Helsinki Stock Exchange Research Articles

Revisiting Stock Market Index for the Helsinki Stock Exchange 1912–1981

Stock market indices play a central role in portfolio and risk management and performance evaluation, as well as academic research. This paper presents a fully updated and extended stock market index for the Finnish stock market using new and updated historical databases that cover the period from the establishment of the Helsinki Stock Exchange in October 1912 to the end of 1981. In addition to the all-share market index, four industry indices are presented for the first time. The observed geometric mean market return is 1.034 percent per month (13.14% p.a.). Of the industry indices, the banking sector performed the worst as it was found to have clearly lagged behind in the market, whereas the paper and forest and the metal and manufacturing industries performed the best during the sample period. The results also highlight the importance of taking into account corporate capital actions—which are, historically, often the hardest information to obtain—as they can have a material effect on the index performance.

Clustering-based value investing strategy in the Helsinki Stock Exchange: k-means algorithm

The purpose of this research is to study the possibility of combining quantitative clustering of stocks and value investing. The feasibility of this approach is tested using Finnish market data from the period 2005 to 2021. The benchmark index used in this research is the OMX Helsinki Growth Index. The strategy is based on the combination of P/E, P/CF, and P/B ratios, which serve as the basis for the k-means algorithm. The data is pre-processed by removing stocks that have not generated positive earnings and cash flow during the previous 12 months. The k-means algorithm assigns stocks to clusters, and the cluster with the lowest financial ratios is chosen as the value portfolio. The research also includes a sensitivity analysis of value portfolios, where the initial number of clusters in the clustering phase ranges from three to ten. Returns of different value portfolios are compared to each other and the benchmark index. The quality of results is evaluated using the Sharpe ratio and Jensen's alpha. According to the findings, the value portfolio constructed using nine clusters generated the highest risk-adjusted return, with an annual return of 30.27% over the 2005 to 2021 period. Furthermore, the best-performing value portfolio from 2005 to 2017 was compared to the benchmark index from 2018 to 2021. The value portfolio achieved an annual return of 26.05% during the 2018-2021 period, while the corresponding return of the benchmark index was 11.74%.

Miten johtajuutta viestitään? Suomalaiset toimitusjohtajat Twitterissä

How is leadership communicated? Finnish CEOs on Twitter Twitter offers CEOs the opportunity to communicate with a wide audience. For corporate stakeholders, CEO communication is important because it can affect, for example, the corporate image or the information that company’s stakeholders receive about the company’s vision or values. So far, however, not much is known about the Twitter communication of Finnish CEOs or the leadership that they communicate on Twitter, so this article addresses these aspects through the strategic leadership communication theory (Ki 2015) and Glick’s (2011) CEO roles. The data have been collected over a period of seven months and consists of a total of 132 public references from the CEOs whose companies are listed on the Helsinki Stock Exchange or the TE500 CEO list. The data were analyzed with qualitative content analysis. The main results show that the Twitter use of Finnish CEOs is interactive yet rather inactive

Helsinki Stock Exchange: trading and listed securities, 1912–1981

A newly collected historical database for the Helsinki Stock Exchange (HSE) is used to analyse the number and structure of listed equity securities. The analysis shows that from its establishment in October 1912 to the end of 1981, a total of 849 different stock series and related issue rights have been listed on the HSE. Of these, 206 are normal stock series and they represent 167 different companies. The two largest industries represented on the HSE during most of the analysed period are metal and manufacturing and pulp and paper industries. Together they represented more than half of the listed companies throughout most of the sample period.

Gold market and selected Nordic stock markets: Granger causality

Motivation: The turbulence in financial markets, especially stocks, makes investors seek safer ways of capital allocation. Gold exhibiting a low or negative correlation with stocks can constitute an alternative form of investment for them. The price volatility of aforementioned assets has impact on investors’ decisions. That is why the assessment of interrelations between stock and gold returns is important. The direction of causality between the analysed variables is reflected by the fact that investors tend to transfer their funds from gold markets to more profitable markets, or return to gold markets. The research focuses on linkages between gold-stock markets of selected Nordic countries which in comparison with countries classified as key producers and consumers of gold were not under investigation so far. There is therefore a research gap in empirical research.
 Aim: The aim of this paper is to investigate the causal relationship between the rates of return on stock markets in three Nordic countries, represented by their respective indices — OMXH25 (Finland: the Helsinki Stock Exchange Index), OMXS30 (Sweden: the Stockholm Stock Exchange Index) and OSEAX (Norway: the Oslo Børs All Share Index) — and the returns from investment in gold. The VAR model was applied in the analysis to perform a Granger non-causality linear test, along with decomposition of variance and the impulse response function. The study covered the period between September 2001 and October 2020.
 Results: The study showed no causality between the analysed rates of return, except in Norway, where the gold market was found to have an impact on the stock market, assuming a statistical significance of 0.14. In the other two countries, changes in gold prices did not affect stock prices, and vice versa.

Markkinointiesite suostuttelun välineenä kansainvälisissä yrityskaupoissa

This article examines how shareholders opinions and actions are influenced in takeover bids through convincing and persuasive rhetoric. The focus of this article is on arguments and other rhetorical features used to make the takeover bid acceptable or even desirable. The material of the study consists of marketing brochures published in friendly takeover bids in which shareholders of eight companies listed on the Helsinki Stock Exchange received an offer to sell their shares. The offers were made between end of 2018 and early 2021 by a foreign bidder. This study sheds light on the highly controversial and complex phenomenon of cross-border mergers and acquisitions in Finland from a communication perspective. In this article, rhetorical features are analyzed in their context, i.e., how investor relations restrict and enable language use. The findings of the research show how positive image of M&A is constructed through argumentation, but also distinct persuasive characteristics shareholders should be aware of to make rational decisions on whether to accept or reject the offer.

Peer Interaction and Pioneering Organizational Form Adoption: A tale of the first two for-profit stock exchanges

Building on a historical case study on the first two stock exchanges to adopt the now globally dominant for-profit organizational form, the Stockholm Stock Exchange in 1993 and the Helsinki Stock Exchange in 1995, we argue that interaction among socially proximate peers contributes to pioneering organizational form adoption within an industry, particularly when such forms are introduced by established organizations. Peer interaction can induce a search for technically efficient organizational forms through the sharing of collective experiences, the establishment of collective assumptions, and a joint search for solutions. Together, these factors contribute to the legitimization of novel organizational forms in the local setting before the adoption of the first instantiation of those forms. We propose a context-sensitive multilevel model of peer-interaction-induced pioneering organizational form adoption that considers shared macro environmental drivers, idiosyncratic local environmental drivers, and peer interaction as central social mediators between the two.

Structure of Investor Networks and Financial Crises

In this paper, we ask whether the structure of investor networks, estimated using shareholder registration data, is abnormal during a financial crises. We answer this question by analyzing the structure of investor networks through several most prominent global network features. The networks are estimated from data on marketplace transactions of all publicly traded securities executed in the Helsinki Stock Exchange by Finnish stock shareholders between 1995 and 2016. We observe that most of the feature distributions were abnormal during the 2008–2009 financial crisis, with statistical significance. This paper provides evidence that the financial crisis was associated with a structural change in investors’ trade time synchronization. This indicates that the way how investors use their private information channels changes depending on the market conditions.

Investor networks were abnormal during 2008-2009 financial crisis

In this paper, we ask whether the structure of investor networks, which are estimated using shareholder registration data, is abnormal during financial crises. We answer this question by analyzing the structure of investor networks through 10 prominent features. The networks are estimated from data on marketplace transactions of all publicly traded securities executed in the Helsinki Stock Exchange by Finnish stock shareholders between 1995 and 2016. We observe that most of the feature distributions were abnormal during the 2008--2009 financial crisis, with statistical significance. This paper provides evidence that the financial crisis was associated with a structural change in investors' trade time synchronization. This indicates that the way how investors use their private information channels changes over market conditions.

Revisiting Index Methodology for Thinly Traded Stock Market. Case: Helsinki Stock Exchange

Stock market indices play a central role in portfolio management and academic research. This paper reviews and discusses the main issues in index construction, especially on thinly traded stock markets and in a historical setting with deficiency of information. The main methods to deal with missing price observations are studied. As a case in point, a newly collected historical database for the Finnish stock market that covers the period from the establishment of the Helsinki Stock Exchange (HSE) in October 1912 forward is used. The HSE suffered from severe thin trading with only approximately 20% of the stocks having a daily transaction in the early part of the sample. Overall, the results show that index construction methodology have a major impact on the index as well as its statistical properties. The results also highlight the impact of corporate actions, the hardest information to obtain, on the market index performance.

Helsinki Stock Exchange Index during World War One: Statistical Test of Hypotheses on the Basis of Counter-Factual Modeling

The article proposes an improved model of St. Petersburg Stock Exchange index dynamics and constructs a similar model of Helsinki Stock Exchange index on the basis of published results of a counterfactual model predicting the hypothetical dynamics of St. Petersburg Stock Exchange index after July 1914 under the assumption that there is no war. The author hypothesizes that internal economic factors that determined the downward trend of St. Petersburg Stock Exchange index also influenced the dynamics of Helsinki Stock Exchange index under the assumption that there was no war. To test this hypothesis the author has constructed (in the R software environment) the ARIMA statistical model that is an integrated autoregressive-moving average model which extends the ARMA model for non-stationary time series. The constructed counterfactual models proved that while the influence of pre-war factors remained, the dynamics of both indices did not show similar trends thus suggesting that the Finnish stock market was developing without any noticeable look at St. Petersburg Stock Exchange and inner economic factors of the Russian Empire.

Clusters of investors around initial public offering

The complex networks approach has been gaining popularity in analysing investor behaviour and stock markets, but within this approach, initial public offerings (IPOs) have barely been explored. We fill this gap in the literature by analysing investor clusters in the first two years after the IPO filing in the Helsinki Stock Exchange by using a statistically validated network method to infer investor links based on the co-occurrences of investors’ trade timing for 69 IPO stocks. Our findings show that a rather large part of statistically similar network structures form in different securities and persist in time for mature and IPO companies. We also find evidence of institutional herding.

Clusters of Investors Around Initial Public Offering

The complex networks approach has been gaining popularity in analysing investor behaviour and stock markets, but within this approach, initial public offerings (IPO) have barely been explored. We fill this gap in the literature by analysing investor clusters in the first two years after the IPO filing in the Helsinki Stock Exchange by using a statistically validated network method to infer investor links based on the co-occurrences of investors' trade timing for 69 IPO stocks. Our findings show that a rather large part of statistically similar network structures form in different securities and persist in time for mature and IPO companies. We also find evidence of institutional herding.

The market dynamics of socially embedded trading

Social embeddedness has provided a compelling challenge to neoclassical descriptions of markets. Nevertheless, without a corresponding description of the micro-social forces that counter embeddedness, the description of embeddedness is essentially static, and does not integrate the dual forces of embeddedness and markets. In this study, we identify a sociological force counter to embeddedness residing in third parties whose presence may interrupt socially embedded informal trading partnerships. Using data from the Helsinki Stock Exchange in 1996–1997, we confirm that stock trades are socially embedded in partnerships in which trading persists from week to week and in which prices deviate from immediate trading prices. Importantly, we find that trading partnerships are more likely to be interrupted when prices deviate from immediate trading prices and when third parties are present who trade with one or both members of the partnership. Thus, third parties are a critical sociological force in the embeddedness-market dynamic.

News Sentiment Incorporation in Real-Time Trading

This article describes how machines are the new breed of traders as news sentiment arrivals drive the stock price change. Strategies are the technical approach to search for profit from event-based speculations. This paper revisits these topics in a novel way and first uncovers distinctive characteristics of high frequency trading in Helsinki stock exchange insinuating the impression on positive recovers of event trading. Here is a better prediction by the incorporation of news on returns that proposed event trading strategy has significant effects on Finnish stock. This article contributes to the con temporarily embarked, upgrading form of practical paperwork on the take of news events in high economic science.

Trading, Profits, and Volatility in a Dynamic Information Network Model

AbstractWe introduce a dynamic noisy rational expectations model in which information diffuses through a general network of agents. In equilibrium, agents who are more closely connected have more similar period-by-period trades, and an agent’s profitability is determined by a centrality measure that is related to Katz centrality. Volatility after an information shock is more persistent in less central networks, and volatility and trading volume are also influenced by the network’s asymmetry and irregularity. Using account-level data of all portfolio holdings and trades on the Helsinki Stock Exchange between 1997 and 2003, we find support for the aggregate predictions, altogether suggesting that the market’s network structure is important for these dynamics.

Incorporating News in Real Time Trading: A High Frequency Trading Perspective

Machines are the new breed of traders. This environment motivates a need to check in Helsinki stock exchange on event driven strategies proposed by Aldridge (2009). This paper is the first paper in its nature and thus contributes to the contemporarily embarked, upgrading form of practical paperwork on the take of News events in high economic science. The information difference is much enclosed in the ideal program trading practices thus validating our proposed event trading strategy. We find better prediction by the incorporation of news on Returns that event trading has significant effects on Finnish stock.

Defined strategies for financial working capital management

Purpose – The purpose of this paper is to develop strategies for financial working capital management and to present previous literature on financial working capital management and its measures. Design/methodology/approach – Qualitative comparative analysis is used to formulate the strategies, and the variables in the analysis have been selected from previous literature. Empirical data consists of 91 companies listed in the Helsinki Stock Exchange during 2008-2012. Findings – The results indicate 11 possible strategies for financial working capital management which all aim at increasing financial working capital. There are suitable strategies for all companies independent from their profitability, capital intensity or working capital requirements. Research limitations/implications – The presented strategies have been created theoretically and have not been tested in companies, which could be done in future research. Originality/value – This study has three contributions. First, previous literature on financial working capital management is reviewed. Second, a novel measure for financial working capital is developed. Third, strategies for financial working capital management are presented.

Хельсинкская фондовая биржа в начале ХХ в.: опыт статистического анализа биржевого индекса

Хельсинкская фондовая биржа в начале ХХ в.: опыт статистического анализа биржевого индекса

Modifying the cash conversion cycle: revealing concealed advance payments

Purpose – The cash conversion cycle (CCC) is widely used in the academic studies of working capital management and supply chain efficiency. The purpose of this paper is to introduce a modification of this measure that takes into account advance payments as a component of operational working capital. Design/methodology/approach – A new measure, the modified cash conversion cycle (mCCC) is introduced and tested with empirical data of companies in Helsinki Stock Exchange. Findings – The mCCC reveals the real efficiency of operational working capital in companies that receive advance payments to a remarkable extent. Research limitations/implications – The mCCC can be used in empirical analysis in academic studies. In this paper, the empirical data are used only for testing the mCCC. The paper concerns received advance payments, but the mCCC can also be extended also to other components of operational working capital ignored by the traditional CCC. Practical implications – The paper offers insights into the variations of CCC for class teachers, and business practitioners, particularly financiers, who deal with operational working capital, cash flow predictions and calculations. Originality/value – There are current items that may have a remarkable effect on operational working capital, but traditionally only inventories, accounts receivable and accounts payable are discussed. The authors argue that also other current items should be taken into account, if they affect the efficiency of operational working capital. The new mCCC is encouraged to be used instead of the CCC when observing working capital management.