Capital Market Returns Research Articles

Environmental, social, and governance investing and sustainability of pension funds: Evidence from the Organisation for Economic Cooperation and Development countries

Various stakeholders have pressed pension funds (PFs) to refocus their investment strategies on environmental, social and governance (ESG) principles; however, limited attention has been devoted to the impact of sustainable investing on PF assets. Using data from the Organisation for Economic Cooperation and Development (OECD) countries from 1999 to 2022 and using the generalised method of moment estimation, we find that the growth of pension assets in countries with high sustainability scores has slowed since the sustainable development goals were adopted. The impact is more pronounced in the European Union (EU) countries. This finding is noteworthy because EU countries are known for their leadership in sustainable development. Capital market returns are the primary channel through which sustainable investing contributes to reduced pension asset growth. Our findings provide policymakers with important information about the unintended costs of addressing climate risk through exclusionary PF policies. In OECD countries with low fertility rates and ageing populations, the cost exacerbates the sustainability challenges that PFs face.

A Systematic Review on Impact of Political Crisis and Election on Capital Market Returns

The capital markets worldwide are vastly impacted by market sentiments and investors tend to react and rebalance their portfolios time to time due to such changes in market sentiments from political events. This systematic review examines the impact of political crisis and election on the capital market returns worldwide. It employs a systematic review research method and has gone through 4573 articles, out of which 62 articles published in reputed journals between 1970 and 2023 were considered for review. Of the methodology of the studies reviewed, 43.5% is quantitative, 27.4% is mixed, 17.7% is qualitative, and the rest is conceptual. Researches published in the context of Asian countries contributed 40% of this reviewed study, followed by Europe, Africa, and North America, each with 10%, South America with 3%, Australia with 1%, and allied countries within unions or agreements with 26%. The results show that political crises significantly impact capital market returns in Asia. Studies in North American context indicate that before elections and during political crises, the capital market volatility significantly rises with decreased capital market returns. In Australia, political events cause financial market fluctuation. In Africa, political instability hinders long-term capital accumulation. Additionally, informal political instability in South America directly affects economic growth, while formal instability indirectly affects economic vulnerability. The outcomes of such research hold practical implications for policymakers in formulating portfolio strategies and, therefore, delineate avenues for research exploring the integrated effects of political events on capital market returns by amalgamating trading information from stock exchanges worldwide.

PENGARUH PENGUMUMAN DIVIDEN TERHADAP ABNORMAL RETURN DAN TRADING VOLUME ACTIVITY PADA PASAR MODAL INDONESIA TAHUN 2020-2021

The Covid-19 pandemic has had a broad impact on all sectors in Indonesia. Many investors responded by selling their shares to minimize potential losses that could be caused by continued economic uncertainty. Market conditions that continue to experience significant decline have triggered a crisis in the capital market. In an effort to calm panic in the market, dividend announcements are considered an effective strategy because they have a positive signal that can provide confidence to investors and act as a counterweight to market volatility. Therefore, this research aims to determine the effect of dividend announcements on abnormal returns and trading volume activity in the Indonesian capital market in 2020-2021. This research uses the event study method which studies the capital market's reaction to an event whose information is published as an announcement. The research results show that there is an influence of dividend announcements on abnormal returns in the Indonesian capital market, especially in the energy and consumer cyclicals sectors and there is an influence of dividend announcements on trading volume activity in the Indonesian capital market, especially in the basic materials and technology sectors. "Pengumuman dividen ; Abnormal return ; Trading volume activity ; Covid-19"

Exploring the Convergence of Macroeconomic Variables and Market Capitalization in an Emerging Economy: An Empirical Analysis Using Arbitrage Pricing Theory

This study delves into the interaction between macroeconomic variables and market capitalization in Emerging Capital Markets, i.e., Bangladesh. We examine the effects of the invest-to-deposit ratio (IDR) by financial institutions, market interest rate (MKTINT), and Consumer Price Index (CPI) on market capitalization (MAKTCAP). This study utilizes a dataset spanning 83 months, encompassing the period from 2015 to 2021. The macroeconomic influence is examined empirically by using the Arellano–Bover/Blundell–Bond generalized method of moments (GMM) estimator, supplemented by the ordinary least squares (OLS) and weighted least squares regression (WLS). Also, use Breusch-Pagan and Cook-Weisberg tests to measure heteroskedasticity in the model. The findings show a strong correlation between IDR and MAKTCAP, pointing to IDR as the most important yet overlooked factor influencing capital market returns. However, MKTINT and CPI results address a negative relationship with MAKTCAP. Higher IDR indicates that the capital market receives more cash flow to enhance market capitalization. At the same time, lowering MKTINT and CPI enables the capital market to get more money flow.

A Systematic Review on Impact of Political Crisis and Election on Capital Market Returns

A Systematic Review on Impact of Political Crisis and Election on Capital Market Returns

Does political crisis impact the capital market returns in Bangladesh?

This study aims at figuring out the key reasons responsible for inhibiting companies to go for IPO. For the purpose, 100 privately listed companies situated in Dhaka had been approached and 15 companies responded. To substantiate the views of the companies, interviews from academician, merchant bank authorities, capital market journalist forum, and regulators were taken. In total, 25 Key Informant Interviews (KIIs) were conducted for the study. A focus group discussion (FGD) was arranged consisting 30 representatives from different merchant banks. To present the findings of the study, a thematic analysis approach was chosen where initial codes from the interviews and FGD were transformed and six key themes: macro-environment deterrent, institutional limitations, firm specific barriers, capital market deterrents, corporate governance code 2018, and money market deterrents were identified as the main factors of IPO avoidance by eligible companies. The study revealed that lack of coordination among relevant policy makers, few clauses of corporate governance code 2018, costly and lengthy IPO issuance process, insignificant tax gap, bank’s lenience towards loan defaulters, loan rescheduling facility of banks, lack of knowledge regarding capital market products, and compliance related issues are considered the most crucial reasons for IPO avoidance.

Analysis Of The Effect Of Motivation And Knowledge About Capital Market, Return, Risk And Minimum Capital On Interest To Invest In The Indonesia Stock Exchange (Case Study In The Financial Audit Board Of The Republic Of Indonesia)

The purpose of this study was to find out how the influence of motivation, capital market knowledge, return, risk and initial capital on interest in investing in the Indonesia Stock Exchange.The research method uses a quantitative approach using primary data in the form of a survey through a questionnaire instrument, while the analytical method uses multiple regression statistical analysis. The research sample is BPK employees with random sampling technique.Based on the results of this study confirms: 1) Motivation has a positive and significant effect on interest in investing, the results of statistical tests noted that 49.4% of investment interest is influenced by motivation which shows that BPK employee motivation has a positive and significant influence on investment interest; 2) Knowledge of the capital market has a positive effect on investment interest. The results of statistical tests noted that 19.8% of BPK employees' investment interest was influenced by knowledge of the capital market; 3) Knowledge of Return has an effect on investment interest. The results of statistical tests noted that only 9.8% of BPK employees' investment interest was influenced by knowledge of returns; 4) knowledge about risk has a positive effect on investment interest. The results of statistical tests noted that 0.277 or 27.7% of knowledge about risk affects the investment interest of BPK employees; 5) Knowledge of minimum capital has an effect on investment interest. The results of statistical tests noted that 11.3% knowledge of minimum capital affects the investment interest of BPK employees; and 6) Motivation, knowledge of the capital market, stock returns, risk and minimal capital together have an effect on interest in investing in the capital market. The results of statistical tests noted that 76.9% interest in investment is jointly influenced by motivation, knowledge of the capital market, stock returns, risk and minimal capital. Meanwhile, the remaining 23.1% is influenced by external factors other than the five independent variables studied.

A Guaranteed-Return Structured Product as an Investment Risk-Hedging Instrument in Pension Savings Plans

This study proposes a structured product (SP) for hedging defined contribution pension fund members against capital market risk. Using Monte Carlo simulations on three different guaranteed returns to test the investment strategy of the SP against a balanced investment portfolio, we measure their performance across a wide variety of capital market returns and risk scenarios. The results show that the SP guarantees a minimal return on the pension savings portfolio and offers a higher portfolio return at a lower investment risk, compared with the balanced investment portfolio. We conclude that the SP may become popular among pension fund members, potentially leading to improved risk management, greater competition, and investment strategy innovations for defined contribution pension schemes.

Analisis Faktor-Faktor yang Berpengaruh terhadap Return Saham Perusahaan Jasa di Bursa Efek Indonesia pada Periode 2018-2021

This study aims to explore the impact of DER, LDR, and NIM on stock returns of service companies in the IDX for the period of 2018-2021. Secondary data was obtained purposively for company financial reporting or via the website www.idx.com. Data analysis is done through multiple regression testing, F-test, and t-test. The results obtained show that only DER and LDR partially have a significant effect on stock returns of service companies in the study period, while NIM has proven to have no significant effect on stock returns. Simultaneously, the three independent variables proved to have a significant effect on service company stock returns in the study period. It is expected that the results of this study will contribute to providing deeper insight into the various factors that can influence stock returns in the Indonesian capital market and serve as a reference for investors and financial managers in making investment decisions.

Carry Trade and Capital Market Returns in South Africa

This paper assesses the extent to which carry trade operations affect the performance of equity and bond markets in a target country, South Africa, by considering the US and the euro area as the funding countries. A two- and three-factor capital asset pricing model (CAPM) is employed to assess whether the pricing of equity and bond markets in South Africa depends on the US dollar/rand and euro/rand carry trade returns. Moreover, the paper uses the quantile regression technique to assess whether this pricing varies with the distribution of the equity and bond returns. The findings support that the US- and euro-funded carry trade are essential factors for the pricing of equity and bond markets in South Africa. Moreover, the results of the two-factor model show a negative relationship between the equity excess return and the US-carry trade returns at lower quantiles of the equity market returns. The positive relationship is observed in the upper quantiles of the equity market. The negative relationship means that carry trade activities reduce equity market returns during a bear market as investors close out their position when conditions in the equity market become unfavourable. The results of the three-factor model, controlling for the global volatility or uncertainty, show that carry trade investors exit the equity market to invest in the bond market when global uncertainty rises. This finding shows that carry trade investors choose less risky assets during rising global uncertainty.

Market efficiency and global issues: A case of Indonesia

The efficient market hypothesis assumes that the stock prices fully reflect all relevant information. Under the weak form, the future prices are independent of current prices or in the other words, they follow the random walk hypothesis. Global issues tend to have an impact on capital markets around the world. Therefore, the objective of this study is to assess the effect of global issues on the movements of expected returns in the Indonesian capital market from January 1, 2022, to June 30, 2022. The sample of 755 listed firms is used to test whether the expected returns have a random pattern during the observation period. The results of runs tests and variance ratio test show that the expected return movements are not random. On those results, the weak form of the efficient market hypothesis is rejected, and it can be concluded that the capital market in Indonesia for this period is inefficient. The findings of this study imply that the information about global issues does not affect the market. The success of the Indonesian government’s strategy in dealing with global issues (including the Covid-19 pandemic) in the form of a vaccination program and also followed by excellent fiscal and monetary policies has led to more predictable returns in the capital market. Moreover, investors can set their portfolios to get extraordinary returns as the market is more predictable.

Investigating the asymmetric relationship between housing prices and the stock market in Iran: quantile-on-quantile approach

PurposeThe purpose of this study, the nonlinear relationship between the real estate market and the stock market was investigated in Iran. For this intent, the monthly data from 2012:4 to 2022:5 is used.Design/methodology/approachIn this study, the quantile-on-quantile estimation method is used, which is a combination of the nonparametric estimation methods and the quantile regression.FindingsThe research results show that, in the low quantiles, the effect of stock market return on the housing market return is negative or zero. In fact, in this situation, the increasing returns in the stock market will shift part of the financial resources of the economy to the market and create stagnation or even negative returns in the housing market. This situation is seen more strongly in some other quantiles, including the 0.25 and 0.75 quantiles; in contrast, the effect of high quantiles of stock market returns is positive on the housing market.Originality/valueIt seems that the demand in the housing market increase in a situation where the returns of the stock market are growing, and the market is in a bullish condition, and this causes an increase in the price and returns in this market. In addition, the results show that the effect of stock market returns on capital market returns is asymmetric and nonlinear.

Capital Market Knowledge, Return, Risk Perception, Technological Advancement, and Investment Interest in Social Media

Purpose: This study aims to determine and investigate the effect of capital market knowledge, return, risk perception, and technological advancement on investment interest in social media. Methodology: The present study employs a descriptive research design that utilizes quantitative methods. The study's population consisted of followers of the @ngertisaham account on Instagram. A sample of 100 respondents was collected using the Slovin formula. The data collection methodology applies a questionnaire, and next, the acquired data is processed employing the IBM SPSS Statistics version 25 software application. The data analysis technique uses a validity test, reliability test, classical assumption test, and hypothesis testing (multiple linear regression analysis, coefficient of determination, f-test, and t-test). Findings: The findings of this study show that there is only a partial relationship between capital market knowledge, technological advancement, and investment interest among Instagram followers of the @ngertisaham account. However, this relationship is not significant. In contrast, the return and risk perception variables show positive and statistically significant effects on investment interest among Instagram followers of the @ngertisaham account. Novelty: The novelty aspect of this study is using respondents of Instagram followers of the @ngertisaham account.

Optimal Portfolio Choice with Health-Contingent Income Products: The Value of Life Care Annuities

We study optimal retirement portfolio choice and welfare when individuals can choose between stocks, bonds, and either a life-contingent (life) annuity or a health-contingent (life care) annuity. We develop a life-cycle model of annuitization, consumption, and investment decisions for a single retired individual who faces stochastic capital market returns, uncertain health status, differential mortality risks, and uncertain out-of-pocket health care expenditure, including at end of life. Using the calibrated model, we find that life care annuities are more attractive than life annuities and would enhance annuity demand by 12 percentage points. Life care annuities allow individuals to reduce precautionary savings and consume more throughout retirement, with individuals willing to pay a loading of up to 21% for access to the product.

Do Capital Market Returns Actually Predict the Standard of Living of A Nation:Evidence from Nigeria

The study tried to resolve the disagreement in many quarters that the returns of the capital market do not predict or relate to the standard of living of a reporting nation. The position of the researchers in this study was taken by using Nigeria Stock Exchange data and world bank website from 1985 to 2021 and analyzed with Error Correction Mechanism, among others. The result of the cointegration test showed that long run relationship exists between the dependent variable-standard of living proxied by Per capita Gross Domestic Product and independent variables, All-Share Index, Value of Transactions and Volume of Transactions. Further analyses revealed that All Share Index significantly relate to standard of living, while other variables insignificantly impact standard of living in Nigeria. However, the Granger causality test showed that the Per Capita Gross Domestic Product granger causes the Value of Transaction in the Capital Market; implying that Standard of living in Nigeria that determines the Value of Transactions in the Capital Market and not the other way round. It is also observed that Per Capita Gross Domestic Product (standard of living indicator) is not autoregressive or does not reinforce itself; which statistically is confirmed evidence showing that standard of living in the past cannot predict future standard of living in Nigeria. It is on these premises that the researchers recommend among others that policies should be put in place to enhance the growth of the capital market which will ultimately impact on the standard of living of Nigerians. Keywords: Standard of living, Capital market, ECM, Nigeria DOI: 10.7176/RJFA/13-12-07 Publication date: June 30 th 2022

Financial sustainability: measurement and empirical evidence

Financial sustainability is underrepresented in both the research on and practice of sustainability management and reporting. This article proposes a conceptual measure of financial sustainability and examines its association with capital market returns. The measure is positioned at the intersection of sustainability management, risk management and risk governance. Financial sustainability is regarded as a crucial control parameter complementing shareholder value and can be viewed by risk-averse investors as a secondary condition of investment decisions. It reduces refinancing and insolvency risks, leading to risk-adjusted excess returns in an imperfect capital market with financing restrictions and insolvency costs. We propose measuring a firm’s financial sustainability in terms of four conditions: (1) firm growth, (2) the company’s ability to survive, (3) an acceptable overall level of earnings risk exposure, and (4) an attractive earnings risk profile. We show that the application of a conditions-based investment strategy to European firms with high financial sustainability (i.e., firms fulfilling all four conditions) over the period from July 1990 to June 2019 results in monthly excess returns of 0.39%. This portfolio’s risk is lower than the risk of market investment. We find that the excess returns increase when incrementally adding each of the four conditions to the investment strategy.

Editor’s Letter

1. Jean L. P. Brunel 1. Co-Editor 2. Paul Bouchey 1. Co-Editor Very strong capital market returns have provided a good deal of satisfaction to many of the families we are privileged to serve. Yet, at the same time, such returns have brought several families to a point where a very

Streamlining Investors’ Perceptions and the Behaviour of Capital Market Returns Around the World

Streamlining Investors’ Perceptions and the Behaviour of Capital Market Returns Around the World

Can Shorts Predict Returns? A Global Perspective

Abstract Using multiple short-sale measures, we examine the predictive power of short sales for future stock returns in 38 countries from July 2006 to December 2014. We find that the days-to-cover ratio and the utilization ratio measures have the most robust predictive power for future stock returns in the global capital market. Our results display significant cross-country and cross-firm differences in the predictive power of alternative short-sale measures. The predictive power of shorts is stronger in countries with nonprohibitive short sale regulations and for stocks with relatively low liquidity, high shorting fees, and low price efficiency.

A comparative study of the impact of sanctions on the oil and cement companies listed in Tehran Stock Exchange: Forecasting and Future Trends

Imposing sanctions can have several malicious effects on a developed or developing economy and Iran is not an exception to this matter. The main purpose of this paper is to determine whether imposing oil sanctions have a significant impact on oil, gas and petroleum companies’ capital structure or not. Furthermore, a comparison between oil industry and cement industry and a prediction of oil companies’ capital structure trend are conducted. The most innovative aspect of our study is to evaluate the influence of sanctions on a firm-specific variable rather than macroeconomic level. To address this problem, we investigate oil and cement companies listed in Tehran Stock Exchange from 2006 to 2018. The leverage ratio indicating capital structure, sanction dummy variable and ROA, tangibility of assets, capital market return, economic growth and inflation rate are dependent variable, independent variable and control variables, respectively. The data are obtained from companies’ financial statements and we use OLS regression to estimate our equations. The results indicate that the 2012 oil sanctions against Iran affect the oil companies’ leverage ratio negatively and the future trend reveals that the share of equity in capital structure will increase. Moreover, we inspect no significant relationship between oil sanctions and cement companies’ capital structure. Therefore, government policymakers should plan strategies to lift or limit the oil sanctions and oil corporate managers should find some reasonable routes for balancing their companies’ capital structure to exploit debt financing benefits.