Int. J. Financial Stud.2016, 4(3), 15; doi:10.3390/ijfs4030015 - published 20 July 2016 Show/Hide Abstract
Abstract: The study adds an empirical outlook on the predicting power of using data from the future to predict future returns. The crux of the traditional Capital Asset Pricing Model (CAPM) methodology is using historical data in the calculation of the beta coefficient. This study instead uses a battery of Generalized Auto Regressive Conditional Heteroskedasticity (GARCH) models, of differing lag and parameter terms, to forecast the variance of the market used in the denominator of the beta formula. The covariance of the portfolio and market returns are assumed to remain constant in the time-varying beta calculations. The data spans from 3 January 2005 to 29 December 2014. One ten-year, two five-year, and three three-year sample periods were used, for robustness, with ten different portfolios. Out of sample forecasts, mean absolute error (MAE) and mean squared forecast error (MSE) were used to compare the forecasting ability of the ex-ante GARCH models, Artificial Neural Network, and the standard market ex-post model. Find that the time-varying MGARCH and SGARCH beta performed better with out-of-sample testing than the other ex-ante models. Although the simplest approach, constant ex-post beta, performed as well or better within this empirical study.
Int. J. Financial Stud.2016, 4(3), 14; doi:10.3390/ijfs4030014 - published 1 July 2016 Show/Hide Abstract
Abstract: In this study, we aim to investigate the impacts of credit default swaps (CDS) premium as a risk financial indicator on the fluctuations of value of the Turkish lira against the Euro. We try to answer the following questions: Is the CDS premium change among the drivers of EUR/TL exchange rate and what are the possible effects of CDS premium volatility on EUR/TL exchange rate stability in different conditions? In this regard, we developed a MS-VAR regime change model and asymmetric, frequency domain and rolling windows causality analysis methods. Results obtained from all tests imply that risk premium is partially a driver of the EUR/TL exchange rate between the years 2009 and 2015.
Int. J. Financial Stud.2016, 4(3), 13; doi:10.3390/ijfs4030013 - published 24 June 2016 Show/Hide Abstract
Abstract: Systemic risk events constitute an important issue in current financial systems. A leading course of action used to mitigate such events is identification of systemically important agents in order to implement the prudential policies in a financial system. In this paper, a bi-level cross-shareholding network of the stock market is considered according to direct and integrated ownership structure. Furthermore, different systemic risk indices are applied to identify systemically important companies in an early warning system. Results of application of these indices on cross-shareholding data from Tehran Stock Exchange show that integrated network indices produce more reliable results. Moreover, results of statistical analysis of the networks indicated the existence of scale-free characteristics in the TSE cross-shareholding network.
Int. J. Financial Stud.2016, 4(2), 12; doi:10.3390/ijfs4020012 - published 2 June 2016 Show/Hide Abstract
Abstract: Europe’s elite football clubs are a small group of about 30 clubs mostly originating from the Big Five leagues in England, Italy, Spain, Germany, and France. These clubs top Deloitte’s Football Money League ranking Europe’s top football clubs by revenues. They also win the vast majority of national and European football competitions, and account for the major share of FIFA World Cup appearances. Nevertheless, empirical analyses studying the antecedents of financial success of this peculiar sample are rare. This paper extends previous research by building an empirical model of financial performance and applying it to a unique, high-quality dataset of the top 30 EU football clubs by club revenues analyzed over ten consecutive seasons from 2004 to 2013. Fixed effects models are performed to account for time trends and club fixed effects. The results show that financial success is driven by national and international sporting success, as well as brand value; sporting success is driven by team investments, and team investments tend to be driven by (foreign) private majority investors.
Int. J. Financial Stud.2016, 4(2), 10; doi:10.3390/ijfs4020010 - published 17 May 2016 Show/Hide Abstract
Abstract: This study aims to explore the relationship between market integration, foreign portfolio equity holding and inflation rates on international stock market linkages between Pakistan and India. To measure stock equity interlinkage, we constructed international co-movement index through rolling beta estimation. Market integration variable between these two countries is constructed using the International Capital Asset Pricing Model (ICAPM). To check the impact of market integration, foreign portfolio equity holding and inflation rate on Pakistan-Indian stock market co-movement, we applied autoregressive distributed lag (ARDL) estimation. ARDL estimation is applied due to different stationarity levels of the included variables. The level of convergence speed is measured by the introduction of error correction term (ECT) followed by variance decomposition analysis. Results of the study indicated presence of long term relationship among the included variables along with significance variance in bilateral co-movement due to inflation rate differential. The significance of inflation rate differences between these two countries are in accordance with portfolio balance theory stating that investors possess information about the macroeconomic variables thereby readjusting their portfolios for effective diversification.
Int. J. Financial Stud.2016, 4(2), 11; doi:10.3390/ijfs4020011 - published 17 May 2016 Show/Hide Abstract
Abstract: In this study, the performance of the Multifractal Model of Asset Returns (MMAR) was examined for stock index returns of four emerging markets. The MMAR, which takes into account stylized facts of financial time series, such as long memory, fat tails and trading time, was developed as an alternative to the ARCH family models. Empirical analysis of the study consists of two sections. In the first section, we estimated the parameters of GARCH, EGARCH, FIGARCH, MRS-GARCH and MMAR for the stock index returns of Croatia, Greece, Poland and Turkey. In the second section, 1000 paths were obtained for each model using Monte Carlo simulations. We then compared the scaling function values of simulated and original time series for different q orders (1–5). According to the obtained results, the MMAR is mostly superior to other models and presents the best replica of the original time series. Another important finding is the achievement of the MRS-GARCH. We found that for lower levels of persistency (long memory) of return series, the performance of the MRS-GARCH excels, and for H = 0.5, it narrowly outperforms the MMAR.