Financial Market Efficiency Research Articles

Do News Reports and Google Searches Impact Bitcoin Prices? An Analysis of Granger Causality

Objective: to analyze the Granger causality relationship between the number of Bitcoin news articles, the number of Google searches related to the term "Bitcoin," and the price of the cryptocurrency. The study aims to understand how these variables influence each other using an econometric time series model. Theoretical framework: the paper is based on studies on financial market efficiency, cryptocurrencies, and Granger causality theory. It reviews research that explores the impact of media information and online searches on the price of financial assets, such as Bitcoin, while also discussing Bitcoin’s role as both a speculative asset and a transactional currency. Method: the construction of a time series with weekly data, from 2015 to 2018, covering Bitcoin price, the number of news articles, and Google searches. The Vector Autoregressive (VAR) model was used to conduct the Granger causality test and verify if there are causal relationships between these variables. Results and Discussion: the findings indicate a triple causality relationship among the studied variables. Bitcoin's price influences both the number of news articles and Google searches, and in turn, the articles and searches also influence Bitcoin's price. This suggests that increased interest and media coverage of Bitcoin drive its demand and price. Research implications: the research suggests that Bitcoin's price behavior is influenced not only by traditional economic factors but also by media information and the volume of online searches. This highlights the importance of informational factors in the cryptocurrency market and the influence of digital media on asset pricing. Originality/value: the study proposes integrating data from news articles and Google searches with Bitcoin price behavior, applying Granger causality analysis. Its contribution lies in demonstrating the importance of media in the dissemination and pricing of cryptocurrencies, providing a new perspective for the literature on digital assets and speculative behavior.

An analysis of optimal equilibrium in the carbon trading market - From a tripartite evolutionary game perspective

As the climate crisis intensifies, achieving the global consensus of carbon peaking and carbon neutrality has become imperative. Carbon trading is an important financial measure to address the environmental crisis, and the realization of the dual‑carbon goals requires the cooperation and joint efforts of all parties involved in the carbon emissions trading market. This study constructs a dynamic evolutionary game model involving enterprises, government, and financial institutions while considering consumers' influence. By solving for equilibrium points and conducting numerical simulations, we explore optimal strategy choices for each stakeholder. Our findings reveal that the success of enterprise low-carbon transition is contingent upon market dynamics and requires active cooperation from government, financial institutions, and the public. Furthermore, factors such as financial market efficiency and internal governance capacity significantly impact enterprises' transformation decisions by influencing low-carbon transition costs. Public feedback indirectly affects enterprise decisions through its influence on financial institutions' provision of green services. Additionally, gradual reduction of carbon quotas by government entities facilitates progress toward low-carbon transformation objectives.

Contribution to the Study of the Impact of IFRS on the Quality of Information and Financial Markets: Which Theories are Used?

The aim of this article is to examine the extent to which theories of financial market effi-ciency, agency and signaling can be used to study and understand financial phenomena, in particular conflicts of interest between managers and shareholders, and investor behavior in financial markets following the transition to International Financial Reporting Standards (IFRS).

Exploring the dynamic connections between oil price shocks and bond yields in developed nations: A TVP-SVAR-SV approach

This paper investigates the impact of oil price changes on bond yields across nine developed nations, focusing on how demand, supply, and oil-specific demand shocks influence bond spreads. Using a Time-Varying Parameter Structural Vector Autoregression with Stochastic Volatility (TVP-SVAR-SV) model, we find that bond yields are short-term responsive to oil price fluctuations, indicating efficient domestic bond markets. However, we observe distinct country-specific reactions, particularly in the US and the UK. In the US, supply shocks cause temporary declines in bond yields, while demand shocks reduce bond yields in both countries. Oil-specific demand shocks have cyclical impacts. Unlike the global financial crisis, the COVID-19 pandemic uniquely influenced bond yields, with minimal short-term effects in Canada, France, Spain, and the US post-COVID-19, contrasting with the severe impacts during the financial crisis. These findings suggest investors should consider the varying impact of oil shocks on bond yields across countries, and policymakers should monitor and address the potential implications of oil price fluctuations for financial stability and market efficiency.

Environmental impact of financial Market's development in Australia

Enhancing environmental quality has become one of the most commonly discussed topics in the modern world, particularly in response to the challenges posed by the increasing threats to climate change. The financial system is acknowledged as a crucial factor in achieving environmental quality by facilitating the flow of financial resources. This study aims to examine the impact of a unique aspect of the financial system—financial market development—on environmental quality in Australia. What sets this study apart from existing works is its comprehensive approach, capturing broader measures of financial market development, including financial market depth, access, efficiency, and stability. By employing the Autoregressive Distributive Lag (ARDL) model over the period from 1983 to 2021, our research demonstrates a positive impact of market-based financial development on Australia's environmental quality by reducing greenhouse gas emissions in the long run. Specifically, an opposing impact of financial market development on environmental quality is evident in the short run. Our findings highlight that financial market development degrades environmental quality in the short run by contributing to increased greenhouse gas emissions, which further emphasizes the importance of integrating both the positive and negative effects of financial market development in policymaking, particularly in the context of achieving Australia's environmental targets.

NAVIGATING FINANCIAL DECISIONS: A COMPREHENSIVE REVIEW OF THEORIES, BEHAVIOURS, AND INNOVATIONS

This literature review synthesizes seminal and contemporary research on financial decision-making, emphasizing theoretical frameworks and empirical findings. Fama's (1970) Efficient Market Hypothesis sets the foundation for understanding market behavior, while Kahneman and Tversky's (1979) Prospect Theory introduces psychological influences, highlighting biases such as loss aversion (Tversky & Kahneman, 1991). Jensen and Meckling (1976) provide insights into agency theory, exploring the implications of managerial behavior on firm performance. The influence of gender on investment strategies is examined by Barber and Odean (2001), illustrating the role of overconfidence. Additionally, the impact of social interactions on financial choices is explored by Bursztyn et al. (2014). Financial literacy, addressed by Lusardi and Mitchell (2014), underscores the importance of informed decision-making in personal finance. The review also highlights the integration of behavioral insights in corporate finance, particularly in capital structure decisions (Myers, 1984) and risk management practices (Hull, 2012). Overall, the collected works illustrate a rich tapestry of factors influencing financial decisions, blending economic theory with behavioral insights, and emphasizing the necessity for ongoing research in this dynamic field. KEYWORDS: Financial Decision-Making, Behavioral Finance, Prospect Theory, Market Efficiency, Agency Theory, Overconfidence, Financial Literacy, Risk Management, Capital Structure and Social Interactions.

Exploring the impact of religious diversity on market performance and financial growth in developed economies

This paper investigates the relationship between religious diversity and financial market efficiency through an empirical analysis spanning multiple (50) countries and time periods. Utilizing a comprehensive dataset compiled from various sources, including religious demographics and financial market indicators, we employ advanced econometric techniques to examine the impact of religious diversity on market efficiency. Our findings suggest a nuanced relationship between religious diversity and financial market dynamics, with significant implications for investors, policymakers, and societal stakeholders. The analysis reveals that regions characterized by higher religious diversity tend to exhibit lower levels of market efficiency, as measured by volatility, liquidity, and price informativeness. Furthermore, our results indicate that religious diversity and market efficiency vary across religious denominations and geographical regions. Our research's implications extend beyond finance, offering insights into the broader societal implications of religious diversity and its impact on economic outcomes.

THE IMPACT MODEL OF INTEREST RATE LIBERALIZATION REFORM ON THE PROFITABILITY OF STATE-OWNED COMMERCIAL BANKS: A CASE STUDY OF BANK C OF CHINA

This paper explores the definition and development of interest rate marketization in China and its impact on the profitability of state-owned commercial banks. The reform, characterized by the People's Bank of China's gradual easing of interest rate controls and expansion of the benchmark interest rate's floating range, enhanced financial market flexibility and efficiency but challenged traditional banking profit models based on interest margins. Through qualitative case studies and thematic analysis of the Bank C (China), the study finds that Bank C effectively mitigated these challenges by optimizing asset-liability management, adjusting asset and liability structures, and employing proactive risk management. These measures improved its investment returns and profitability. Additionally, Bank C’s adoption of countercyclical strategies and advancements in digital transformation and process automation helped sustain its profit model. The research concludes that Bank C's strategic adjustments enhanced its profitability and competitive edge, offering insights for other banks in similar market conditions and aiding predictions of financial market trends.

The Impact of Blockchain Technology on Financial Markets and Its Future Trends: An Economic Perspective Based on Data Analysis

Based on the economic perspective of data analysis, this paper deeply discusses the impact of blockchain technology on the financial market and its future trend. By using econometrics, we systematically analyze how blockchain technology can change the operation mechanism of financial markets, improve transaction efficiency, reduce transaction costs, and enhance the security and transparency of financial markets. The study has found that the decentralized nature of blockchain technology can help to break down the barriers of the traditional financial market and promote the popularization and inclusiveness of financial services. At the same time, the automatic execution function of smart contracts simplifies the process of financial transactions and reduces the risk of human intervention and fraud. In addition, the blockchain technology has also enhanced the trust mechanism of the financial markets by improving the security and traceability of the data. In terms of econometric analysis, we use a large amount of financial data to empirically test the impact of blockchain technology on the performance of the financial market by building regression models, time series analysis and other methods. The results show that there is a significant positive correlation between the application of blockchain technology and financial market efficiency, liquidity and stability. Looking into the future, with the continuous innovation and improvement of blockchain technology, its application in the financial market will be more extensive and deeper. On the one hand, blockchain technology is expected to promote the further digitalization and intelligence of the financial market, and improve the convenience and personalization of financial services. On the other hand, blockchain technology will also promote the cross-border integration and innovation of the financial market, and inject new vitality into the global economic development.

Is there more to asset price linkages in China than meets the eye: Cross-asset momentum and the role of hybrid funds

Within publicly offered funds, hybrid funds combining stocks and bonds offer investors returns while mitigating risks through capital flows between these markets. Our study, analyzing China's financial market data from 2006 to 2022, uncovers a cross-asset momentum relationship between stocks and bonds. Portfolios leveraging cross-asset momentum demonstrate excess returns unexplained by other asset pricing factors. Our analysis highlights the intermediary role of hybrid funds in this cross-asset momentum transmission mechanism. Funds with more flexible asset allocation ratios play a more crucial intermediary role. These insights hold significant implications for investors aiming to optimize asset allocation across diverse markets and for policymakers aiming to bolster China's financial market efficiency.

Economic policy uncertainty and financial system efficiency

Economic policy uncertainty (EPU) adversely affects financial system functioning with potentially critical repercussions for economies and corporations worldwide. Financial system efficiency (FSE) has a vital influence on fostering optimal economic growth and development; however, the impact of EPU on FSE remains under-explored. This study investigates the effect of EPU on FSE along with its components financial institution efficiency (FIE) and financial market efficiency (FME). Using data from 22 countries over a 20-year period (2002–2021), our analysis reveals a significant negative effect of EPU on FSE, FIE and FME. Notably, our split-sample analysis highlights the accentuated adverse effects of EPU in high-EPU regimes, emphasising the importance of vigilance during periods of elevated policy uncertainty. We conduct a series of sensitivity tests, including alternative measures of EPU, FSE, FIE and FME, and apply two-stage least squares and two-step dynamic system generalised method of moments estimators and introduce additional control variables. These tests consistently reaffirm the core conclusions of our study. Finally, we discuss the implications of our findings for policymakers.

Research on Empowering the Development of Green Finance in the Yangtze River Delta Economic Belt with Digital Economy

This article constructs a model of the development trend of green finance under the influence of various factors such as big data and the Internet of Things through literature review and personal practice. Based on the pattern of domestic "dual carbon" environment driving the vigorous development of digital economy, it solves the problem of the effect differences under traditional financial system, credit constraint mechanism, and financial supervision on the development of green finance. At present, green finance in the Chinese market is only at a relatively large scale, but it has broad development prospects and can further break through with the development of the digital economy. Therefore, exploring it, finding the right direction and reasonable development strategies can improve the quality and efficiency of China's financial market.

Financial development and central bank bilateral currency swaps: Is there trade effect?

Purpose ― This paper aims to empirically investigate the impact of currency swaps on international trade, given China's differential level of financial development and its currency swap partners. Methods ― The study employes an empirical structural gravity model using datasets encompassing financial development, trade, and intuitive gravity equation variables for 27 countries from 1980 to 2013. The level of financial development and swaps was captured by the interaction term of the disaggregated measure of financial development, such as access, depth, and efficiency, each interacting with currency swaps.Findings ― The findings suggest that currency swaps are essential for trade and exhibit a large trade effect, especially for countries with relatively low levels of financial development. The paper substantiates empirical evidence indicating disparities in financial development across countries, and such differences are important in determining trade patterns. Implication ― Strong financial systems promote trade in advanced economies, whereas the opposite holds true for developing countries. The examination of the influence of financial systems on trade through empirical tests remains important on the research agenda of policymakers and researchers, especially those looking at industry-level import and export data.Originality ― The study delves into the nexus between financial development and trade within the framework of the Central Bank bilateral currency swap network by highlighting the role of financial institutions and market size (depth), activity (access), and efficiency. In addition, it addresses the drawbacks of previous empirical research that largely focuses on the private credit-to-GDP ratio as a key proxy for financial development.

PSYCHOLOGICAL FACTORS AFFECTING INVESTORS DECISION MAKING

The paper investigates the psychological factors influencing investors' decision-making processes, with a particular focus on how biases affect risk tolerance and investment decisions. Utilizing a comprehensive methodology that includes ANOVA, regression, and correlational analysis, this study examines the effects of biases such as overconfidence, anchoring, herd behaviour, regret aversion and optimism biases on investment decisions. The research findings reveal significant correlations between these psychological biases and investor behaviour, highlighting their impact on risk assessment and decision-making strategies. To ensure the reliability of the research tools, a Cronbach’s Alpha test was conducted, confirming the consistency of the instruments used. The study's results challenge the traditional notion that states that investment decisions are driven solely by logical reasoning and underscoring the substantial influence of emotional and cognitive biases. These insights contribute to the field of behavioural finance by enhancing understanding of the psychological underpinnings in investment decision-making and suggesting practical applications for financial education and advisory services. The paper advocates for the inclusion of psychological bias recognition in investor education, proposing that such an approach can significantly improve decision-making and lead to better investment outcomes. The implications of this research extend beyond individual investors to financial advisors and policymakers, offering them a foundation to develop strategies and regulations that help mitigate bias-driven investment mistakes, ultimately fostering greater financial well-being and market efficiency. Keywords: Investor Decision Making, Risk Tolerance, ANOVA, Regression Analysis, Correlational Analysis, Overconfidence Bias, Anchoring Bias, Herd Behaviour Bias, Regret Aversion Bias, Optimism Bias, Behavioural Finance.

Analysis of Financial Market Efficiency

This comprehensive study delves into the intricacies of financial market efficiency, anchored around the Efficient Market Hypothesis (EMH) as postulated by Eugene Fama. It scrutinizes the hypothesis across its weak, semi-strong, and strong forms, incorporating a broad spectrum of empirical evidence and theoretical discourse. In light of recent advancements in technology and the increasing complexity of global financial markets, this paper also explores the impact of high-frequency trading, artificial intelligence, and blockchain technology on market efficiency. Through a meticulous examination of both supportive and critical perspectives on the EMH, the analysis extends to consider the implications of market efficiency on investment strategies, portfolio management, and regulatory frameworks. By juxtaposing traditional financial theories with contemporary market phenomena, this study seeks to offer a nuanced understanding of the dynamic interplay between market efficiency, technological innovation, and investor behavior. The ultimate objective is to provide a balanced viewpoint that acknowledges the merits of the EMH while also recognizing the evolving challenges and opportunities within global financial markets.

Cross-asset momentum and the hybrid fund transmission mechanism in China's stock and bond markets.

The allocation of assets across different markets is a crucial element of investment strategy. In this regard, stocks and bonds are two significant assets that form the backbone of multi-asset allocation. Among publicly offered funds (The publicly offered funds in China correspond to the mutual funds in the United States, with different names and details in terms of legal form and sales channels), the stock-bond hybrid fund gives investors a return while minimizing the risk through capital flow between the stock and bond markets. Our research on China's financial market data from 2006 to 2022 reveals a cross-asset momentum between the stock and bond markets. We find that the momentum in the stock market negatively influences the bond market's return, while the momentum in the bond market positively influences the stock market's return. Portfolios that exploit cross-asset momentum have excess returns that other asset pricing factors cannot explain. Our analysis reveals that hybrid funds play an intermediary role in the transmission mechanism of cross-asset momentum. We observe that the more flexible the asset allocation ratio of the fund, the more crucial the intermediary role played by the fund. Hence, encouraging the development of hybrid funds and relaxing restrictions on asset allocation ratios could improve liquidity and pricing efficiency. These findings have significant implications for investors seeking to optimize their asset allocation across different markets and for policymakers seeking to enhance the efficiency of China's financial market.

Segmented multifractal detrended fluctuation analysis for assessing inefficiency in North African stock markets

This study employs segmented multifractal analysis to evaluate the efficiency of key financial markets in North Africa. The proposed method, an adapted version of Multifractal Detrended Fluctuation Analysis (MF-DFA), integrates a wavelet-based change-point detection to identify and separate the two most dynamically changing phases. Subsequent multifractal measurements are then conducted for each of these identified intervals. Focusing on three equity indices—the Egyptian Exchange Index (EGX30), Moroccan All Shares Index (MASI), and Tunisian Stock Index (Tunindex)–that collectively represent the North African financial and economic landscape, empirical results reveal significant asymmetric multifractality, especially notable in the two Maghreban indices. These findings prompt inquiries into the influence of major events on financial market efficiency. Segmented multifractal analysis introduces a novel approach to explore the dynamics and resilience of these sectors, contributing to a more profound understanding of their complex behaviors and responses to various stimuli.

A Comprehensive Approach to Bankruptcy Risk Evaluation in the Financial Industry

The study presents a comprehensive approach to examining the potential risk of bankruptcies in financial sector organizations. This investigation explores 20 financial sector entities and evaluates their fiscal history from 2000 to 2018. The developed model assesses the chance of these companies going bankrupt by analyzing indicators like liquidity, profitability, debt composition, and operational effectiveness. These metrics are contrasted to regulatory requirements and assessed as having low, moderate, or elevated risk repercussions, ultimately contributing to an overall threat rating. Additionally, the model has a unique algorithm that compensates for excessive debt levels, strengthening the reliability of the risk appraisal grade. This straightforward instrument illustrates the demand to incorporate a variety of financial health indicators. According to the findings, excessive amounts of debt have a detrimental influence on profitability, leading to decreased stock returns and a greater probability of bankruptcy. These findings have practical implications for investors and stakeholders, providing insightful information to help inform decision-making, especially during periods of economic unpredictability such as pandemics. Furthermore, they encourage the enhancement of financial market efficiency.

An Evolutionary Model of Financial Market Efficiency with Costly Information

An Evolutionary Model of Financial Market Efficiency with Costly Information

Effect of inward foreign direct investment on entrepreneurship productivity in emerging markets

This study explores the effect of inward foreign direct investment (FDI) on entrepreneurship productivity, which reflects the quality of entrepreneurship and is measured through the ratio of opportunity-to-necessity entrepreneurship, in emerging markets. Using data across 67 emerging markets during 2002 and 2018, we find that inward FDI has a positive effect on entrepreneurship productivity and this effect is positively moderated by both financial market efficiency and labor market flexibility. However, these effects are not found in developed economies. This study not only enriches our knowledge of the antecedents of entrepreneurship productivity and the value of inward FDI, but also helps explain why some emerging markets benefit to a greater extent from inward FDI than others. Moreover, it provides guidance for emerging market governments taking advantage of inward FDI to improve entrepreneurship productivity.