Journal of Risk and Financial Management

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16 pages, 976 KiB

Open AccessArticle

Transformation of the Ukrainian Stock Market: A Data Properties View

by Alex Plastun, Lesia Hariaha, Oleksandr Yatsenko, Olena Hasii and Liudmyla Sliusareva

J. Risk Financial Manag. 2024, 17(5), 177; https://doi.org/10.3390/jrfm17050177 - 24 Apr 2024

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This paper investigates the evolution of the Ukrainian stock market through an analysis of various data properties, including persistence, volatility, normality, and resistance to anomalies for the case of daily returns from the PFTS stock index spanning 1995–2022. Segmented into sub-periods, it aims [...] Read more.

This paper investigates the evolution of the Ukrainian stock market through an analysis of various data properties, including persistence, volatility, normality, and resistance to anomalies for the case of daily returns from the PFTS stock index spanning 1995–2022. Segmented into sub-periods, it aims to test the hypothesis that the market’s efficiency has increased over time. To do this different statistical techniques and methods are used, including R/S analysis, ANOVA analysis, regression analysis with dummy variables, t-tests, and others. The findings present a mixed picture: while volatility and persistence demonstrate a general decreasing trend, indicating a potential shift towards a more efficient market, normality tests reveal no discernible differences between analyzed periods. Similarly, the analysis of anomalies shows no specific trends in the market’s resilience to the day-of-the-week effect. Overall, the results suggest a lack of systematic changes in data properties in the Ukrainian stock market over time, possibly due to the country’s volatile conditions, including two revolutions, economic crises, the annexation of territories, and a Russian invasion leading to the largest war in Europe since WWII. The limited impact of reforms and changes justifies the need for continued market reform and evolution post-war. Full article

(This article belongs to the Special Issue Financial Markets, Financial Volatility and Beyond (Volume III))

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18 pages, 869 KiB

Open AccessArticle

Stock Overvaluation, Management Myopia, and Long-Term Firm Performance

by Jialin Song, Luyu Wang, Sihong Wu and Yiyi Su

J. Risk Financial Manag. 2024, 17(4), 161; https://doi.org/10.3390/jrfm17040161 - 16 Apr 2024

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Abstract

How does stock overvaluation in secondary financial markets affect long-term firm performance when significant corporate “insiders” seek to realize self-benefit? Using a sample of Chinese listed companies from 2007 to 2018, we find that overvaluation of stock price has a negative impact on [...] Read more.

How does stock overvaluation in secondary financial markets affect long-term firm performance when significant corporate “insiders” seek to realize self-benefit? Using a sample of Chinese listed companies from 2007 to 2018, we find that overvaluation of stock price has a negative impact on long-term firm performance. Moreover, our results show that management myopia mediates the relationship between stock overevaluation and long-term performance. Our study enriches the discussion of stock overvaluation and extends the management myopia literature by considering unique aspects of the irrational behavior of firm decision makers, providing implications for governments to improve their capital market reform and development. Full article

(This article belongs to the Special Issue Financial Markets, Financial Volatility and Beyond (Volume III))

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26 pages, 1520 KiB

Open AccessArticle

Trade Agreements and Financial Market Integration in Latin America and the US

by Obed Fernando Izaguirre, Seungho Shin and Duygu Zirek

J. Risk Financial Manag. 2024, 17(3), 126; https://doi.org/10.3390/jrfm17030126 - 20 Mar 2024

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Abstract

The primary objective of this study is to examine the extent of financial integration between Latin American and US financial markets, particularly in light of recent efforts to foster integration through trade agreements. Spanning from 1 January 1990 to 31 December 2019, the [...] Read more.

The primary objective of this study is to examine the extent of financial integration between Latin American and US financial markets, particularly in light of recent efforts to foster integration through trade agreements. Spanning from 1 January 1990 to 31 December 2019, the sample focuses on major market indices and key sectors. Financial integration is quantified using a DCC multivariate GARCH model, incorporating a smooth transition model, structural breaks, and regression-based approaches. Results indicate increased comovement with the US for main market indices in Argentina, Chile, Colombia, Mexico, and Peru, while Brazil shows a decrease. Similar trends are observed in sectoral analyses. This study also reveals heightened correlation post-trade agreements. Structural break analysis highlights significant shifts in dynamic correlations for countries with US free trade agreements. These findings support the argument of increased financial integration, bearing significance for portfolio diversification and international policy formulation. Full article

(This article belongs to the Special Issue Financial Markets, Financial Volatility and Beyond (Volume III))

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14 pages, 845 KiB

Open AccessArticle

The Effects of Geopolitical Risk on Foreign Direct Investment in a Transition Economy: Evidence from Vietnam

by Loc Dong Truong, H. Swint Friday and Tan Duy Pham

J. Risk Financial Manag. 2024, 17(3), 101; https://doi.org/10.3390/jrfm17030101 - 01 Mar 2024

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Abstract

Foreign direct investment (FDI) is a key driver of economic development of both developed and developing countries. Understanding and having insights into the factors that motivate increased FDI arevery important for both academics and policy makers. A key factor that multinationals incorporate in [...] Read more.

Foreign direct investment (FDI) is a key driver of economic development of both developed and developing countries. Understanding and having insights into the factors that motivate increased FDI arevery important for both academics and policy makers. A key factor that multinationals incorporate in their decisions on FDI is geopolitical risk (GPR). Therefore, this study is devotedto investigating the short-term and long-term effects of GPR on FDI in Vietnam. Data used in this study are the yearly geopolitical risk index, FDI, and other control variables covering the period from 1986 to 2021. Using the autoregressive distributed lag (ARDL) bounds testing approach, the empirical results confirm that geopolitical risk (GPR) has a significantly negative effect on FDI in Vietnam in the longterm. Specifically, in the longterm, 1 percent increase in the GPR index is associated with 5.7983 percent decrease in Vietnam’s FDI. In addition, the results derived from the ARDL model indicate that in the shortterm, GPR has a significantly positive effect on the FDI for the one-year lag, meaning that an increase in the GPR index leads to an increase in FDI. Moreover, the results derived from the error correction model (ECM) indicate that 42.89% of the disequilibria from the previous year are converged and corrected back to the long-run equilibrium in the current year. Based on the findings, some policy implications are drawn for policymakers to mitigate the negative effects of GPR on FDI. Full article

(This article belongs to the Special Issue Financial Markets, Financial Volatility and Beyond (Volume III))

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16 pages, 885 KiB

Open AccessArticle

How Consideration of Future Consequences, Prior Gain or Loss, Personal Risk Profile, and Justification Affect Risk–Payoff Preferences

by W. Eric Lee

J. Risk Financial Manag. 2024, 17(2), 83; https://doi.org/10.3390/jrfm17020083 - 18 Feb 2024

Cited by 1 | Viewed by 1089

Abstract

This study examines (1) how risk–payoff preference can be affected by differences in consideration of future consequences (CFC), prior gain/loss, and personal risk profile, and (2) whether one’s risk–payoff preference may vary with justification prompts. Using an experimental design with 366 undergraduate business [...] Read more.

This study examines (1) how risk–payoff preference can be affected by differences in consideration of future consequences (CFC), prior gain/loss, and personal risk profile, and (2) whether one’s risk–payoff preference may vary with justification prompts. Using an experimental design with 366 undergraduate business students, participants are tasked to make risk–payoff choices in two scenarios, with the combined risk–payoff outcomes serving as the dependent variable. In addition, participants are assessed on their personal risk profiles and also complete the 14-item CFC scale to gauge the propensity to take into account future consequences of their behaviors. Findings show that one who scores low (high) in CFC will prefer lower (higher) risk and payoff. Further, for an individual who scores high in CFC and has a prior gain (loss), he/she will be more inclined to prefer lower (higher) risk and payoff, though this effect is moderated by one’s risk profile. Finally, justification prompts help to reduce one’s propensity toward high risk–payoff, irrespective of prior gain/loss and risk profile considerations. With regard to consumers’ financial choices, particularly in a volatile economic environment, the findings here indicate that prompting for strategic justifications before making decisions can help lower one’s overall propensity toward high risk–payoff choices. Full article

(This article belongs to the Special Issue Financial Markets, Financial Volatility and Beyond (Volume III))

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17 pages, 1919 KiB

Open AccessArticle

Impact of Financial Factors on the Economic Cycle Dynamics in Selected European Countries

by Bogdan Andrei Dumitrescu and Robert-Adrian Grecu

J. Risk Financial Manag. 2023, 16(12), 492; https://doi.org/10.3390/jrfm16120492 - 21 Nov 2023

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Abstract

The aim of this paper was to assess the impact generated by the financial market shocks on the economic cycle in European countries. In addition to the studies from the literature, which focus more on the developed economies, this paper also considered the [...] Read more.

The aim of this paper was to assess the impact generated by the financial market shocks on the economic cycle in European countries. In addition to the studies from the literature, which focus more on the developed economies, this paper also considered the situation at the level of a group of emerging economies to highlight the potential differences. In this sense, it was analyzed how the shocks at the level of the banking sector, those at the level of the capital market, and those at the level of the real estate market influence the dynamics of the economic cycle. Both econometric models for the individual analyses of each state, such as the Bayesian vector autoregression model, and models at the level of groups of states, such as panel regressions, were used for the period 2007–2022. The results showed a strong connection between the dynamics of the financial system and that of the real economy. In addition, the impact of financial factors on the economic cycle tends to be much stronger and more significant in the case of developing countries, compared to developed ones. In this regard, it was recommended that fiscal and monetary policies should be coordinated to generate the expected effect on the economy. Full article

(This article belongs to the Special Issue Financial Markets, Financial Volatility and Beyond (Volume III))

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19 pages, 539 KiB

Open AccessArticle

Environmental Performance and a Nation’s Growth: Does the Economic Status and Style of Governance of a Country Matter?

by Shailesh Rastogi, Jagjeevan Kanoujiya, Pracheta Tejasmayee, Souvik Banerjee, Neha Parashar and Asmita Dani

J. Risk Financial Manag. 2023, 16(10), 460; https://doi.org/10.3390/jrfm16100460 - 22 Oct 2023

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Abstract

The literature abounds with studies on the impact of the growth of nations on the environment. However, studies on the financial materiality of environmental concerns are found less often. This study aims to determine the impact of environmental concerns on a nation’s GDP [...] Read more.

The literature abounds with studies on the impact of the growth of nations on the environment. However, studies on the financial materiality of environmental concerns are found less often. This study aims to determine the impact of environmental concerns on a nation’s GDP per capita (GDPC). In addition, the influence of developed nations and democracy is also explored. The data for 106 countries and ten years (2011–2020) are procured from World Bank’s official website. The countries with incomplete data for a balanced panel are not included. Panel data econometrics (quantile regression) is applied to analyze the data. Environmental concerns are measured with the help of environmental efficiency (EE) using data envelopment analysis (DEA). It is found that environmental efficiency (EE) negatively impacts the GDPC for low levels of GDPC. However, no association of EE with GDPC is witnessed in the case of high GDPC levels. In addition, developed nations positively moderate the EE’s impact on the GDPC when the GDPC levels are high. Moreover, democratic nations negatively moderate the EE’s impact on the GDPC when low GDPC levels exist. The main implication of the current study is that developed high GDPC countries could bear a significant chunk of the cost of EE. This way, the adverse impact of an increase in EE on the GDPC (by low GDPC counties) could be dodged, and by the efforts of developed high GDPC countries, EE could be increased significantly without adversely impacting their GDPC. Full article

(This article belongs to the Special Issue Financial Markets, Financial Volatility and Beyond (Volume III))

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35 pages, 1929 KiB

Open AccessArticle

Determinants of Non-Performing Loans in a Small Island Economy of Fiji: Accounting for COVID-19, Bank-Type, and Globalisation

by Shasnil Avinesh Chand, Ronald Ravinesh Kumar and Peter Josef Stauvermann

J. Risk Financial Manag. 2023, 16(10), 436; https://doi.org/10.3390/jrfm16100436 - 07 Oct 2023

Viewed by 1656

Abstract

An increase in non-performing loans and bad debts in the banking sector can make banks vulnerable to a loss of confidence among customers and other banks and a banking collapse. The recent pandemic (COVID-19) and the evolving globalisation can affect bank operations, although [...] Read more.

An increase in non-performing loans and bad debts in the banking sector can make banks vulnerable to a loss of confidence among customers and other banks and a banking collapse. The recent pandemic (COVID-19) and the evolving globalisation can affect bank operations, although the effects may depend on the type of banks and other bank-specific factors. In this paper, we revisit the topic on the determinants of non-performing loans of banks in a small island economy of Fiji over the period 2000 to 2022. We apply a fixed-effect method and consider seven banks (five commercial banks and two non-bank financial institutions). In our estimations, we examine the effect of bank-specific factors and control for the social and economic globalisation, the GFC, the COVID-19 pandemic, and bank-type effects, as well as the effect of the interaction between the bank type and the pandemic, as key contributions of the study. Overall, our results are consistent in terms of the effects noted from the bank-specific factors. From the extended model estimations, we note that COVID-19 had a more adverse effect on loan losses than the GFC, and the interaction between the bank type and COVID-19 indicates that non-banks were highly vulnerable to loan losses, whereas commercial banks exhibited greater preparedness. Economic globalisation reduces bank losses, whereas social globalisation exacerbates NPLs. Full article

(This article belongs to the Special Issue Financial Markets, Financial Volatility and Beyond (Volume III))

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