Effect Of Market Risk Research Articles

The Effect of Market Risk, Business Risk, and Financial Risk on Stock Returns in Automotive Companies

This research aims to determine the influence of investment risk consisting of market risk (X1), business risk (X2), and financial risk (X3) on stock returns (Y) in automotive companies listed on the BEI in 2014-2023 simultaneously and Partial. This research data was obtained from the financial reports of automotive companies listed on the Indonesia Stock Exchange (BEI) and the finance.yahoo.com website. The research sample consisted of 10 automotive companies listed on the Indonesia Stock Exchange for 10 years, namely the 2014-2023 period. The data analysis technique used is descriptive statistical analysis and multiple linear regression analysis using the t test and F test methods. The results of the research show that the market risk variable has a significant negative influence on stock returns, business risk has a significant positive influence on stock returns and financial variables. risk has an insignificant negative effect on stock returns. Meanwhile, simultaneously (F test) the independent variables have a significant influence on the stock return variable. With a determinant coefficient (R2) of 0.111, it shows that 11.1% of the dependent variable on stock returns can be explained by independent variables consisting of market risk, business risk and financial risk and the remaining 88.9% is explained by other variables that are not researched.

The effect of market risk on returns: Case of banking in Indonesia

The banking industries are a sector that play important role to support national development and national economy. During Covid-19 pandemic, most of market in the world include Indonesia has urgent circumstances. The objective of this study is to examine whether the Covid-19 pandemic has bad impact on returns of banking industries. The results of regression over January 3, 2020, to December 30, 2021 show that there is positive relationship for risk-return of BBNI and BBRI. Those results imply that Covid-19 pandemic does not have significant effect on returns for those banks. It also means that most investors feel safe for those banks financial performance.

Does the exposure to financial risks have an impact on the efficiency of deposit money banks in Nigeria?

The management of deposit money banks' risk portfolio investments in an effective manner in order to maximize the wealth of their shareholders by guaranteeing safety, returns on depositors' funds, and confidence in the system is the primary function of deposit money banks in the modern era. The study took an empirical approach to examining the effects that financial risks have on the overall performance of deposit money banks in Nigeria. To be more specific, shifts in financial performance were analyzed from the perspective of the relative effects of credit risk, liquidity risk, market risk, operational risk, and bank size. Both statistical and econometric methods were utilized in the analysis of the data that was utilized in the study. The study specifically focused on 18 deposit money banks that were listed on the floor of the Nigerian Stock Market for a period of 19 years. During the process of estimating the specified model, the technique of panel data analysis was utilized. In the empirical analysis, the fixed effects were chosen because they were found to be the most accurate representation of the relationships. According to the findings of this research project, the cumulative effects of financial risks do not have a negative impact on the performance of banks. To be more specific, the findings of the empirical study showed that the relationship between financial risk, as measured by Credit risk, and the financial performance of deposit money banks in Nigeria is not significant in any way. The level of risk posed by liquidity is a significant factor in determining the performance of deposit money banks in Nigeria during the time period under investigation. In Nigeria, the effects of market risk, interest rate risk, and operational risk did not in any way significantly affect the performance of banks.

Effect of Market Risk and Operational Risk Exposures on Profitability of Life Insurance Companies in Kenya

Effect of Market Risk and Operational Risk Exposures on Profitability of Life Insurance Companies in Kenya

Market Risk and Stock Return of Listed Financial Service Firms in Nigeria

The trading financial instruments in the capital market by Financial Service Firms (FSF) have generated return arising from changes in the prices of stock which exposed the firms to market risk. An effective market risk decision remains significant to determining stock return level realized from the volume and value of stock traded. This study examines the effect of market risk on stock return of listed FSF in Nigeria. The population of this study consists of fifty-six (56) financial service firms listed in the Nigerian Stock Exchange Market. In arriving at the sample size of twenty-nine (29) firms the purposive sampling technique and filtering criteria were employed. Data were sourced secondarily from the audited annual report of financial service firms, Nigeria Stock Exchange fact book, and other relevant financial service firms’ websites for period of twelve (12) years (2007-2018). Panel multiple regression technique of data analysis was applied using the ordinary least square estimator. The findings of the study revealed that book to market ratio as a proxy of market risk was insignificantly negative on stock return during the period under review. Net interest margin as a proxy of market risk revealed a significant positive effect on stock return during the period of review. Also, the study revealed that control variables of firm size, leverage had significant positive effects on stock return, though; the effect of monetary policy rate was positive but insignificant on stock return. The study concluded that a higher book to market ratio would reduce stock return and to a larger extent the reduction in stock return may not be affected significantly. It also concluded that a higher net interest margin would result to a higher stock return and vice versa. The study recommended that decision-makers and portfolio managers of financial service firms should employ appropriate risk strategies through derivatives, forwards, futures, swaps, options that can mitigate market risk in order to optimize return. Keywords: Financial Services Firms, Stock Returns, Market Risk, Firms Specific Risk factors, Nigerian Stock exchange. DOI: 10.7176/EJBM/13-8-10 Publication date: April 30 th 2021

Maximizing Utility of Withdrawals in Retirement and the Efficiency of Required Minimum Distributions

We focus on a simplified problem for a risk-averse retiree seeking to maximize utility associated with annual spending and a remaining value at the end of the problem horizon when the funds are extracted from a portfolio that includes a risk-free and a risky asset. To organize discussions about this setting we utilize a novel metric which we label “Efficiency”. This measurement compares the utility derived from annual withdrawals and the final value with a benchmark based upon the maximum sustainable spending rate that could have been chosen under perfect information. We use 10,000 scenarios developed using historical data to evaluate efficiency over a family of spending rules and asset allocations. In the process, we develop insights about the structure of such rules, and asset allocation schemes. The metric used here can be useful by planners and advisors who wish to present a comparison of policies built around upon a single value. Some withdrawal strategies will outperform the benchmark for many investors. In particular, we find that strategies built around Required Minimum Distribution (RMD) rules are surprisingly efficient and also have characteristics that mitigate against some effects of market risk, longevity risk, and sequencing risk. Our findings suggest that advisors and clients will be well served by comparing policies in a consistent way and that we all should more seriously consider withdrawal strategies built around RMD rules.

PENGARUH RISIKO KREDIT, RISIKO PASAR DAN RISIKO LIKUIDITAS TERHADAP KINERJA KEUANGAN PERBANKAN (Studi pada Bank Umum Konvensional yang terdaftar di Bursa Efek Indonesia periode 2014-2018)

This study aims to determine the effect of credit risk on the financial performance of banks, the effect of market risk on bank financial performance, the effect of liquidity risk on bank financial performanc. The research method used in this is a quantitative method. The population observed in this study was all conventional cemmercial banks listed on the idx for the period 2015 to 2018. The population in this study was 42 banking companies sampling techniques with a total sample of 56. The type of data used is secondary data. The results showed that Credit Risk (NPL) no significant positive effect on finanial performance (ROA), Market Risk (NIM) has a significant positive effect on bank financial performance (ROA). Liquidity Risk (LDR) has a significant positive effect on bank financial performance (ROA). Credit risk (NPL), market risk (NIM) and liquidity risk (LDR) have different effects. Because seen by the t test, where there are variables that cannot be seen.

Market Risk Hedging Strategy and Financial Performance at Nigeria Stock Exchange Listed Banks

The main objective of the study was to determine the Market Risk Hedging strategy and financial performance of listed banks at Nigeria Stock Exchange (NSE). Contingency theory and Agency theory were used to expound on the effect of market risk hedging strategy and financial performance. Longitudinal cross sectional survey research design was adopted. The study’s target population includes all the 28 listed banks at Nigeria stock exchange. Data was collected from 2009 to 2018 for 20 listed banks in Nigeria. The secondary data sources for the period of between 2009 and 2018 were collected from Nigeria Stock Exchange and annual reports and accounts of the listed banks. The data was collected from audited financial statements of listed banks and other relevant internal report. Data collected was subjected to diagnosis tests of normality, autocorrelation, multicollinearity, linearity, homoscedasticity, stationarity, fixed and random effects. Correlation analysis was carried out to establish the relationship between the dependent and independent variables. Generalized Least Squares (GLS) regression analysis model was used to establish the relationship and significance between the study variables. The formulated hypotheses were tested. STATA statistical software version 10 was used for data analyses. The study found out that there are positive relationship between market risk hedging strategy and price earnings ratio which is the measure of financial performance of the listed banks at NSE. Based on the findings, the study concluded that Market Risk Hedging Strategies have a significant effect on financial performance of listed banks at NSE. The study recommends that there is need for the listed banks to effectively manage their risk as it was found that risk management positively influence financial performance of listed banks. The study further recommends that there is need for the management of listed banks to constantly check their banks’ exposure to credit risk, insolvency risk, and interest rate sensitivity. Keywords: Market Risk Hedging, Financial Performance. DOI: 10.7176/EJBM/12-15-11 Publication date: May 31 st 2020

EFFECTS OF MARKET RISKS AND FINANCIAL EFFICIENCIES ON CAPITAL STRUCTURE

ABSTRACT This paper examines the effect of market volatilities, and firm-specific financial efficiencies on the dynamics of capital structure of non-financial US firms. Since market volatility and market-based capital structure measurement are inversely related, fluctuations in equity valuations posed challenges to corporate manager’s target capital structure policies. Furthermore, the necessary rebalancing and speed of adjustment to target capital structure, induced by market volatilities, may vary among firms due to firm-specific characteristics, overall US economic conditions and global financing environment. There is an a posteriori substantiation in the extant literature, that the effect of financial efficiency on capital structure is antithetical to the effect of market volatility. This dichotomy between the effect of market risk and corporate financial efficiency on capital structure exposes a non-trivial managerial dilemma from a view that, corporate managers often have enormous influence on financial efficiency but a negligible influence on market volatility, at least in the short and medium term. In an attempt to understand this capital structure dynamics, this paper applied a portfolio approach by differentiating firms capital structure based on risk-return path-dependence , by assigning firms to portfolio groups, through an efficient combination of market volatility and financial efficiency. In both capital structure and partial adjustment models, the paper in addition to standard capital structure determinants, integrates domestic and global macroeconomic indicators, to account for the financing effect of economic interactions among US firms’, the US economy and the global economy. The paper shows that managers of relatively less risky and highly efficient firms revert to the desired capital structure relatively slower than their high risk- low efficient counterparts. Keywords Capital structure, Market Risk, Portfolio, Financial Efficiency, Dynamic Panel

Incentive Contracts, Market Risk, and Cost of Capital

AbstractShould incentive contracts expose the agent to market‐wide shocks? Counterintuitively, I show that market risk cannot be filtered out from the compensation and managed independently by the agent. Under plausible risk preferences, the principal should offer a contract in which performance pay increases following a favorable market shock. In the aggregate, however, the effect of market risk on individual contracts diversifies away and the agency problem does not directly affect the cost of capital. The analysis suggests caution in interpreting changes in cost of capital in terms of the stewardship role of accounting information.

Incentive Contracts, Market Risk, and Cost of Capital

Should incentive contracts expose the agent to market-wide shocks? Counter-intuitively, I show that market risk cannot be filtered out from the compensation and managed independently by the agent. Under plausible risk preferences, the principal should offer a contract in which performance pay increases following a favorable market shock. In the aggregate, however, the effect of market risk on individual contracts diversifies away and the agency problem does not directly affect the cost of capital. The analysis suggests caution in interpreting changes in cost of capital in terms of the stewardship role of accounting information.

Noise trading and stock returns: evidence from China

PurposeThe purpose of this paper is to analyze the trading behaviors of retail investors and investigate their impacts on stock returns.Design/methodology/approachAs retail investors are considered as the main noise traders in the capital market, using the trading records of Chinese retail investors from 2005 to 2009, the authors study their trading preferences and the correlation of their trades. Then, they use a multifactor model to test whether the co‐movement of stock returns could be explained by individual sentiment.FindingsThe authors' results show that the small‐cap stocks are obviously preferred by retail investors. Meanwhile, the net stock demands of retail investors are systematically correlated, even when the effect of market risk is excluded. In the perspective of the net stock demands, the authors use BSI to measure the individual sentiment, finding that individual sentiment plays an important role in the formation of the cross‐section of stock returns. However, the authors' results imply that BSI is a reverse indicator to predict the future returns, which implies that the trading behaviors of retail investors are irrational.Originality/valueConsistent with behavioral theory, the authors' findings support the viewpoint that stock returns could be affected by the systematic correlated trading of retail investors. To some extent, their findings highlight the need to know more details of individual investors' trading behaviors through which the fluctuations of asset prices can be better understood.

Private pensions and the financial crisis

The current economic and financial crisis has shaken confidence in funded pension systems in general and in defined contribution (DC) pension plans in particular. The crisis has highlighted the impact of market conditions on retirement savings accumulated in DC pension plans and the uncertainty as to whether those retirement savings may prove adequate to finance retirement – particularly for those close to retirement. The purpose of this paper is to provide recommendations on how to ensure adequate retirement income from DC pension plans. In this context, this paper addresses three main questions: 1) How much do people need to save? 2) How can the effects of market risk on DC pension plans be alleviated? 3) How can retirement income be protected during the payout phase? The analysis concludes that in order to deliver adequate retirement income from DC pension plans with a certain degree of certainty, there is a need for comprehensive measures which include: higher contributions; increasing the contribution period by postponing retirement; setting as default options relatively conservative investment policies including life-cycle strategies; and managing risk in the payout phase with inflationindexed life annuities.

Voluntary Disclosure of the Effects of Market Risk on Earnings

Voluntary Disclosure of the Effects of Market Risk on Earnings

Accounting for Contractual Contingency: Insights Into Oil and Gas Asset Market Risk Exposures

Market risk exposures of balance sheet asset values are becoming an increasingly important accounting issue. In oil and gas, oilfield exposures to oil prices are specific and contractual, presenting a contingency problem for standard setting bodies. In this paper we use 292 oilfield contracts to explore the effects of market risk on sector financial reporting. Asset disclosures do not distinguish between global variations in oilfield ownership terms, nor on market risk implications for the value of oilfield assets. We provide evidence that disclosures do not capture price sensitivities implicit in oilfield ownership contracts and propose refinements to capture market risk in financial reporting.

The Effect of Market Risk on Portfolio Diversification

The Effect of Market Risk on Portfolio Diversification