Financial Market Development Research Articles

Legal and organizational aspects of introducing ESG-standards in the Russian banking sector

Objective: to study the processes of introduction and practical implementation of ESG standards in the Russian banking sector and to assess their impact on the prospects for the financial market development in general.Methods: logical and structural analysis, system-functional approach, formal legal method.Results: the author reveals the essence and features of such a relatively new phenomenon for the Russian banking sector as ESG-principles of doing business and responsible financing. The study reveals the prerequisites for the formation of modern ESG concepts in international practice, analyzes the possibility of their implementation in the practical activities of the Russian financial sector subjects and assesses the prospects for the Russian banking system development within the paradigm of responsible entrepreneurship and sustainable development.Scientific novelty: consists in the complex study of relations associated with the ESG principles implementation in the Russian financial sector. A distinctive feature of this work is the focus on both practical issues of implementing the ESG principles in the Russian financial sector and assessing the prospects for the ESG banking development in the Russian Federation.Practical significance: the formation of a certain theoretical basis necessary both for studying the essence of the ESG approach and the sustainable development of financial sector entities, and for developing proposals for adjusting regulatory policy in this area in the future.

Cryptocurrency Management in Vietnam

Decentralized cryptocurrency has captured the attention of both individual and institutional investors. Cryptocurrency regulation in Vietnam is attracting great public attention and is a decisive factor in the development of this new financial market. The article assesses the current status of cryptocurrency mining and its use in Vietnam, thereby drawing policy implications for the management of this particular asset class in the coming period.

Correlation Analysis between Stock Index and Spot Index

Since the reform and opening up, with the continuous strengthening of China's economic strength, the continuous improvement of the financial market, and the increasing appeal of investors to avoid market risks. Since China's first stock index futures contract was listed and traded, the research on the relationship between this financial derivative and the corresponding spot market has been a hot spot in academic circles. It refers to the hot events triggered by the futures market, and it has also been widely concerned by the media, the government and the people. China's financial derivatives market is still in its infancy, the market system is not yet perfect, and the professional quality of institutions and individuals engaged in trading still lags far behind that of investors in western mature markets. How to improve the futures index market mechanism and maintain the stable operation of the market deserves the government's in-depth consideration. China's financial futures market supervision authorities should continue to vigorously promote the improvement and development of China's stock index futures market. Specific measures include: speeding up the introduction of institutional investors to participate in futures trading and cultivating mature market trading subjects; Establish an investor suitability management system to lower the entry threshold of the stock index futures market; Perfecting the risk management system of the futures market will provide the necessary risk barrier for the healthy and stable development of China's financial market.

Asymmetric Impact of Corporate Tax on Stock Market Development: Evidence from The Nonlinear Autoregressive Distributed Lag (ARDL) Approach

The stock market and tax policy are widely considered as two core factors for economic growth in any country. A well-developed and functioning stock market provides information on profit-making of successful investment projects, risk diversification, and efficient resource allocation. In addition to domestic resources, the stock market is also considered a crucial part of the global economy. In recent years most OECD countries, including the United States, have substantially reduced their corporate tax rates to stimulate investments, attract foreign capital, and achieve higher economic growth. Corporate tax cuts in a country are expected to positively affect stock market development by encouraging domestic investments and allowing for profit repatriation by multinational companies and foreign firms which will effectively lead to higher stock market development. Despite an extensive literature examining effects of tax policy and the stock market on economic growth, only a few studies have investigated the relationship between corporate tax rate and stock market development, and these studies have shown mixed results. This study investigates the link between corporate tax and stock market development for a group of nine selected OECD countries for the period of 1980-2018 using both long-run and short-run models. In addition to the Pesaran, Shin and Smith (2001) bounds testing approach to cointegration and error correction modeling using the linear ARDL model, we employ the Shin, Yu and Greenwood-Nimmo (2014) nonlinear cointegration approach to investigate the asymmetric impact of corporate tax changes on stock market development. Our findings indicate that, in the linear model in most of countries in this sample, corporate taxing adversely affects stock market development both in the short run and in the long run. In addition, as the first study using the N-ARDL estimation method to investigate this relationship, the robust and strong statistical results show that the effect of corporate tax on stock market development as a major part of financial market development is asymmetric. We show that corporate tax policies in the short run have a nonlinear, asymmetric impact on stock market development. The magnitude of the impact depends on whether the tax policy is a decrease or an increase in corporate tax. Furthermore, this effect changes among the countries in our study. For instance, the stock market's reaction to an increase of corporate taxing in the United States is much more rapid than that of decreases of corporate taxing. Corporate tax increases immediately and strongly affect the stock market, but the stock market takes years to incorporate the effect of tax decreases.

Empirical Determinants of Derivative Markets in Asia, Latin America and Sub Saharan Africa

The paper examined the relationship between the derivative markets and financial markets depth, efficiency, stability and access in Asia, Latin America and Sub-Sahara Africa. A panel logit model was applied from the period 2009 to 2017 on the financial market development data collected for countries in Asia, Latin America and Sub-Sahara Africa. The results of the panel logistic regression model positively revealed that derivative markets are influenced positively by the improvement to financial access (measured by stock market capitalization to GDP) and financial efficiency (measured by net interest margin) of the financial markets of the regions studied. However, an examination of financial depth and financial stability were observed to have an adverse propensity for the derivative market development. Therefore, countries in Asia, Latin America and Sub-Sahara Africa are recommended to significantly focus on improving financial efficiency and financial access within their respective financial markets. Further a document review was carried on the publications of the Committee of Global Financial System (CGFS) and Committee on Payment and Settlement Systems (CPSS) of the Bank for International Settlement (BIS). It is recommended that policy makers must promote greater respect for market autonomy, strengthen legal and judicial systems, boost regulatory independence and effectiveness, deepen the domestic investor base, pursue bi-directional international participation while preparing for spill overs and develop robust financial market infrastructure to facilitate the establishment of vibrant derivative markets. Keywords: Bank for International Settlements (BIS), Derivative markets, financial access, financial depth, financial efficiency, financial stability and panel logit model. DOI: 10.7176/RJFA/13-18-03 Publication date: September 30 th 2022

Research on Portfolio Model Based on LSTMIS-AMTM and Improved Markowitz

With the development of financial market, portfolio investment has become a new hotspot in the field of quantitative investment. We develop a model to propose the best strategy of gold and bitcoin portfolio investment. We first use LSTMIS to predict the value of gold and bitcoin with input sequence consisting of last 30 days data. Then we use the predicted data and the mean value of last 5 days as long- and short-term moving average input of AMTM model respectively, hence judging whether to buy or sell. Then we improve and modify the existing Markowitz portfolio model by treating gold and bitcoin as two different stocks and completing the matching of the two through the model, so as to make quantitative investments and reduce the risk while satisfying a higher rate of return.

Financial Time Series Model Based on Least Squares Support Vector Machine Predictive Control Algorithm in Financial Market

China’s financial market also faces some outstanding problems, namely, obvious structural imbalance in the size of the financial market, on the one hand, the absolute dominance of the size of the indirect financing market, mainly the bank lending market and on the other hand, the imbalance in the size of the direct financing market and the indirect financing market. At the same time, there is also a structural imbalance of the financial market among regions in China. How to verify the objective existence of such structural imbalance in different regions and measure the difference in the level of financial market development among regions is the focus of this paper. This paper constructs a financial market development level indicator system from three dimensions, equity market, bond market, and lending market, and measures the financial market development level by using inter-provincial panel data from 2001 to 2020 through neural network algorithm, time series model, and support vector machine algorithm, and analyzes the regional heterogeneity of financial market development on this basis. The results show that the overall market level of the financial industry in the eastern coastal region of China is the highest, but the intra-regional differences are also the most obvious; the overall market level of the financial industry in the northeastern region of China is the lowest, and the differences with the eastern region rise significantly; the market level of the financial industry at the provincial level in the central and eastern regions shows an all-time decreasing trend, while the western and northeastern regions of China show a convergence, then divergence, and then convergence trend. Therefore, differentiated financial policies should be implemented according to the stage of regional development in order to enhance the financial development level of each economic region and gradually narrow the regional financial development gap.

An empirical analysis of impact of banking sector on Indian stock market

PurposeThis study attempts to examine the relationship between the banking sector and stock market development in India.Design/methodology/approachTo analyze the relationship between banks and stock market development, the ratio of stock market capitalization to GDP is proxied by stock market development. The determinants of the stock market development are used for analysis namely domestic credit to the private sector as a ratio of GDP is used as a proxy for the development of banks, saving rate, per capita real GDP, and inflation. The autoregressive distributed lag (ARDL)-Bounds testing approach is used for the analysis. The paper also used the unrestricted error correction model and CUSUM and CUSUM square test to check the stability of the model.FindingsThe ARDL bounds test found that there is a long-run relationship between stock market development and bank-centered financial development. The results also revealed that the stock market is positively influenced by the development of banks, savings, and per capita real GDP in the short-run as well as long-run.Research limitations/implicationsThis paper suggests that improvement of banking sector plays an important role to increase liquidity of the capital market development in India. This paper also suggests that the economic growth and savings rate have positive impact to induce the capital market growth in both short run and long run.Originality/valueThe study has investigated the empirical relationship between the banking sector and the stock market development in a different methodological approach by using an ARDL model which is appropriate for a small sample size. There are few studies related to bank-centered financial development and stock market development in the context of India.

Predicting China's carbon price based on a multi-scale integrated model

Carbon price is one of the core indicators of the carbon market. Making accurate predictions of carbon prices based on insight into the volatility characteristics of the carbon market will not only provide a scientific basis for investors and regulators to make decisions and greatly promote emission reduction, but also effectively promote the healthy development of the carbon financial market. Based on the historical carbon price data of the national carbon market, this paper constructs the EEMD-BP-ELM model to predict the high and low frequency components of China's future carbon price. On this basis, according to China's goal of peaking carbon emissions before 2030 and achieving carbon neutrality before 2060, the CHINAGEM-E model is used to predict the trend component of the carbon price under the baseline and the 2060 carbon neutral scenarios. Finally, the trend component is combined with the high and low frequency components to obtain the price range from 2022 to 2060. We find that under the baseline scenario, China's carbon price range in 2060 is [343, 785] CNY/tCO2, while under the 2060 carbon neutral scenario, this price range is [1543, 3531] CNY/tCO2.

The Impact of US-China Trade War and Protectionism--In Terms of China

This paper focuses on the consequence of the trade war between China and the US on China's economy under trade protectionism policies. This paper first introduces the history of trade wars, the motives of trade protectionism and the status of the trade war. Based on the above background information, this paper explains that trade deficit is the core reason for the outbreak of sino-US trade war, and introduces in detail a series of economic and technological sanctions adopted by the United States against China. Based on the above information, the paper concludes the impact of the Sino-US trade war on China's economy. The trade war between China and the US has slowed down the development of China's economy, technology industry and financial market through a series of measures, including high tariffs, trade bans and technology monopolies, while also bringing high unemployment to China.

Does betting against beta strategy work in major Asian Markets?

This study examines the betting against beta (BAB) anomaly and its drivers for five major Asian markets, using data from January 1999 to January 2020. We find positive raw returns-based BAB premiums for India, China, and South Korea, while they are negative in Japan and Indonesia. Cross-sectional differences in BAB premiums seem to be positively associated with the level of information uncertainty and financial market development. Decomposition of the BAB phenomenon shows that BAB premiums are driven by betting against correlation (BAC) premiums in India while betting against volatility (BAV) premiums drive it in China and S.Korea. Funding liquidity risk and margin constraints drive positive BAC in India and Indonesia. Positive BAV in China is driven by MAX (lottery behavior), while idiosyncratic volatility (IVOL) and MAX together drive them in S.Korea. Negative BAB in Japan and Indonesia is mainly due to negative BAV premiums caused by MAX in Japan and both IVOL and MAX in Indonesia. CAPM-based risk-adjusted BAB premiums are not significant for S.Korea, Japan, and Indonesia, while in India and China, they are significant but get explained by the profitability factor. We conclude that the BAB strategy is not universally applicable, and its drivers vary across sample markets.

Financial reforms and low‐income households' impact on international consumption risk sharing

AbstractComplete financial markets allow countries to share their consumption risks internationally, thereby creating welfare gains through lower volatility of aggregate consumption. Using a panel of 116 countries between 1970 and 2019, I show that a higher share of low‐income households reduces consumption risk sharing, especially so in less‐developed countries. Moreover, I find that a broad range of financial market reforms and financial integration have a positive impact on international consumption risk sharing in poorer developing countries, while in emerging market countries, financial market development, financial reforms, and capital account openness has an impact. In advanced economies, financial (stock and bond) market development as well as financial integration improves international risk sharing. A lack of financial reforms, a lower degree of financial integration and a high share of low‐income households thus contribute to the degree of risk sharing being lower in developing countries than in advanced economies.

Sources of Financial Development and Their Impact on FDI Inflow: A Panel Data Analysis of Middle-Income Economies

The present research aimed to investigate the long-run and short-run effects of different sources of financial development on FDI inflow for middle-income economies during the period of study, 1980 to 2020. An annual frequency of data was obtained for the required set of variables from WDI and the IMF. The estimations revealed no cross-sectional dependence, a significant cointegration, and the stationarity of FDI inflow at first difference, while the explanatory and controlled variables were as mixed level. It validated the panel ARDL estimations methods such as mean group, pooled mean group, and a dynamic fixed effect for testing the required set of hypotheses. The Hausman test confirmed the consistency and efficiency of the dynamic fixed effect as the method of estimations. The panel estimations revealed the significance of financial market development, inflation rate, trade openness, and real economic growth as the most critical factors for FDI inflow in middle-income economies. The policymakers should consider these factors for making their policies regarding FDI inflow in their economies. Future research may consider time series ARDL for each independent middle-income country. The findings of the study are generalized only to middle-income economies rather than higher-income and lower-income countries.

Banks, Financial Markets and Economic Development: some evidence for India by

Banks, Financial Markets and Economic Development: some evidence for India by

The Impact of Governance on Financial Institution and Financial Market Development: Empirical Evidence from Emerging Markets

Abstract The overall objective of the study is to investigate the impact of governance on financial development in Sub-Saharan African countries. To achieve the stated objective, the study employed balanced data of 43 Sub-Saharan African countries during the year 2002 to 2018. To analyze the data, the study used both the fixed and random effect estimation approaches and explored the relationship between the three dimensions of governance and three pillars of financial development in Sub-Saharan African countries. The study also applied the Principal Component Analysis (PCA) to create indexes for the political, economic, and institutional dimensions of governance taking the six world governance indicators. The overall findings of the study indicate that the political, economic, and overall governance composite index has a positive and significant impact on the overall financial developments of sub-Saharan African countries. The development of financial institutions in the region is influenced significantly and positively by political, institutional, and overall governance. In addition, the economic dimension of governance has had a significant and positive impact on the development of the financial markets in sub-Saharan Africa. Furthermore, trade openness, real interest rate, inflation, real GDP, and access to electricity are all major macroeconomic predictors of financial development, according to the study. As a result, all aspects of governance quality in the Sub-Saharan African countries must be improved. This can be achieved by policies aimed at strengthening voice and accountability, political stability, government effectiveness, regulatory quality, rule of law, corruption control, and overall macroeconomic reform.

Russian Bancassurance Perspectives: From Path Dependence to Ecosystem

The aim of the study is to identify the future of Russian bancassurance in the “digital” world based on the formation of a reasonable opinion on its prospects within the framework of path dependence and the ecosystem approach. The relevance of the article is determined by the significance of bancassurance for the development of the insurance sector and the Russian financial market as a whole. The author uses methods such as analysis and synthesis, analogy, induction, descriptive analysis, matrix construction, clustering using graphs, and index method. The study is based on the works of domestic and foreign authors, data from the Bank of Russia on the state of the banking sector of the Russian Federation and key indicators of the insurers; reports of the rating agency “RA Expert” on bancassurance; data of Professional Analysis Systems of Markets and Companies Interfax. Based on the results of quantitative analysis, the author concludes that the key factor determining the development of Russian bancassurance within the framework of path dependence is the role of banks as recipients of cash flows. The author shows that the digital transformation of bancassurance is mainly associated with the digitalization of intermediary relations between the bank, individual client and insurance company. To quantify the level of such transformation, the author proposes indices of digitalization of bancassurance. The author shows that bancassurance can be successfully built into ecosystems due to its peculiarities. However, the conditions for the development of ecosystems in the Russian market can lead to the dissolution of bancassurance in ecosystems and the loss of its significance for the development of the Russian financial market. The presented conclusions are to be discussed taking into account the study of new issues in this problem area, including a study of the mergers and acquisitions market to analyse changes in the ownership structure of banks and insurance companies; a study of corporate bancassurance; broader analysis of quantitative values of bancassurance due to new data; analysis of ecosystem development in the Russian financial market in order to move from predictive judgments to a discussion of real situations.

The causality link between financial development and economic growth in Mexico

To assess the nexus between financial development and economic growth in Mexico, we used an ARDL model over the period of 1978-2019. Domestic credit to the private sector is used as a proxy for the banking sector development; value of shares traded is used as a proxy for the financial market development. In the long-run, we find that the banking sector development has a positive impact on growth; an increase by 1% in the banking sector development causes an improvement of 0.098% in growth. Moreover, we find a negative relationship between the stock market development and growth; where an increase by 1% in the stock market development causes a decrease by 0.046% in growth. Findings from this paper suggest that Mexican authorities should accelerate in priority the financial reforms of the stock market, and reinforce the regulatory environment in order to stimulate economic growth in the long-run.

Administrative and legal regulation of the provision of financial services in Ukraine: a comparative aspect

The formation of an appropriate mechanism of administrative and legal regulation of services in the field of financing was carried out at each stage of its development by annually expanding the theoretical (legislative and doctrinal-scientific) and practical basis, providing greater opportunities for consumers to exercise their rights to prompt and prompt service. To date, the topic studied by the authors is one of the most developed in Ukraine. The article analyzes the possibility of formulating a quality mechanism of administrative and legal regulation of financial services in Ukraine through the prism of European integration processes and preventive measures. An extensive analysis of the current financial system of Ukraine is given. The administrative-legal, informational and anti-corruption components of the regulation of financial services are highlighted. It was also found that an important new form of incentive funding for the regions were competitions for budget subventions for the achievement of achievements, rather than their absolute level, which allows them to participate effectively in depressed regions. The strategy of development of the Ukrainian financial market is aimed at its transformation into the main mechanism for attracting investment by Ukrainian companies, creating conditions for effective investment of private and pension savings. The authors revealed the steps and stages of establishing the procedure for providing financial services in terms of such an integral principle of the modern formation of the process of providing services in Ukraine as the principle of service. As a result of the study, in addition to the classic administrative component of financial services, information and anti-corruption services were singled out. The general and special jurisdiction for committing offenses in the field of regulation of financial services at the level of bylaws of Ukraine is analyzed.

ICT, human capital and productivity in Chinese cities

This study uses a rich city-level dataset to analyse the relationship between information and communication technology (ICT) and productivity performance in China during 2003–2016. It is shown that ICT positively contributes to Chinese cities’ productivity in conjunction with other growth determinants, such as human capital, foreign direct investment (FDI), infrastructure development, financial market development, and research and development investment. An identifiable amplified effect is detected when ICT exceeds certain threshold in Chinese cities. This threshold level is reached in over a half of Chinese cities particularly cities in coastal regions. Finally, ICT is found to substitute human capital in China’s context. Since the average education level in Chinese cities is low, the finding is in line with the argument that ICT only improves productivity of high-skilled workers but worsens that of the low-skilled ones.

Environmental regulation, market forces, and corporate environmental responsibility: Evidence from the implementation of cleaner production standards in China

China, the world’s largest emerging economy, has been under enormous pressure to combat environmental challenges. In response, the Chinese government has implemented a series of cleaner production standards (CPSs) to address pollution issues. Taking advantage of the staggered passage of 56 CPSs during the period 2003–2010, this study uses a difference-in-differences research design to investigate how environmental regulation drives corporate environmental responsibility. The results show that, following the passage of a CPS, firms in regulated industries exhibit a significant improvement in both green investment and green innovation, indicators of corporate environmental responsibility. Moreover, the effect of CPSs is strengthened by pressure from key stakeholders – institutional shareholders and large customers, and also by two market conditions, namely product market competition and financial market development. The findings have important policy implications and suggest that coercive regulatory forces and market forces can reinforce each other to improve the effectiveness of environmental regulations.