Market-specific Factors Research Articles

Interest rate spreads: Different stories for different types of loan

The paper studies the determinants of the interest rate spreads in Estonia, a country that stands out among European countries for its wide spreads and highly concentrated banking sector. Four distinct credit markets are considered for housing loans, consumer loans, long-term corporate loans and short-term corporate loans. The paper uses quarterly panel data from 2000Q1–2021Q1. It uses a two-stage approach to disaggregate the observed spread into a component determined by the bank-specific factors and a component determined by the market-specific factors, which is called pure spread. For each of the two components, we find substantial differences in the determinants of the spreads across different types of loan. While credit risk is important for long-term corporate and housing loans, inverse efficiency is significant in the segment of short-term loans. The contribution of market concentration to the pure spread is larger for household loans than for corporate loans.

Analyzing the Influence of Marketing Strategies on Consumer Behavior in the Fast Fashion Industry: The Case of Zara in Cyprus

Purpose: This article aims to examine the impact of marketing strategies on consumer behavior within the fast fashion industry, specifically focusing on Zara's operations in Cyprus. By exploring the relationship between marketing strategies and consumer responses, the research seeks to contribute to the understanding of effective strategies in this dynamic market. Theoretical Reference: The article draws on established consumer behavior theories to provide a theoretical framework for analyzing the influence of marketing strategies on consumer decision-making. Method: A quantitative research approach was employed, utilizing a survey methodology to collect data from Cypriot consumers. The survey focused on assessing consumer perceptions and behaviors in response to Zara's advertising campaigns, special offers, and social media promotions. Results and Conclusion: The findings reveal that Zara's marketing strategies significantly impact consumer behavior in the Cypriot market. Specifically, special offers and social media promotions substantially influence purchase intentions and brand loyalty. However, the study also identifies limitations in the generalizability of the results due to its focus on a single brand and market. Implications of Research: The article offers valuable insights for fashion retailers seeking to optimize their marketing efforts. By understanding the effectiveness of different marketing strategies, businesses can tailor their campaigns to resonate with target audiences and build stronger customer relationships. The findings also highlight the importance of considering cultural and market-specific factors in developing marketing strategies. Originality/Value: This article contributes to the existing body of knowledge by providing empirical evidence on the impact of marketing strategies on consumer behavior within the Cypriot fast fashion context. By focusing on Zara, a major industry player, this study offers a detailed examination of the specific strategies employed.

The role of uncertainty and sentiment for intraday volatility connectedness between oil and financial markets

We quantify intraday volatility connectedness between oil and key financial assets and assess how it is related to uncertainty and sentiment measures. For that purpose, we integrate the well-known spillover methodology with a TVP VAR model estimated on a unique, vast dataset of roughly 300 thousand 5 min quotations for most heavily traded financial assets: crude oil, the US dollar, S&P 500 index, gold and US treasury bonds. This distinguishes our investigation from previous studies, which usually employ relatively short samples of daily or weekly data and focus on connectedness between two asset classes. We contribute to the literature across three margins. First, we document that market connectedness at intraday frequency presents a different picture on markets co-movement compared to the estimates obtained using daily data. Second, we show that at 5 min frequency volatility is mostly transmitted from the stock market and absorbed by the bond and dollar markets, with oil and gold markets being occasionally important for volatility transmission. Third, we present evidence that daily averages of intraday connectedness measures respond to changes in sentiment and market-specific uncertainty. Interestingly, our results contrast with earlier findings, as they show that connectedness among markets decreases in periods of high volatility owing to market-specific factors. Our study points to the importance of using high-frequency data in order to better understand financial and commodity markets dynamics.

Portfolio management under capital market frictions: a grey clustering approach

International portfolio management is influenced by the existence of “frictions”, factors or events that interfere with trade, which are linked in financial literature to market-specific factors, such as available information, restrictions, investor protection, or market liquidity. Given the wide variety of factors that can be included in these categories, scientific studies typically focus on a reduced number of indicators at a time in order to offer an in depth analysis of their impact. We offer a consolidated view of the perspectives observed in financial literature by proposing a novel index for market frictions that includes all these four components and rank fifteen post-communist East European capital markets based on their index values. We then constructed various scenarios by assuming different levels of importance for the criteria used in index construction. By employing grey clustering analysis, we cluster these capital markets into three categories—strongly recommended, recommended with some reserve, and not recommended—based on the importance given by the decision maker to these factors. The results show that some of the studied markets are in the same cluster, irrespective of the chosen scenario. The only market always included in the “strongly recommended” category is Hungary, indicating that it is a good investment option for international participants. Bulgaria and Slovakia are always regarded as “recommended with reserve” markets, whereas the Republic of Moldova is part of the “not recommended” category. The other markets show a degree of variability that can be explained by different investor perspectives. This study contributes to the existing literature by combining the advantages of grey clustering and portfolio analysis. Investors can use this approach during the decision-making process related to their investments.

Volatility connectedness on the central European forex markets

We perform a comprehensive assessment of volatility connectedness between the currencies of Central European (CE) countries using high-frequency data from 2009 to 2022. We provide evidence of asymmetries in connectedness that are dominated by negative volatility, especially during periods of economic distress. We also detect statistically significant economic or political events that lead to increased volatility connectedness. Plus, we document the impact of global shocks, not local ones. Further, the existing lag in the response of the spillover index to stressful events offers an opportunity to effectively hedge foreign exchange risk and to use the CE currencies as hedging tools. Finally, in terms of market-specific factors, liquidity dominates uncertainty as a connectedness driver. Our results are robust with respect to volatility measures and provide direct policy implications for portfolio composition and hedging.

Fresh air eases work—the effect of air quality on individual investor activity

Abstract This article shows that contemporaneous and lagged air pollution negatively affects the likelihood of German individual investors to log in and trade in their brokerage accounts, using intraday data and controlling for investor-, weather-, traffic-, and market-specific factors. A 1 SD increase in air pollution leads to a 1.3 percent reduction in the probability of logging in, which is larger than the response to a 1 SD increase in sunshine. We argue that changes in air pollution affect productivity in cognitively demanding tasks, such as trading. Our results are robust to macroeconomic productivity shocks, nonlinearities, or measurement error.

Potencies and Opportunities of Halal Market in Global Industry: An Empirical Analysis of Malaysia and Indonesia.

The halal industry has experienced substantial growth in recent years, with an estimated value of USD 2.3 trillion. This rapid expansion has positioned the halal market as a promising sector with significant potential in the global economy. Interestingly, the market has transcended its traditional Muslim consumer base, attracting non-Muslims as well. This paper aims to provide an in-depth analysis of the global halal industry, focusing on the potencies and opportunities it presents within the worldwide market. Specifically, it seeks to identify the factors that drive the demand for halal products in Malaysia and Indonesia and examine the potential for these countries to become leaders in meeting global halal requirements. The research methodology employed in this study relies on secondary data from reputable journals and proceedings. The findings indicate that the GDP of Malaysia and Indonesia exerts a positive and significant influence on the halal market. Both countries exhibit similar potentials and opportunities in the halal sector, although their rates of expansion may vary based on market-specific factors and duration of market presence. The insights derived from this research aim to inform future researchers, scholars, practitioners, and policymakers, aiding them in making informed decisions regarding the strategic development of the halal market. By understanding the realities and opportunities of the global halal industry, stakeholders can navigate a path towards sustainable growth and capitalize on the emerging prospects within the halal market.

Analyzing Relationship Between ROA and Beta and The Influence of Multi Factors on ROA – A Case of Vietinbank in Vietnam

In emerging markets such as Vietnam, banking markets has been developing with fast growth and implies risk, hence, we need to focus on building strategies for improving ROA and profitability of banks. Hossain and Khalid (2018) found that bank specific factors and market specific factors have influenced the bank profitability. One of this study’s purposes is to state formulation of weighted beta capm index, By using VAR (vector auto-regression model) which is a reliable method, our research results tell that there are management and policy implications: Ministry of Finance, State bank of Vietnam and relevant agencies need to control GDP better in medium term to help increasing bank ROA.Beside, the bank may increase lending rate in long term to support ROA. Also, the bank consider to mange cost better in medium term to increase ROA. Last but not least, bank management can consider to reduce lending rate in short term in order to reduce risk or beta. Therefore, our study can be expanded for other markets.

The Moderating Effect of Market-Specific Factors on the Return Predictability of Investor Sentiment

This paper examines the return predictability of investor sentiment in 12 Asian and European markets during the period between 2004 and 2016. Employing the composite sentiment index constructed from the consumer confidence index ( CCI), advance/decline ratio ( ADR), and volatility premium ( VP), we find a strong negative relationship between investor sentiment and the next 3 to 24-month returns. This outcome implies that sentiment could be a contrarian predictor of market returns over various periods. Moreover, we reveal an essential role of local factors, including financial development, institutional governance, and culture, in the sentiment-return diversification among regional markets. We discover that the moderating effect of market-specific factors is time-varying and different between Asian and European areas. As a result, sentiment has a shorter-term impact in Europe but a longer-term impact in Asia.

The determinants of IPO initial returns in emerging markets: a quantile regression

PurposeThis article investigates the determinants of cross-section variation of initial public offerings' (IPOs) first-day returns in a sample of 710 issues across seven emerging markets between 2013 and 2017.Design/methodology/approachOrdinary least squares regression (OLS) and the semi-parametric quantile regression (QR) technique are employed. QR enables to analyse beyond the explanatory variables' relative mean effect at various points in the endogenous variable distribution. Furthermore, parameter estimates under QR are robust to the existence of outliers and long tails in the data distribution.FindingsUnderpricing varies across countries with an average of 78%. According to the OLS results, independent variables explain 26% of the variation of IPOs' first-day returns. Findings show that employing QR is important, given the non-normality of the data and because each quantile is associated with a different effect of explanatory variables.Originality/valueIn addition to firm-specific, market-specific and issue-specific factors, the paper extends IPOs' underpricing literature through studying the impact of country-specific characteristics, largely neglected by literature, on IPO underpricing.

The impact of Company-specific and Macro-economic factors on Company Performance: Evidence from Insurance Sector in Sri Lanka

This study examines the impact of company-specific and macro-economic factors on insurance companies' financial and market performance in Sri Lanka. The analysis was conducted using a panel regression. The sample consisted of nine listed insurance companies from 2010 to 2019, inclusive of both years. Capital structure, capital adequacy, liquidity position, and company size were considered as company-specific factors, whereas inflation and GDP growth were considered as market-specific factors. Net profit margin, return on assets, return on equity, and earnings per share were considered to measure the financial performance. In contrast, market value-added (MVA) was used to measure the market performance. Capital adequacy and capital structure have a significant negative association with financial performance, whereas the size is positively related to financial and market performance. The GDP growth rate is negatively associated with financial performance. Moreover, the liquidity position of the company is positively related to the MVA. The study provides evidence that the capital structure, capital adequacy, GDP growth rate, size of the company and liquidity position are essential factors that affect the insurance sector's financial and market performance in Sri Lanka. The study recommends that Sri Lankan insurance companies pay due attention to these factors to address financial and market performance matters. There is a dearth of studies in Sri Lanka on this phenomenon. We contribute as the direct study that analyzes the financial and market performance of the insurance sector in Sri Lanka in a single study. 
 Keywords: Company-specific factors, Financial performance, Market performance, Insurance sector, Macroeconomic factors, Sri Lanka.

Speculative bubbles and herding in cryptocurrencies

This study investigates speculative bubbles in the cryptocurrency market and factors affecting bubbles during the COVID-19 pandemic. Our results indicate that each cryptocurrency covered in the study presented bubbles. Moreover, we found that explosive behavior in one currency leads to explosivity in other cryptocurrencies. During the pandemic, herd behavior was evident among investors; however, this diminishes during bubbles, indicating that bubbles are not explained by herd behavior. Regarding cryptocurrency and market-specific factors, we found that Google Trends and volume are positively associated with predicting speculative bubbles in time-series and panel probit regressions. Hence, investors should exercise caution when investing in cryptocurrencies and follow both crypto currency and market-related factors to estimate bubbles. Alternative liquidity, volatility, and Google Trends measures are used for robustness analysis and yield similar results. Overall, our results suggest that bubble behavior is common in the cryptocurrency market, contradicting the efficient market hypothesis.

Influencing factors of short- and long-term returns on IPOs in the Chinese and the U.S. capital markets: A systematic literature review

In their studies, Loughran, Ritter, and Rydqvist (1994), Fan, Wong, and Zhang (2007), Chi and Padgett (2005) as well as Ritter (1991) show differences in the regional characteristics of underpricing and overpricing in initial public offerings (IPOs). Our study analysis the regional differences in the influencing factors of underpricing or overpricing based on a systematic literature review that is focused on the Chinese and the U.S. capital markets. Therefore, following the systematic literature review protocol, it was possible to select 38 papers published between 1988 and 2019. Our results show that stock market-specific factors are crucial for regional differentiation. Results on the correlation between stakeholder- and issuance-specific factors are at least partially contradictory. The uniformly identified correlations of stakeholder and issuance factors diverge only slightly in both markets. The investigation of the influencing factors mentioned in the studies also reveals the causal relationship that the IPO return phenomenon of underpricing is influenced by site-exclusive and site-independent factors, whereas overpricing is primarily influenced by site-independent factors. We thus close an existing research gap and satisfy an important information need of issuers and investors.

Foreign Portfolio Investment and Earnings Quality: Evidence from Sri Lanka

The development flows signs renewed foreign interest in the stock market during mid-2017, recording an all-time high in foreign purchases. With the realization of investment opportunities and potential in capital markets in Sri Lanka, foreign investors actively participated in trading in CSE making volatility in Foreign Portfolio Investment (FPI), which lead the researcher to investigate the determinants of FPI under company performance (ROA, ROE and OPM), market-specific factors (MC, MI and BETA), earnings quality (EQ) measured by total accruals (TA) and macro-economic variables (IR and GDP) using evidence from Sri Lanka. Using the three dependent variables of TNFP, TFP, and TFS the researcher analyzed quarterly data for the period from 2011 to 2016 under panel data regression model and concluded, ROE, MC, MI, BETA, GDP Growth and IR has a significant relationship with foreign portfolio investment where the results suggested earnings quality does not have any impact on foreign portfolio investment. The findings of the study are especially useful for potential investors, regulators and the interested parties of investment decisions.

Co-movement of volatility risk premium: evidence from single stock options market in India

ABSTRACT This study investigates the existence of commonality of volatility risk premium in the index and individual stock options. Using data from the National Stock Exchange (NSE) India, the study finds that the commonality relationship is both economically and statistically significant. The commonality relationship is robust, even after including the market-specific and stock-specific factors.

The Impact of Company Performance, Earnings Quality and Macroeconomic Variables on Foreign Portfolio Investment: Evidence from Sri Lanka

The development flows signs renewed foreign interest in the stock market during mid-2017 recording an all-time high in foreign purchases. With the realization of investment opportunities and potential in capital markets in Sri Lanka, foreign investors actively participated in trading in CSE making volatility in Foreign Portfolio Investment (FPI), which lead the researcher to investigate the determinants of FPI under company performance (ROA, ROE and OPM), market-specific factors (MC, MI and BETA), earnings quality (EQ) measured by total accruals (TA) and macro-economic variables (IR and GDP) using evidence from Sri Lanka. Using the three dependent variables of TNFP, TFP, and TFS the researcher analyzed quarterly data for the period from 2011 to 2016 under a panel data regression model and arrived at the conclusion that, ROE, MC, MI, BETA, GDP Growth and IR has a significant relationship with foreign portfolio investment where the results suggested that earnings quality does not have any impact on foreign portfolio investment.

The Relative Effects of Business-to-Business (vs. Business-to-Consumer) Service Innovations on Firm Value and Firm Risk: An Empirical Analysis

Many firms introduce both business-to-business service innovations (B2B-SIs) and business-to-consumer service innovations (B2C-SIs) and need to better allocate their resources. However, they are unsure about B2B-SIs’ effects on firm value or risk, especially relative to those of B2C-SIs. The authors address this problem by developing hypotheses that relate the number of B2B-SIs and B2C-SIs to firm value and firm risk together with the moderators (the number of product innovations and customer-focus innovations). To test the hypotheses, the authors develop and estimate a model using unique panel data of 2,263 SIs across 15 industries over eight years assembled from multiple data sources and controlling for firm- and market-specific factors, heterogeneity, and endogeneity. They analyze innovation announcements using natural language processing. The results show that B2B-SIs have a positive effect on firm value and an insignificant influence on firm risk. Importantly, the effect of a B2B-SI on firm value is significantly greater than that of a B2C-SI. Unlike B2C-SIs, the effect of B2B-SIs on firm value is greater when the firm has more product innovations. Surprisingly, unlike B2C-SIs, the effect of B2B-SIs on firm value is less positive when the SIs emphasize customers. These findings offer important insights about the relative value of B2B-SIs.

Corporate internationalization, subsidiary locations, and the cost of equity capital

This study examines the relationship between corporate internationalization and the cost of equity capital. We find that international diversification reduces the cost of equity. The diversification benefits are particularly strong during the 2008 financial crisis and for financially constrained firms. We also find that market-specific factors serve as important channels through which the corporate internationalization effects amplify or attenuate. Overall, our study provides support for theories that multinational companies perform valuable diversification functions to investors in a world with segmented and imperfect financial markets.

Investor sentiment antecedents

PurposeThe determinants of investor sentiment based on stock market proxies are found in numbers in empirical studies. However, investor sentiment antecedents developed from primary survey measures by constructing an investor sentiment index (ISI) are not done till date. The purpose of this paper is to fill this research gap by first developing an ISI for the Indian retail investors and then examining the investor-specific, stock market-specific, macroeconomic and policy-specific factors’ individual impact on the investor sentiment.Design/methodology/approachFirst, the authors develop the ISI by using the mean scores of six statements as formulated based on popular direct investor sentiment surveys undertaken throughout the world. Then, the authors employ the structural equation modeling approach on the responses of 576 respondents on 40 statements (representing the index and four study hypotheses) collected in 2016 across the country.FindingsThe results show that investor- and stock market-specific factors are the major antecedents of investor sentiment for these investors. However, interestingly macroeconomic fundamentals and policy-specific factors have no role to play in driving their sentiment to invest in the stock market.Practical implicationsThe major implication of the results is that the Indian retail investors are showing a mixed approach of Bayesian and behavioral finance decision making. So, these implications can guide the investment consultants, regulators, other stakeholders in markets and overwhelmingly the retail investors to introspect their investment decision making across time horizons.Originality/valueThe formulation of ISI in an emerging market context and thereafter examining possible antecedents to influence retail investors in their investment decision making are not done till date. So, the study is unique in its research issue and findings and will have significant implication for the retail investors at least in emerging market contexts.

Surgeon Participation in Early Accountable Care Organizations.

We aimed to characterize the landscape of surgeon participation in early accountable care organizations (ACOs) and to identify specialty-, organization-, and market-specific factors associated with ACO participation. Despite rapid deployment of alternative payment models (APMs), little is known about the prevalence of surgeon participation, and key drivers behind surgeon participation in APMs. Using data from SK&A, a research firm, we evaluated the near universe of US practices to characterize ACO participation among 125,425 US surgeons in 2015. We fit multivariable logistic regression models to characterize key drivers of ACO participation, and more specifically, the interaction between ACO affiliation and organizational structure. Of 125,425 US surgeons, 27,956 (22.3%) participated in at least 1 ACO program in 2015. We observed heterogeneity in participation by subspecialty, with trauma and transplant reporting the highest rate of ACO enrollment (36% for both) and plastic surgeons reporting the lowest (12.9%) followed by ophthalmology (16.0%) and hand (18.6%). Surgeons in group practices and integrated systems were more likely to participate relative to those practicing independently (aOR 1.57, 95% CI 1.50, 1.64; aOR 4.87, 95% CI 4.68, 5.07, respectively). We observed a statistically significant interaction (P <0.001) between surgical specialty and practice organization. Model-derived predicted probabilities revealed that, within each specialty, surgeons in integrated health systems had the highest predicted probabilities of ACO and those practicing independently generally had the lowest. We observed considerable variation in ACO enrollment among US surgeons, mediated at least in part by differences in practice organization. These data underscore the need for development of frameworks to characterize the strategic advantages and disadvantages associated with APM participation.