The role of R&D and economic policy uncertainty in Sri Lanka's economic growth.

In this paper, we assess the role of investment in research and development (R&D) and economic policy uncertainty (EPU) in Sri Lanka's economic growth experience. We do this by first determining which endogenous growth theories best explain the evolution of total factor productivity (TFP) in the country. Using historical time series data (1980-2018), we find that semi-endogenous growth theories best explain the evolution of TFP in Sri Lanka. This evidence suggests that R&D is critical to the country's TFP expansion. We find that, through R&D, EPU has a crucial detrimental impact on TFP growth, although it is short-lived. Our findings are robust and have important implications for R&D investment and for moderating EPU.

Exchange rate exposure in the South African stock market before and during the COVID-19 pandemic.

We examine the nature of exchange rate exposure before and during the COVID-19 pandemic. Using a multifactor arbitrage pricing model and daily data from South Africa, we show that, as compared with sectors, industries have been more exposed to the exchange rate risk during than before the pandemic. We further show that exchange rate exposure mostly hurts the sectors and industries, although a few sectors, such as beverages, mining, personal goods, and tobacco, and industries, such as basic materials, consumer goods, and technology, may benefit from it. Our estimates survived robustness checks.

Investor attention on COVID-19 and African stock returns.

We examine the financial consequences of rising global investor attention or risk attitude related to the COVID-19 pandemic for African stock markets. Using daily investor attention indices, which are based on global COVD-19-related google search queries, and stock return indices for 14 African stock markets, we show that investor attention is an important determinant of stock returns. Our estimates suggest that an increase in investor attention consistently reduces stock returns in three stock markets, namely Botswana, Nigeria, and Zambia. In contrast, an increase in investor attention may enhance stock returns in Ghana and Tanzania. Our estimates imply that, in uncertain times like the current pandemic, stock markets like those of Ghana and Tanzania may offer potential diversification benefits to investors. We demonstrate that our estimates are broadly robust using a composite measure of investor attention.•We built a direct and unambiguous measure of investor attention or risk attitude related to the COVID-19 pandemic.•In an exponential generalised autoregressive heteroskedasticity of order one (i.e. EGARCH(1,1)) framework, we regressed stock returns on their first lags, investor attention, exchange rate returns, and commodity returns, and controlled for investor attention in the variance equation.

Stock return predictability over four centuries: The role of commodity returns.

We merge two unique historical datasets on commodity and stock prices covering four centuries and three leading stock markets (Netherlands, UK, and US) to show that, consistent with theoretical predictions, commodity returns can predict stock returns. We show that about 64% and 56% of the commodity returns can predict stock returns in-sample and out-of-sample, respectively. Aggregating commodity returns by market, returns from agriculture, energy, and livestock and meat markets appear to consistently predict stock returns. These results are robust to recessions and expansions.