All Share Price Index Research Articles

Measuring Extreme Market Risk: The Sri Lankan Context

Abstract Many empirical studies have been carried out in developed and emerging markets using methods to account for extreme market risk. A front-runner in the methods used is Extreme Value Theory (EVT). In this study, these methods are applied to the All Share Price Index (ASPI) of the Colombo Stock Exchange (CSE) to obtain risk forecasts for VaR (Value at Risk) and ES (Expected Shortfall) at 99% confidence level. Recognizing the merits of both conditional and unconditional models for risk measures the most suitable unconditional model and conditional model are found for the ASPI. Contrary to other studies the Historical Simulation method was found to be more appropriate for obtaining static estimates than the static EVT model. The Two-Step Approach of McNeil and Frey which combines EVT and Generalized Auto-Regressive Conditional Heteroskedasticity (GARCH) methodologies was found to be the most appropriate conditional model. Backtesting of models is done using a binomial test, Christoferssen’s conditional coverage test and McNeil and Frey’s ES test.

Business cycles and stock market performance in South Africa

The stock market is an important indicator of an economy’s financial health. It checks the mood of investors in a country. Stock market performance is a vital component of business cycle growth. Thus, this study investigates the relationship between stock market performance and business cycles in South Africa for the period 2002-2009 using monthly data. This is done by constructing a Vector Error Correction Model (VECM). The study specifies a business cycle model with the business cycle coincident indicator of South Africa being the independent variable explained by the All Share Price index (ALSI), Real Effective Exchange Rate (REER), Money Supply (M1), Inflation (CPIX) and the Prime Overdraft Rate (POR). The ALSI represents stock market performance whilst the rest of the variables are to enhance model specification. The study found a positive association between stock market performance and business cycles and this match with most of the results from the empirical literature provided

Identifying Return Distribution of Sri Lankan Stock Market Index

In the current financial world, prediction of stock returns has become a vital task. Many prediction techniques available recently depend on the return distribution of stock index. Identifying return distribution of stock return has an immense interest among researchers nowadays. Many researchers have proposed different distributions to model the return distribution of stock market indices. However a study aimed at finding the distribution of return series of local stock indices was not found. In this study return distributions of All Share Price Index (ASPI) of the Colombo stock exchange was examined. The study period consists of 5 years daily data from 1st August 2007 to 31st July 2012 of the ASPI. Results display that the return distribution of ASPI cannot be modeled using Normal distribution and Student's t distribution. The Scaled t distribution with parameters mu = 0.0000613719, sigma = 0.00619983 and nu = 2.54137 can be introduced as the best distribution to model the return distributions of All share price index. Kolmogorov-Smirnov (K-S) Test has been used to access the suitability of fitted distribution. Random numbers were generated using Scaled t distribution with above mentioned parameters and the K-S test was carried out using the generated series and the return series of ASPI. The same procedure was repeated 100 times in order to improve the accuracy of results. Minimum p-value of 0.0534 was obtained in the simulation study and exhibit that the test is not significant under 5% level of significance above 95% times. Finding of this research will help many researches in the financial sector of Sri Lanka to use an appropriate distribution for modeling the ASPI returns and hence to enhance the forecasting accuracy.

Profitability of technical trading strategies in emerging Sri Lankan stock market

This study examines whether the technical trading strategies can outperform the unconditional buy-and-hold strategy to forecast stock price movements and earn excess returns, after adjusting transaction costs, in emerging Colombo Stock Exchange (CSE). The study uses daily market closing prices of All Share Price Index (ASPI), which is a composite index to represent whole market, for twenty five years from January 1985 to December 2010. The variable length moving average method and fixed length moving average method with sixteen different rules is used as the methodology to analyze data. The empirical findings of the study confirmed that the moving average trading strategies have statistically significant predictive ability in explaining the market and capable of generating excess return to investors. However after considering transaction costs the excess return is negligible.DOI: http://dx.doi.org/10.4038/kjm.v2i2.6549 Kelaniya Journal of Management Vol.2(2) 2013:32-50

Using Feed Forward BPNN for Forecasting All Share Price Index

Use of artificial neural networks has become a significant and an emerging research method due to its capability of capturing nonlinear behavior instead of conventional time series methods. Among them, feed forward back propagation neural network (BPNN) is the widely used network topology for forecasting stock prices indices. In this study, we attempted to find the best network topology for one step ahead forecasting of All Share Price Index (ASPI), Colombo Stock Exchange (CSE) by employing feed forward BPNN. The daily data including ASPI, All Share Total Return Index (ASTRI), Market Price Earnings Ratio (PER), and Market Price to Book Value (PBV) were collected from CSE over the period from January 2nd 2012 to March 20th 2014. The experiment is implemented by prioritizing the number of inputs, learning rate, number of hidden layer neurons, and the number of training sessions. Eight models were selected on basis of input data and the number of training sessions. Then the best model was used for forecasting next trading day ASPI value. Empirical result reveals that the proposed model can be used as an approximation method to obtain next day value. In addition, it showed that the number of inputs, number of hidden layer neurons and the training times are significant factors that can be affected to the accuracy of forecast value.

Sensitivity of stock prices to economic events: econometric evidence from Sri Lankan stock market and US stock market

This paper attempts to examine the sensitivity of stock prices to economic events in an emerging market and in a developed market. Historically several studies have been undertaken on the stock market sensitivity on important economic events in several markets. The sensitivity of stock prices to major economic events is measured by using the volatility test of Inclan and Tiao which objectively differentiates the volatile period from the weekly data series of both markets. The All Share Price Index (ASPI) and New York Stock Exchange (NYSE) Composite Index are used for the volatility test of Inclan and Tiao (1994). Then, the major economic events are matched with the volatility periods of the prices. It is found that the stock prices in both markets are highly sensitive to the major economic events. The findings of this study consistent with Bailey and Chung (1995) who find that important political events tend to be associated with sudden change in volatility. Thus this suggests that portfolio managers should be cautious in advising their clients in dynamic situations in the markets in this nature. DOI: http://dx.doi.org/10.4038/suslj.v11i1.5886Sabaragamuwa University Journal 2012; V. 11 No. 1 pp 21-32

Stock market movement and macroeconomic influences: evidence from Saudi Arabia

This paper examines the dynamic relationship between stock price-movement and selected macroeconomic variables of Saudi Arabia by adopting the cointegration methodology. The monthly data on the Tadawul all-share price index, consumer price index, net foreign direct investment and deposit (discount) rates from January 2000 to December 2011 are used for this empirical investigation. Specifically, this paper focuses on the analysis of the long-run equilibrium and short-run multivariate causality between these variables and forecast stock market movement. An accurate estimation of the relationship between the stock market behaviour and economic variables as well as the forecast stock movement enables both local and global investors to make effective investment decisions. Similarly, for the policy makers, a precise prediction of this type of relationship and forecast movement of stock prices may help government monetary agencies and other institutions in designing policies to attract more capital inflows into an emerging economy of Saudi Arabia’s capital market.

Measuring the Risk and Performance in Plantation Sector Using CAPM Based Jensen’s Alpha

This paper evaluates the company performance using the CAPM Based Jensen's Alpha. The CAPM of Sharpe (1964), Lintner (1965) and Mossin is a widely used model in modern Finance to estimate cost of equity and company performance. We carried out our study for ten plantation companies listed on Colombo Stock Exchange (CSE). We used cost of equity that is calculated using CAPM to determine the Economic Value Added (EVA).The EVA measures whether the companies have created shareholders' value during the estimating period. We selected the sample period of 2000 to 2005 years and we applied the monthly ending prices of common stocks of each company for the regression. The monthly ending prices of All Share Price Index (ASPI) are used as the market proxy. To estimate the beta, we applied market model. It was found that almost all the companies have created value for their shareholders during the study period. To measure the market performance, we calculated Jensen's alpha for each company and according to Jensen's alpha we found that the market performance is not satisfactory in most plantation companies. These results are important for Corporate Managers undertaking risk calculations, for fund managers making investment decision and, amongst others, for investors who wish to assess value of their investments. DOI: 10.4038/suslj.v6i1.1690 Sabaragamuwa University Journal, vol 6, no. 1, pp 68-81

The Impact of Privatization on Capital Market Development and Individual Share Ownership

In this paper, an attempt has been made to estimate the impact of share issue privatizations on the growth of the Nigerian capital market (especially stock markets), and to examine the effect privatization has had on the pattern of share ownership by individuals and institutional investors. Privatization broadens and deepens the capital market resulting from increased listings and market size, improved liquidity and regulatory infrastructure, improved awareness and enlarged investor base. Privatization has also provided opportunity for risk diversification, enhanced professionalism and increased government attention. The implementation of the first and second round privatization has resulted in a tremendous boost to the total equity market capitalization, number of listed equities and the all-share price index. Besides, the market capitalization, profit before tax and cash dividend of most of the affected enterprises had improved considerably as these companies offered over 1.3 billion shares for sale to the public and were purchased by over 800,000 shareholders, many of whom were first timers in the market. Although the capital market has been beneficial to the privatized companies, it is important to note that the companies themselves have not fared much better. High transaction (or floatation) costs make it expensive to raise money from the market and the shallowness of the market limits the amount of money that can be raised there, even by companies with the best financial records. Price volatility and the existence of a large informal market in quoted securities cast a pall on the efficiency of the capital market as a framework for resource allocation and mobilization. In spite of the identified shortcomings, the privatization program has enhanced the development of the Nigerian capital market.