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Volume 13, June

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J. Risk Financial Manag., Volume 13, Issue 7 (July 2020) – 11 articles

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Open AccessArticle
Return and Volatility Transmission between World-Leading and Latin American Stock Markets: Portfolio Implications
J. Risk Financial Manag. 2020, 13(7), 148; https://doi.org/10.3390/jrfm13070148 (registering DOI) - 08 Jul 2020
Abstract
This study uses the BEKK-GARCH model to examine the return-and-volatility spillover between the world-leading markets (USA and China) and four emerging Latin American stock markets over the global financial crisis of 2008 and the crash of the Chinese stock market of 2015. Regarding [...] Read more.
This study uses the BEKK-GARCH model to examine the return-and-volatility spillover between the world-leading markets (USA and China) and four emerging Latin American stock markets over the global financial crisis of 2008 and the crash of the Chinese stock market of 2015. Regarding return spillover, our findings reveal a unidirectional return transmission from Mexico to the US stock market during the global financial crisis. During the crash of the Chinese stock market, the return spillover is found to be unidirectional from the US to the Brazil, Chile, Mexico, and Peru stock markets. Moreover, the results indicate a unidirectional return transmission from China to the Brazil, Chile, Mexico, and Peru stock markets during the global financial crisis and the crash of the Chinese stock market. Regarding volatility spillover, the results show the bidirectional volatility transmission between the US and the stock markets of Chile and Mexico during the global financial crisis. During the Chinese crash, the bidirectional volatility transmission is observed between the US and Mexican stock markets. Furthermore, the volatility spillover is unidirectional from China to the Brazil stock market during the global financial crisis. During the Chinese crash, the volatility spillover is bidirectional between the China and Brazil stock markets. Lastly, a portfolio analysis application has been conducted. Full article
(This article belongs to the Special Issue Mathematical Finance with Applications)
Open AccessArticle
Influence of Organisational Culture on Supply Chain Resilience: A Power and Situational Strength Conceptual Perspective
J. Risk Financial Manag. 2020, 13(7), 147; https://doi.org/10.3390/jrfm13070147 - 07 Jul 2020
Viewed by 97
Abstract
The purpose of this paper is to explore how organisational culture, represented by the competing values framework (CVF), and the relationship mechanisms of situational strength and power influence an organisation’s approach to supply chain resilience (SCRES). This is a conceptual paper which uses [...] Read more.
The purpose of this paper is to explore how organisational culture, represented by the competing values framework (CVF), and the relationship mechanisms of situational strength and power influence an organisation’s approach to supply chain resilience (SCRES). This is a conceptual paper which uses a multi-theoretical approach to create a framework outlining how organisations which possess different characteristics of culture within the CVF will work to achieve SCRES. Secondary analysis of four case examples as discussed in the supply chain and resilience literature are then used to support the development of propositions from this framework in more detail. The paper suggests that ‘flexibility focused’ cultures will create weaker situational strengths for supply chain partners when managing disruptions, while ‘stability focused’ cultures will create stronger situational strengths in the same scenarios. ‘Internally focused’ cultures may use coercive power with supply chain partners when managing disruptions, while ‘externally focused’ cultures will prefer non-coercive power in the same scenarios. The four case studies from the literature highlight that each type of culture within the CVF can enable an organisation to achieve SCRES. The practical implications of the findings are that managers should take into consideration how their organisation’s culture will influence their relationships with supply chain partners, depending on their application of power and situational strength. However, future research is required to empirically test the propositions. Full article
(This article belongs to the collection Supply Chain Management)
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Open AccessArticle
An Empirical Investigation on Determinants of Sustainable Economic Growth. Lessons from Central and Eastern European Countries
J. Risk Financial Manag. 2020, 13(7), 146; https://doi.org/10.3390/jrfm13070146 - 06 Jul 2020
Viewed by 117
Abstract
The study focuses on the effects of imports, exports, financial direct investment inflow and financial direct investment outflow on sustainable economic growth expressed by various macroeconomic indicators (gross domestic product, gross domestic savings, gross domestic capital) using the least squares panel method. Sample [...] Read more.
The study focuses on the effects of imports, exports, financial direct investment inflow and financial direct investment outflow on sustainable economic growth expressed by various macroeconomic indicators (gross domestic product, gross domestic savings, gross domestic capital) using the least squares panel method. Sample data were selected for ten Central and Eastern European (CEE) countries and the time frame considered was 2005–2016. Generally, transitional economies have to incorporate strong savings and a steady capital formation in order to achieve higher economic growth via foreign direct investment. Results showed that the analyzed factors played a major role in the sustainable economic growth of CEE countries. Another important and valuable insight of this study is that the financial sector steers the process of achieving sustainable economic growth across CEE countries. Full article
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Open AccessEditorial
Computational Finance
J. Risk Financial Manag. 2020, 13(7), 145; https://doi.org/10.3390/jrfm13070145 - 04 Jul 2020
Viewed by 163
Abstract
The field of computational finance is evolving ever faster. This book collects a number of novel contributions on the use of computational methods and techniques for modelling financial asset prices, returns, and volatility, and on the use of numerical methods for pricing, hedging, [...] Read more.
The field of computational finance is evolving ever faster. This book collects a number of novel contributions on the use of computational methods and techniques for modelling financial asset prices, returns, and volatility, and on the use of numerical methods for pricing, hedging, and risk management of financial instruments. Full article
(This article belongs to the Special Issue Computational Finance)
Open AccessArticle
Corporate Social Responsibility, Trade Credit and Financial Crisis
J. Risk Financial Manag. 2020, 13(7), 144; https://doi.org/10.3390/jrfm13070144 - 03 Jul 2020
Viewed by 130
Abstract
Socially responsible firms receive more finance and have been well researched in the corporate finance literature. In this paper, we examine the relationship between CSR and trade credit. Using data from the US manufacturing industry, we find that CSR has a significant positive [...] Read more.
Socially responsible firms receive more finance and have been well researched in the corporate finance literature. In this paper, we examine the relationship between CSR and trade credit. Using data from the US manufacturing industry, we find that CSR has a significant positive association with the buyer and supplier sides of trade credit. During the 2008–2009 financial crisis, the manufacturing industry trade badly fell. We also argue and find evidence that, during crisis, CSR is negatively associated with trade credit. These findings are robust for alternate proxies of CSR and trade credit, sample selection, and time period. Moreover, the potential endogeneity concerns do not affect our results. Finally, we show that this relationship exists for both domestic and multinational firms’ subsamples. Overall, our results indicate that firms with high social performance use more trade credit to increase their business activity. Full article
(This article belongs to the Special Issue Green and Sustainable Finance)
Open AccessArticle
An Alternative Pricing System through Bayesian Estimates and Method of Moments in a Bonus-Malus Framework for the Ghanaian Auto Insurance Market
J. Risk Financial Manag. 2020, 13(7), 143; https://doi.org/10.3390/jrfm13070143 - 03 Jul 2020
Viewed by 132
Abstract
This paper examines the current No-Claim Discount (NCD) system used in Ghana’s auto insurance market as inefficient and outmoded and, therefore, proposes an alternative optimal Bonus-Malus System (BMS) intended to meet the present market conditions and demand. It appears that the existing BMS [...] Read more.
This paper examines the current No-Claim Discount (NCD) system used in Ghana’s auto insurance market as inefficient and outmoded and, therefore, proposes an alternative optimal Bonus-Malus System (BMS) intended to meet the present market conditions and demand. It appears that the existing BMS fails to acknowledge the frequency and severity of policyholders’ claims in its design. We minimized the auto insurance portfolios’ risk through Bayesian estimation and found that the risk is well fitted by gamma, with the claim distribution modeled by the negative binomial law with the expected number of claims (a priori) as 14%. The models presented in this paper recognize the longevity of accident-free driving and fully reward higher discounts to policyholders from the second year when the true characteristics of the hidden risks posed to the pool have been ascertained. The BMS finally constructed using the net premium principle is very optimal and has reasonable punishment and rewards for both good and bad drivers, which could also be useful in other developing economies. Full article
(This article belongs to the Section Risk)
Open AccessArticle
Digitalization of the EU Economies and People at Risk of Poverty or Social Exclusion
J. Risk Financial Manag. 2020, 13(7), 142; https://doi.org/10.3390/jrfm13070142 - 02 Jul 2020
Viewed by 173
Abstract
Despite the fact that a comprehensive analysis of digitalization processes in the EU member states has been carried out, the impact of a country’s digitalization level on the risks of poverty and social exclusion requires further investigation. The purpose of the paper is [...] Read more.
Despite the fact that a comprehensive analysis of digitalization processes in the EU member states has been carried out, the impact of a country’s digitalization level on the risks of poverty and social exclusion requires further investigation. The purpose of the paper is to verify a hypothesis that a higher level of national digitalization provides positive trends in reducing the risks of poverty and social exclusion for the population. The Digital Economy and Society Index (DESI) was used to evaluate the digitalization levels of the EU countries. The indicator “People at risk of poverty or social exclusion” (AROPE) was applied to estimate the poverty level. As the main research methods, the authors used a comparative and correlation analysis with respect to the above-mentioned indicators, as well as the Monte Carlo method in order to evaluate the probability of a change in the indicator “population at risk of poverty or social exclusion” in 2021. The EU countries with higher digitalization levels have a lower percentage of the population at risk of poverty and social exclusion. However, a higher digitalization level of the EU member states does not provide an accelerated risk reduction of poverty and social exclusion. Statistical calculations with respect to the entire population of these countries mainly indicate reverse processes. At the same time, a further reduction of poverty and social exclusion level is less probable in the countries with a higher level of digitalization. For relatively poor segments of the population (the 1st and 2nd quintiles by income) in the EU member states, the level of digitalization does not play a significant role. For relatively wealthy segments of the population (the 3rd and 4th quintiles by income) the authors noticed a pattern: the higher the level of digitalization is, the lower the risk of poverty and social exclusion becomes. A pairwise comparison of countries with initially similar AROPE values showed that in most cases (3 out of 5), the countries with higher levels of digitalization showed a more significant reduction in poverty and social exclusion. However, the probability of further positive changes in this area is higher for the countries with a lower level of digitalization. Full article
(This article belongs to the Special Issue Trends in Information Technology)
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Open AccessArticle
Clustering of Extremes in Financial Returns: A Study of Developed and Emerging Markets
J. Risk Financial Manag. 2020, 13(7), 141; https://doi.org/10.3390/jrfm13070141 - 02 Jul 2020
Viewed by 228
Abstract
This paper investigates the clustering or dependency of extremes in financial returns by estimating the extremal index value, in which smaller values of the extremal index correspond to more clustering. We apply the interval estimator method to determine the extremal index for a [...] Read more.
This paper investigates the clustering or dependency of extremes in financial returns by estimating the extremal index value, in which smaller values of the extremal index correspond to more clustering. We apply the interval estimator method to determine the extremal index for a range of threshold values in the developed and emerging markets from 2007–2017. The indices we used to represent developed markets are from France, Germany, Italy, Japan, USA, UK, Spain, and Sweden. For the emerging markets, we use indices from China, Brazil, India, Malaysia, Russia, Saudi Arabia, and Portugal. The results show that clustering occurs in the emerging and developed markets under several threshold values. This study will shed light on the dependency structure of financial returns data and the proprieties of the extremes returns. Moreover, understanding clustering of extremes in these markets can help investors reduce the exposure to extreme financial events, such as the financial crisis. Full article
(This article belongs to the Section Mathematical Finance)
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Open AccessArticle
Information Frictions and Stock Returns
J. Risk Financial Manag. 2020, 13(7), 140; https://doi.org/10.3390/jrfm13070140 - 01 Jul 2020
Viewed by 151
Abstract
The purpose of this paper is to assess the impact of ambiguity on financial analyst forecast incentives and the associated abnormal stock returns. I present a model incorporating ambiguity aversion into a two-period Lucas tree model. The resulting model confirms the role of [...] Read more.
The purpose of this paper is to assess the impact of ambiguity on financial analyst forecast incentives and the associated abnormal stock returns. I present a model incorporating ambiguity aversion into a two-period Lucas tree model. The resulting model confirms the role of ambiguity in the determination of asset returns. In particular, the model with ambiguity aversion generates a lower price and a higher required rate of returns compared to the classical model without ambiguity concern. I construct a measure of ambiguity and provide empirical evidence showing that the incentive of analysts to misrepresent information is a function of ambiguity. Analysts are more likely to bias their forecasts when it is more difficult for investors to detect their misrepresentation. Under ambiguity, analysts’ optimistic forecasts for good/bad news tend to deteriorate. Moreover, stock returns are positively related with ambiguity. Under ambiguity neither good nor bad news is credible. Investors systematically underreact to good news forecast and overreact to bad news forecast when ambiguity exists. Full article
(This article belongs to the Special Issue Quantitative Risk)
Open AccessArticle
Do Capital Flows Matter for Monetary Policy Setting in Inflation Targeting Economies?
J. Risk Financial Manag. 2020, 13(7), 139; https://doi.org/10.3390/jrfm13070139 - 30 Jun 2020
Viewed by 170
Abstract
The aim of this study is to determine if capital flows can account for the international effects on domestic monetary policy, using an augmented Taylor rule model. In addition to the standard determinants of nominal interest rates, we include capital flow measures to [...] Read more.
The aim of this study is to determine if capital flows can account for the international effects on domestic monetary policy, using an augmented Taylor rule model. In addition to the standard determinants of nominal interest rates, we include capital flow measures to show how central banks consider this important factor when deciding on the most appropriate monetary policy. Using a panel of inflation targeting economies and the dynamic panel approach, this study finds that capital inflows and outflows are an important determinant of nominal interest rates. Full article
Open AccessArticle
Technology Acceptance in e-Governance: A Case of a Finance Organization
J. Risk Financial Manag. 2020, 13(7), 138; https://doi.org/10.3390/jrfm13070138 - 29 Jun 2020
Viewed by 187
Abstract
Presently, one of the most critical challenges for e-government and e-banking is the accurate and correct realization of factors that have a significant impact on customer behavior. Without appropriate knowledge of these factors, it would be impossible to predict the level of welcoming [...] Read more.
Presently, one of the most critical challenges for e-government and e-banking is the accurate and correct realization of factors that have a significant impact on customer behavior. Without appropriate knowledge of these factors, it would be impossible to predict the level of welcoming toward new services, acquire a competitive advantage, and coordinate marketing programs with the needs of customers. On the other hand, in today’s competitive world, banks are obliged to implement new services to retain current customers and attract new ones. This research has been conducted with the goal of identifying influential factors that have an impact on the development of user intentions. The theoretical research model has been designed based on the technology acceptance model (TAM), as well as technology adoption theory, technology dissemination theory, and planned behavior theory. This study adopted an empirical approach to investigate key acceptance factors in a case organization. The statistical population of this research consists of customers and employees in different branches of a financial institution called Mehr bank in Iran. The data was collected by means of questionnaires that were completed by 200 customers and employees who work at Mehr bank or have business relationships with it. Data analysis in descriptive and inferential statistics domains had been done in SPSS and AMOS software, respectively. This paper presents first-hand data analysis of a case study on technology adoption in banking systems in Iran. In addition, structural equations have been used for inferential analysis. The findings of this study confirm the direct impact of “perceived usefulness” and “perceived ease of use” towards user attitudes. In addition, results show that “attitude” and “perceived usefulness” have a direct impact on the development of usage intention in customers. However, the results do not confirm the role of subjective norms on the development of user intent. This study is limited to a selected organization, and the proposed model should be examined by applying it in different contexts. Full article
(This article belongs to the Special Issue Real Estate Economics and Finance)
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