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Volume 14
Issue 10
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J. Risk Financial Manag., Volume 14, Issue 10 (October 2021) – 51 articles

Cover Story (view full-size image): Using monthly zip-code level data on credit card transactions covering 16 US cities, this paper investigates changes in consumption at local commercial places during the early coronavirus disease 2019 (COVID-19) era. The estimation results based on common factors across zip codes show that relative consumption of products and services that can be consumed at home has increased up to 56% amid COVID-19 compared to the previous year, whereas relative consumption of products and services that cannot be consumed at home has decreased up to 51%. Similarly, after controlling for the corresponding factors, online shopping has increased up to 21%, while its expenditure share has increased by up to 16% compared to the pre-COVID-19 period.View this paper
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29 pages, 55661 KiB  
Article
A Wavelet Perspective of Crisis Contagion between Advanced Economies and the BRIC Markets
by Constantin Gurdgiev and Conor O’Riordan
J. Risk Financial Manag. 2021, 14(10), 503; https://doi.org/10.3390/jrfm14100503 - 19 Oct 2021
Cited by 5 | Viewed by 1891
Abstract
This paper investigates the relationship between the BRICs’ and the advanced economies’ stock markets from 2000 to 2016 utilizing continuous wavelet transform. The continuous wavelet transform allows us to explore these relationships in the time–frequency domain to capture short- and long-term investors’ perspectives. [...] Read more.
This paper investigates the relationship between the BRICs’ and the advanced economies’ stock markets from 2000 to 2016 utilizing continuous wavelet transform. The continuous wavelet transform allows us to explore these relationships in the time–frequency domain to capture short- and long-term investors’ perspectives. Bi-directional spillovers are captured in terms of returns and volatility. In addition to covering the periods of the dot.com crash, the 11 September 2001 events, the pre-2007 financialization bubble period and the resulting Global Financial Crisis, we study volatility spillovers arising from the BRIC, U.S. and European market shocks post the Global Financial Crisis. Based on our results, we confirm findings in relatively fragmented literature that document time-varying and imperfect BRIC markets’ integration with mature economies. Overall, we show that arbitrage opportunities continue to exist in international stock market portfolios with respect to BRIC assets. In a major addition to the literature, our study captures spillovers from the advanced economies’ shocks to BRIC markets, as well as contagion from BRIC markets’ shocks to advanced economies’ markets. Full article
(This article belongs to the Special Issue Wavelet Applications in Finance)
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15 pages, 594 KiB  
Article
Experts’ Perspective on the Development of Experiential Marketing Strategy: Implementation Steps, Benefits, and Challenges
by Ana-Maria Urdea and Cristinel Petrișor Constantin
J. Risk Financial Manag. 2021, 14(10), 502; https://doi.org/10.3390/jrfm14100502 - 19 Oct 2021
Cited by 10 | Viewed by 16480
Abstract
Consumer needs change over time as a result of the fast-paced advancement in technology and the induction of the Internet, expansion that leads to a difficulty for brands to adapt their marketing promotion strategy and trying to remain innovative and effective at meeting [...] Read more.
Consumer needs change over time as a result of the fast-paced advancement in technology and the induction of the Internet, expansion that leads to a difficulty for brands to adapt their marketing promotion strategy and trying to remain innovative and effective at meeting their consumers’ expectations. This research investigates what effect experiential marketing campaigns have on both customers’ perception and business outcomes, aiming to develop a deeper understanding of experiential marketing, its challenges, and benefits, to understand customers’ reactions to experiential touchpoints, to explore what type of technology increases experiential perceived value, and to envisage the evolution of experiential marketing strategy. To capture all the important facets of the research objectives, an exploratory survey based on the voices of 31 marketing experts from all around the world was applied. By identifying the key drivers of experiential marketing campaigns in a hybrid setting, the present study highlighted the important role that experiential marketing has as a communication strategy, offering additional insights to marketing specialists on the experiential marketing implementation steps. A theoretical framework of the steps needed to put into practice an experiential marketing strategy was proposed. Full article
(This article belongs to the Special Issue Consumer Behavior and Marketing Strategy)
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18 pages, 365 KiB  
Article
Assessing Institutional Dynamics of Governance Compliance in Emerging Markets: The GCC Real Estate Sector
by Rekha Pillai, Husam-Aldin N. Al-Malkawi and M. Ishaq Bhatti
J. Risk Financial Manag. 2021, 14(10), 501; https://doi.org/10.3390/jrfm14100501 - 18 Oct 2021
Cited by 6 | Viewed by 3306
Abstract
The real estate sector has emerged as the bedrock of the Gulf Cooperation Council (GCC) economies, and it has remained resilient despite the various unprecedented micro- and macro-economic shocks devouring the world’s economies. However, wavering investor attitudes and minimal exposure to real estate [...] Read more.
The real estate sector has emerged as the bedrock of the Gulf Cooperation Council (GCC) economies, and it has remained resilient despite the various unprecedented micro- and macro-economic shocks devouring the world’s economies. However, wavering investor attitudes and minimal exposure to real estate investment vehicles, coupled with weak regulatory frameworks, have led to dramatic downturns in the sector. Transparency about what is happening in real estate is imperative if the success of high-profile initiatives is to continue and much depends on good corporate governance (CG) in the sector. Using the most recent data from 2019, the current study applies the CG Index (CGI) and CG Deviation Index (CGDI) constructs to the real estate (RE) sector in the GCC in an effort to develop vital indicators for future RE investment decisions in the GCC region. The results indicate that the highest CG adherence levels are being achieved in Dubai, followed by Abu Dhabi and Saudi Arabia. The authors attribute these countries’ success in CG adherence to the entrepreneurial identity of them RE firms as well as to their governance capacity, their socio-cognitive capability, and the level of regulatory enforcement within the context of their dominant governance logic. It should be noted that there are variations in adherence levels throughout each region. The results also agree with prior literature that a higher CGS leads to a lower CGD score, and vice versa. At this point, encouraging more real estate investment trust (REIT) formations in the GCC could ensure value propositions, such as liquidity, to both investors and RE companies as well as solid governance fundamentals. This is strongly recommended for increasing the RE presence and its contribution to the GDP of each country. Full article
(This article belongs to the Special Issue International Trends and Economic Sustainability on Emerging Markets)
22 pages, 1791 KiB  
Review
Determinants of EMNEs’ Entry Mode Decision with Environmental Volatility Issues: A Review and Research Agenda
by Yameng Li, Ruosu Gao and Jingyi Wang
J. Risk Financial Manag. 2021, 14(10), 500; https://doi.org/10.3390/jrfm14100500 - 18 Oct 2021
Cited by 6 | Viewed by 3761
Abstract
Emerging market multinational enterprises (EMNEs) play a vital role in global economic development and usually adopt aggressive internationalization strategies. However, the volatile global environment has caused EMNEs to face various risks in their overseas expansion. To maximize the competitive advantages and achieve successful [...] Read more.
Emerging market multinational enterprises (EMNEs) play a vital role in global economic development and usually adopt aggressive internationalization strategies. However, the volatile global environment has caused EMNEs to face various risks in their overseas expansion. To maximize the competitive advantages and achieve successful expansion, EMNEs should choose the most suitable foreign entry mode. Therefore, EMNEs need to understand what environmental factors affect their decision-making and how they influence the choice of entry modes, especially in a volatile environment. This review examines 44 selected journal articles from 1996 to June 2021 on the environmental volatility determinants of EMNEs’ entry mode choice. The entry mode choice we examined is mainly wholly-owned subsidiary versus international joint venture. We categorized the environmental volatility determinants investigated in the literature we reviewed into country-level factors (such as cross-national distance) and industry-level factors (such as industry condition). The main contributions are: (1) the review reveals three research gaps in extant studies, which are lack of research on external environmental factors, lack of research on multinationals from less concerning emerging economies, and lack of research on small-to-medium (SMEs) enterprises. (2) Practically, the study highlights the importance of understanding external environmental factors for EMNEs to make the most suitable entry mode decisions. Full article
(This article belongs to the Special Issue Internationalization of Emerging Market Multinational Enterprises in a Volatile Environment)
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16 pages, 890 KiB  
Article
The Effect of Risk, R&D Intensity, Liquidity, and Inventory on Firm Performance during COVID-19: Evidence from US Manufacturing Industry
by Jack Clampit, Dinesh Hasija, Michael Dugan and John Gamble
J. Risk Financial Manag. 2021, 14(10), 499; https://doi.org/10.3390/jrfm14100499 - 18 Oct 2021
Cited by 16 | Viewed by 5254
Abstract
Because prior knowledge may not generalize to the COVID-19 setting, scholars are racing to test the efficacy of existing theoretical frameworks during COVID-19. Most business studies are conceptual or surveys of damage. The main purpose of the paper is to extend the forthcoming [...] Read more.
Because prior knowledge may not generalize to the COVID-19 setting, scholars are racing to test the efficacy of existing theoretical frameworks during COVID-19. Most business studies are conceptual or surveys of damage. The main purpose of the paper is to extend the forthcoming stream that tests firm performance by examining it during COVID-19. We examine the sales growth of 1298 US manufacturers during COVID-19 compared to their pre-COVID-19 baselines. Riskier firms with higher R&D intensities performed better during COVID-19, especially when cash-to-inventory levels were low. This study is among the first to empirically identify actionable predictors of firm performance during COVID-19 via a quantitative analysis of strategies and performance outcomes. Understanding what type of firms perform at higher levels during COVID-19 will help decision makers make more informed decisions moving forward. Employing ordinary least squares (OLS) regression to test our hypotheses, our findings suggest that R&D intensive firms should pivot tactically regarding current asset management, if needed, but not strategically, while prioritizing inventory versus cash retention. The positive effect of inventory versus cash extends theory by suggesting a new boundary condition related to pandemics that reverses the positive link between cash and performance found during crises with more conventional levels of turbulence. Our most important contribution, however, is practical, via the testing of predictors that can help firms during COVID-19. For example, we found that firms with higher levels of operating risk experienced 60 percent more sales growth than risk-averse firms. This knowledge that risk-taking predicted performance during COVID-19 (especially when coupled with a focus on R&D intensity and inventory level) may encourage those that can adopt less risk-averse strategies, while others focus on tactical adjustments or mitigative measures during COVID-19 and future black swan events. Full article
(This article belongs to the Special Issue Infectious Disease Outbreaks, Uncertainties, Firms, and Financial Markets)
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27 pages, 2493 KiB  
Article
An Assessment of the Efficiency of Canadian Power Generation Companies with Bootstrap DEA
by Mohamed Dia, Shashi K. Shahi and Luckny Zéphyr
J. Risk Financial Manag. 2021, 14(10), 498; https://doi.org/10.3390/jrfm14100498 - 18 Oct 2021
Cited by 3 | Viewed by 2252
Abstract
Power generation companies play an important role in the Canadian economy, as most of the economic activities in the manufacturing and service sectors are powered by electricity. The significance of the Canadian power generation industry shows that efficiency analysis is essential for efficiently [...] Read more.
Power generation companies play an important role in the Canadian economy, as most of the economic activities in the manufacturing and service sectors are powered by electricity. The significance of the Canadian power generation industry shows that efficiency analysis is essential for efficiently managing power generation and distribution in Canada. However, there have been few attempts to study the relative efficiencies of the Canadian power generation companies. This study fills in this gap by assessing the overall technical, managerial, and scale efficiencies of a sample of Canadian power generation companies via the non-parametric bootstrap DEA methodology, with firm-level annual inputs and outputs data over an 18-year horizon. The results of our investigation indicate low levels of overall technical and managerial efficiencies but relatively high levels of scale efficiencies of the Canadian power generation companies over the entire study period. We also found that the 2007–2009 financial crisis impacted the relative performance of the Canadian power generation companies. Our results also allowed us to identify the benchmark power generation companies for each type of efficiency that the inefficient companies should target toward improving their efficiency. Full article
(This article belongs to the Special Issue Sustainability, Marketing and Communication)
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15 pages, 1534 KiB  
Article
Questioning the Assumptions, Sustainability and Ethics of Endless Economic Growth
by Haydn Washington
J. Risk Financial Manag. 2021, 14(10), 497; https://doi.org/10.3390/jrfm14100497 - 18 Oct 2021
Cited by 8 | Viewed by 4608
Abstract
This article questions the assumptions, sustainability and ethics of endless economic growth on the basis of environmental science, ecological economics and ecological ethics. It considers the impossibility and unsustainability of endless physical growth on a finite planet. It considers the indicators of environmental [...] Read more.
This article questions the assumptions, sustainability and ethics of endless economic growth on the basis of environmental science, ecological economics and ecological ethics. It considers the impossibility and unsustainability of endless physical growth on a finite planet. It considers the indicators of environmental degradation (all increasing) and argues that society’s addiction to endless growth is irresponsible. It discusses the key problem of denial, and how this blocks us from finding workable solutions. It discusses how in theory GDP could continue to grow modestly in the future if we adopted a steady-state economy where growth was not caused by an expanding population or resource use. However, this model is currently unpopular, with many advocating the green and circular economies that are partial solutions, and which justify ongoing growth through a fantasy of absolute decoupling. I discuss the need for society to change its anthropocentric worldview to one of ecocentrism. I then question whether the UN Sustainable Development Goals are actually ecologically sustainable. I discuss how, when we ignore the problems of an endlessly growing economy, we create significant risk to society. Rather than a focus only on ‘sustainable economic growth’, I suggest it is time to focus centrally on an ecologically sustainable economy and future. Full article
(This article belongs to the Special Issue Sustainable Economic Growth)
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20 pages, 5491 KiB  
Article
Minimising Risk—The Application of Kotter’s Change Management Model on Customer Relationship Management Systems: A Case Study
by Danny Sittrop and Cheryl Crosthwaite
J. Risk Financial Manag. 2021, 14(10), 496; https://doi.org/10.3390/jrfm14100496 - 17 Oct 2021
Cited by 4 | Viewed by 20605
Abstract
Implementing a Customer Relationship Management (CRM) system requires significant consideration with respect to change management and the associated business risks. This paper describes how to best achieve the change goal and minimize these risks. The research question under investigation is: “How can Kotter’s [...] Read more.
Implementing a Customer Relationship Management (CRM) system requires significant consideration with respect to change management and the associated business risks. This paper describes how to best achieve the change goal and minimize these risks. The research question under investigation is: “How can Kotter’s change management model be used effectively to enhance the value and utilisation of a CRM system”. Kotter’s eight-stage change model is the adopted change model used by the organisation under study. As business intelligence (BI) is a growing field within industry and academia alike, limited substantive research has been done regarding how to manage the change process itself within a BI project. Often research either focuses on the technical development (e.g., agile methodology) or the change process from a holistic perspective. However, both are needed to effectively manage the risk of failure. The research design for this study was that of a single organisation case study. The research questions were addressed by using a deductive research style. To allow for multiple perspectives and triangulation of the data, a mixed-methods approach (Quant + QUAL) was used. Outcomes of the research showed that whilst there was some success in the implementation of Kotter’s change model, it could have been significantly improved if the competencies identified in this research were considered and incorporated prior and during the change journey. Building on Kotter’s classic work with change management, this research fills the gap by describing the pertinent competencies required in managing the change process, identifying common pitfalls and investigating the common threads between the ‘data to outcome’ process and the change management process to better mitigate the risk This paper adds value to current change literature/models by defining and describing the importance of these competencies when embarking on a change program related to BI tools and systems and how these competencies are incorporated into Kotter’s model. Full article
(This article belongs to the Section Risk)
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15 pages, 3186 KiB  
Article
The COVID-19 Shock: A Bayesian Approach
by Oussama Abi Younes and Sumru Altug
J. Risk Financial Manag. 2021, 14(10), 495; https://doi.org/10.3390/jrfm14100495 - 15 Oct 2021
Cited by 2 | Viewed by 2925
Abstract
The coronavirus crisis that started in December 2019 was declared a pandemic by March 2020 and had devastating global consequences. The spread of the virus led to the implementation of different preventive measures prior to the availability of effective vaccines. While many governments [...] Read more.
The coronavirus crisis that started in December 2019 was declared a pandemic by March 2020 and had devastating global consequences. The spread of the virus led to the implementation of different preventive measures prior to the availability of effective vaccines. While many governments implemented lockdowns to counter the pandemic, others did not let the virus halt economic activity. In this paper, we use a Bayesian Vector Autoregressive framework to study the effects of the pandemic on prices, unemployment rates, and interest rates in nine countries that took distinctive approaches in tackling the pandemic, where we introduce lockdowns as shocks to unemployment. Based on impulse response functions, we find that in most countries the unemployment rate rose, interest rates fell or turned negative, and prices fell initially following the implementation of the lockdown measures. However, the massive fiscal and monetary stimulus packages to counteract the effects of the pandemic reversed some of the effects on the variables, suggesting that models with explicit recognition of such effects should be developed. Full article
(This article belongs to the Special Issue Monetary Policy, Inflation and Unemployment Dynamics: Theory and Empirics)
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24 pages, 452 KiB  
Article
Sovereign Default Forecasting in the Era of the COVID-19 Crisis
by Tamás Kristóf
J. Risk Financial Manag. 2021, 14(10), 494; https://doi.org/10.3390/jrfm14100494 - 15 Oct 2021
Cited by 6 | Viewed by 3973
Abstract
The COVID-19 crisis has revealed the economic vulnerability of various countries and, thus, has instigated the systematic exploration and forecasting of sovereign default risks. Multivariate statistical and stochastic process-based sovereign default risk forecasting has a 50-year developmental history. This article describes a continuous, [...] Read more.
The COVID-19 crisis has revealed the economic vulnerability of various countries and, thus, has instigated the systematic exploration and forecasting of sovereign default risks. Multivariate statistical and stochastic process-based sovereign default risk forecasting has a 50-year developmental history. This article describes a continuous, non-homogeneous Markov chain method as the basis for a COVID-19-related sovereign default risk forecast model. It demonstrates the estimation of sovereign probabilities of default (PDs) over a five-year horizon period with the developed model reflecting the impact of the COVID-19 crisis. The COVID-19-adopted Markov model estimates PDs for most countries, including those that are advanced with AAA and AA ratings, to suggest that no sovereign nation’s economy is secure from the financial impact of the COVID-19 pandemic. The dynamics of the estimated PDs are indicative of contemporary evidence as experienced in the recent financial crisis. The empirical results of this article have policy implications for foreign investors, sovereign lenders, export finance institutions, foreign trade experts, risk management professionals, and policymakers in the field of finance. The developed model can be used to timely recognize potential problems with sovereign entities in the current COVID-19 crisis and to take appropriate mitigating actions. Full article
(This article belongs to the Special Issue COVID-19’s Risk Management and Its Impact on the Economy)
12 pages, 992 KiB  
Article
Volatility Spillovers among Cryptocurrencies
by Lee A. Smales
J. Risk Financial Manag. 2021, 14(10), 493; https://doi.org/10.3390/jrfm14100493 - 15 Oct 2021
Cited by 10 | Viewed by 3109
Abstract
The cryptocurrency market has experienced stunning growth, with market value exceeding USD 1.5 trillion. We use a DCC-MGARCH model to examine the return and volatility spillovers across three distinct classes of cryptocurrencies: coins, tokens, and stablecoins. Our results demonstrate that [...] Read more.
The cryptocurrency market has experienced stunning growth, with market value exceeding USD 1.5 trillion. We use a DCC-MGARCH model to examine the return and volatility spillovers across three distinct classes of cryptocurrencies: coins, tokens, and stablecoins. Our results demonstrate that conditional correlations are time-varying, peaking during the COVID-19 pandemic sell-off of March 2020, and that both ARCH and GARCH effects play an important role in determining conditional volatility among cryptocurrencies. We find a bi-directional relationship for returns and long-term (GARCH) spillovers between BTC and ETH, but only a unidirectional short-term (ARCH) spillover effect from BTC to ETH. We also find spillovers from BTC and ETH to USDT, but no influence running in the other direction. Our results suggest that USDT does not currently play an important role in volatility transmission across cryptocurrency markets. We also demonstrate applications of our results to hedging and optimal portfolio construction. Full article
(This article belongs to the Special Issue Risk and Volatility Spillovers in Financial Markets)
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14 pages, 1824 KiB  
Article
Democracy and Corruption
by Markus Brueckner
J. Risk Financial Manag. 2021, 14(10), 492; https://doi.org/10.3390/jrfm14100492 - 15 Oct 2021
Cited by 5 | Viewed by 3082
Abstract
I examine the relationship between democracy and the perceived risk of corruption in a panel of 130 countries. My panel model controls for country fixed effects and enables the estimation of a within-country relationship between democracy and corruption. My main finding is that [...] Read more.
I examine the relationship between democracy and the perceived risk of corruption in a panel of 130 countries. My panel model controls for country fixed effects and enables the estimation of a within-country relationship between democracy and corruption. My main finding is that democracy significantly reduces the risk of corruption, but only in countries where ethnic fractionalization is low. In strongly fractionalized countries a transition from autocracy to democracy does not significantly reduce corruption. One explanation for these findings is that the corruption-reducing effect of greater accountability of politicians under democracy is undermined by the common pool problem; fractionalization increases the severity of the common pool problem. Full article
(This article belongs to the Section Applied Economics and Finance)
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15 pages, 600 KiB  
Article
The Effect of U.S. Investor Sentiment on Cross-Listed Securities Returns: A High-Frequency Approach
by Juan Pablo Gutierrez Pineda and Daniel Perez Liston
J. Risk Financial Manag. 2021, 14(10), 491; https://doi.org/10.3390/jrfm14100491 - 15 Oct 2021
Cited by 2 | Viewed by 2047
Abstract
This paper studies the impact of a high-frequency investor sentiment measure (New FEARS) on the returns of foreign securities listed in U.S. markets as American Depository Receipts (ADRs). We recreate a high-frequency investor sentiment measure by aggregating search volume indices (SVIs) for a [...] Read more.
This paper studies the impact of a high-frequency investor sentiment measure (New FEARS) on the returns of foreign securities listed in U.S. markets as American Depository Receipts (ADRs). We recreate a high-frequency investor sentiment measure by aggregating search volume indices (SVIs) for a set of negative economic search terms. We find that ADR aggregate market returns exhibit a negative reaction to increases in searches for negative economic terms such as “recession”, “crisis”, and “bankruptcy” by U.S. households. This is the first paper to measure the effects of high-frequency investor sentiment on cross-listed securities. Moreover, the results are consistent throughout our study regardless of the variation of sentiment and aggregate market return measure we use. We also explore ADR regional market indices and show that Latin American ADRs are more sensitive to this investor sentiment measure. Full article
(This article belongs to the Special Issue Theoretical, Empirical, and Experimental Aspects of Market Microstructure)
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14 pages, 661 KiB  
Article
Behavioral Decision Making in Normative and Descriptive Views: A Critical Review of Literature
by Junyi Chai, Zhiquan Weng and Wenbin Liu
J. Risk Financial Manag. 2021, 14(10), 490; https://doi.org/10.3390/jrfm14100490 - 14 Oct 2021
Cited by 6 | Viewed by 7038
Abstract
Recent studies on decision analytics frequently refer to the topic of behavioral decision making (BDM), which focuses on behavioral components of decision analytics. This paper provides a critical review of literature for re-examining the relations between BDM and classical decision theories in both [...] Read more.
Recent studies on decision analytics frequently refer to the topic of behavioral decision making (BDM), which focuses on behavioral components of decision analytics. This paper provides a critical review of literature for re-examining the relations between BDM and classical decision theories in both normative and descriptive reviews. We attempt to capture several milestones in theoretical models, elaborate on how the normative and descriptive theories blend into each other, thus motivating the mostly prescriptive models in decision analytics and eventually promoting the theoretical progress of BDM—an emerging and interdisciplinary field. We pay particular attention to the decision under uncertainty, including ambiguity aversion and models. Finally, we discuss the research directions for future studies by underpinning the theoretical linkages of BDM with fast-evolving research areas, including loss aversion, reference dependence, inequality aversion, and models of quasi-maximization mistakes. This paper helps to understand various behavioral biases and psychological factors when making decisions, for example, investment decisions. We expect that the results of this research can inspire studies on BDM and provide proposals for mechanisms for the development of D-TEA (decision—theory, experiments, and applications). Full article
(This article belongs to the Special Issue Impact of Uncertainty Vis a Vis Risk in Investment Decisions)
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24 pages, 355 KiB  
Article
The Nexus between Financial Development and Economic Growth: Panel Data Evidence from Developing Countries
by E. M. Ekanayake and Ranjini Thaver
J. Risk Financial Manag. 2021, 14(10), 489; https://doi.org/10.3390/jrfm14100489 - 14 Oct 2021
Cited by 18 | Viewed by 5798
Abstract
The objective of this study is to investigate the nexus between financial development (FD) in economic growth (GROWTH) in developing countries. The study uses panel data from 138 developing countries during the period 1980–2018. The relationship between financial development and economic growth is [...] Read more.
The objective of this study is to investigate the nexus between financial development (FD) in economic growth (GROWTH) in developing countries. The study uses panel data from 138 developing countries during the period 1980–2018. The relationship between financial development and economic growth is investigated using four explanatory variables that are commonly used to measure the level of financial development and several other control variables, including a dummy variable representing the financial and banking crises. The sample of 138 developing countries is also classified into six geographic regions. We have carried out panel unit-root tests and panel cointegration tests before estimating the specified models using both Panel Least Squares (Panel LS) and Panel Fully Modified Least Squares (FMOLS) methods. In addition, panel Granger causality tests have been conducted to identify the direction of causality between FD and GROWTH for each of the regions. The results of the study provide evidence of a direct relationship between FD and GROWTH in developing countries. Furthermore, there is evidence of bi-directional causality running from FD to GROWTH and from GROWTH to FD in samples of Europe and Central Asia, South Asia, and all countries, but not in East Asia and Pacific, Latin America and the Caribbean, Middle East and North Africa, and Sub-Saharan Africa. Full article
(This article belongs to the Special Issue Financial Development and Economic Growth)
12 pages, 433 KiB  
Article
Modeling of Social Risks in the Labor Sphere
by Olha Shulha, Tatiana Kostyshyna, Maryna Semykina, Liudmyla Katan and Hanna Smirnova
J. Risk Financial Manag. 2021, 14(10), 488; https://doi.org/10.3390/jrfm14100488 - 14 Oct 2021
Viewed by 1775
Abstract
Modern society has developed in such a way that social reality is characterized by the significant dynamics of all processes and their uncertainty. Under such conditions, risk accompanies any purposeful activity of the social subject, and, in turn, the latter is aimed at [...] Read more.
Modern society has developed in such a way that social reality is characterized by the significant dynamics of all processes and their uncertainty. Under such conditions, risk accompanies any purposeful activity of the social subject, and, in turn, the latter is aimed at reducing the uncertainty of its results. The purpose of this paper is to form the basis of a comprehensive study of social risks in the labor sphere and to develop practical recommendations for minimizing their negative consequences. In order to determine the main factors influencing the probability for the unemployed not to work in the specialty in which they have trained, we used the data of a micro-level survey on economic activity of the population to build linear regression models based on structural variables. As a result of applying the method of economic-mathematical modeling, in particular the basics of probability theory, the models of social risks of unemployment in terms of occupational groups and employment of unemployed persons outside of the specialty they have trained in were developed. The models developed made it possible to formalize and identify patterns of supply and demand dynamics of labor in terms of professions, as well as to identify the main factors influencing the change in the probabilistic characteristics of employment of unemployed persons outside of the specialty they have trained in. Full article
(This article belongs to the Special Issue Mechanisms and Models of Risk Management)
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14 pages, 326 KiB  
Article
Do Overlapped Audit Committee Directors Affect Tax Avoidance?
by Hidaya Al Lawati and Khaled Hussainey
J. Risk Financial Manag. 2021, 14(10), 487; https://doi.org/10.3390/jrfm14100487 - 14 Oct 2021
Cited by 8 | Viewed by 3613
Abstract
This research is motivated by the Omani government’s desire to reduce tax avoidance and bolster tax revenue collected from financial institutions. The purpose of this paper is to examine the impact of overlapped audit committee (AC) chairs and other directors on tax avoidance [...] Read more.
This research is motivated by the Omani government’s desire to reduce tax avoidance and bolster tax revenue collected from financial institutions. The purpose of this paper is to examine the impact of overlapped audit committee (AC) chairs and other directors on tax avoidance practice and whether they play a monitoring or advisory role in tax avoidance practice. As a measure of overlapped AC chairs, we used a dummy variable to indicate whether an AC chair sits on other committees within a company or not. We used the proportion of AC members who serve on the AC and other committees within a company as our proxy for overlapped AC directors. We used a company’s cash effective tax rate as a proxy for tax avoidance. We regressed tax avoidance on overlapped AC membership and other control variables, using a sample of 204 firm-year observations from financial institutions listed on the Muscat Stock Exchange between 2014 and 2019. Our regression results show that a higher proportion of overlapped AC members and the presence of an overlapped AC chair were both associated with lower effective tax rates, which equated to more tax avoidance. This suggests that these directors play an advisory role in the Omani context. We found, however, that these directors play a monitoring role when firms take a loss. From these findings, we draw important implications for regulators who need to rethink the potential consequences of having overlapped AC chairs and AC directors. Our study focuses on Omani financial institutions, which are highly regulated and monitored by the central bank, and our findings may not be directly applicable to non-financial institutions that are less regulated, so caution is needed when interpreting the findings. Further research could employ a repeated measured research design, such as ours, and explore the same research question in non-financial institutions. Full article
(This article belongs to the Special Issue Corporate Governance and Its Impact on Accounting and Finance II)
10 pages, 1509 KiB  
Article
Univariate and Multivariate Machine Learning Forecasting Models on the Price Returns of Cryptocurrencies
by Dante Miller and Jong-Min Kim
J. Risk Financial Manag. 2021, 14(10), 486; https://doi.org/10.3390/jrfm14100486 - 14 Oct 2021
Cited by 14 | Viewed by 3219
Abstract
In this study, we predicted the log returns of the top 10 cryptocurrencies based on market cap, using univariate and multivariate machine learning methods such as recurrent neural networks, deep learning neural networks, Holt’s exponential smoothing, autoregressive integrated moving average, ForecastX, and long [...] Read more.
In this study, we predicted the log returns of the top 10 cryptocurrencies based on market cap, using univariate and multivariate machine learning methods such as recurrent neural networks, deep learning neural networks, Holt’s exponential smoothing, autoregressive integrated moving average, ForecastX, and long short-term memory networks. The multivariate long short-term memory networks performed better than the univariate machine learning methods in terms of the prediction error measures. Full article
(This article belongs to the Special Issue Machine Learning Applications in Finance)
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18 pages, 1833 KiB  
Article
Self-Organising (Kohonen) Maps for the Vietnam Banking Industry
by Man Ha, Christopher Gan, Cuong Nguyen and Patricia Anthony
J. Risk Financial Manag. 2021, 14(10), 485; https://doi.org/10.3390/jrfm14100485 - 13 Oct 2021
Cited by 2 | Viewed by 2277
Abstract
This is the first study to use the self-organisation (Kohonen) map technique, an artificial neural network based on a non-supervised learning algorithm, to categorise Vietnamese banks into super-class groups. Drawing on unbalanced yearly data from 2008 to 2017, this study identifies two super-class [...] Read more.
This is the first study to use the self-organisation (Kohonen) map technique, an artificial neural network based on a non-supervised learning algorithm, to categorise Vietnamese banks into super-class groups. Drawing on unbalanced yearly data from 2008 to 2017, this study identifies two super-class groups (one and two). While group one consists of joint stock banks, group two consists of commercial state and joint stock banks. Using the non-structural indicator, the Lerner index, to capture market power, and the data enveloped analysis technique to measure bank performance, our result shows significant differences in Lerner scores (which represent bank market power) of the two groups of banks. Differences in the Lerner scores provide evidence of a group of strong banks that is isolated from other banks. This implies that this strong bank group has the potential to be monopolist and impairs Vietnam’s competitive banking environment. The reason is that group two banks may be more profitable due to greater market power, whereas group one banks may struggle to cut costs to remain viable. These findings provide a better understanding for bank executives, policymakers and regulators of the Vietnam banking industry, and ensure an efficient and competitive Vietnam banking environment. Full article
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17 pages, 2393 KiB  
Article
Make the Best from Comparing Conventional and Islamic Asset Classes: A Design of an All-Seasons Combined Portfolio
by Andrea Delle Foglie and Gianni Pola
J. Risk Financial Manag. 2021, 14(10), 484; https://doi.org/10.3390/jrfm14100484 - 13 Oct 2021
Cited by 1 | Viewed by 2319
Abstract
This paper aims to contribute to the existing literature in portfolio management and strategy by investigating the performance, diversification, and hedging benefits arising from integrating Sharia-compliant stocks into a conventional portfolio. Thus, this paper tests the performance of a Combined Portfolio, resulting from [...] Read more.
This paper aims to contribute to the existing literature in portfolio management and strategy by investigating the performance, diversification, and hedging benefits arising from integrating Sharia-compliant stocks into a conventional portfolio. Thus, this paper tests the performance of a Combined Portfolio, resulting from the combination of conventional Islamic instruments, covering different macroeconomic scenarios in the last decade (2010–2020). The strategic asset allocation was designed following the Global Macro Anima (GMA) strategy, solving a risk-parity optimisation problem using a specifically developed MATLAB™ algorithm. The findings will contribute to answering the question related to the possibility of including alternative instruments to increase diversification with hedging benefits by building asset allocations that perform well across different macroeconomic scenarios. Full article
(This article belongs to the Special Issue Islamic Finance)
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3 pages, 216 KiB  
Editorial
Transnational and Transdisciplinary Lessons from the COVID-19 Pandemic
by Frédéric Dutheil, Valentin Navel, Julien S. Baker, Emilie Tran, Alistair Cole, Binh Quach, Jiao Jiao, Jean-Baptiste Bouillon-Minois and Maëlys Clinchamps
J. Risk Financial Manag. 2021, 14(10), 483; https://doi.org/10.3390/jrfm14100483 - 13 Oct 2021
Cited by 1 | Viewed by 1611
Abstract
On 7 January 2020, China identified a virus called severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) [...] Full article
(This article belongs to the Special Issue Transnational and Transdisciplinary Lessons of COVID 19 From the Perspective of Risk and Management)
23 pages, 346 KiB  
Article
A Novel Measure of Political Risk and Foreign Direct Investment Inflows
by Pavel Jeutang and Kwabena Kesse
J. Risk Financial Manag. 2021, 14(10), 482; https://doi.org/10.3390/jrfm14100482 - 12 Oct 2021
Cited by 3 | Viewed by 3089
Abstract
This paper proposes a novel measure of political risk that confirms some of the findings documented in the Foreign Direct Investments (FDI) literature. Particularly, we confirm the positive relationship between political stability and its components on FDI inflows, and the moderating effect of [...] Read more.
This paper proposes a novel measure of political risk that confirms some of the findings documented in the Foreign Direct Investments (FDI) literature. Particularly, we confirm the positive relationship between political stability and its components on FDI inflows, and the moderating effect of natural resources on this relationship. The proposed political risk measure contains relevant, unique and incremental information not observed in the literature. For example, although this measure is highly correlated with the political risk rating of the International Country Risk Guide (ICRG), it contains unique information that explains FDI inflows beyond what is explained by the ICRG rating. A link to the database for our political risk rating for 150 countries covering 2000 to 2015 has been provided. Full article
(This article belongs to the Special Issue Political Risk in Financial Markets)
24 pages, 1727 KiB  
Article
A Novel Model Structured on Predictive Churn Methods in a Banking Organization
by Leonardo José Silveira, Plácido Rogério Pinheiro and Leopoldo Soares de Melo Junior
J. Risk Financial Manag. 2021, 14(10), 481; https://doi.org/10.3390/jrfm14100481 - 12 Oct 2021
Cited by 3 | Viewed by 3022
Abstract
A constant in the business world is the frequent movement of customers joining or abandoning companies’ services and products. The customer is one of the company’s most important assets. Reducing the customer abandonment rate has become a matter of survival and, at the [...] Read more.
A constant in the business world is the frequent movement of customers joining or abandoning companies’ services and products. The customer is one of the company’s most important assets. Reducing the customer abandonment rate has become a matter of survival and, at the same time, the most efficient way to maintain the customer base, since the replacement of dropouts by new customers costs, on average, 40% more. Aiming to mitigate the churn (customer evasion) phenomenon, this study compared predictive models to discover the most efficient method to identify customers who tend to drop out in the context of a banking organization. A literature review of related works on the subject found the neural network, decision tree, random forest and logistic regression models were the most cited, and thus the models were chosen for this work. Quantitative analyses were carried out on a sample of 200,000 credit operations, with 497 explanatory variables. The statistical treatment of the data and the developments of predictive models of churn were performed using the Orange data mining software. The most expressive results were achieved using the random forest model, with an accuracy of 82%. Full article
(This article belongs to the Special Issue Machine Learning Applications in Finance)
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20 pages, 6907 KiB  
Article
Framework on Performance Management in Automotive Industry: A Case Study
by Elena Lascu, Irina Severin, Florina Daniela Lascu, Razvan Adrian Gudana, Gabriela Nalbitoru and Nicoleta Daniela Ignat
J. Risk Financial Manag. 2021, 14(10), 480; https://doi.org/10.3390/jrfm14100480 - 12 Oct 2021
Cited by 3 | Viewed by 3795
Abstract
The purpose of this research is to identify the risks and deficiencies that affect the performance of companies that provide vehicle after-sales services. Thus, this paper highlights the results of a comparative study based on a questionnaire conducted at the level of six [...] Read more.
The purpose of this research is to identify the risks and deficiencies that affect the performance of companies that provide vehicle after-sales services. Thus, this paper highlights the results of a comparative study based on a questionnaire conducted at the level of six brands in the automotive industry. A model was developed to investigate the factors that affect the global performance of the after-sales sector and the authenticity of the information related to the issue studied. Moreover, based on the collected data, this study evaluates the strategies related to performance management used by the organizations studied. In the end, even if the results showed a score of 81% on the questionnaire, we found that companies that provide vehicle after-sales services have not implemented and do not maintain totally the strategies related to performance management. Consequently, the need for change can be emphasized. Based on the analyzed data in the second part of the paper, we identified deficiencies and risks in terms of the organization, operation and management of the service units. These results confirm that the vehicle repair service has a significant influence on employee and customer satisfaction, on the quality of the vehicles repaired and the repair completion time. Full article
(This article belongs to the Special Issue Advances in International Management Research)
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22 pages, 341 KiB  
Article
Does Fixed Income Buffer against Fraud Shocks?
by Steven James Lee
J. Risk Financial Manag. 2021, 14(10), 479; https://doi.org/10.3390/jrfm14100479 - 11 Oct 2021
Viewed by 1894
Abstract
Counterparty risk in the form of investment fraud damages a retiree’s nest egg. Does fraud negatively impact portfolios that are both stock and bond-heavy equally? This study uses Monte Carlo analysis within the Trinity Study framework to determine the average reduction in portfolio [...] Read more.
Counterparty risk in the form of investment fraud damages a retiree’s nest egg. Does fraud negatively impact portfolios that are both stock and bond-heavy equally? This study uses Monte Carlo analysis within the Trinity Study framework to determine the average reduction in portfolio success of a retiree who experiences fraud. Findings suggest that each incidence of fraud results in a loss of three percentage points in retirement success. However, portfolios containing some bonds (75/25, 50/50, and 25/75) outperform all equity (and all bond) allocations, particularly when fraud is present. On average, each incident of fraud reduces the chance the victim will enjoy a successful retirement by nearly 3%. Various limitations, implications, and future research possibilities are discussed. Full article
(This article belongs to the Special Issue Fixed Income Securities)
10 pages, 530 KiB  
Article
Changes in Consumption in the Early COVID-19 Era: Zip-Code Level Evidence from the U.S.
by Hakan Yilmazkuday
J. Risk Financial Manag. 2021, 14(10), 478; https://doi.org/10.3390/jrfm14100478 - 11 Oct 2021
Cited by 2 | Viewed by 3598
Abstract
Using monthly zip-code level data on credit card transactions covering 16 U.S. cities, this paper investigates changes in consumption at local commercial places during the early coronavirus disease 2019 (COVID-19) era. Since using aggregate-level data can suppress valuable information on consumption patterns coming [...] Read more.
Using monthly zip-code level data on credit card transactions covering 16 U.S. cities, this paper investigates changes in consumption at local commercial places during the early coronavirus disease 2019 (COVID-19) era. Since using aggregate-level data can suppress valuable information on consumption patterns coming from zip codes, the main contribution is achieved by estimating common factors across zip codes that are controlled for factors that are zip-code and time specific as well as those that are zip-code and sector specific. The estimation results based on common factors across zip codes show that relative consumption of products and services that can be consumed at home (e.g., grocery, pharmacy, home maintenance) has increased up to 56% amid COVID-19 compared to the previous year, whereas relative consumption of products and services that cannot be consumed at home (e.g., fuel, transportation, personal care services, restaurant) has decreased up to 51%. Similarly, after controlling for the corresponding factors, online shopping has increased up to 21%, while its expenditure share has increased by up to 16% compared to the pre-COVID-19 period. Full article
(This article belongs to the Special Issue Infectious Disease Outbreaks, Uncertainties, Firms, and Financial Markets)
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17 pages, 2017 KiB  
Article
Multi-Asset Value Payoff: Is Recent Underperformance Cyclical?
by Yesim Tokat-Acikel, Marco Aiolfi and Yiwen Jin
J. Risk Financial Manag. 2021, 14(10), 477; https://doi.org/10.3390/jrfm14100477 - 11 Oct 2021
Viewed by 2936
Abstract
Recent value factor underperformance has called into question whether the value factor payoff is cyclically low, or if there are more structural challenges. We use a new approach to explore a link between the well-known macroeconomic exposures of traditional asset classes and those [...] Read more.
Recent value factor underperformance has called into question whether the value factor payoff is cyclically low, or if there are more structural challenges. We use a new approach to explore a link between the well-known macroeconomic exposures of traditional asset classes and those of value premia in a multi-asset context, focusing on country equities, bonds, and currencies in developed markets. Taking advantage of the cross-country inflation and growth expectations implicit in every value portfolio, we derive the net inflation and real growth characteristics embedded in each asset class carry portfolio at each point in time. Our analysis provides several insights: (1) Multi-asset value payoff is only weakly related to the global business cycle. (2) However, we find that the payoff to value portfolios is strongly linked to relative growth and inflation expectations across countries. (3) Over the last decade, we find that cheaper assets have had much lower net relative macro exposures compared to earlier time periods. This characteristic coincides with the period of unconventional central bank policies designed to lift global growth after the Global Financial Crisis (GFC). Full article
(This article belongs to the Special Issue Mathematical and Empirical Finance)
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12 pages, 689 KiB  
Review
The Preventive Role of Exercise on the Physiological, Psychological, and Psychophysiological Parameters of Coronavirus 2 (SARS-CoV-2): A Mini Review
by Julien S. Baker, Alistair Cole, Dan Tao, Feifei Li, Wei Liang, Jojo Jiao, Yang Gao and Rashmi Supriya
J. Risk Financial Manag. 2021, 14(10), 476; https://doi.org/10.3390/jrfm14100476 - 9 Oct 2021
Cited by 5 | Viewed by 4942
Abstract
The world has been severely challenged by the Coronavirus Disease (COVID-19) outbreak since the early 2020s. Worldwide, there have been more than 66 million cases of infection and over 3,880,450 deaths caused by this highly contagious disease. All sections of the population including [...] Read more.
The world has been severely challenged by the Coronavirus Disease (COVID-19) outbreak since the early 2020s. Worldwide, there have been more than 66 million cases of infection and over 3,880,450 deaths caused by this highly contagious disease. All sections of the population including those who are affected, those who are not affected and those who have recovered from this disease, are suffering physiologically, psychologically or psychophysiologically. In this paper we briefly discuss the consequences of COVID-19 on physiological, psychological and psychophysiological vulnerability. We also attempt to provide evidence in support of exercise management as a prevention strategy for improving and minimizing the physiological, psychological and psychophysiological effects of COVID-19. Moderate exercise including walking, yoga and tai-chi to name but a few exercise regimes are critical in preventing COVID-19 and its complications. Governments, public health authorities and the general population should maintain physical activity during the COVID-19 pandemic to prevent additional physical and mental distress. Full article
(This article belongs to the Special Issue Transnational and Transdisciplinary Lessons of COVID 19 From the Perspective of Risk and Management)
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22 pages, 856 KiB  
Article
Corporate Cash Holdings and National Culture: Evidence from the Middle East and North Africa Region
by Sherif El-Halaby, Hosam Abdelrasheed and Khaled Hussainey
J. Risk Financial Manag. 2021, 14(10), 475; https://doi.org/10.3390/jrfm14100475 - 8 Oct 2021
Cited by 11 | Viewed by 3356
Abstract
This paper investigates to what extent cultural dimensions, based on Hofstede’s model, can clarify differences in cash holding levels. The sample includes 395 banks across 19 countries in the Middle East and North Africa region over a period of 16 years (1999–2014). The [...] Read more.
This paper investigates to what extent cultural dimensions, based on Hofstede’s model, can clarify differences in cash holding levels. The sample includes 395 banks across 19 countries in the Middle East and North Africa region over a period of 16 years (1999–2014). The findings indicate that when uncertainty avoidance and masculinity decrease, cash holdings increase, whereas when power distance, long-term orientation, and individualism increase, the cash holdings increase correspondingly. Based on robustness analysis, the results remain unaffected even after controlling corporate and macroeconomic characteristics related to inflation, corruption, and the exchange rate system. Further analysis shows insignificant differences between Islamic and non-Islamic banks regarding the influence of culture over cash holdings. This study contributes to the literature regarding the impact of culture on corporate cash holdings based on a unique and different context, through examining this relationship in financial institutions located in the Middle East and North Africa region. Full article
(This article belongs to the Special Issue Corporate Finance)
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24 pages, 373 KiB  
Article
Predicting Bank Failures: A Synthesis of Literature and Directions for Future Research
by Li Xian Liu, Shuangzhe Liu and Milind Sathye
J. Risk Financial Manag. 2021, 14(10), 474; https://doi.org/10.3390/jrfm14100474 - 8 Oct 2021
Cited by 8 | Viewed by 5582
Abstract
Risk management has been a topic of great interest to Michael McAleer. Even as recent as 2020, his paper on risk management for COVID-19 was published. In his memory, this article is focused on bankruptcy risk in financial firms. For financial institutions in [...] Read more.
Risk management has been a topic of great interest to Michael McAleer. Even as recent as 2020, his paper on risk management for COVID-19 was published. In his memory, this article is focused on bankruptcy risk in financial firms. For financial institutions in particular, banks are considered special, given that they perform risk management functions that are unique. Risks in banking arise from both internal and external factors. The GFC underlined the need for comprehensive risk management, and researchers since then have been working towards fulfilling that need. Similarly, the central banks across the world have begun periodic stress-testing of banks’ ability to withstand shocks. This paper investigates the machine-learning and statistical techniques used in the literature on bank failure prediction. The study finds that though considerable progress has been made using advanced statistical and computational techniques, given the complex nature of banking risk, the ability of statistical techniques to predict bank failures is limited. Machine-learning-based models are increasingly becoming popular due to their significant predictive ability. The paper also suggests the directions for future research. Full article
(This article belongs to the Special Issue A Commemorative Issue in Honor of Professor Michael McAleer, 1952–2021)
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