Financial World Research Articles

Editorial: Challenging issues in risk governance and control

The leitmotif of this fourth issue of the journal seems to revolve around the role of finance in the current context of climate change. Concerns about the disastrous effects of climate change affect many areas. The rapidity of climate change requires urgent action from governments, industries and businesses to build more resilient communities and reduce the impact of disasters. The most recent example is the disaster that is affecting Australia, with fires fueled by record temperatures and entrenched drought conditions. Coordinated national action is critical for managing the impacts of this phenomenon. Although the most immediate financial impact of catastrophic events regards the insurance sector, the whole world of finance is affected by these phenomena. In this context, areas of growing interest for scholars at the international level are sustainable finance, corporate social responsibility and insurance.

Earnings management in global background

Earnings management is a general term in accounting decisions that may affect the results of the financial statements. Financial statements represent the core of information is used not only by internal but also external entities. Their role is to provide a true picture of the financial situation and the performance of a particular business in an international environment. In practice, however, there may be opportunities to influence accounting information using a variety of methods and techniques, and as a result, the financial statements lose their function and misrepresent the accounting data, resulting in profit manipulation. Profit manipulation is also dealt with by the phenomenon of earnings management, which is a topical topic in the world of finance in the international environment. This is a very complex and multifaceted phenomenon occurring in companies, irrespective of their territory, area of business or size. Several profit models are used to measure and detect earnings management, whose detection capability varies. This paper focuses on the selection of profit models according to individual forms of earnings management and the assessment of variable profit models in the V4 countries.

Forecasting stock price index movement using a constrained deep neural network training algorithm

The prediction of stock index movement is considered a rather significant objective in the financial world, since a reasonably accurate prediction has the possibility of gaining profit in stock exchange, yielding high financial benefits and hedging against market risks. Undoubtedly, the area of financial analysis has been dramatically changed from a rather qualitative science to a more quantitative science which is also based on knowledge extraction from databases. During the last years, deep learning constitutes a significant prediction tool in analyzing and exploiting the knowledge acquired from financial data. In this paper, we propose a new Deep Neural Network (DNN) prediction model for forecasting stock exchange index movement. The proposed DNN is characterized by the application of conditions on the weights in the form of box-constraints, during the training process. The motivation for placing these constraints is focused on defining the weights in the trained network in more uniform way, by restricting them from taking large values in order for all inputs and neurons of the DNN to be efficiently exploited and explored. The training of the new DNN model is performed by a Weight-Constrained Deep Neural Network (WCDNN) training algorithm which exploits the numerical efficiency and very low memory requirements of the L-BFGS (Limited-memory Broyden-Fletcher-Goldfarb-Shanno) matrices together with a gradient-projection strategy for handling the bounds on the weights of the network. The performance evaluation carried out on three popular stock exchange indices, demonstrates the classification efficiency of the proposed algorithm.

Desktop Bots

Abstract Robotic process automation (RPA) that grew up in the financial world has begun to edge its way into engineering and manufacturing, for applications like change management, compliance, and bill of materials. This article delves deeper into the challenges of RPA and its implementation.

Digital Currency and Economic Crises: Helping States Respond

The current crisis, at the time of writing, has had a profound impact on the financial world, introducing the need for creative approaches to revitalizing the economy at the micro level as well as the macro level. In this informal analysis and design proposal, we describe how infrastructure for digital assets can serve as a useful monetary and fiscal policy tool and an enabler of existing tools in the future, particularly during crises, while aligning the trajectory of financial technology innovation toward a brighter future. We propose an approach to digital currency that would allow people without banking relationships to transact electronically and privately, including both internet purchases and point-of-sale purchases that are required to be cashless. We also propose an approach to digital currency that would allow for more efficient and transparent clearing and settlement, implementation of monetary and fiscal policy, and management of systemic risk. The digital currency could be implemented as central bank digital currency (CBDC), or it could be issued by the government and collateralized by public funds or Treasury assets. Our proposed architecture allows both manifestations and would be operated by banks and other money services businesses, operating within a framework overseen by government regulators. We argue that now is the time for action to undertake development of such a system, not only because of the current crisis but also in anticipation of future crises resulting from geopolitical risks, the continued globalization of the digital economy, and the changing value and risks that technology brings.

A multigroup study of continuance intention of mobile banking in China

Mobile banking has been penetrating into the life of more people and generating greater influence on the daily life and the financial world in an unprecedented way. In China, however, the continuance usage of mobile banking remains underperformed. This paper examines the differences of the continuance intention to use mobile banking across different segments (gender, age and education level) of the Chinese population using the integrated expectation confirmation model (ECM) and task-technology fit (TTF) model. The data was collected through the online questionnaire and was tested with partial least squares regression and multigroup analysis. Results suggest that task-technology fit and satisfaction are important predictors of the continuance intention to use mobile banking. Confirmation also indirectly affects the continuance intention through the mediating effect of satisfaction. Significant differences were identified in perceiving the impact of task-technology fit on continuance intention for the age and education level subsamples.

Financial world in the new reality

Рассмотрено: трансграничное движение капитала, цифровые валюты центральных банков, проблемы социально- экономического развития , связанные с благосостоянием населения, а также положительный опыт и противоречия цифровизации банковской сферы.

Işletmelerin Sermaye Yapıları ve Firma Değerleri Arasındaki İlişki - BIST Sınai Endeksinde Bir Uygulama1 (The Relationship Between Capital Structures and Company Values of Companies - An Application in the BIST Industrial Index)

Purpose: The existence and direction of the relationship between capital structure and firm value is one of the most debated issues in the financial world. This research was conducted to determine whether there is any relationship between the capital structure and firm value of the firms and, if any, the level and direction of this relationship. Design/methodology/approach: The sample of the study consisted of 111 companies whose data can be accessed from the companies operating in Borsa Istanbul (BIST XUSIN) Industrial Index. The data related to the companies subject to the research were taken from the official web addresses of Borsa Istanbul and the Public Lighting Platform and made ready for analysis by the researchers. Descriptive statistics, correlation analysis, panel unit root tests and panel regression analyzes were performed to achieve the aim of the study. Findings: As a result of the study, it was concluded that there was a positive correlation between the Active Profitability Ratio (AKO) and KVYK/TA and OZ/TA ratios, while a negative correlation was found between UVYK/TA and LNTB/OZ ratios. It has been concluded that there is a negative relationship between the return on equity (OKO) and the ratios of UVYK/TA, LNTB/OZ and TB/TA. It has been concluded that there is a positive correlation between the Profit Per Share (HBKO) ratio and the OZ/TA ratio, while there is a negative relationship between the KVYK/TA, UVYK/TA, LNTB/OZ and TB/TA ratios. Discussion: According to these results, it can be stated that capital structure ratios of firms affect the ratios representing firm values and established models give meaningful results. It has been determined that the use of debt in the capital structures of the firms included in the Borsa Istanbul Industrial Index adversely affects the firm value and the use of equity positively affects the firm value.

The Mad March for US Capital Markets: Impact of COVID-19 Pandemic on Dow Jones Industrial Average

Financial Markets, considered as backbone of a capitalist economy, when under pressure exogenously, is a cause of concern for both domestic and foreign investors, triggering various false alarms. When investors lose confidence in its structure, panic buying and selling kicks in, amplifying uncertainty into real economy. The stock markets of US, which has undergone one of the finest sophistications in history, witnessed the most horrific volatility due to COVID-19 pandemic, signifying a chaos created by the microscopic virus in financial world. Towards establishing the magnitude of panic sell off effect in stock markets, this paper uses formal event study analysis technique. In this study we examine the aftermath of first locally transmitted COVID-19 case in US, on Dow 30 and its constituent units, representing a unique industry. The empirical results indicate significantly negative cumulative abnormal returns, measuring magnitude of “blood-bath” on The Wall Street.

Green Investments: A Mini-Review

The purpose of this assignment is basically the familiarization of green investments which is the tool used in businesses and financial sustainable analysis. Green investment which is also known as the eco investment is such a form of socially responsible investing in which the investments are carried out in those companies which are proved helpful in producing the products that are environmentally friendly. These companies use new technology and basically earn profit in this way. With the apparentness of the environmental effect of industries, green investments took a central place not only in culture but in the financial world also. Most of the green investments are known as socially responsible investments and the socially responsible investments are known as green investments but these two are not mutually inclusive. Socially responsible investments mean to make an investment in the companies which fulfill specific ethical or moral criteria. It might include companies that have an interest in the environment. There are many sectors and areas which follow green investment. Green investment funds can be increased by firms and companies. They can also be increased by the individuals performing green investment (XM, 2019).

İLK KRİPTOPARA ARZLARI (ICOs): START-UP FİRMALARI ÜZERİNE KAPSAMLI BİR İNCELEME

In this study, the theoretical framework of the ICO concept, which is one of the newest and most discussed topics in the financial world, is examined. ICO meaning, basic characteristics of the ICO, the ICO process, ICO participants, its advantages and disadvantages, the determinant factors of success of the ICOs performed up to date, the risks waiting for the investors and the differences between IPO and ICO are comprehensively analyzed. All ICOs realized are examined comparatively and critical success factors are tried to be determined. The aim of this study is to make this subject better understood by market participants and to give insights to other following studies in the academic world

СТРАТЕГІЧНІ ПРІОРИТЕТИ РЕФОРМУВАННЯ МІЖНАРОДНОГО ВАЛЮТНОГО ФОНДУ ЯК ФУНКЦІОНАЛЬНОГО ІНСТИТУТУ МІЖНАРОДНИХ ФІНАНСОВИХ ВІДНОСИН

The article is devoted to the functioning of the International Monetary Fund in the status of an international financial cooperative, which forms its credit capital through official borrowings from member countries and the issuance of promissory notes on a bilateral basis. One of the effective tools for providing financial assistance to the IMF to overcome the effects of the global economic crisis was the organization's focus on providing member countries with stand-by loans and extended financing loans. The urgent need for the International Monetary Fund to make greater progress in building an integrated and objective system of supervisory control over the functioning of the global financial system led to the expansion of the IMF's functional competencies for regular monitoring of cross-border movement of capital resources. capital movements, diagnostics of the processes of accumulation of global foreign exchange reserves and their country structure, as well as the development and implementation in regulatory practice of a reliable and objective system of global liquidity ratios, taking into account the systemic impact of global financial instability. Reforming the International Monetary Fund in the format of building a global model of the international economic order should also include the implementation of a set of measures to ensure macroeconomic stability in the world. Special attention should be paid to such areas of reforming the International Monetary Fund as strengthening the openness of its internal paperwork and significantly simplifying the bureaucratic procedures for obtaining credit resources by states. The reform of the IMF in the context of the formation of a global model of the international financial order provides as a mandatory component and redistribution of spheres of influence of member countries within the organization in accordance with their competitive status in world finance and contribution to global economic development. It is about the objective need to strengthen the competitive position for the adoption by the International Monetary Fund of management decisions of developing countries and countries with emerging markets.

Diverging Roads: Theory-Based vs. Machine Learning-Implied Stock Risk Premia

We assess financial theory-based and machine learning methods to quantify stock risk premia and investigate the potential of hybrid strategies by comparing the quality of the respective excess return forecasts. In the low signal-to-noise environment of a one-month investment horizon, we recommend to rely on a theory-based strategy that exploits the information in current option prices, especially if the risk premium estimate is to be updated at a high frequency. At the one-year horizon, a random forest can improve on the theory-based method, provided that a sufficiently long training period is used. In an effort to connect the opposing philosophies, we identify the use of a random forest to account for the approximation errors of the theory-based approach towards measuring stock risk premia as a promising hybrid strategy. It combines the advantages of two diverging roads in the finance world.

A bibliometric overview of volatility

Price volatility is a matter of importance for making decisions in the finance world. The growing studies regarding volatility have focused on minimizing the risks through modeling, estimating and forecasting. This paper presents a bibliometric overview of the most important authors, institutions and countries that work on the topic. Additionally, a historical analysis of how the agents have interrelated is presented. For the purposes of the analysis and the design of tables and graphics, tools from the Web of Science Core Collection and the VOSviewer software were used. The results show the importance of volatility in the study of business economics and decision making.

ФОРМУВАННЯ ЕКОНОМІЧНОЇ КОМПЕТЕНТНОСТІ УЧНІВ ЛІЦЕЮ:ПРАКТИКУМ З ЕКОНОМІКИ, ФІНАНСОВОЇ ГРАМОТНОСТІ ТА ОСНОВПІДПРИЄМНИЦТВА ЗА ПРОГРАМОЮ «УЧЕНЬ ЛІЦЕЮ У СВІТІ ЕКОНОМІКИ, ФІНАНСІВ ТА ПІДПРИЄМНИЦТВА»

The paper highlights the problem of developing a textbook “Manual on Economics, Financial Literacy and Fundamentals of Entrepreneurship under the programme “Lyceum Student in the World of Economics, Finance and Entrepreneurship” on the basis of the Concept of Economic Education in Gymnasium and Lyceum. The conducted study takes into consideration the dynamics of updating trends in economic education both in Ukraine and in the world. The paper analyzes the information on scientific research regarding efficiency of school economic education as well as the requests of pupils, their parents and teachers; it also substantiates the need for contextual and competence-oriented approaches in shaping textbook content aimed at forming basic economic knowledge, rational economic thinking and entrepreneurship, responsible attitude to the consequences of their own economic behavior in the family, country, world among lyceum students. In the paper the analytical materials on the problem under investigation are processed, the dynamics of views, preferences and demands of society regarding economic education in general secondary education institutions are traced. The authors defined the scientific and methodological aspects of forming economic competence among lyceum students. The paper provides the basis for shaping the content of economically oriented teaching materials. Firstly, in education it seems important to shape appropriate economic skills among lyceum students that they will require in later life. Secondly, it is important in education to enhance the trust in different financial institutions and public policy, i.e. the citizen’s responsible attitude towards financial relations. Thirdly, it is important to encourage lyceum students to develop their entrepreneurship skills. The paper describes the manual content presented as a textbook. The problem of developing and compiling present-day textbooks attractive for students and teachers is of current interest. Tasks given in the manual presented as a textbook are aimed at preparing students for life in contemporary rapidly changing economic conditions and enable participants of the educational process to implement a cross-cutting content idea of “Entrepreneurship and Financial Literacy”.

The Inverted Parabola World of Classical Quantitative Finance: Non-Equilibrium and Non-Perturbative Finance Perspective

Classical quantitative finance models such as the Geometric Brownian Motion or its later extensions such as local or stochastic volatility models do not make sense when seen from a physics-based perspective, as they are all equivalent to a negative mass oscillator with a noise. This paper presents an alternative formulation based on insights from physics.

Trump’s populist contentment with Brexit

The campaign for Brexit, then its adoption, has been under scrutiny by a pleased-as-punch Donald Trump eager to witness the dawn of a new day for US-UK trade agreements. Promising better economic deals for both countries, Brexit also signified that the UK had finally succeeded in disposing of the European yoke and could now exercise her regained freedom. The nationalist ingredient in supporting Brexit has been fueled by “politics of anger”, which resonate with Trump’s populist rhetoric based on accusations against corrupt elites, citizens’ enemies and conspirators, open borders, multilateral agreements, and die-hard world finance. The resonance between the two nations is even stronger when paralleled with the personalities of both leaders who share in demagogy, bigotry, performance skills, impulsivity, and narcissism. These resemblances become instrumental for D. Trump in implementing his policies, especially when driven, like Boris Johnson, by the urgency of bringing jobs and past glories back. This angry patriotism, as well as the rejection of international institutions and the establishment presented as the villains responsible for Britain’s and America’s dysfunction are very disturbing to Trump’s detractors. This paper examines American perceptions of Brexit, supporters and detractors alike, as well as studying the ambiguous and ambivalent, yet inevitable and indispensable relationship between the UK and the USA.

A Study on the Derivatives Market in India

Derivatives market a significant role to play in a country's economic development. The study's objective is to investigate the effect on the underlying market volatility of financial derivatives (futures and options). Currently, financial derivatives have become increasingly popular and utmost frequently used in the world of finance. This has grown with an extraordinary speed all over the world that now it is called as the derivatives revolution. In India, the emergence and growth of the derivatives market is relatively more derivative. This article aims to study futures and options by considering a company derivative from Indian stock market. This paper aims at suggesting the best possible ways to investors to gain more profits in derivative markets.

Stock Price Prediction

Stock trading is a very crucial activity in the world of Finance and is a supporting structure for many companies. Predicting the future value of a stock is the main goal of stock price prediction project. In this paper, we have used machine learning algorithms to predict future stock prices of a company. Stock prediction by the stock brokers is mainly done using the time series or the technical and fundamental analysis but as these techniques are very unreliable and limited, we propose making use of intelligent techniques such as machine learning. Python is a programming language which can be used to implement machine learning algorithms with its numerous inbuilt libraries. We propose an approach that uses machine learning algorithms and will be trained on the historical stock data that is available and gain intelligence, later it uses the knowledge acquired for predicting the stock prices accurately. Random Forest Regression is one of the machine learning technique that is used for stock price prediction for small and large capitalizations also in different markets employing both up-to-minute and daily frequencies.

Frankfurt am Main as a Center of Formation of Financial Oligarchy

The article looks at the role of Frankfurt am Main as a financial centre and its role in the developing of financial dynasties . Frankfurt am Main had a considerable role in the rising of Jewish financial dynasties (Baruch, Belmont, Goldman, Goldschmidt, Oppenheimer, Rothschild, Schiff, Seligman, Stern, Erlanger) . The vital position in Frankfurt am Main had German financial dynasties (Betmann, Metzler and others) . The article emphases the history of less known families of the financiers . Some of these families keep essential roles in the world of finance . The information contained in the article shows the close relative connections between mentioned families of financiers .