Casablanca Stock Exchange Research Articles

Contribution of the Cointegration Theory to the Study of the Volatility of Financial Markets: Case of the Casablanca Stock Exchange

Abstract The purpose of this paper is to highlight the long-term relationship between stock prices and dividends for a sample of companies listed on the Casablanca Stock Exchange between 2002 and 2016 using the cointegration theory especially its developments in panel data. Our results show that prices are more volatile than dividends, which rejects the possibility of their anticipation by the dividend discount model under the assumption of efficient markets.

An Empirical Analysis of a Stock Market Index of a Developing Country: Case of the Main Index of the Casablanca Stock Exchange MASI

Purpose: Managing stock market risk and making an optimal investment decision in a stock market requires study- ing the dynamics of this market and analyzing the fluctuations of its benchmark index in order to avoid heavy damage in the event of crises. This paper aims to study and analyze the fluctuations of the main index of the Casablanca Stock Exchange "MASI" to explore its efficiency and stability in the normal financial context (especially before the recent pandemic crisis). Design/methodology/approach: To carry out this study, two methods are proposed, the first one, how evolves this index over time depending on some random data generation processes widely used for stock prices: A Random Walk with a drift RW(α) and an autoregressive process of order 1 AR(1). Based on the actual MASI returns series used (2007-2018), we estimate each equation parameter according to the process chosen to generate the artificial MASI returns series to know the most relevant data generation process in the case of The Moroccan financial market. The second method focuses on the technique of "simple moving average" as a method of stock prices fluctuation analysis to make its investment decision, choosing the proper order on the same series. Findings: The results and findings of our econometric study show, in the first method, that either the RW(α) or the AR(1) process cannot adequately model MASI fluctuation. However, the results of the second method affirm the utility of the simple moving average to identify trends, their strength and buy / sell signals, using some techniques known in this field, in order to make decisions and draw interpretations in investment terms and risk management, which can prove that the market is less efficient and stable. Research limitations/implications: An important implication of this study is the need to explore the efficient models to describe the MASI return series. Originality/value: This study offers empirical evidence in relation to the estimation of the econometric model to describe MASI and how to make adequate investment decisions in the Moroccan stock market. Moreover, contributes to future research to find other more appropriate models.

Accounting Beta as an Indicator of Risk Measurement: The Case of the Casablanca Stock Exchange

The problem of determining the cost of equity is crucial to the development of organizations. It is an essential means of calculating value creation. The financial literature has proposed several models for estimating the cost of equity, such as the capital asset pricing model (CAPM). However, this model is only used for listed companies, and cannot be used for unlisted companies. To remedy this situation, alternative measures of the cost of equity have emerged, such as accounting beta. The main objective of this research was to explore the relationship between market beta and accounting beta calculated using ROA, ROE and net income to demonstrate the ability of accounting beta to measure risk for unlisted companies. To carry out this study, we exploited data from a sample of 49 companies listed on the Casablanca Stock Exchange during the period of 2015–2019. We used panel data econometrics to empirically test the research hypotheses. The results show that the accounting beta calculated using ROA and ROE significantly represents the market beta and is a satisfactory solution to calculate the cost of equity of unlisted firms. The results of the study contribute to the existing literature on the cost of capital by reinforcing the role of accounting beta as a solution for determining the cost of equity and therefore the creation of value for the organization.

The impact of COVID-19 on the topological properties of the Moroccan stock market network

This paper investigates the topological evolution of the Casablanca Stock Exchange (СSE) from the perspective of the Coronavirus 2019 (COVID-19) pandemic. Cross-correlations between the daily closing prices of the Moroccan most active shares (MADEX) index stocks from March 1, 2016 to February 18, 2022 were used to compute the minimum spanning tree (MST) maps. In addition to the whole sample, the analysis also uses three sub-periods to investigate the topological evolution before, during, and after the first year of the COVID-19 pandemic in Morocco. The findings show that, compared to other periods, the mean correlation coefficient increased remarkably through the crisis period; inversely, the mean distance decreased in the same period. The MST and its related tree length support the evidence of the star-like structure, the shrinkage of the MST in times of market turbulence, and an expansion in the recovery period. Besides, the CSE network was less clustered and homogeneous before and after the crisis than in the crisis period, where the banking sector held a key role. The degree and betweenness centrality analysis showed that Itissalat Al-Maghrib and Auto Hall were the most prominent stocks before the crisis. On the other hand, Attijariwafa Bank, Banque Populaire, and Cosumar were the leading stocks during and after the crisis. Indeed, the results of this study can be used to assist policymakers and investors in incorporating subjective judgment into the portfolio optimization problem during extreme events.

Profit Warnings and Stock Returns: Evidence From Moroccan Stock Exchange


 
 
 
 There is an important literature focused on profit warnings and its impact on stock returns. We provide evidence from Moroccan stock market which aims to become an African financial hub. Despite this practical improvement, academic researches that focused on this market are scarce and our study is a first investigation in this context. Using the event study methodology and a sample of companies listed in Casablanca Stock Exchange, we examined whether the effect of qualitative warning is more negative compared to quantitative warnings in a short event window. Our empirical findings show that the average abnormal return on the date of announcement is negative and statistically significant. The magnitude of this negative abnormal return is greater for qualitative warnings than quantitative ones.
 
 
 

Financial Performance of Initial Public Offerings: Exploratory Study

The subject of prowess and relevance constantly represents an apprehension of the leaders which alerts the presence of the firm in its market notwithstanding their definitions and complicated measures emanating from the determination of the performance. The latter, as being a kaleidoscopic and multidimensional construct, can never illustrate a consensus of the authors.
 The present study allows us to constitute a frame of reference to prepare the ground of an investigation concerning financial performance before and after Initial Public Offerings (IPOs) in companies listed on the Casablanca Stock Exchange in Morocco. The object of this paper is to offer a literature review that highlights the explanatory factors of an IPO decision and its impact on financial performance. Notably through theoretical foundations which underlie the decision to go public and its effect on performance, namely: the theory of the agency and the timing of the market theory (founded on the assumption of earnings management). As well, based on international empirical studies that demonstrated the behavior of listed companies (regardless of their structure or their line of business) in terms of performance in a period pre- and post-listing. By using different aggregates and performance indicators, the studies’ findings proved the phenomenon of higher financial performance that improves faster than normal during the year before but diminishes after the going public event in the long run. This article brings a more holistic and integrated view of the relationship between IPO and performance, as well as avenues for future research are offered in the conclusion.

Contribution to the analysis of the determinants of the disclosure of information on CSR on websites in Morocco: case of financial organizations listed on the Casablanca stock exchange

Contribution to the analysis of the determinants of the disclosure of information on CSR on websites in Morocco: case of financial organizations listed on the Casablanca stock exchange

A Comparative Study of the Fama-French Three Factor and the Carhart Four Factor Models: Empirical Evidence from Morocco

This paper investigates the validity of the Fama-French Three Factor (FF3F) and the Carhart Four Factor (C4F) models in Morocco. Monthly returns of Casablanca Stock Exchange-listed companies are extracted from Reuters DATASTREAM over a 5 years’ period (2013-2017). Market, size, value and momentum effect-mimicking exogenous variables are formed and regressed against the returns of size and value-sorted portfolios over a total of 8 multivariate linear regressions. While the size and value effects were found to partially hold, the momentum effect was found to be insignificant. Additionally, the C4F Model did not exhibit a better explanatory power compared to the FF3F Model. It appears that both models cannot be fully relied on in order to predict cross-sections of return in the Casablanca Stock Exchange (CSE), as they both only partially hold in the latter. Ultimately, this study brings value to the existing literature by testing two widely explored asset pricing models in an emerging market where equity research-oriented inquiries are relatively scarce or basic. Even if the models do not fully hold in the Moroccan context, this study posits whether the individual anomalistic factors hold in the CSE, which might be useful for future asset pricing models augmenting endeavors.

A Hybrid Approach of Wavelet Transform, Convolutional Neural Networks and Gated Recurrent Units for Stock Liquidity Forecasting

Stock liquidity forecasting is critical for investors, issuers, and financial market regulators. The object of this study is to propose a method capable of accurately predicting the liquidity of stocks. The few studies on stock liquidity forecasting have focused on single models such as Seasonal Auto-Regressive Integrated Moving Average with eXogenous factors, the nonlinear autoregressive network with exogenous input, and Deep Learning. A new trend in forecasting which attempts to combine several approaches is emerging at the moment. Inspired by this new trend, we propose a hybrid approach of Wavelet Transform, Convolutional Neural Networks, and Gated Recurrent Units to predict stock liquidity. Our model is tested on daily data of companies listed on the Casablanca Stock Exchange from 2000 to 2021. Its forecasting performances are evaluated based on the Mean Absolute Error, the Root Mean Square Error, the Mean Absolute Percentage Error, Theil’s U statistic, and the correlation coefficient. Finally, the outperformance of the proposed model is confirmed by comparison with other reference forecasting models. This study contributes to the enrichment of the field of prediction of financial risks and can constitute a framework of analysis allowing to help the stakeholders of the financial markets to forecast the liquidity of the actions.

The effects of corporate governance mechanisms on earnings management: Empirical evidence from Moroccan listed firms

Abstract Purpose: The purpose of the study is to systematically review and examine the effectiveness of corporate governance mechanisms in restraining earnings management among the listed firms of the Casablanca Stock Exchange. Research methodology: In this study, we used the modified Jones model to calculate discretionary accruals. Our sample comprises 27 firms covering the period from 2016 to 2018, analyzed by the EGLS estimator. Results: Our empirical results show that gender diversity, board size, and audit committee independence reduce the managers' discretion. Simultaneously, we found a significantly positive association between earning management and different corporate governance characteristics such as CEO duality, institutional investor ownership, and family ownership. We do not find any evidence that audit committee size, ownership concentration, and managerial ownership significantly influence discretionary accruals. Limitations: This study's main limitation is that we did not address the direction of discretionary accruals, which does not allow us to detect the motivational aspects behind earnings management. Contribution: The results of this study will help Moroccan authorities in their formulation of an appropriate regulatory framework because very few studies have been conducted in this area in the case of the Moroccan listed companies, especially with a large set of governance variables as our empirical model. Keywords Accruals; Board of directors; Corporate governance; Earnings management; Ownership structure

Financial Risk of Indebted Companies: A Study of the Impact of Financial Structure and the Earnings Growth

The choice of a financial structure by the companies is a strategic decision which frames their use of the fund resources. The companies that are financially well-off resort directly to the equity capital by opting for a perfect autonomy. It also turns out that this is an obvious option, rather than using external resources which come along with financial expenses. In this article, we are interested in indebted companies and their growth and the impact of the latter on the βeta of their representative stocks. In order to answer this problem, an empirical study was conducted on a panel of 44 Moroccan companies listed on the Casablanca Stock Exchange between 2008 and 2019. Based on the results obtained, we have shown that the level of indebtedness and earnings growth do not have a significant influence on the financial risk measured by the βeta of the companies studied. In this case, we come back to a neutrality of the financial structure and the earnings growth on the βeta displayed by these companies.

The impact of the adoption of IFRS standards on the informational relevance of financial performance indicators of companies listed in the Casablanca BVC

The adoption of international financial standards should provide companies with enormous benefits, especially through the production of reliable and high-quality financial information by strengthening the explanatory power of accounting and stock market performance indicators. These indicators are key elements used to assess the value created by firms. This article is proving to be a great contribution to scientific research in this field. It will allow an empirical approach to assess the impact of the adoption of IFRS standards on the informational relevance of financial performance indicators. In figures, 93 observations were collected from companies listed on the Casablanca stock exchange from 2015 through 2020. We used a theoretical framework based essentially on the theory of financial market efficiency and a series of empirical tests on the two samples: IFRS- Sample Standards and Local- Sample Standards. Ultimately, our main results seem to indicate that the implementation of IFRS standards contributes to slightly to the improvement of the informational relevance of accounting figures for Moroccan companies listed in the Casablanca stock market. JEL classification : M41 Paper Type : Empirical research

The value relevance of IFRS 16 in the Moroccan context

The implementation of IFRS 16 - Leases, on January 1, 2019, by introducing a unique model for accounting lease contracts for lessees, is supposed to meet the common objective of the international and the American accounting standard setters (IASB and FASB), to improve the method of accounting for leases (operating and financing) and provide accurate and relevant accounting information. In this context, this study aims to analyze the value relevance of the adoption of IFRS 16, in companies listed on Casablanca stock exchange, by employing the valuation framework developed by Ohlson (1995), widely used in the literature to assess the value relevance of accounting information by its ability to explain stock market prices. Results confirm those obtained by previous research on the value relevance of IFRS standards in Morocco, concluding that the transition to IFRS 16 did not lead to the production of more relevant financial information compared to the old standard (IAS 17). This study aims to enrich the current literature that is interested in the application of IFRS standards in the context of developing countries. Its results also help to inform accounting standard setters in these countries in their plans to modernize their accounting information systems. Our research nevertheless has limitations, including the size of the sample, given the optional application of IFRS in Morocco, as well as the relatively limited depth in terms of time since the transition to the standard in 2019. JEL Classification: M4. Paper type: Empirical research.

Using of the Circularity Indicators in the Financial Communication of Listed Companies in the Construction Industry

Purpose: The Building and Public Works sector is experiencing remarkable growth due to the increase in infrastructure needs. Because it is one of the most waste-generating sectors. This growth will explode in the coming years, especially with a linear economy model. Thus, the transition to a circular economic model is necessary and financial communication practices must be aligned with it. Under this objective, this paper seeks to explore the financial communication practices of listed companies in terms of circular economy. Design/Methodology/Approach: The annual reports of seven (7) Moroccan construction companies listed on the Casablanca Stock Exchange were analyzed and discussed in the light of theoretically approved circularity indicators. Findings: The content disseminated by the listed construction companies through their annual reports in relation to the circular economy is often limited to the description of broader actions. Some listed companies communicate numerical indicators particularly in relation to energy and water consumption, recycling and recovery of waste, substitution of natural resources by alternative materials. Practical implications: This paper is a benchmarking tool for listed and unlisted companies in the construction sector, with the aim of improving the quality of the indicators disseminated and increasing the environmental performance of companies.

Predicting Stock Market Movements Using Machine Learning Techniques

The purpose of this paper is to compare the performance of various state-of-the-art machine learning techniques in predicting the behavior of stock-market returns. To do so, we gathered ten years of daily historical data (2488 observations per stock) for the top ten most liquid stocks in Casablanca Stock Exchange (Morocco) and trained six machines learning classifiers (ridge regression, LASSO regression, support-vector machine, k-nearest neighbors, random forest, and adaptive boosting) and an ensemble of them (i.e. ensemble learning) in order to predict one-day-ahead, one-week-ahead, and one-month-ahead prices direction (i.e. positive or negative returns). The performance of each algorithm is then evaluated using accuracy, precision, recall, and F1 scores. Applying the Diebold-Mariano test at a significance level of 5%, we have found that support-vector machine, random forest, and adaptive boosting perform equally well and outperform all other single classifiers for short-term predictions (one-day-ahead and one-week-ahead). However, for monthly predictions, all methods display similar predictive accuracy. In addition, our study suggests that ensemble learning significantly improves all performance metrics for the three prediction horizons. We have also found that for all models the performance significantly decreases as the prediction horizon increases.

Relation d’impact entre Performance financière et performance sociale : Enseignement d’une étude empirique

This work aims to provide answers to a question widely debated within academic circles. This is the study of the links between corporate social responsibility (CSR) and financial performance (PF). In this context, several hypotheses and explanatory models, studying the interactions between them, have been developed. In this logic, we tried to address the following question: to what extent can social performance impact financial performance especially for listed companies? The methodology followed to answer this question is the calculation of correlation matrices and the application of the Granger causality test. To represent the financial performance, four ratios have been used, namely: PER, ROE, BPR, BPA. for social performance, the scoring method was used to assess companies listed on the Casablanca stock exchange in terms of their socially responsible commitment. The results obtained by the causality test in the sense of Granger show that it is difficult to reveal a causal link, either unidirectional or bidirectional, between social performance and financial performance at the level of all the ratios considered. Indeed, this relationship has only been shown for certain ratios and also for different thresholds, sometimes up to 12%; Rarely at interesting thresholds like 1% and 5%. This corroborates with the results obtained by most of the previous research in this area.

AN ALTERNATIVE FRAMEWORK FOR SOCIALLY RESPONSIBLE PORTFOLIOS OPTIMIZATION APPLIED TO THE MOROCCAN STOCK EXCHANGE

The purpose of this article is to propose an alternative approach for portfolio optimization combining financial and ethical constraints in one hand, and objective and subjective investor’s preferences in the other hand. This approach intends to support investors in selecting and optimizing financial and social portfolio’s performances. More precisely, we introduce analytic hierarchy process (AHP) to measure the ethical performance (EP) score of each asset considering ethical criteria. For its part, fuzzy multiple criteria decision making (FMCDM) is used to determine the overall financial quality score of assets with respect to key financial criteria i.e., short term return, long term return, and risk. Besides, interactive fuzzy programming approach is applied to support the investor’s decision, considering its subjective preferences. The robustness of our approach is tested through an empirical study involving the case of the Casablanca Stock Exchange (CSE). The results give evidence that the Socially Responsible (SR) Portfolio have performed similar to the conventional one, as no significant differences were found in term of return. However, the SR portfolio allows the investor to achieve his ethical goal, against a slight financial sacrifice.

THE IMPACT OF BEHAVIORAL BIASES ON INVESTMENT PERFORMANCE: DOES FINANCIAL LITERACY MATTER?

This paper aims to investigate the impact of behavioral biases and financial literacy on investment performance in an emerging stock market context. Based on data collected from a sample of 196 Moroccan investors operating in Casablanca stock exchange, we test the research hypotheses using structural equation modeling. Out of the four heuristics examined in our proposed conceptual framework (i.e. overconfidence, representativeness, anchoring and herding), only overconfidence and representativeness had a significant positive impact on financial performance. Our results also suggest a significant positive impact of financial literacy on representativeness, while it was found negatively associated with overconfidence. This research paper is the first of its kind to investigate the existence of heuristics in an African, Arab and emerging market. As well, the current study is among the earliest attempts to examine how behavioral biases relate to investors performance.Keywords: Heuristics; financial literacy; investment performance; stock market; SEM.JEL Classification: G02.DOI: https://doi.org/10.32479/ijefi.11318

The COVID-19's Spillover Effects on Industry Indices Returns: Evidence from Casablanca Stock Exchange

Resume Cette etude examine la reaction de la Bourse de Casablanca au COVID-19 en considerant plus particulierement l'effet d'entrainement des cas et des deces lies au COVID-19 dans cinq pays selectionnes affectes par le COVID-19, dont le Maroc, sur les rendements des indices industriels de la Bourse de Casablanca du 13 juin 2019 au 11 juin 2020. Cette etude utilise le (modeles VAR avec des variables exogenes) a cette fin, pour examiner les rendements des indices de l'industrie (variables endogenes) en reponse aux cas et aux deces lies au COVID-19 (variables exogenes). Les resultats empiriques suggerent l'existence d'effets de d'entrainement significatifs sur les rendements de la plupart des indices industriels, suggerant que la Bourse de Casablanca est plus vulnerable aux situations epidemiologiques d'autres pays. Plus precisement, les resultats suggerent que les retombees de l'Espagne et de la France sont l'un des facteurs cles qui influencent negativement les rendements de la majorite des indices industriels. Mots cles : COVID-19, rendements des indices de l'industrie, Bourse de Casablanca, modele VAR-X. Abstract This study investigates the Casablanca Stock Exchange response to COVID-19 by considering more particularly the spillover effect of COVID-19 related cases and deaths of five selected countries affected by COVID-19, including Morocco, on the Casablanca Stock Exchange’s industry indices returns from June 13, 2019, to June 11, 2020. This study employs the “VAR-X model” (VAR models with exogenous variables) for this purpose, to examine industry indices returns (endogenous variables) response to COVID-19 related cases and deaths (exogenous variables). The empirical findings suggest the existence of significant spillover impacts on most of the industry indices returns, suggesting that Casablanca Stock Exchange is more vulnerable to the epidemiological situations of other countries. More specifically, the findings suggest that spillovers from Spain and France are one of the key driving factors that influence negatively the majority of industry indices returns. Keywords: COVID-19, Industry indices returns, Casablanca Stock Exchange, VAR-X model.

Prudence and temperance in portfolio selection with Shariah-compliant investments

PurposeThis paper aims to explore the impact of Sharīʿah-compliant stocks on other investor risk preferences beyond the risk aversion, namely, prudence and temperance.Design/methodology/approachThis paper uses the non-parametric model data envelopment analysis with the shortage function as a measure of performance. The model uses three specifications considering skewness and kurtosis that describe according to expected utility theory, prudence and temperance.FindingsResults show that first, efficient portfolios consist mainly of conventional stocks in the three-model specification. Second, the skewness improvement is achieved only when considering conventional stocks while Sharīʿah-compliant assets do not exhibit any impact on the third moment. Finally, diversification through both conventional and Sharīʿah-compliant stocks does not lead to kurtosis reduction. Sharīʿah-compliant stocks in efficient portfolios are sensitive to return and risk solely, and hence, prudence and temperance as related to skewness and kurtosis measures can be ignored in optimal portfolio selection during normal market conditions.Research limitations/implicationsFindings suggest the same conclusions for four Islamic screening methods; however, readers should be prudent due to the limited sample. Results show that Sharīʿah-compliant assets do not have an impact on higher-order moments optimal portfolio returns, and hence, question the commonly admitted assumption of non-normality return distributions at least for Sharīʿah-compliant stocks.Practical implicationsThe research findings suggest that Islamic investor preferences are described only by return and risk along with Sharīʿah criteria for stock selection and portfolio allocation. Portfolio managers should not care about higher-order moments to manage Sharīʿah-compliant funds. The traditional mean-variance Markowitz framework will be sufficient for investment or allocation decision-making. Description of Sharīʿah-compliant portfolio returns with only the first two order moments gives such asset more resiliency to extreme events like a crisis.Originality/valueThis research is the first in literature exploring whether prudence and temperance defined by higher-order moments can be drivers, besides Sharīʿah criteria, in portfolio allocation decision-making. This study is unique in terms of methodology and application. It uses individual stock data on the Casablanca Stock Exchange.