Global Capital Market Research Articles

The Influence of Financial and Industrial Policy on Harmonization of European and Asian Integration Processes

JEL Classification Codes: E42, E52, F00, G38. 1. Introduction The aim of this study is to determine the characteristics of financial and industrial policies implemented in context of Western sanctions, as well as existing demographic, infrastructural, and institutional limitations, on the development of Russian economy. Continued dependence on global oil and gas prices, low diversification of Russian economy, and other factors limit its potential growth. Historical experience of Russia and other countries of the Eurasian Economic Union suggest that overcoming these constraints requires significant time and effort. Therefore it is necessary to develop effective anti-crisis financial and industrial policies that would stimulate growth of Russian economy, which is the principal driving force behind the formation and integration of the Eurasian Economic Space. Economic sanctions imposed by the European Union and the USA have limited the access of Russian companies and commercial banks to capital and technologies required to implement their investment projects, and thus have creating obstacles to the sustained growth of Russian economy. The uncertainty of prospects for Russia's economic growth and the harmful effects of prolonged recession require the identification of specific factors limiting the development of integration processes in the globalizing economy. In order to improve Russia's economic situation, the investment scenario of economic development must be implemented, wherein price increases for certain products might lead to a relative reduction in prices in the economy as a whole. 2. Theoretical, Informational, Empirical, and Methodological Grounds of the Research This study rests on the theoretical framework formed by conceptual approaches to the market economy theory, institutional design, financial economics, modern concepts of the economic growth theory and the new industrialization, and other factors that determine the direction of contemporary industrial policy, which forms in the context of economic sanctions based on an integrated system of risk management and import substitution programs (Arslan-Ayaydin et al., 2014; Averina et al., 2016; Boldeanu and Tache, 2016; Carstina et al., 2015; Tcvetkov et al., 2015; Theriou, 2015; Budik and Schlossberger, 2015; Thalassinos et al., 2015). In order for Russian economy to grow, it needs hard currency and technological resources required for the development and implementation of investment projects. Sanctions imposed on Russia restrict its ability to raise funds in global financial markets in order to implement its energy projects, and thus they increase the risk of prolonged economic recession. Economic and technological sanctions imposed on Russia by the Western countries have limited the access of Russian companies and commercial banks to the global capital market, and thus their ability to borrow funds and attract investments. Prolongation and extension of these sanctions by the European Union and the USA would certainly limit Russia's economic growth and decreases its financial stability. Despite certain volatility in the global financial market caused by the United Kingdom's decision to leave the European Union (Brexit) following the referendum held on June 23, 2016, the current state of the world economy has not deteriorated. The pace of economic growth in major developed economies has remained stable, and in developing countries, including the Eurasian Economic Union, it has not decreased significantly (Rupeika-Apoga and Nedovis, 2015; Liapis and Thalassinos, 2013; Medvedeva et cd., 2015; Allegret et cd., 2016; Sharma, 2014; Salimova and Makolov, 2016; Sibirskayaeta]., 2016). Authors of this study evaluate and verify the factors affecting Russia's economic growth, which in 2016 demonstrated better dynamics than in 2014. Naturally, the prospects for economic growth could be positively influenced by increasing oil prices; however the forecasts suggest $50 per barrel at best. …

From Confrontation to Cooperation: The London Debt Agreement of 1953 and Later Debt Crises

From Confrontation to Cooperation: The London Debt Agreement of 1953 and Later Debt Crises The London Debt Agreement of 27 February 1953 managed to solve the complex problem of German foreign debt of the pre- and post-war periods. The initiative for an international debt conference came from the Allies. But Germany also had a vested interest in regulating its debt, so as to be granted access to the global capital market once more. Contrary to all prior concerns, the settlement was finalised without a hitch. Most of the obligations were even paid back ahead of time. Since the 1990s public interest in the Agreement has been reignited. It has been repeatedly proposed as a solution to contemporary debt crises. At first, the London settlement was considered as a potential answer to debt crises in the Third World. One-World activists demanded that the countries in question should be relieved of a large part of their debt in the spirit of London 1953. It is frequently overlooked that the London Agreement did not specify a cut in capital for private pre-war debt, but instead a modification of interest and duration periods. Even in the current debt crisis, which originated in 2010, the London Agreement is frequently cited as a possible solution. The German government is often criticised in the foreign press for its uncompromising attitude on debt relief, especially towards weaker members of the Eurozone, and is called on to remember its recent history. When this happens, however, the special historic circumstances of the 1950s are usually not taken into account. Greece and other debtor countries, as part of the Eurozone, no longer have control over a national currency. The crisis of one country always impacts the community of the Eurozone as a whole. In light of this, it is rather misleading to take the London Agreement as a blueprint for the solution of contemporary debt crises. However, the discussion in the international press continues on whether the London Debt Agreement can serve as a model in the present crisis.

Globalisation and inequality in a dynamic economy: an axiomatic analysis of unequal exchange

An axiomatic analysis of the concept of unequal exchange (UE) between countries is developed in a dynamic general equilibrium model that generalises John Roemer’s (Central Planning and the Soviet Economy, MIT Press, Cambridge, 1983) economy with a global capital market. The class of UE definitions that satisfy three fundamental properties—including a correspondence between wealth, class and UE exploitation status—is completely characterised. It is shown that this class is nonempty and a definition of UE exploitation between countries is proposed, which is theoretically robust and firmly anchored to empirically observable data. The full class and UE exploitation structure of the international economy is derived in equilibrium.

Are Country and Size Risks Priced in the Brazilian Stock Market?

Abstract When estimating a firm's cost of equity for valuation and other purposes in emerging markets without (or with only partial) capital market integration, many practitioners include a premium for country risk. In principle, the inclusion of such a risk factor would be justified if the particular country of interest was not sufficiently integrated into the global capital market. Initially, the paper measures and tests the degree of integration for the Brazilian market and does not reject the hypothesis of integration. The paper then tests directly the relevance of country risk premium in individual stocks' expected returns in the Brazilian market. Monthly data for the stocks of 57 of the most actively traded, non-financial firms, over the 2004 to 2014 period are used, using EMBI (Emerging Markets Bond Index) as a proxy for country risk, and this is found not to be significant. Finally, a premium for the size factor, also commonly used by practitioners, is also tested. Although it is found to be significant, the premium is negative, in contrast with current practice, which entails the addition of a positive premium to the required returns on small stocks. The inclusion of both a country risk and a size premium, in addition to the market portfolio risk premium, corresponds to the use of the Goldman Sachs model, as proposed by Mariscal and Lee (1993).

Research on Strategies of Stock Index Futures Transaction Based on LMS Linear Regression

In recent years, stock index futures has developed into an important financial derivative in the global capital market and provided an indispensable investment and hedging tool for investors. This paper is mainly studying the low frequency transaction of stock index futures. Firstly, it conducts data cleaning to the stock index futures data and has an interpolation calculation to the missing values. Afterwards, it judges the market information in the short period and achieves the purpose of gaining profits through the basis. Furthermore, the time and the price difference are used as the key factors for establishing the quantitative model of gaining profits. Through lease square regression and inventory analysis technology, it completes the whole transaction process with several actions such as judging the open position time, transaction direction, reverse position closing time and yield accounting. Finally, as to the regression testing of the model, it detects the expression of the strategy through annual earnings, maximum drawback, transaction frequency, Sharpe ratio, variety commonality and cycle commonality. In the end, it conducts scientific analysis to the approaches used in the model and discusses the advantages and disadvantages of the model, thus providing some optimizing strategies in considering the improvement direction in practical application.

Strengthening Domestic Corporate Activity in Global Capital Markets: A Canadian Perspective on South Africa's Corporate Governance

As a Canadian corporate law scholar who recently had the opportunity to visit South Africa, I was humbled by both the profound challenges and the immutable positive spirit of the South African people when it comes to thinking about their economic and social future. Hence while this paper is a reflective discussion on the kinds of challenges that exist and the strategies that could be deployed to enhance corporate governance in South Africa, it must be emphasized at the outset that it is for Sub-Saharan African nations to develop their own governance models. They are best positioned to adopt strategies that align with their social, economic and political goals, and it is not for the West to impose Anglo-American conceptions of corporate and securities laws on developing nations. While there are lessons, both positive and negative, from the North American governance experience, self-determination of optimal governance strategies for emerging economies will allow them to take account of both domestic needs and global capital markets. This paper is divided into four parts. The first part sets a context for the discussion, including an overview of the corporate law regime in South Africa and more generally, the challenges faced by Sub-Saharan Africa in terms of economic development. Corporate governance cannot be discussed without at least some appreciation of the challenges posed by foreign direct investment, the level of debt of these nations and broader development concerns. Much of the wealth of Sub-Saharan Africa has been mortgaged previously, creating enormous barriers to becoming independent in their economic policy choices. Part II then sets out a framework for thinking about corporate governance in Sub-Saharan Africa, briefly analyzing both shareholder wealth maximization and stakeholder models of governance. Part III shifts into a more specific discussion of corporate governance developments in South Africa. In this respect, South Africa shares much in common with Canada in terms of its capital structure, corporate law and challenges of being a host nation for many multinational enterprises (MNEs) headquartered elsewhere. The King II Report on corporate governance is examined in terms of its influence on shaping corporate governance policy in South Africa. A more fulsome conception of corporate governance for South Africa includes empowerment, equity and the inclusion of African value systems. Finally, Part IV looks forward, examining the possible benefits and limits of socially responsible investing through the new Johannesburg Stock Exchange SRI Index. It also briefly discusses areas of further research that may provide assistance in enhancing domestic corporate activity in South Africa.

The Impact of Isak 29 on the Value Relevance of Accounting Information (Empirical Study on Mining Companies Listed on the Indonesia Stock Exchange 2013-2015) Elvian Galang Prabuwoso1, Bambang

The Impact of Isak 29 on the Value Relevance of Accounting Information (Empirical Study on Mining Companies Listed on the Indonesia Stock Exchange 2013-2015) Elvian Galang Prabuwoso1, Bambang Setyobudi Irianto, Laeli Budiarti Abstract The purpose of this study is to examine whether ISAK 29 has an impact on the value relevance of accounting information of mining companies listed on the Indonesia Stock Exchange. This study attempted to reveal market reaction to accounting standard policies changes, acertainaccounting numbers can reflect the information that investors use in assessing the value of corporate equity. Reduction phenomenon in market capitalization and stock index of mining sector coincided when ISAK 29 start to be effective, indicate the negative reaction to ISAK 29 implementation. This phenomenon is contrast with DSAK's goal of adopting IFRS, which is to improve the functioning of the global capital market by providing relevant, more comparable and high-quality information to investors. The population used in this study is mining company listed on the Indonesia Stock Exchange in 2013 and 2015. Total mining company listed on the Indonesia Stock Exchange is 41 companies. Sampling method to select the sample in this research is purposive sampling. The total sample of this study is 32 mining companies for each year in 2013 and 2015. This study used price test with valuation model, the results showed an increase in adjusted R2, indicate that the implementation of ISAK 29 in Indonesia has an effect of increasing the value relevance of accounting information. Therefore, there is an increase in the value relevance of accounting information of mining companies in Indonesia after implementation of ISAK 29. Chow test result showed that the F-stat value is greater than F-table, the test results indicate a structural changes of the valuation model that used to determine the value relevance of accounting information after the implementation of ISAK 29. In conclusion, implementation of ISAK 29 effected the structural changes in the form of value relevance differences. Full Text: PDF DOI: 10.15640/ijat.v5n2a4

Международные финансовые институты и вызовы многополярности

The world is changing, moving towards multi-polarity. However, despite the explicit shifting of the center of economic gravity from the West to the East, the dominance of the West in establishing the rules of conduct in the global economy and global finance remain virtually immutable. The author argues that the widely-discussed reform of the IMF quota and governance has not led to a significant strengthening of the role of the most dynamically developing emerging economies in the Fund’s decision-making. Regional economic players (such as the BRICS) have been actively involved in the international division of labor. However, the existence of institutional financial monopolies hinders the redistribution of global value added. Armed with the advanced information technologies and financial innovations, the leaders of financial globalization are redirecting scarce global resources in favor of the world-systemic core. The study is based on comparative methods and system analysis and aims to provide a comprehensive view on the way of involvement of global financial institutions in the control of the processes of financial globalization. US dominance in international financial institutions contribute to the further advancement of the global role of dollar as reserve currency of central banks, the currency of international settlements, deposits, loans and investments. It’s shown that the implementation of financial globalization is strongly correlated with the concept of the «center-periphery» model, on which the functioning of the global capital market is dependent. The features of the modern structure of the global currency market are summarized. The article reveals some legal aspects of global governance, in particular the role of the Anglo-American law in the global economy and global finance. It is concluded that for full participation of emerging markets, particularly the BRICS countries, in the processes of globalization, it is necessary to create a parallel financial system, aimed at the development of the real sector of the economy, which would be independent of the rules that have been established within existing system of international financial institutions.

Zmiana pozycji korporacji transnarodowych w gospodarce światowej – implikacje dla międzynarodowych rynków finansowych

W artykule przedstawiono ewolucję korporacji transnarodowych i konsekwencje ich rosnącej roli w gospodarce światowej. Podjęto próbę oceny wpływu tych zmian na globalne przepływy kapitału oraz konsekwencje tego faktu dla międzynarodowych rynków finansowych. Artykuł składa się z trzech części. Część pierwsza – ewolucja korporacji transnarodowych jako podstawa uzyskania silnej pozycji w gospodarce światowej. Część drugiej – analiza potencjału najpotężniejszych korporacji transnarodowych na tle PKB państw oraz wartości globalnego rynku kapitałowego. Część trzecia – próba oceny wpływu korporacji na międzynarodowe przepływy kapitału i funkcjonowanie rynków finansowych.

Understanding bilateral exchange rate risks

We apply the autoregressive conditional jump intensity (ARJI) model to weekly bilateral exchange rate returns of 31 countries and examine the determinants of bilateral exchange rate risks over the period 2001–2013. Consistent with the balance sheet effects in the open economy literature, we find that bilateral exchange rate risks are significantly reduced by external financial liabilities, above and beyond the standard optimal currency area (OCA) factors, and the development of domestic financial sectors will attenuate this effect. Subsample analysis reveals that developed countries also face credit constraints in the global capital market and the negative effects of external liabilities on bilateral exchange rate risks are increasingly pronounced in countries facing more credit constraints.

Enhancing the Transparency of Sovereign Wealth Funds: From the Middle East to China

Sovereign wealth funds, as an active participant in the global capital market, have attracted increasingly more attention from both academicians and practitioners. The opacity of the funds is one o...

Could the impaired intention of ethical investment be recovered?

AbstractThe environmental pollution caused by Advanced Semiconductor Engineering in October 2013 in Taiwan highlighted the fact that foreign investors tend to support the classical economic ideas of arbitrage and shareholder wealth maximization, which is in conflict with the fact that institutional investors in the current global capital market lean towards the stakeholder theory in ethical investments. Will local investors’ decision-making also be influenced by differences in the perceived ethics of negative environmental corporate social responsibility (ECSR)? Compared to the remedial measures implemented by British Petroleum for the 2010 Deepwater Horizon oil spill, Advanced Semiconductor Engineering, another international corporation, decided to not respond to any news regarding the toxic wastewater incident. In contrast, Advanced Semiconductor Engineering only made clearer promises after extreme public pressure. This study investigated whether remedial measures for negative ECSR are an important factor influencing investors’ decisions. The purpose is to clarify the interactions among perceived moral intensity of negative ECSR, the implementation of remedial measures, and the intention of ethical investment. An experimental design was employed to test the hypotheses. The results indicated that perceived moral intensity has a significant negative impact on the intention of ethical investment. The implementation of remedial measures for negative ECSR affects investors’ intent to invest. Finally, positive ECSR remedial measures also serve as a key moderating variable in the relationship between perceived moral intensity and the intention of ethical investment. This study clarified whether the provision of remedial mechanisms can effectively recover or maintain investor investment intent when companies experience negative ECSR.

ТЕНДЕНЦИИ РАЗВИТИЯ ГЛОБАЛЬНОГО РЫНКА ВЕНЧУРНОГО ФИНАНСИРОВАНИЯ: СРАВНИТЕЛЬНЫЙ АНАЛИЗ

The purpose of the paper is to explore of the global venture capital market and to reveal of its development trends. Methodology. To achieve this goal used methods: statistical analysis, forecasting method autoregression model, the calculation of the coefficient of variation, Spearman rank correlation coefficient and linear Pearson correlation coefficient. Results. The analysis of the development of the global venture capital market for the years 2007-2015 executed. The coefficients of variation of the volume of venture capital investment and the number of venture capital deals are designed. According to the calculations, variations in the volume of venture capital investment rate is 11.8%, which is almost 2.1 times higher than the value of the coefficient of variation in the number of venture capital deals in the global market of venture capital investments (5.7%). It means: the actual data volume of venture capital investment and the number of venture capital deals are homogeneous collections, because the values of the coefficients of variation of these indices is less than 33%. A characteristic feature of these indicators is a low level of variability and minor fluctuations, that is, a tendency even venture investments of innovative development in the world. To determine the closeness of the connection between the amount of capital raised in the IPO, and the number of transactions Spearman rank correlation coefficient is calculated, as well as the strength of correlation between the volume of investment and the number of transactions in the global market transactions MA indirect action: development of competitive capital markets for small companies, expanding the range of products offered by financial institutions, the development of long-term sources of capital, to simplify the formation of venture capital funds procedure, stimulating interaction between large and small enterprises and financial institutions, promotion of entrepreneurship. Value/originality. On the basis of generalization of foreign experience mechanisms to encourage venture capital financing of innovative development of industry identified and the use of these mechanisms in terms of Ukraine. In the future, the development of proposals to attract venture capital funds to enhance the innovative development of domestic industrial production is planned.

Monetary Policy and Global Banking

Multinational banks use their global internal capital market to respond to local shocks. However, what distinguishes global banks is not only their geographical diversification, but also their funding model: the primary source of stable funding for banks is denominated in their domestic currency. When global banks use their global balance sheets to smooth out local shocks, they need to hedge their foreign exchange exposure. In times when there is limited capital to take the other side of the hedging transaction, this will attenuate the use of internal markets to smooth out local shocks. In this context, tightening monetary policy in the lender’s home country can actually reduce pressure on the swap market, making lending abroad more attractive. Using the changes in interest paid on excess reserves by monetary authorities in six major currency areas between 2000 and 2015, we show that multinational banks reduce their reserve holdings and increase their lending abroad in response to a tightening of domestic monetary policy. This result is robust to the inclusion of a narrow set of fixed effects, and holds at the loan level. Consistent with the proposed mechanism, we show that global banks’ cross-border movement of capital is associated with an increase in foreign exchange swapping activity and its rising cost, as manifested in violations of covered interest rate parity.

RELATIONSHIP BETWEEN LITHUANIAN SOVEREIGN CREDIT RISK AND EQUITY MARKET

We analyse relationship between Lithuanian sovereign credit risk and equity market. The aim of the paper is to find the impact of the sovereign credit risk, which is expressed in the terms of Credit Default Swaps (CDS), on the movements of stocks prices of Lithuania. We use VAR (vector autoregression) model in order to find the relationship between Lithuanian CDS spread and OMX Vilnius index. We use impulse reaction method to investigate the impact of CDS spreads on the OMX Vilnius index. After analysis of equity index OMX Vilnius and Lithuanian CDS price relationship it was found out that there exists an opposite relationship between these two variables. When the CDS prices are rising, the equity prices decrease and vice versa. The main finding is that Lithuanian capital market returns reacts immediately to the changes of credit risk of Lithuania which is set by the global capital market and expressed by the CDS prices and Lithuanian capital market is under the great foreign pressure.

The Effect of Global Financial Crisis on Nigeria Economy

This research work studied the effect of global financial crisis on Nigeria economy in Nigeria. The financial crisis ravaging the global economy is naturally a serious cause for concern to policy makers. Secondary data were used in this study, the data were collected from CBN statistical bulletin also data were also gathered from journals and textbook that are related to the research topic. The overall significance of the regression is tested using Fisher's statistics. In this study the calculated F* value of 47.375 is significant at 5%. The result however show that linear relationship exist between the dependent and the independent variables of the model. The evidence established that the independent explanatory variables have individual and combine impact on the market capitalization in Nigeria. There is significant relationship between global financial crisis and capital market in Nigeria. Some of the recommendations made in this study are that. There is an urgent need for the total overhaul of regulations and regulatory framework, in order to enhance both the on-site and off-site examination and supervision of the banks. There is the need for increased and enhanced provisions for consumer protection. Nigerian economy is a mono-economy; any crash on the price of oil internationally will cripple our economy. So it is a matter of urgency for the Nigerian economy to divest into agriculture, manufacturing, information technology etc. Political stability is an important factor that encourages investment in an economy. So our nascent democracy should be nurtured.

Adoption of International Financial Reporting Standards in Bangladesh: Benefits and Challenges

The study focuses on the recent adoption status of International Financial Reporting Standards (IFRS) in a developing economy like Bangladesh. The objectives of this paper are to identify the development of the accounting profession in Bangladesh, the legal and regulatory framework of accounting, IFRS adoption process, benefits and challenges of adopting IFRS in Bangladesh. The issues raised in the paper are drawn mainly from prior works of literature and secondary information. IFRS adoption promises a lot of benefits like decreased cost of capital, improved financial reporting quality, increased ability to secure borders-listing, better Access to Global Capital Markets and attraction of foreign direct investment, etc. Some challenges also exist like the development of a legal and regulatory framework, low audit fees, awareness campaign and training of personnel etc. which must be overcome for successful adoption of IAS/IFRS. The paper also argues that the Financial Reporting Council (FRC), as proposed by the draft Financial Reporting Act 2013 (FRA) should not be handled by non-experts body. This paper strongly recommends that the ICAB council may be reformed consisting of Three Board - (i) Accounting Standard Board (ii) Auditing Standard Board and (iii) Financial Reports Review Board to ensure compliance of international standard and effective implementation. Keywords: International Financial Reporting Standards, Adoption, benefits and challenges, ICAB, Bangladesh.

ANALYSIS OF LITHUANIAN CREDIT DEFAULT SWAPS

This paper studies international sovereign Credit Default Swaps (CDS) market focusing attention to the CDS of Central and East Europe. The main purpose of the study was to perform detail analysis of Lithuanian CDS in the global capital market. We compared the CDS markets of other countries and found some commonalities between them. We study the credit curve produced by CDS and volatility of CDS. A great attention is paid to investigate the relationship of CDS and the government bond market. Analysis of finding a leading role of CDS and the bond markets in the price discovering process is made. A leading market for different periods is found by using the Vector Error Correction model. Our main finding is that during the volatile period price discovery takes place in the bond market and in the calm period price discovery is observed in the CDS market. Disclosed relationship between CDS spreads and Eurobonds yield risk premium gives an additional decision making tool for sovereign debt managers.

On the Tracking and Replication of Hedge Fund Optimal Investment Portfolio Strategies in Global Capital Markets in Presence of Nonlinearities, Applying Bayesian Filters: 1. Stratanovich Kalman Bucy Filters for Gaussian Linear Investment Returns Distribution and 2. Particle Filters for Non-Gaussian Non-Linear Investment Returns Distribution

The hedge fund represents a unique investment opportunity for the institutional and private investors in the diffusion-type financial systems. The main objective of this condensed article is to research the hedge fund’s optimal investment portfolio strategies selection in the global capital markets with the nonlinearities. We provide a definition for the hedge fund, describe the hedge fund’s organization structures and characteristics, discuss the hedge fund’s optimal investment portfolio strategies and review the appropriate hedge fund’s risk assessment models for investing in the global capital markets in time of high volatilities. We analyze the advanced techniques for the hedge fund’s optimal investment portfolio strategies replication, based on both the Stratonovich – Kalman - Bucy filtering algorithm and the particle filtering algorithm. We developed the software program with the embedded Stratonovich – Kalman - Bucy filtering algorithm and the particle filtering algorithm, aiming to track and replicate the hedge funds optimal investment portfolio strategies in the practical cases of the non-Gaussian non-linear chaotic distributions.

Strategies on Initial Public Offering of Company Equity at Stock Exchanges in Imperfect Highly Volatile Global Capital Markets with Induced Nonlinearities

This research considers the strategies on the initial public offering of company equity at the stock exchanges in the imperfect highly volatile global capital markets with the nonlinearities. We provide the IPO definition and compare the initial listing requirements on the various markets. We analyze the IPO techniques: the fixed-price offerings, auctions, book-building. We focus on the IPO initial underpricing, long-run performance and after market liquidity problems. 1. We propose that the information absorption by the investors occurs in the evolving learning process about the company’s value, taking to the consideration the fundamental purpose of investing and the responsibilities of investors. 2. We think that the information absorption capacity by the investors on the IPOs impacts the investor’s investment decisions and serves as a pre-determinant for the successful IPO deal completion. We propose the Ledenyov theory on the origins of the IPO underpricing and long term underperformance effects, which states that the IPO underpricing and long term underperformance can be explained by the changing information absorption capacity by the investors on the IPO value. 3. We think that the IPO winning virtuous investment strategies can only be selected by the investors with the highest information absorption capacity through the decision making process on the IPO investment choices at the selected stock exchange in the imperfect highly volatile global capital markets with the nonlinearities; applying the econophysical econometrical analysis with the use of the inductive, deductive and abductive logics in the frames of the strategic choice structuring process, that is the winning through the distinctive choices process.