ABSTRACT
We examine the impact of the Bank of Japan's exchange traded fund (ETF) purchases on two aspects of market efficiency—long-range dependence and price delay—of the TOPIX and Nikkei 225 indices. An increase in ETF purchases results in lower long-range dependence for both indices while the impact on the price delay varies according to index and measure. A sub-period analysis shows that the impact on market efficiency varies over time, with the dominant pattern being a delayed harmful effect, followed by a positive impact and thereafter a negative effect. The implications of these findings are discussed.
ABSTRACT
Documenting the interlinkages among assets that are widely used to hedge against inflation is crucial for investors, as the necessity to protect the investment portfolio is stronger under inflationary conditions. For this purpose, we investigate the volatility spillovers between treasury inflation-protected securities (TIPS) and a battery of other assets perceived as inflation hedges, including bonds, gold, real estate, oil and equities. The applied methodology comprehends the time-varying parameter vector autoregressive (TVP-VAR) extension of the Diebold and Yilmaz (Int J Forecast 28:57–66, 2012, 10.1016/j.ijforecast.2011.02.006) approach for the period 1/1/2010–3/31/2022. Our results indicate that the assets under consideration are moderately interconnected and subjected to several exogenous shocks, such as the US–China trade war, the COVID-19 pandemic and the Russia–Ukraine war. Furthermore, we assess the hedging effectiveness of TIPS against each asset by estimating hedge ratios and optimal portfolios weights, before and after the spread of COVID-19 pandemic, by using conditional variance estimations (DCC-GARCH). The empirical findings show that the short position in the volatility of TIPS is proved to be an excellent hedge for all the sampled assets, with the exception of short-term Treasury bonds, and their hedging ability was improved during COVID-19.
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The main goal of the article is to examine the tracking efficiency of a homogenous sample of 14 ETFs listed on European exchanges, replicating the performance of Euro Stoxx 50 Index—a benchmark index for blue chips from the euro area. This study provides some insights into the tracking quality of European ETFs over the long time horizon (2012–2021 period) including data from entire business cycle: both economic prosperity and COVID-19 crisis. The study has been made applying different tracking error calculation techniques and return intervals—daily, weekly and monthly. Passive investing may be a highly desirable, cheap and accurate method for long or short term investments in the largest 50 cap companies in the euro zone. Hence, this unique research may help to succeed in ETF selection process. The study reveals that ETFs are very effectively managed by keeping the TEs below 0.3% (for ETFs with accumulating share classes) and below 1% (for ETFs with distributing share classes). This shows that the ETFs with accumulating share classes perform much better—the average TE for three different methods is 0.11% for accumulating share classes ETFs and 0.33% for distributing share classes ETFs. It proofs, that it is not important whether to use the standard deviation of the difference between the return of an ETF and that of its benchmark index, or the standard error of regression in TE assessment, both methods give very similar results. However, TE calculation method signifies, if the average of the absolute difference between the return of an ETF and that of the index is used. Additionally, it is found that time intervals used in TE calculations matter—the shift from monthly to daily intervals results in reduction of TE levels. Using shorter intervals brings lower TE values of European ETFs.
ABSTRACT
* Prior research shows that during periods of high market volatility, investors tend to shift wealth from risky to safe assets. * This research examines the behavior of registered investment advisers (RIAs) and their clients during the 2020 market downturn due to the COVID-19 pandemic, specifically exploring portfolio management decisions during this period. * The authors of this study find that RIAs provided value to their clients during the COVID-19 market crash, using effective buy/sell strategies. * This study also investigates the use of Twitter as a means of communication with prospective and existing clients. The authors discuss how financial advisers can benefit from continuing education resources around managing investor behavior online when so many rely on social media. Financial planning stakeholders, specifically RIA firms, organizations such as the Financial Planning Association, and the Certified Financial Planner Board of Standards, would serve their members well by utilizing more aggressive public campaigns to promote awareness of the value associated with working with financial advisers. Additionally, regulatory bodies and compliance departments should consider providing financial advisers and marketing departments with greater flexibility around the use of social media as a tool to educate and disseminate information during periods of high market volatility.
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Based on the daily stock closing price data of 14 A-share listed banks in China from January 2009 to June 2021, this paper makes a comparative analysis of the contagion effect of risks in the banking industry before and after the outbreak of COVID-19. Based on the transfer entropy method, this paper calculates the correlation network matrix of inter-bank risk contagion effect and empirically studies the contagion effect of risks in the banking industry before and after the outbreak by using social network analysis method, depicting the network structure of systemic risk contagion in Chinese banking industry. This study found that the risk of inter-bank system increased significantly after the outbreak and the key nodes of bank risk contagion have also changed before and after the outbreak;state-owned banks are less risky, joint-stock banks and local financial institutions are riskier, and the contagion effect of risks between banks is asymmetric.
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We examine the price discovery performance of China's crude oil futures traded on the Shanghai International Energy Exchange (INE) for the spot prices of 19 types of deliverable and nondeliverable Asian crude oil. We find evidence for the INE crude oil futures price discovery function even at the early stage for almost all the deliverable crudes and some nondeliverable crudes. Both the INE crude oil futures price and the spot price significantly contribute to the price discovery process, with substantially time‐varying informational roles. While the price discovery performance was severely damaged around the period of COVID‐19 pandemic shock intensification in China with the temporary cancellation of nighttime trading, it improved to some extent after China started the recovery from the shock. But such improvement deteriorated drastically and disappeared since early 2021. Further analysis reveals that both economic fundamentals (e.g., the warehouse inventory) and trading‐related characteristics of the futures market are significant determinants of the price discovery performance. The overall findings imply that the INE crude oil futures market has evolved into a useful and important information source in pricing Asian crudes, and is on the path to emerge as an Asian benchmark.
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This paper examines the impact of COVID‐19 on tail risk contagion across commodity futures markets using a copula‐based network method. We document a significant increase in the lower and upper tail contagiousness of commodities following the COVID‐19 outbreak. Contagion shows an obvious clustering characteristic, that is, there is higher tail risk connectedness between commodities in the same category. Agricultural commodities are significantly less contagious than metals and energy commodities;soft commodities in particular can offer investors significant diversification benefits. There are several hub commodities in the contagion network, chief among them copper, which are good transmitters of shocks and should be treated with caution by investors and regulators. Although tail risk and contagiousness of individual commodities increase together during the pandemic, we find a negative cross‐sectional relationship between tail risk and contagiousness, that is, commodities with high tail risk are not necessarily highly contagious and may even be less so.
ABSTRACT
* Prior research shows that during periods of high market volatility, investors tend to shift wealth from risky to safe assets. * This research examines the behavior of registered investment advisers (RIAs) and their clients during the 2020 market downturn due to the COVID-19 pandemic, specifically exploring portfolio management decisions during this period. * The authors of this study find that RIAs provided value to their clients during the COVID-19 market crash, using effective buy/sell strategies. * This study also investigates the use of Twitter as a means of communication with prospective and existing clients. The authors discuss how financial advisers can benefit from continuing education resources around managing investor behavior online when so many rely on social media. * Financial planning stakeholders, specifically RIA firms, organizations such as the Financial Planning Association, and the Certified Financial Planner Board of Standards would serve their members well by utilizing more aggressive public campaigns to promote awareness of the value associated with working with financial advisers. * Additionally, regulatory bodies and compliance departments should consider providing financial advisers and marketing departments with greater flexibility around the use of social media as a tool to educate and disseminate information during periods of high market volatility.
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The results reveal a significantly negative impact of Covid-19 on the US stock market being an idiosyncratic black swan event. [...]the author also points out that US may not have hurried to act because its banking sector seemed to recover more quickly than in Australia and Europe. [...]Tetsuya Kirihata's “Contribution of business angel investments: evidence from Estonia” addresses the contribution of business angels (BAs), defined as wealthy individuals who provide risk capital to entrepreneurial firms without family connections in Eastern Europe, Estonia, which is emerging as a start-up hub in the region in recent years.
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Purpose>This paper aims to analyze the impact of Covid-19 on the stock market volatility and uncertainty during the first and second waves.Design/methodology/approach>This study has applied event study and autoregressive integrated moving average models using daily data of confirmed and death cases of Covid-19, US S&P 500, volatility index, economic policy uncertainty and S&P 500 of Bombay Stock Exchange to attain the purpose.Findings>It is observed that, during the first wave, the confirmed cases and the fiscal measure have a significant impact, while the vaccination initiative and the abnormal hike of confirmed cases have a significant impact on the US stock returns during the second wave. It is further observed that the volatility of Indian and US stock markets spillovers during the sample period. Moreover, a perpetual correlation between the Covid-19 and the stock market variables has been noticed.Research limitations/implications>At present, the world is experiencing the third wave of Covid-19. This paper has considered the first and second waves.Practical implications>It is expected that business leaders, stock market regulators and the policymakers will be highly benefitted from the research outcomes of this study.Originality/value>This paper briefly highlights the drawbacks of existing policies and suggests appropriate guidelines to successfully implement the forthcoming initiatives to reduce the catastrophic impact of Covid-19 on the stock market volatility and uncertainty.
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During the past two years, people have witnessed the devastating impact of COVID-19, the war in Ukraine, and natural disasters like wildfires and Hurricane Ian. Armstrong thinks these events have made them all more aware of the needs of those who are adversely affected by events beyond their control. Rather than being passive observers, she thinks they as planners should be more proactive by bringing up the topic of charitable planning with their clients and showing them different ways they can help those who are less fortunate than themselves. Finally, as a board member of the Foundation for Financial Planning, she would be remiss if she didn't mention their Foundation. This organization's mission is to help the underserved gain control of their financial lives with the assistance of pro bono financial planners.
ABSTRACT
Pam Capalad is the founder and CEO of Brunch & Budget, a virtual financial planning firm. At Brunch & Budget, Pam provides affordable, high-quality financial advice and works to break down financial barriers for people of color. She spoke with Hannah Moore, CFP about how her team provided powerful outreach during the COVID- 19 pandemic, and how showing up and paying attention can help change lives and right wrongs in the financial system. When the COVID-19 pandemic first hit in Mar 2020, the country was stunned. As people all over America lost their jobs or watched their businesses dry up, Pam sprang into action. She took her expertise and energy to the grassroots.
ABSTRACT
The efficient market hypothesis assumes that the stock prices fully reflect all relevant information. Under the weak form, the future prices are independent of current prices or in the other words, they follow the random walk hypothesis. Global issues tend to have an impact on capital markets around the world. Therefore, the objective of this study is to assess the effect of global issues on the movements of expected returns in the Indonesian capital market from January 1, 2022, to June 30, 2022. The sample of 755 listed firms is used to test whether the expected returns have a random pattern during the observation period. The results of runs tests and variance ratio test show that the expected return movements are not random. On those results, the weak form of the efficient market hypothesis is rejected, and it can be concluded that the capital market in Indonesia for this period is inefficient. The findings of this study imply that the information about global issues does not affect the market. The success of the Indonesian government’s strategy in dealing with global issues (including the Covid-19 pandemic) in the form of a vaccination program and also followed by excellent fiscal and monetary policies has led to more predictable returns in the capital market. Moreover, investors can set their portfolios to get extraordinary returns as the market is more predictable.
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Purpose>This paper aims at examining the co-movement dependent regime and causality relationships between conventional and Islamic returns for emerging, frontier and developed markets from November 2008 to August 2020.Design/methodology/approach>First, the authors used the Markov-switching autoregression (MS–AR) model to capture the regime-switching behavior in the stock market returns. Second, the authors applied the Markov-switching regression and vector autoregression (MS-VAR) models in order to study, respectively, the co-movement and causality relationship between returns of conventional and Islamic indexes across market states.Findings>Results show the presence of two different regimes for the three studied markets, namely, stability and crisis periods. Also, the authors found evidence of a co-movement relationship between the conventional and Islamic indexes for the three studied markets whatever the regime. For the Granger causality, it is proved only for emerging and developed markets and only during the stability regime. Finally, the authors conclude that Islamic indexes can act as diversifiers, or safe-haven assets are not strongly supported.Originality/value>This paper is the first study that examines the co-movement and the causal relationship between conventional and Islamic indexes not only across different financial markets' regimes but also during the COVID-19 period. The findings may help investors in making educated decisions about whether or not to add Islamic indexes to their portfolios especially during the recent outbreak.
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We study a sector rotation strategy that switches among equity sectors and from equities to T-bills based on signals of a high-volatility regime in equities. We find that an implementation of the strategy using highly liquid sector-specific ETFs would have earned 6.6% more than the S&P 500 per year during the period December 1998 to December 2020, while experiencing much lower volatility. The performance of the strategy is especially strong during crisis periods such as the 1998–2002 crash and recession, the 2008–2009 Great Recession, and the COVID-19 recession, with much higher and smoother returns than the S&P 500.
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Although the employment of the value of a statistical life (VSL) is a cornerstone of USA governmental risk analysis, many argue that the VSL is flawed when evaluating proposed regulations. The VSL is only an estimate of the willingness to accept wage versus risk, which may be inaccurate for policies that mitigate large risks in pandemics, such as COVID-19. The VSL is revisited using a different approach and utilized in measuring the total value of loss from deaths caused by COVID-19 for 48 selected countries. The modified theory of the demand for health by Gary Becker is utilized to measure the VSL resulting from consumer optimization of utility, subject to constraints and investments in health made to change their survivorship at different ages. Estimates show that the VSL for an average American is around $7.2 million compared to the world VSL of about $1.3 million. Switzerland has the highest VSL of approximately $9.4 million. The total value of loss from deaths caused by COVID-19 is around 6.1% of the USA GDP, compared to the global loss of 1.2% of the world's GDP, while Belgium has the highest value of loss with 9.7% of its GDP. The best possible data and procedures are necessary to make robust and reliable public health decisions while responding to the COVID-19 pandemic. The VSL measure introduced here can be applied to a specific individual, group, or population. It is comprehensive, straightforward, generalizable, and provides a consistent measure with the most popular methods. More importantly, it provides an added value to the existing methods that enable us to break down the VSL into two main components, one that accounts for working time. The other accounts for leisure time and different diminishing consumption and discount rates.
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In this study, we explore the role of individual exposure to negative life events on the disposition effect (DE) – i.e., the tendency of traders in financial markets to sell assets at gain faster than those at a loss. We hypothesize that individual exposure to negative life events may influence the disposition effect through different behavioral mechanisms, namely trading volume reduction, better information processing, and emotions. In three studies, we combine a quasi-natural experiment by considering the disposition effect, as measured with individual financial data from a trading exercise, both before and during the COVID-19 pandemic and across individuals exposed to a different extent to COVID-19. We also manipulated and elicited the emergence of specific emotions from the exposure to COVID-19 and tested whether such emotions influence the DE. Our results show that individual exposure to negative life events will reduce the disposition effect, mainly via better information processing emotion. Negative life events further reduce the DE when anger is elicited in the individual decision-maker.
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India witnessed the first major wave of COVID-19 in 2020. The second major wave during April 2021 caused a higher number of infected cases across the country. These waves of COVID-19, rising cases and lockdown announcements severely impacted the Indian economy. Moreover, huge volatility was observed in the prices of oil and exchange rates during the similar period. Thus, this study tests the effect of selected macroeconomic variables and the COVID-19 pandemic on the performance of the Indian stock market. Using co-integration and the vector error correction model on the NIFTY 100 firms, the findings suggest co-integration and long-term association among variables. The Indian stock market experienced an inverse connection with the exchange rate volatility;the coefficient value is 57.582. The exchange rates rose heavily (with a value of Indian rupee being 76.95 against US dollar) with the onset of COVID-19 cases. Further, these cases do hurt the sentiments of the stock market;however, the relationship is relatively infirm (the value is 0.22) as compared to that of the exchange rate. The accumulated major negative influence of COVID-19 on the economy had a weak impact on the stock market. In conclusion, it should be noted that after the first wave, businesses were more prepared and therefore incorporated the required changes that saw them through the second wave. Acknowledgment The infrastructural support provided by the FORE School of Management, New Delhi in completing this paper is gratefully acknowledged.
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People keep seeing news about inflation in the headlines. It is higher than it's been in over 40 years. And some people are very concerned about that. One particular group that is changing plans are soon-to-be retirees. During the first couple years of the pandemic, 2.4 million more people retired than expected, according to the Federal Reserve Bank of St. Louis. Reasons ranged from losing their jobs to deciding they didn't want to risk contracting COVID-19 to caring for other family members. But now there's a new player in town that is causing almost the opposite effect. As of the time of writing, inflation is at 8.3 percent. That is down from 8.5 percent in March, but that is still higher than it's been in decades. Cummings and his wife often eat spaghetti, and they have seen the prices of spaghetti sauce going up by more than a dollar in the last couple of months. If inflation were only limited to spaghetti sauce, things wouldn't be so bad, but prices are up across the board.
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FPA of New Jersey hosts a lot of events. Last fall, the chapter hosted its fall conference, which leaders dubbed the Post-Pandemic Party, or the PPP. As COVID-19 cases were winding down, chapter leaders thought they would celebrate with the first in-person event since the start of the pandemic. Unfortunately, shortly before the conference, the first variant was announced, and people were hesitant about coming. Lisa Crosta, CFP, CPA, president of the FPA of New Jersey chapter, said they asked members to see if they were still comfortable with attending the conference. They took a poll asking if they would attend, and if so, would they like to see vaccination requirements. And they had more people say yes than not. They were worried;if they require it, how many people are they going to lose because they didn't or they did require it? It was pretty resounding that the majority wanted the vaccine, so they required it for the first one. The conference commenced without a hitch, and many of the attendees were thankful to attend a conference in real life.