Connectedness of green investments and uncertainties: new evidence from emerging markets

Purpose>This study aims to investigate the response of green investments of emerging countries to own-market uncertainty, oil-market uncertainty and COVID-19 effect/geo-political risks (GPRs), using the tail risks of corresponding markets as measures of uncertainty.Design/methodology/approach>This study employs Westerlund and Narayan (2015) (WN)-type distributed lag model that simultaneously accounts for persistence, endogeneity and conditional heteroscedasticity, within a single model framework. The tail risks are obtained using conditional standard deviation of the residuals from an asymmetric autoregressive moving average – ARMA(1,1) – generalized autoregressive conditional heteroscedasticity – GARCH(1,1) model framework with Gaussian innovation. For out-of-sample forecast evaluation, the study employs root mean square error (RMSE), and Clark and West (2007) (CW) test for pairwise comparison of nested models, under three forecast horizons;providing statistical justification for incorporating oil tail risks and COVID-19 effects or GPRs in the predictive model.Findings>Green returns responds significantly to own-market uncertainty (mostly positively), oil-market uncertainty (mostly positively) as well as the COVID-19 effect (mostly negatively), with some evidence of hedging potential against uncertainties that are external to the green investments market. Also, incorporating external uncertainties improves the in-sample predictability and out-of-sample forecasts, and yields some economic gains.Originality/value>This study contributes originally to the green market-uncertainty literature in four ways. First, it generates daily tail risks (a more realistic measure of uncertainty) for emerging countries' green returns and global oil prices. Second, it employs WN-type distributed lag model that is well suited to account for conditional heteroscedasticity, endogeneity and persistence effects;which characterizes financial series. Third, it presents both in-sample predictability and out-of-sample forecast performances. Fourth, it provides the economic gains of incorporating own-market, oil-market and COVID-19 uncertainty.

Overreaction and Underreaction during the Covid-19 Pandemic in the South African Stock Market and Its Implications

The aim of this study was to investigate overreaction and underreaction from the six main sectors in the Johannesburg stock exchange due to the significant impact of Covid-19 on economic activities and financial markets globally. Using a Threshold GARCH model, the findings revealed the presence of overreaction mostly in the healthcare, industrial and telecom sector. However, very few stocks in the banking and tech portrayed overreaction while none of the stocks in the consumer goods sector revealed the presence of overreaction or underreaction because the coefficient of the leverage term was statistically insignificant. From these findings, there is a high risk of investing in healthcare, industrial and telecom stocks, which is not compensated by additional returns. Investors can minimize risk in this sectors by adding healthcare, industrial and telecom stocks in a well- diversified portfolio and assigning a risk coefficient to their pricing. This study adds to the body of knowledge on market anomalies by looking at overreaction and underreaction during the coivid-19 pandemic, which is an important concept in behavioral finance. This study is significant to market participants that are willing to trade on the Johannesburg stock exchange as it provides valuable insights on behavioral pattern and anomalies.

Soaring Demand on Public Health Innovation through Digitalization due to Pandemic, are Tech Stocks worth Investing?

Despite optimism, COVID-19 pandemic still emerges as a challenge to the economy and public health worldwide. Authorities have taken a variety of measures focusing on the control of the spread of the fatal disease. With no available cure and high transmissibility rate, containment, testing, social distancing, lockdowns, and epidemiological investigation are practiced globally. Digital innovation comes into play from the technology industry just like software applications, artificial intelligence, and the like as a supplement to conventional practices. Technology has played a pivotal role in the disease investigation process and in preventing further outbreaks. With all the uncertainty in the market, economy, and public health, how lucrative is investing in Tech Stocks nowadays?