of this paper is to investigate determinants of corporate risk management by taking into consideration board size and board tenure. The study was informed by Modern Portfolio Theory while panel approach was deemed to be appropriate. Based on inclusion-exclusion criteria, 49 firms were sample from 2013-2019 giving a total of 343 firm-year observations. The findings revealed that board size had a positive and insignificant effect while board tenure was significant and positively related to corporate risk management. The longer the experience of managers, the more knowledgeable they become thus more capable of managing corporate risk. This study contributes by providing additional empirical evidence regarding determinants of corporate risk management
The Impact of Macroeconomic and Institutional Factors on Economic Growth in the CEE-4 Countries
Get PDFThe aim of the study is to examine the main factors driving economic growth in the CEE-4 countries since the transition with the main focus on macroeconomic policies and institutions. The building of a market economy in the region required deep macroeconomic reforms and the creation of a wide range of institutions and business practices needed to support those reforms. Since the collapse of communist regimes, the CEE-4 countries have adopted in the early 1990s a set of policy principles focused on fiscal discipline, interest rate liberalisation, trade and financial liberalisation, privatisation, deregulation and openness to direct foreign investment. Macroeconomic stability by itself, however, does not ensure high rates of GDP growth. In most cases, sustained high rates of growth also depend upon key structural measures, such as regulatory reform, civil service reform, improved governance, and banking sector reform. Institutions of central planning in the CEE-4 region were one of the key barriers to growth prior to the transition. As the development of institutions has been necessary to support the well-functioning market economies in the CEE-4 region, the study also examines deep factors of production – institutions – in addition to the demand-side and the supply-side factors affecting output
Real Gross Domestic Product as Value Added Tax Base: Evidence from Ghana
Get PDFTotal Private Consumption is the ideal Valued Added Tax base for Valued Added Tax revenue modelling and forecasting. However, data on private consumption expenditure is not available in most developing countries. With this reason, this study aims to study the appropriateness of real Gross Domestic Product as a Valued Added Tax base by testing the correlation between Valued Added Tax Revenue and Real Gross Domestic Product. It further examines the elasticity of Valued Added Tax revenue to changes in real Gross Domestic Product of Ghana. It is realized from the study that a one percent increase in real Gross Domestic Product results in a 3.7337 percent increase in Total Valued Added Tax revenue. Also, a, high correlation of 0.9365 is realized between real Gross Domestic Product and Total Valued Added Tax revenue. Since monthly and/or quarterly data on private consumption expenditure is not available in Ghana, real Gross Domestic Product can be used as VAT base (especially in VAT revenue modelling and forecasting) because of the high correlation and elasticity between Value Added Tax revenue and real Gross Domestic Product. Sequel to these, the study recommends that the government of Ghana implements supply-side policies that will boost investment and production, reduce imports and encourage import substitution, and also demand-side policies that will increase aggregate demand. These policies will expedite rapid economic growth, and an increase in Value Added Tax revenue will be a consequent result
Capital Structure and Value of Nigerian Manufacturing Companies
Get PDFThis study provides current evidence on long term controversies surrounding the relevance of capital structure to the value of firms as desideratum for effective debt policy decisions by corporate organisations. Ex-post Facto design was employed for random selection of 10 manufacturing firms across 6 real sectors of Nigerian manufacturing industry. The study estimated balanced panel data with Panel (OLS) Regression techniques using 180 observations. From findings, the results of preferred Random Effect estimation at 5% level of significance show that measures of capital structure such as debt-to-equity and debt-to-total assets have insignificant effects on value of firms when proxy by Tobin’s Q. Thus, the study re-affirms the claim of M-M Approach that capital structure does not matter when it comes to firm’s performance in term of stock market efficiency. In practice, therefore, management should consider the use of debt as last option for financing profitable projects
Comparing Optimal Monetary Policy Rules, Does Wage Inflation Matters?
Get PDFThe aim of this paper is to determine the optimal monetary policy for the Tunisian economy by comparing different targeting rules in terms of welfare loss. Our approach is conducted through simulated scenarios from a small open economy DSGE model, with frictions in the labor market. We are motivated by the fact that the Tunisian economy suffers from inflation, unemployment and a continuous depreciation of its currency which put pressure on production costs. In addition, with underdeveloped financial market attention is given to exchange rate volatility. Recent literature focuses on wage inflation to reduce production costs and unemployment caused by terms of trade fluctuations rather than reacting to the exchange rate. Our main result is the superiority of the wage inflation rule in reducing welfare losses
Forecasting Value Added Tax Revenue in Ghana
Get PDFGovernments need accurate tax revenue forecast figures for good economic planning but there seems to be no consensus on which method is the most suitable to deliver reliable results leading to differences in the choice of technique from one country to another. This study therefore forecasts Ghana’s Value Added Tax (VAT) Revenue by comparing two methods, ARIMA with Intervention and Holt linear trend methods to establish the one with more precise predictive powers for VAT Revenue. Monthly VAT revenue data from the year 2002 to 2019 is used in the analysis. The findings show that ARIMA with Intervention method outperformed the Holt linear trend model in terms of accuracy and precision. A comparison of predicted results from the ARIMA with intervention model from 2017 to 2019 with Ghana Revenue Authority’s VAT revenue targets based on their in-house forecasting model for the same period reveals that the ARIMA with intervention approach performs better than the in-house forecasting model of the VAT authority. In this case, the study recommends the ARIMA with intervention method to the tax authority for consideration in its forecasting