10 research outputs found
Governance in the MENA region: The hidden engine of economic growth
Get PDFThis study investigates the impact of governance on economic growth by analyzing data from 18 Middle East and North Africa (MENA) countries over the period from 2000 to 2023. Using Generalized Least Squares (GLS) estimation, the research explores the interdependent relationship between various dimensions of governance and economic performance. To verify the robustness of the results, the study further employs the Generalized Method of Moments (GMM) and utilizes an alternative proxy for economic growth. The findings indicate that corruption has a detrimental effect on economic growth in the MENA region. Additionally, higher levels of government effectiveness are associated with enhanced economic performance, while weaker voice and accountability are linked to slower growth. Interestingly, political stability exhibits a dual relationship: it is negatively associated with the Human Development Index but positively correlated with real GDP per capita. These outcomes remain consistent across robustness checks using different estimation techniques. The study offers practical insights for policymakers, emphasizing the importance of strengthening institutional frameworks and promoting transparency and accountability to foster sustainable economic growth in the MENA region
Causality and dynamic relationships between exchange rate and stock market indices in BRICS countries Panel/GMM and ARDL analyses
Get PDFPurpose: This paper aims to investigate simultaneously the causality and the dynamic links between exchange rates and stock market indices. It attempts to identify the short- and long-term effect of the US dollar on major stock market indices of Brazil, Russia, India, China and South-Africa (BRICS) nations. Design/methodology/approach: This paper applies a new methodology combining the panel generalized method of moments model and the panel auto-regressive distributed lag (ARDL) method to investigate the existence of a causal short-/long-run relationships and dynamic dependence among all stock market returns and exchanges rates changes of BRICS countries. Findings: Results show that exchange rate changes have a significant effect on the past and the current volatility of the BRICS stock indices. Besides, ARDL estimations reveal that exchange rate movements have a significant effect on short- and long-term stocks market indices of all BRICS countries. Originality/value: The findings have implications for policymakers and market participants who try to manage the exchange rate will have a different dose of intervention if they know that the effects of currency depreciation are different than appreciation. These results have important implications that investors should take into account in frequency-varying exchange rates and stock returns and regulators should consider developing sound policy measures to prevent financial risk.Propósito: Este artículo tiene como objetivo investigar simultáneamente la causalidad y los vínculos dinámicos entre los tipos de cambio y los índices bursátiles. Intenta identificar el efecto a corto y largo plazo del dólar estadounidense en los principales índices bursátiles de Brasil, Rusia, India, China y Sudáfrica (BRICS). Diseño/metodología/enfoque: Este artículo aplica una nueva metodología que combina el modelo del método generalizado de momentos de panel y el método autorregresivo de retardo distribuido (ARDL) de panel para investigar la existencia de relaciones causales de corto/largo plazo y de dependencia dinámica entre todos los rendimientos del mercado de valores y cambios en los tipos de cambio de los países BRICS. Hallazgos: Los resultados muestran que los cambios en los tipos de cambio tienen un efecto significativo en la volatilidad pasada y actual de los índices bursátiles BRICS. Además, las estimaciones de ARDL revelan que los movimientos de los tipos de cambio tienen un efecto significativo en los índices bursátiles de corto y largo plazo de todos los países BRICS. Originalidad/valor: Los hallazgos tienen implicaciones para los formuladores de políticas y los participantes del mercado que intentan administrar el tipo de cambio tendrán una dosis diferente de intervención si saben que los efectos de la depreciación de la moneda son diferentes a los de la apreciación. Estos resultados tienen implicaciones importantes que los inversores deberían tener en cuenta en las variaciones de frecuencia de los tipos de cambio y los rendimientos de las acciones, y los reguladores deberían considerar el desarrollo de medidas políticas sólidas para prevenir el riesgo financiero
Causality and dynamic relationships between exchange rate and stock market indices in BRICS countries Panel/GMM and ARDL analyses
Get PDFPurpose: This paper aims to investigate simultaneously the causality and the dynamic links between exchange rates and stock market indices. It attempts to identify the short- and long-term effect of the US dollar on major stock market indices of Brazil, Russia, India, China and South-Africa (BRICS) nations.
Design/methodology/approach: This paper applies a new methodology combining the panel generalized method of moments model and the panel auto-regressive distributed lag (ARDL) method to investigate the existence of a causal short-/long-run relationships and dynamic dependence among all stock market returns and exchanges rates changes of BRICS countries.
Findings: Results show that exchange rate changes have a significant effect on the past and the current volatility of the BRICS stock indices. Besides, ARDL estimations reveal that exchange rate movements have a significant effect on short- and long-term stocks market indices of all BRICS countries
Originality/value: The findings have implications for policymakers and market participants who try to manage the exchange rate will have a different dose of intervention if they know that the effects of currency depreciation are different than appreciation. These results have important implications that investors should take into account in frequency-varying exchange rates and stock returns and regulators should consider developing sound policy measures to prevent financial risk.
Doi: https://doi.org/10.1108/JEFAS-04-2019-005
The impact of macroeconomic and conventional stock market variables on Islamic index returns under regime switching
No full textAbstractThe objective of this paper is to study the impact of conventional stock market return and volatility and various macroeconomic variables (including inflation rate, short-term interest rate, the slope of the yield curve and money supply) on Islamic stock markets returns for twenty developed and emerging markets using Markov switching regression models. The empirical results for the period 2002–2014 show that both developed and emerging Islamic stock indices are influenced by conventional stock indices returns and money supply for both the low and high volatility regimes. However, the other macroeconomic variables fail to explain the dynamics of Islamic stock indices especially in the high volatility regime. Similar conclusions are obtained by using the MS-VAR model
The Impact of Option Strategies in Financial Portfolios Performance: Mean-Variance and Stochastic Dominance Approaches
No full textOptimal diversification, stochastic dominance, and sampling error
No full text
Purpose
The purpose of this paper is to contribute to the literature in three ways: first, the authors investigate the impact of the sampling errors on optimal portfolio weights and on financial investment decision. Second, the authors advance a comparative analysis between various domestic and international diversification strategies to define a stochastic optimal choice. Third, the authors propose a new methodology combining the re-sampling method, stochastic optimization algorithm, and nonparametric stochastic dominance (SD) approach to analyze a stochastic optimal portfolio choice for risk-averse American investors who care about benefits of domestic diversification relative to international diversification. The authors propose a new portfolio optimization model involving SD constraints on the portfolio return rate. The authors define a portfolio with return dominating the benchmark portfolio return in the second-order stochastic dominance (SSD) and having maximum expected return. The authors combine re-sampling procedure and stochastic optimization to establish more flexibility in the investment decision rule.
Design/methodology/approach
The authors apply the re-sampling procedure to consider the sampling error in the optimization process. The authors try to resolve the problem of the stochastic optimal investment strategy choice using the nonparametric SD test by Linton et al. (2005) based on sub-sampling simulated p values. The authors apply the stochastic portfolio optimization algorithm with SSD constraints to define optimal diversified portfolios beating benchmark indices.
Findings
First, the authors find that reducing sampling error increases the dominance relationships between different portfolios, which, in turn, alters portfolio investment decisions. Though international diversification is preferred in some cases, the study’s results show that for risk-averse US investors, in general, there is no difference between the diversification strategies; this implies that there is no increase in the expected utility of international diversification for the period before and after the 2007-2008 financial crisis. Nevertheless, the authors find that stochastic diversification in domestic, global, and Europe, Australasia, and Far East markets delivers better risk returns for the US risk averters during the crisis period.
Originality/value
The originality of the idea in this paper is to introduce a new methodology combining the concept of portfolio re-sampling, stochastic portfolio optimization with SSD constraints, and the nonparametric SD test by Linton et al. (2005) based on subsampling simulated p values to analyze the impact of sampling errors on optimal portfolio returns and to investigate the problem of stochastic optimal choice between international and domestic diversification strategies. The authors try to prove more coherence in the portfolio choice with the stochastically and the uncertainty characters of the paper.
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International diversification versus domestic diversification: Mean-variance portfolio optimization and stochastic dominance approaches
No full textThis paper applies the mean-variance portfolio optimization (PO) approach and the stochastic dominance (SD) test to examine preferences for international diversification versus domestic diversification from American investors' viewpoints. Our PO results imply that the domestic diversification strategy dominates the international diversification strategy at a lower risk level and the reverse is true at a higher risk level. Our SD analysis shows that there is no arbitrage opportunity between international and domestic stock markets; domestically diversified portfolios with smaller risk dominate internationally diversified portfolios with larger risk and vice versa; and at the same risk level, there is no difference between the domestically and internationally diversified portfolios. Nonetheless, we cannot find any domestically diversified portfolios that stochastically dominate all internationally diversified portfolios, but we find some internationally diversified portfolios with small risk that dominate all the domestically diversified portfolios
