Financial Market Research Articles

Information Asymmetry in the European Funds Market: Impact on Resource Allocation and Sustainable Development

The European Funds market is a key mechanism for fostering regional development and economic growth within the European Union, yet its efficiency can be undermined by information asymmetry, which complicates fund absorption processes. This paper investigates the European Funds market and explores how adverse selection and moral hazard impact the dynamics of the fund allocation. Through qualitative research, the authors assess the European Funds market, identify its key stakeholders, and explore factors influencing funds absorption. Findings reveal complex interactions among European Union institutions, managing authorities, beneficiaries, and consultants. The research highlights economic, administrative, institutional, and social factors that affect fund absorption rates and pinpoint adverse selection and moral hazard as primary consequences of information asymmetry in the European Funds market. By emphasizing the importance of effective communication processes and describing the experiences of various actors in European-funded projects, the study provides actionable insights for policymakers and stakeholders. This paper offers a new perspective on the European Funds market and links information asymmetry to inefficiencies in fund allocation. These findings contribute to a better understanding of the European Funds market, fostering transparency, enhancing institutional capacities, and promoting sustainability in the governance of public funds.

Quantum Majorization in Market Crash Prediction

We introduce the Quantum Alarm System, a novel framework that combines the informational advantages of quantum majorization applied to tail pseudo-correlation matrices with the learning capabilities of a reinforced urn process, to predict financial turmoil and market crashes. This integration allows for a more nuanced analysis of the dependence structure in financial markets, particularly focusing on extreme events reflected in the tails of the distribution. Our model is tested using the daily log-returns of the 30 constituents of the Dow Jones Industrial Average, spanning from 2 January 1992 to 30 August 2024. The results are encouraging: in the validation set, the 12-month ahead probability of correct alarm is between 73% and 80%, while maintaining a low false alarm rate. Thanks to the application of quantum majorization, the alarm system effectively captures non-traditional and emerging risk sources, such as the financial impact of the COVID-19 pandemic—an area where traditional models often fall short.

Potencjalna rola regulacji soft-law i francuskiej koncepcji rozporządzeń z mocą ustawy (ordonnances) w osiąganiu celów zrównoważonego rozwoju

The purpose of the article is to present the interconnection between the financial market, sustainable development and soft-law rules in today’s economy we have an overlapping process in the financial markets between general investment based on financial efficiency and investment concerning social responsibility – including ESG criteria (environmental-social-governance). The concept of sustainable development may be defined as a tool leading not only to economic growth but in the long term also as a solution leading to the elimination of the disproportions and instabilities within a society. The COVID pandemic and the war in Ukraine showed, that today we require some new legal instruments and techniques that could help in the realization of goals of sustainable development and that would ensure legal stability. The methodology used by the author is related to the functional approach of the comparative legal method, the historical-descriptive and the dogmatic method, with a special focus on French and international law regulations. Comparative method is both a science, a research method and the effects of research obtained from the application of the comparative studies. Comparative studies, as a science of comparing selected aspects of different legal systems, is aimed at learning and understanding law in a much broader context, because at the supranational level. It is this aspect that makes comparative research extremely important for sustainable development rules, which are often characterized by a cross-border and international character. The scientific aim of the work is to show whether and how soft important law provisions especially in the financial market, as well as regulations with the force of law, can be a useful instrument supporting the process of building sustainable finance. As part of the conclusions, the author notes that the use of the described legal structures may contribute to faster and more effective implementation of sustainable development regulations. The above is even more important when these regulations appear from a supranational perspective rather than from a national perspective.

Economic Tremors From a Perfect Storm: The Ukrainian Crisis and Its Impact on Regional Stock Market Volatility

This study investigates the impact of the Russia-Ukraine war on stock market volatility in neighboring countries, analyzing five stock market indices (BET, BUX, WIG, SAX, and MOEX) over a three-year period encompassing one year before and two years after the conflict’s outbreak. Employing four volatility estimators (Close-to-Close, Parkinson, Garman-Klass, and Rogers-Satchell), this research examines the evolution of market volatility and inter-market correlations. Findings reveal a general increase in volatility across most indices following the war’s commencement, with the MOEX index experiencing the highest turbulence. The concept of a “proximity penalty” is partially supported, as geographical closeness to the conflict zone does not uniformly correspond to increased volatility. Also, findings show an initial strengthening of correlations between markets in the first year of the war, suggesting a “contagion effect.” However, this is followed by a weakening of correlations in the second year, indicating a potential “decoupling effect” as markets begin to respond more to local economic conditions. These results have significant implications for investors, policymakers, and risk managers, highlighting the need for dynamic portfolio management strategies, tailored policy responses, and flexible risk models that can adapt to changing market conditions during prolonged geopolitical crises. This study contributes to the existing literature by extending the temporal scope of analysis beyond the immediate aftermath of the war’s outbreak and providing insights into the “proximity effect” in the context of a major European conflict. The observed patterns of initial volatility spikes followed by varying degrees of persistence and changing correlation structures offer a nuanced picture of how geopolitical events impact financial markets over time, emphasizing the complex interplay between political events and financial market dynamics. JEL classification: G15, F51 Article History: Received: October 14, 2024; Reviewed: November 27, 2024; Accepted: December 2, 2024; Available online: December 17, 2024.

Comparative analysis of small and medium-sized enterprises (SMES) versus large companies during the COVID-19 pandemic: Evidence from Moroccan financial market

The COVID-19 pandemic significantly affected global financial markets, and Morocco proved no exception. This article analyzes the impact of the pandemic-related announcement on the stock market returns of small and medium-sized enterprises (SMEs) and large companies listed on the Casablanca Stock Exchange. Using event study methodology. This research reveals that SMEs suffered more significant and prolonged declines in stock market returns than large companies, which demonstrated greater resilience. The results underline the importance of adopting crisis management strategies tailored to the specific characteristics of companies according to their capitalization. This offers insights for decision-makers, investors and managers seeking to navigate through periods of major economic turbulence.

Russian financial market under sanctions

Subject. The article discusses the inflation targeting policy. Objectives. The aim is to determine factors affecting the functioning of the Russian financial market in the context of sanctions. Methods. The study draws on the correlation-regression analysis. Results. The paper reveals a dominant significant gap between the money supply and loans and debt securities of the non-financial sector. The ability of corporations to securitize assets is declining. The need to attract household cash to the Russian financial market was established. Conclusions. If considered, the findings will enable the monetary authorities to select the best tools for regulating the financial market.

EXPLORING SHARIA-BASED MSME DEVELOPMENT STRATEGIES THROUGH THE UTILIZATION OF MAJOO POINT OF SALE TECHNOLOGY

This study examines how Sharia economics integration in the MSME business model can be optimized using Majoo POS technology. In the era of globalization and rapidly developing information technology, Micro, Small, and Medium Enterprises (MSMEs) based on the Sharia economy need to continue to develop strategies to expand their markets and improve operational efficiency. MSMEs are the backbone of the national economy, but many face financial management and marketing challenges. The method used is a descriptive qualitative to identify the potential and challenges in implementing this strategy and provide recommendations for MSME actors and related stakeholders. The study results indicate that applying Sharia economics supported by Majoo POS technology can increase the competitiveness of MSMEs and positively contribute to the national economy. Majoo POS technology offers features that facilitate transaction recording, stock management, and real-time data analysis, which can improve the operational efficiency of MSMEs. The practical implications of this study are the importance of government and financial institution support in providing access and training related to technology for MSMEs based on the Sharia economy.

Capital Flows to Emerging Markets: The Role of Information Transparency

Using annual capital flow data from 1990 to 2010 for 21 emerging markets, this study empirically investigates the impact of macroeconomic information transparency on capital flows, taking into account financial market uncertainty. The level of in- formation transparency is measured using the country's compliance with the IMF's SDDS. The findings reveal that SDDS compliance mitigates the negative influence of the VIX index on both net and total gross inflows. However, the positive effect of SDDS compliance on capital inflows is observed only when the VIX index reaches a sufficiently high level. This relationship is primarily driven by other in- vestment inflows, as it is the only type of capital flow significantly affected by the SDDS compliance in conjunction with VIX. The results suggest that although enhanced information transparency in emerging markets may not attract more foreign capital during normal periods, it provides stability by reducing the decline in other investment inflows during times of financial turmoil, ultimately contributing to the overall stability of total capital inflows.

The Price Dynamism during REIT Acquisitions

This study creates, models and calibrates the prices of real estate investment trusts (REITs) within an option pricing framework. Unlike Barraclough et al. [(2013). Using option prices overpayments and synergies in M&A transactions. The Review of Financial Studies, 26(3), 695-772] and Marcato and Sebehela [(2022). The paradoxical prices of options. Review of Pacific Basin Financial Markets & Policies, 25(2), 2250009], this study went further and incorporated new information in the form of news. The results show that for a target (acquiring) firm, the exponential risk premium is made up of the cost of carry plus (less) new news. The same illustration applies equally in a merged entity.

Determinants of the Profitability of Savings Banks in the US and the Moderating Effect of the Pandemic Crisis

The pandemic crisis that began in 2020 and lasted until 2021 has raised concerns about the impact on banking profitability. As a result, the global banking system suffered a drop in the profitability of its banking business as part of the crisis. Taking into account the problem of profitability in the banking sector, some studies have been increasingly highlighted both in academia and in the financial market. Therefore, this study aims to analyze the determinants of bank profitability for banks operating in the savings segment in the United States, for the periods between 2012 and 2022. To this end, four factors explaining profitability (default rate, liquidity, solvency and productivity) were analyzed for 57 banks. In addition, we wanted to assess the moderating effect that the pandemic crisis had on the banking sector. To obtain the results, a panel data analysis model was used, combining cross-section data (banks) and time-series data (years), and a strongly balanced panel was obtained. Four multiple linear regression models were then used and it was possible to identify liquidity and solvency as the main positive factors in bank profitability. In contrast, the factors of default rate and productivity have a negative influence on bank profitability. The results also show that banks with high default rates had greater difficulties during the period of the pandemic crisis, that is, the crisis negatively moderated the effect of default on profitability.

WAYS OF IMPLEMENTING A COMPLEX APPROACH TO INCREASE THE COMPETITIVENESS OF UKRAINE

The study focuses on examining the key factors influencing the competitive state of Ukraine’s socio-economic model at the current stage of development. An analysis of major macroeconomic parameters on the eve of Russia’s full-scale invasion revealed substantial potential for economic recovery following the losses incurred due to COVID-19 pandemic restrictions. Taking into account recent European Union reforms aimed at enhancing competitiveness based on the European Commission’s Communication to the European Parliament, the Council, the European Economic and Social Committee, and the Committee of the Regions, titled «Long-term competitiveness of the EU: looking beyond 2030,» certain related directions for implementing relevant transformations in Ukraine have been identified. As a result, the authors developed a comprehensive approach to enhance the competitiveness of Ukraine. Correspondingly, possible pathways for implementing specific components of this comprehensive approach were proposed. It has been determined that, through incentives involving public and business influence on the elite, it is necessary to ensure the development, implementation, and monitoring of the most urgent reforms, namely: security reform, institutional reform, infrastructure reconstruction, and innovation reform. The most critical steps were identified, primarily involving the deepening of cooperation with foreign partners at both business and governmental levels. The need for decisive action against corruption in all areas of life and the urgent institutional reform required was also highlighted. Using G. Hofstede’s cultural dimensions theory, a regression analysis was conducted to explore the relationship between institutional quality ratings from the “Global Competitiveness Index” and Ukraine’s cultural dimension values. Based on these calculations and the evaluation of statistical correlation density through the determination coefficient, it was found that higher individualism correlates with higher institutional quality, while higher power distance correlates with lower institutional quality. The dependency of institutions on other cultural dimensions was too weak to indicate a meaningful relationship; however, graphical analysis of long-term orientation and uncertainty avoidance suggested a shared dynamic. Three main directions for implementing institutional reform were proposed: fostering civic patriotism among the population, combating the old, corrupt, anti-national elite (oligarchs), and cultivating patriotic meritocrats as replacements. Meeting these conditions would establish a strong foundation for further development of a rule-of-law state. Regarding infrastructure reconstruction and innovation reform, plans for modernization and digitalization were proposed. Particular attention should be paid to implementing and utilizing modern tools to leverage the full spectrum of financial and stock market opportunities. The implementation of modern educational approaches at all levels is also of great importance. The successful combination and implementation of these proposed processes will lead to increased productivity and competitiveness. The driver of positive changes should be Ukrainian business and civil society: entrepreneurs understand what is needed for dynamic growth, and citizens know what is required for a decent life.

Central banks, monetary stability, and the varieties of capital control liberalization

Abstract This article explores the differential liberalization of capital controls in advanced market economies. It shows that although finance-led economies abolished controls by the 1980s, export-led economies retained significant restrictions into the 1990s, contributing to differential financial market development. A historical comparison of Germany and the UK (1961–1985) finds that differential control use resulted from central bankers’ varying expectations of controls’ monetary functions in the domestic economic context. As capital became mobile in the 1960s, sudden capital in- and outflows jeopardized price and currency stability. In the German context of macroeconomic stability, controls effectively limited capital inflows and arrested destabilizing inflationary and exchange rate pressures. However, in the British context of macroeconomic instability and capital outflows, controls could not sufficiently restore stability: as loose fiscal and monetary choices persisted, monetary conditions deteriorated. Thus, Bank of England officials became fervent advocates for control liberalization to enforce restrictive fiscal and monetary choices via market pressures.

Risk prediction of computer investment database information management system based on machine learning algorithms

In recent years, with the continuous development of the financial market, the risk prediction of computer investment database information management systems (IMS) has high practical value. At present, there are risk issues in the information management system, which may cause drawbacks to investment data processing. To address these issues, this article used Machine Learning (ML) algorithms to analyze the risk prediction of computer investment database IMS. This article introduced and utilized typical Self-Organizing Map (SOM) and Artificial Neural Network (ANN) combination algorithms, regression algorithms, and Gradient Boosting Decision Tree (GBDT) algorithms to compare and analyze the prediction accuracy of these three algorithms. This article found that the GBDT algorithm has the highest prediction accuracy. Through a large amount of experimental data, it has been proven that the average testing accuracy using regression algorithms was 3.5% higher than that using neural network algorithms. It was found that the average test accuracy using the GBDT algorithm was 7.2% higher than the average test accuracy using the regression algorithm. The study also explores the combination of physiological and behavioral data collected by wearable devices to provide more comprehensive risk assessment and decision support, which provides an important reference for the optimization of enterprise risk management. Through this innovative data source integration, this paper provides a new perspective for the application and development of machine learning algorithms in computer investment database IMS.

The Shock of Emergencies on Financial Markets and Its Countermeasures

In recent years, the frequent occurrence of major emergencies and their potential impact on the financial market have brought great challenges to the stability and development of the global economy. In this context, it has become an urgent issue to explore how major emergencies affect the financial market and take corresponding measures to deal with them. Through literature research and analysis, this paper concludes the impact of natural disasters, accidents and disasters, public health emergencies and social security emergencies on the financial market respectively, clarifies the transmission path of the impact including the social level, the real economy level and the policy level, and puts forward suggestions for the construction of financial emergency management. That is, to improve the precise prevention and control system, optimize the domestic market environment and the rule of law of financial emergency management rights. The research results are helpful to maintain the stability of the stock market and the overall situation of economic development in major emergencies.

Financial Markets, Efficiency, and Credit Intermediation

Abstract Research and teaching in financial economics very often assumes that the efficient market hypothesis is verified. Nonetheless, financial markets are still very far from reaching substantial levels of efficiency. Moreover, different perspective of market efficiency can be subsumed. In this paper, we provide a clearcut taxonomy of the different nuances of financial markets efficiency, useful for economic research and teaching. We also argue that scholars should necessarily disclose in advance the perspective of market efficiency assumed for the research analysis or teaching purposes and discuss the limitations in the inference that can derive. JEL classification numbers: G14, G10. Keywords: Financial markets, Market efficiency, Efficient market hypothesis, EMH.

The Spillover Effect of US Monetary Policy: A Literature Review

In an era of globalization, the interconnectedness of financial markets means that monetary policy decisions in one country, particularly the United States, can have significant global repercussions. This interconnectedness necessitates a deeper understanding of how US monetary policy influences economic conditions worldwide. This paper reviews the impact of US monetary policy through various channels on advanced and emerging countries differently. The research finds that US monetary policy involves an element of uncertainty. In advanced countries, this uncertainty primarily influences the term premium component of yields, whereas in emerging countries, it affects the expected component of yields. Furthermore, the impact of US monetary policy shocks varies with the business cycle, having a larger effect when growth is weak outside the US. Different channels of spillover include interest rate differentials, exchange rate movements, capital flows, financial market reactions, and changes in risk perception and sentiment. For advanced countries, significant impacts are seen in interest rate spillovers, exchange rate dynamics, financial market volatility, and global trade and economic growth. In emerging countries, the effects are pronounced in exchange rate channels, capital flows, financial stability, term premium, risk perception, and local monetary conditions. Solutions include strengthening financial regulation, diversifying economic structures, building foreign exchange reserves, managing capital flows, improving monetary policy frameworks, fostering regional cooperation, promoting long-term investment, and enhancing data transparency.

Research on the Impact of ESG Rating Divergence on Financial Markets

This study explores the multifaceted impacts of Environmental, Social, and Governance (ESG) rating divergence on financial markets, focusing on both equity and bond markets. Despite the growing importance of ESG criteria in investment decisions, discrepancies in ESG ratingsstemming from varying methodologies, standards, and data qualitypose significant challenges. We analyze how these divergences affect corporate reputations, influence investor behavior, and consequently, impact market volatility, funding costs, and liquidity. Our findings indicate that ESG rating discrepancies can lead to increased funding costs, heightened market volatility, and reduced market liquidity, all of which contribute to increased uncertainty for investors. The study suggests that the resolution of these issues requires the harmonization of ESG standards, enhanced regulatory oversight, and greater transparency in rating methodologies. Through comprehensive analysis, this paper contributes to understanding the implications of ESG rating divergence and proposes actionable strategies for stakeholders to mitigate its adverse effects, thereby fostering a more stable and transparent market environment.

Examining the Market Impact of Social Media Key Opinion Leaders on Investor Sentiment and Financial Market

The rise of social media has transformed Key Opinion Leaders (KOLs) into significant influencers of financial markets. This study examines how KOLs on platforms like Twitter shape investor sentiment and impact stock market performance. The research employs a mixed-methods approach, analyzing social media data and market indicators to map the relationship between KOL statements and market reactions based on the real cases. It explores the psychological mechanisms, such as herding behavior, that amplify these effects. Findings suggest that KOLs can trigger rapid, short-term market movements, particularly among retail investors, leading to increased volatility and potential market inefficiencies. However, the long-term impact of KOL influence on market fundamentals remains less clear. This research highlights the need for updated regulatory frameworks and improved financial literacy to address the challenges posed by social medias growing role in financial markets. By addressing these issues, both regulators and investors can better navigate the increasingly complex landscape shaped by social media-driven financial activity.

The Relationship Between US Dollar Index and US 10 Year Treasury Bond

As a key indicator of the global financial market, the relationship between the US 10-year treasury bond and the US dollar index has attracted extensive attention from the academic community. To explore the correlation and future trends between the two. This article collects relevant data, analyzes the relationship between ARIMA and VAR models, and makes future predictions. The research results show that in the future, the dollar index will remain around 80 points and treasury bond will remain around 4 points. But the correlation between them is weak. At the same time, because the trend of the 10-year treasury bonds of the United States is affected by many factors, more factors need to be considered for their future trend. This study provides empirical evidence for the development of the US economy and lays the foundation for future investors' asset allocation, which has important practical significance for the development of financial markets.

ESG Factors, Returns and Volatility: A Tale From Brazilian Market Data

Objective: This study aims to investigate the relationship between Environmental, Social, and Governance (ESG) factors and financial market performance in Brazil. The objective is to understand the impact of ESG scores on firms’ returns and risk profiles, thereby informing investment strategies and policy decisions. Theoretical Framework: The research is grounded in theories of sustainable finance and risk management, with emphasis on how ESG integration can influence financial outcomes. Notable frameworks include Cochrane’s “factor zoo” and the role of investor attention and analyst coverage in mitigating crash risk. Method: Data for the study was obtained from the Refinitiv Eikon database, covering firm-level ESG characteristics and market data, such as returns and volatility. Ordinary least squares (OLS) regression was used to analyze cross-sectional data, exploring the relationship between ESG scores and financial performance metrics across various sectors. Results and Discussion: The results show no significant relationship between returns and ESG scores. However, a negative and statistically significant relationship was found between ESG scores and volatility, suggesting that firms with higher ESG ratings tend to exhibit lower risk. ESG Controversies Score (ECSC) displayed negative correlations with other ESG metrics, indicating that companies involved in controversies tend to have lower overall ESG scores. Research Implications: These findings suggest that while ESG scores may not directly influence returns, they play a role in risk management, highlighting the importance of ESG factors for investors seeking lower-risk profiles. Originality/Value: This research contributes to the understanding of ESG’s role in the Brazilian market, offering empirical evidence on how ESG integration can shape financial performance and risk, providing a nuanced view of ESG’s impact on investment decisions.