Scielo RSS <![CDATA[Journal of Economics, Finance and Administrative Science]]> vol. 27 num. 54 lang. es <![CDATA[SciELO Logo]]> <![CDATA[Assessing the possibility of winning a WTO dispute before being involved]]> Abstract Purpose: This article focuses on whether there is a chance to win a World Trade Organization (WTO) trade dispute at the consultation stage. The study suggests an approach to resolving trade disputes on a bilateral level before involving formal WTO resolution procedures. Design/methodology/approach: The model describes the determinants of the probability of winning a trade dispute. The econometric model estimates two different groups of factors available during the consultation period - macroeconomic factors and the institutional features of the trade dispute, such as the number of third parties. The data includes WTO trade disputes from 1995 to 2014. Findings: The suggested model predicts the result of trade disputes with a probability of 76.64%. The research proves that institutional factors such as the number of third parties and the subject of the trade dispute influence the probability of winning. Practical implications: The results of the study help predict the probability of winning a trade dispute at the consultation stage so that countries can decide whether to pursue a trade dispute. Originality/value: The research presents several new hypotheses on the results of trade disputes. The authors show that the higher the number of countries involved, the higher the chance of the complainant winning and that if major parties such as the US or the European Union (EU) are involved as third parties, the chance of the complainant winning increases. <![CDATA[Analysing the linkage between total factor productivity and tourism growth in Latin American countries]]> Abstract Purpose: The study aims to investigate the nexus between total factor productivity and tourism growth in Latin American countries for time series data from 1995 to 2017. Design/methodology/approach: Using the extension of the Granger noncausality test in the nonlinear time-varying of Ajmi et al. (2015), the study points out the interconnectedness between the variables during the period. Findings: The study found nonlinear causality between the variables. Particularly, studying the conclusions for the time-varying Granger causality fashion, it can be noticed that the one-way causality from total factor productivity to tourism growth is obtained for Argentina, Bolivia, Brazil, Uruguay and Venezuela, while the vice versa is confirmed for Chile, Ecuador and Nicaragua. Lastly, the study dissected the plots of the curve causality. Practical implications: In view of the results, some crucial policy implications could be suggested, such as, under certain circumstances and as an exceptional case, the use of policy instruments such as targeted investment, marketing and the support of tourism organizations focused on driving a tourism-led-based productivity and/or tourism programs and projects. Originality/value: The current work is distinguished from the existing body of understanding in several substantial directions. This work explores, for the first time, the linkages between the total factor productivity index and tourism growth for Latin American countries. No single attempt has been known to investigate this interaction by using nonlinear causality, and this study determines the shape of the curve between the total factor productivity index and tourism growth for each country. <![CDATA[Determination of the world stock indices' co-movements by association rule mining]]> Abstract Purpose: This study aims to provide preliminary information to the investor by determining which indices co-movement, with the data mining method. Design/methodology/approach: In this context, data sets containing daily opening and closing prices between 2001 and 2019 have been created for 11 stock market indexes in the world. The association rule algorithm, one of the data mining techniques, is used in the analysis of the data. Findings: It is observed that the US stock market indices take part in the highest confidence levels between association rules. The XU100 stock index co-movement with both the European stock market indices and the US stock indices. In addition, the Hang Seng Index (HSI) (Hong Kong) takes part in the association rules of all stock market indices. Originality/value: The important issue for data sets is that the opening/closing values of the same day or the previous day are taken into account according to the open or closed status of other stock market indices by taking the opening time of the stock exchange index to be created. Therefore, data sets are arranged for each stock market index, separately. A&gt;s a result of this data set arranging process, it is possible to find out co-movements of the stock market indexes. It is proof that the world stock indices have co-movement, and this continues as a cycle. <![CDATA[Is there a price bubble in the exchange rates of the developing countries? The case of BRICS and Turkey]]> Abstract Purpose: The last decades have experienced increasingly integrated global political and economic dynamics ranging especially from the influence of exchange rates and trade amid other sources of uncertainties. The purpose of this study is to examine the exchange rate dynamics of Brazil, Russia, India, China, and South Africa (BRICS) and the Republic of Turkey. Design/methodology/approach: Given this perceived global dynamics, the current study examined the BRICS countries and the Republic of Turkey's exchange rate dynamics by using the United States (US) monthly dollar exchange rate data between January 2002 and August 2019. The price bubble which is expressed as exceeding the real value of assets' prices which is observably caused by speculative movements is investigated by using the Supremum Augmented Dickey-Fuller (SADF) and the Generalized Supremum Augmented Dickey-Fuller (GSADF) approaches. Findings: Accordingly, the GSADF test results opined that there are price bubbles in the dollar exchange rate of other countries except for the United States Dollar (USD)/Indian Rupee (INR) exchange rate. As the related countries are classified as developing countries in terms of their structure, they are also expectedly the subject of speculative exchange rate movements. Speculative movements in exchange rates may cause serious problems in national economies. Originality/value: Thus, the current study provides a policy framework to the BRICS countries and the Republic of Turkey. <![CDATA[The impact of real exchange rates on real stock prices]]> Abstract Purpose: The study examines the impact of real exchange rates and asymmetric real exchange rates on real stock prices in Malaysia, the Philippines, Singapore, Korea, Japan, the United Kingdom (UK), Germany, Hong Kong and Indonesia. Design/methodology/approach: This study uses the asymmetric autoregressive distributed lag (ARDL) approach and non-linear autoregressive distributed lag (NARDL) approach. Findings: The asymmetric ARDL approach shows more economic variables are found to be statistically significant than the ARDL approach. The asymmetric real exchange rate is mostly found to have a significant impact on the real stock price. Moreover, real output and real interest rates are found to have a significant impact on the real stock price. The Asian financial crisis (1997-1998) and the global financial crisis (2008-2009) are found to have a significant impact on the real stock price in some economies. Research limitations/implications: Economic variables are important in the determination of stock prices. Originality/value: It is important to examine the impact of asymmetric real exchange rate on the real stock price as the depreciation of real exchange rate could have different impacts than the appreciation of real exchange rate on the real stock price. The previous studies in the literature mostly found the significant impact of nominal exchange rate on the nominal stock price. <![CDATA[Economic policy uncertainty of China and investment opportunities: a tale of ASEAN stock markets]]> Abstract Purpose: The purpose of this paper is to examine the effect of economic policy uncertainty (EPU) of China on investment opportunities in five ASEAN economies. Design/methodology/approach: This paper employs advanced empirical approaches, such as Multivariate DCC-GARCH and Continuous Wavelet Transform (CWT) to test the research objective. The period of analysis involved monthly data from 2003 until 2019. Findings: This paper provides evidence where the Malaysian stock market to be the least exposed to risks emanating from Chinese EPU, followed by Singapore, the Philippines, Thailand and Indonesia. Results for investment opportunities based on time horizon suggest, for a short-term holding period, investors are better off investing in Singapore and Indonesia, while, for medium-term holding periods, all ASEAN markets appear lucrative except for the Philippines. Practical implications: From a managerial perspective, the outcome or findings of this study are expected to aid the retail and institutional investors in designing better strategies on diversifying a stock portfolio with different holding periods. Originality/value: Theoretically, the findings of this study contribute fresh insights into an emerging strand of literature focusing on the transmission of regional policy. Methodologically as well, this study is a novel venture to the best of authors' knowledge. <![CDATA[Return and volatility spillover between India and leading Asian and global equity markets: an empirical analysis]]> Abstract Purpose: The study uses the multivariate GARCH-BEKK model (which was first proposed by Baba et al. (1990) and then further developed by Engle and Kroner (1995)) to examine the return and volatility spillover between India and four leading Asian (namely, China, Japan, Singapore and Hong Kong) and two global (namely, the United Kingdom and the United States) equity markets. Design/methodology/approach: The study employs a multivariate GARCH-BEKK model to quantify return correlation and volatility transmission across the pre- and post-2008 global financial crisis periods (apart from other conventional time series modelling like cointegration, Granger causality using vector error correction model (VECM)). Findings: The results show a tendency of the Indian stock market index to move along with the US and Hong Kong market indices. The decrease in the value of the co-integration coefficient during the recession was explained by reduced investor confidence in developing countries. The result further shows a clear distinction in terms of volatility spillover between the Asian market vis-a-vis US and UK markets. Volatility transmission from India to Asian markets was found to be significantly higher as compared to the US and UK. So also, the study’s results show a puzzling result giving us comparable co-integration ranks for phase 2 (expansion) and phase 3 (slow-down) of the business cycle in most cases. Research limitations/implications: In Granger causality testing, the results were unable to ascertain the difference between phase 2 (expansion) and phase 3 (slowdown). However, the multivariate GARCH (MGARCH)-BEKK model showed a clear reduction in volatility transmission to NIFTY50 (is the flagship index on the National Stock Exchange of India Ltd. (NSE)) as India entered slow-down. This shows that the Indian economy does go through different business cycles, and the changes in parameters hence prove hypothesis 3 to be true with respect to volatility transmission to India from International markets. Originality/value: The results show that for all countries, the volatility transmitted to India increases significantly going from phase 1 (recession) to phase 2 (expansion) and reduces again once the countries enter slow-down in phase 3 (slowdown). This shows that during expansion shocks and impulses in international markets affect the Indian markets significantly, supporting the increase in co-integration in phase 2 (expansion). During expansion, developing markets like India become profitable for investors, due to the high growth rate when compared to developed countries. This implies that a significant amount of capital enters Indian markets, which is susceptible to the volatility of international markets. The volatility transmission from India to the US and UK was insignificant in phase 1 (recession and recovery) and phase 3 (slow-down) showing a weak linkage between the markets during volatile time periods. <![CDATA[Testing the market efficiency in Indian stock market: evidence from Bombay Stock Exchange broad market indices]]> Abstract Purpose: Despite volumes of research on the efficient market hypothesis (EMH) over the last six decades, the results are inconclusive as some studies supported the hypothesis, and some studies rejected it. The study aims to examine the market efficiency of the Indian stock market. Design/methodology/approach: For analysis, nine Bombay Stock Exchange (BSE) broad market indices were selected covering the study period from 01 January 2011 to 31 December 2020. The data collected for this study are daily open, high, low and closing prices of selected indices. The tools used in this study are: (1) unit root test to check the stationarity of time series, (2) descriptive statistics, (3) autocorrelation and (4) runs test. Findings: The empirical findings of the study reveal that BSE broad market indices do not follow a random walk and Indian stock market is as weak-form inefficient. Research limitations/implications: The findings from this study provide several avenues for future research. One of the research implications is that anomalies in the statistical results by different academicians in the finance area need to be explained by future researchers. Practical implications: Investment companies need to understand that extraordinary skills are required to beat the market to make abnormal returns. In an inefficient market where securities do not reflect the complete available information, it is challenging for the investment brokers to convince the customers about the portfolios they recommend to the public that the rate of return would be more than expected. Social implications: As economic growth is related to the growth in the financial sector, developing countries like India depend on the accuracy of the information. In the presence of asymmetric information, the fluctuations in the stock market would have serious harmful consequences on the economy. Originality/value: Amid several controversies surrounding the EMH testing, this study is a modest attempt to provide evidence that the Indian stock market is in weak-form inefficient. However, it is essential to link investors' behaviour and trends observed in the financial sector to fully understand the implications of EMH. <![CDATA[Risk-managed time-series momentum: an emerging economy experience]]> Abstract Purpose: This research study aims to design a novel risk-managed time-series momentum approach. The present study also examines the time-series momentum effect in the Indian equity market. Apart from this, the study also proposes a novel risk-managed time-series momentum approach. Design/methodology/approach: The study considers the adjusted monthly closing prices of the stocks listed on the Bombay Stock Exchange from January 1996 to December 2020 to formulate long-short portfolios. Newey-West t statistics were used to test the significance of momentum returns. The present research has considered standard risk factors, i.e. market, size and value, to evaluate the risk-adjusted performance of time-series momentum portfolios. Findings: The present research reports a substantial absolute momentum effect in the Indian equity market. However, absolute momentum strategies are exposed to occasional severe losses. The proposed time-series momentum approach not only yields 2.5 times higher return than the standard time-series momentum approach but also causes substantial enhancement in downside risks and higher-order moments. Practical implications: The study's outcomes offer valuable insights for professional investors, capital market regulators and asset management companies. Originality/value: This study is one of the pioneers attempting to test the time-series momentum effect in emerging economies. Besides, current research contributes to the escalating literature on risk-managed momentum by suggesting a novel revised time-series momentum approach. <![CDATA[Pakistan: a study of market's returns and anomalies]]> Abstract Purpose: This paper aims to expand foreign investors' understanding of potential return enhancement and risk diversification advantages offered by equity market of Pakistan through comparing its performance to performances in other markets and investigating what matters for investing in Pakistan's market. Design/methodology/approach: Comparative analysis of Pakistan Stock Exchange is performed using data for 22 developed and 22 emerging markets over the period 1993-2019. Cross-sectional analysis is performed using data for 130 non-financial firms from Pakistan and Carhart (1997) and Fama and French (2015) models are applied. The role of liquidity with five-factor model is analyzed using turnover rate and Amihud (2002) illiquidity cost as liquidity measures. Findings: Pakistan's equity offers substantial diversification benefits if added to developed market portfolios. However, observed large returns come together with inverted premia for most traditional factors indicating that investors may want to invest preferably in big stocks with low book-to-market and momentum. Finally, global investors can invest in high yielding stocks with low liquidity risk owing to positive connection between liquidity and returns. Practical implications: This study will provide investment model for foreign investors to enhance their portfolio returns. Policy makers in Pakistan must identify regulatory steps to facilitate foreign investments. Originality/value: To the best of the authors' knowledge, this is the first study which identifies efficiency gains offered by Pakistan's equity for global investors. <![CDATA[Shadow economy in Palestinian territories using currency demand approach]]> Abstract Purpose: The study aims at estimating the shadow economy (SE) using the method of demand for currency in Palestine for the period 2008-2018 by studying the relationship between a group of variables that affect the ratio of money traded outside the banking system to the money supply in the broad sense. Design/methodology/approach: The study has adopted analytical and descriptive research methods to estimate SE in Palestinian territories. The data has been obtained from the inflation reports issued by the Palestinian Monetary Authority for ten years, from 2008 to 2018. A standard model was constructed using EViews version 8 for statistical data processing after converting the annual data to quarterly data. Findings: The authors demonstrated that the size of the SE in Palestinian territories has varied over time, and the annual average of its size during the study period reached about $1764.893 (in millions). This amount constitutes about 15.5% of the gross domestic product. The study provides recommendations for reducing the size of the SE in Palestinian territories. Practical implications: The current study shows that shadow economics could significantly matter for economic policy design by policymakers. Originality/value: This study deals directly with Tanzi’s “estimation of shadow economy in Palestinian territories” concept and its impact on economic policies. <![CDATA[Financial fragility and financial stress during the COVID-19 crisis: evidence from Colombian households]]> Abstract Purpose: Our findings indicate that workers with more financial education were more prepared to face the negative effects on their finances from COVID. This ability reduces the probability of becoming financially fragile and experiencing financial stress. Design/methodology/approach: The authors applied a survey questionnaire to 856 Colombian adults and used principal component analysis to build an index for each factor. Then, the authors used a linear regression model with the indexes to test our hypotheses and verify our results using a structural equation model. Findings: Our findings indicate that workers who have more financial education are more prepared to face the negative effects on their finances, which reduces the probability of becoming financially fragile and having financial stress. Research limitations/implications: The authors found that there is no significant relationship between financial literacy and financial fragility, neither between financial literacy and financial stress, so a better financial education will not lower financial fragility and stress unless it is being applied by households through better financial preparedness. Practical implications: It is important to highlight that the pandemic not only taught us to improve biosecurity measures but also that financial strength, ability to work remotely and income diversification were key factors in facing this adverse shock, the authors show that high levels of financial education have a positively relationship with the ability of individuals to manage their resources, so private and public institutions have to promote better financial education. Originality/value: This is the first study that applies the four different indexes to an emerging country (i.e. Colombia), and the first one to create and use a financial stress index. <![CDATA[Reinvesting in equity crowdfunding: the case of digital workers]]> Abstract Purpose: The purpose of this study is to investigate the initial investment's motivations and study the reinvesting motivations. The results revealed differences in reinvestors' motivations of reinvestors in both winning and losing situations. Specifically, financial return and excitement motives were supported for win and loss situations, while recognition was supported for loss and pleasure in win situations. Design/methodology/approach: The impact of intrinsic and extrinsic motivations on reinvestors was tested using the structural equation model. Furthermore, the framework was analysed with survey data from a total of 355 digital workers from Amazon Mechanical Turk, one of the world's largest crowdsourcing platforms. Findings: The results indicate that there are differences in the motivations for reinvestors when they are in both winning and losing situations. Financial return and excitement motives were supported for win and loss situation, while recognition was supported in loss and pleasure in win situation. Research limitations/implications: This study makes it possible to better understand the motivations behind crowdfunding reinvestment among digital workers. To build on this work, more studies should be conducted with different samples to test the generalisability of these results. Moreover, future studies on different samples could determine whether the same motivations would hold for other investors or whether another motivation would have greater impact on these reinvestment decisions. Originality/value: While previous research on equity crowdfunding has predominantly focused on intrinsic and extrinsic motivations for participating and investing in equity crowdfunding platforms, the motives that specifically affect winning or losing situations for reinvestors have been largely overlooked.