ABSTRACT
This study aims to bridge the gap that has remained unfilled after the initial scrutiny and reporting of the damaging effects of Covid-19 on financial markets. The study analyzes 10 European stock markets and compares their pre and post covid return dynamics. Our findings are surprisingly pleasant, albeit counterintuitive to some. We observe a quick and unprecedented recovery in the European stock market, yielding significantly higher returns post covid, given a reasonably large holding period. We also observe an alteration and change in the status quo of countries while transmitting or receiving cross-market spillovers.
ABSTRACT
The massive contagion of new coronavirus (Covid-19) has disrupted many businesses across the European Union. This has resulted in an immense drag on the revenues and cash flows that may lead to a significant increase in corporate bankruptcies. In this paper, we investigate the impact of Covid-19 on the solvency profile of the firms in the EU member states. We introduce multiple stress scenarios on the non-financial listed firms and report a progressive increase in the probability of default, an increase of debt payback, and declining coverages. Our results indicate that the solvency profile of all firms deteriorates. The manufacturing, mining, and retail sector are most vulnerable to a decline in market capitalization and a reduction in sales revenues. The paper also examines the possible policy interventions to sustain solvency at a pre Covid-19 level. Our findings suggest that for a moderate deterioration in economic conditions, a tax deferral is sufficient. However, in the event of exacerbating business shocks, there should be hybrid support through debt and equity to avoid a meltdown. This study has important implications for policymakers, corporate managers, and creditors.
ABSTRACT
A search for a safe haven inspired by investors' loss aversion significantly exacerbates in times of turbulence. The same happened during the crisis of Covid-19 when recurring losses forced investors to alter their investment strategies, and the search for alternative investment classes picked momentum. This study evaluates the safe haven properties of Green financial products, Islamic assets, and Cryptocurrencies, which gained prominence in financial markets after the global financial crisis, coupled with the long-acknowledged safe haven assets like Gold, Silver, and Treasuries. We employ a quantile VAR framework to examine the connectedness between the assets' markets during stressed, normal, and euphoric periods. Our results show that both Green and Islamic Bonds only act as a safe haven during the normal market condition;however, US Treasury, cryptocurrencies, and gold emerged as safe-haven assets under bearish or extreme volatility periods. While proclivity towards US Treasury and gold supports the phenomenon of flight-to-safety, we find cryptos have also become investors' preference amid bearish trends finding their way into the list of safe havens for investors.
ABSTRACT
The purpose of this study is to ascertain behavioral biases and preference of investors in their investment. In this study, open ended interviews from the investors were conducted at Pakistan Stock Exchange-Lahore to describe their preferences and behavioral aspect in investment. The findings from 10 open-ended interviews shows that the investors hold different preferences and beliefs regarding investment decisions. collectively, three themes emerged as common beliefs of investors from this study. Knowledge with risk appears more sensible than high risk high return. Secondly, investor does not hold any consistent behavioral pattern, but their behavior is influenced by circumstances. The concept of luck can be justified as irrational behavior only and only if the timing match with your investment. This study contributes in terms of qualitative assessment of individual behaviors and preferences using interviews.
ABSTRACT
Despite its relevance for financial services, the impact of human capital efficiency on mutual fund performance has remained unexplored. In this paper, we attempt to explore this gap in the context of the outbreak of COVID-19 that provides us a unique opportunity to assess human capital's importance during economic pressures. We employ data on 2044 equity funds across sixteen COVID-19 affected Asian countries to analyze the performance, market, and volatility timing after sorting these funds as per their human capital efficiency. Our results show that funds with better human capital efficiency outperform their counterparts that rank lower on human capital efficiency. The outperformance as measured by adjusted Sharpe and Sortino’s ratios, Jensen’s alpha, stochastic dominance, market, and volatility timing remained consistent for the pre-COVID period as well as through the outbreak during which the impact of human capital efficiency became even more significant. These findings have important strategic implications for mutual funds.
ABSTRACT
This study investigates herd effects in 101 cryptocurrencies during the period from January 2015 to June 2020. Our results confirm the existence of herding behavior in the cryptocurrency market for the entire sample and show that herding asymmetry is present during both bullish and bearish regimes. The asymmetry in correlated trading is particularly visible in extreme return percentile regimes (1% and 5%) of cryptocurrency market Although our study finds no evidence of correlated trading when cryptocurrency specific fear prevails in the market, crypto investors seem to mimic the trading decisions of others during the COVID-19 pandemic, outside the lockdown periods.
ABSTRACT
The mutual funds' returns, inter alia, are dependent on fund managers' performance. This makes human capital efficiency very central for consistent risk-adjusted performance. The persistence in performance becomes more critical during periods of high turbulence, like the one we are experiencing amidst the outbreak of Covid-19. In this research, we attempt to evaluate the performance of equity funds in massively impacted Latin American countries. These equity funds, with 95% of their investment in the infected region, are ranked as per their human capital efficiency using 2019 as the base year. Our findings demonstrate that funds with higher human capital efficiency significantly outperform their counterparts that rank lower on human capital efficiency. These findings remained consistent for the sub-periods that we specify to map the evolution of Covid-19. We conclude that equity funds should enhance their human capital efficiency to endure resilience amid macroeconomic shocks.
ABSTRACT
In this paper we assess the price reaction, performance and volatility timing of European investment funds during the outbreak of Covid-19. We analyze the time period between January and June 2020 and demonstrate that while most of the investment funds exhibit stressed performance, social entrepreneurship funds endured resilience. This performance remained robust during the various stages of evolution of this contagion. The social funds also demonstrated volatility timing that was absent for most of their counterparts. We attribute the overall stability of these funds to their niche investments in social enterprises that specialize in providing innovative solutions for social issues.
ABSTRACT
The likelihood of pandemics has been perceived very low till very recently. Therefore, the exponential spread of Covid-19 was a major surprise that has resulted in a global rout of financial markets. In this study, we document some preliminary evidence of performance and investment styles of European funds during the evolution of Covid-19. We assess the period between January and May 2020 and categorized the spread of contagion in three phases. The results document that Social Entrepreneurship funds demonstrated positive returns across the three phases, while most of the other subcategories plunged into negative zone. Our findings on style analysis suggest that fund managers have been drifting from high risk option to low risk in terms of size and investment strategy. Similarly, there has been a switch from high risk to relatively less sensitive sectors and a transition of investment from countries with higher to those with lower number of cases.