Market Turbulence Research Articles

How Professional Service Firms Derive Triple Value Bottomline: An IC Perspective

The ever-increasing market turbulence has turned today’s corporate landscape more competitive and complex. Particularly during the last two decades, the increased utilization of Information & Communication Technologies (ICTs) globally transformed the services sector in terms of ease of business processes and improved client service delivery. However, in the current knowledge-based era, these tools & technologies would only be meaningful if these are appropriately utilized by a knowledgeable workforce. In other words, this knowledge age has changed the success mantra of business competitiveness by re-shifting the focus from ICT-based transformations to knowledge-based transformations, though the availability of ICT systems has further augmented the organizational capabilities. Moreover, truly capitalizing on these warrants a knowledge-enabled work culture and recognizing as such the strategic significance of in-house Intellectual Capital (IC) that serves as a prime mover of achieving a sustainable competitive advantage. However, the maximum potential of IC for deriving multi-stakeholder value has not been fully achieved. Therefore, by administering 12 face-to-face semi-structured interviews at Australian Professional Service Firms (PSFs), this research offers a novel perspective on IC valuation by presenting the concept of ‘Triple Value Bottomline’ coupled with ‘IC Best Practices for PSFs’. These collectively offer IC evaluation, measurement and management mechanisms. Overall, the findings reveal immense potential of IC for achieving diverse value outcomes for multi-stakeholders in PSFs.

Influence of knowledge-oriented leadership and knowledge sharing on radical and incremental innovation: the moderating role of market turbulence

Purpose This study aims to analyze and clarify the influence of knowledge-oriented leadership (KOL) on radical and incremental innovation via the mediating role of knowledge sharing (KS). This study also explores the relationship between KS and two aspects of innovation capability by examining the moderating role of market turbulence. Design/methodology/approach The research model was tested using a structural equation modeling design based on survey data collected from 335 participants in 132 manufacturing and service firms in Vietnam. Findings The findings revealed that KOL serves as a key precursor to foster radical and incremental innovation directly or indirectly through KS processes. In addition, it highlights the moderating role of market turbulence in strengthening the impact of KS activities on two forms of innovation capability. Research limitations/implications By highlighting the important role KOL practice for stimulating KS behaviors, this paper provides a valuable understanding and novel approach for firms to improve radical and incremental. The research findings support the idea that market turbulence significantly contributes to increasing the effects of KS on innovation capability. Originality/value This study contributes to bridging research gaps in the the literature and advances the insights of how KOL directly and indirectly fosters innovation capability via the mediating role of KS processes under the market turbulence.

Exploring the impact of external collaboration on firm growth capability: the mediating roles of R&D efforts

In today’s business environment with high market turbulence, rapid technological change, and fierce competition, external collaboration and internal efforts in research and development (R&D) become equally important for firm growth. However, little is known about the effects of external collaboration on firm growth that generates along the path from outside to inside. Therefore, this study aims to explore the indirect effects of different types of external collaboration on firm growth capability via R&D efforts. It empirically analyzed a sample of 94 Chinese top-ranking innovative enterprises by applying hierarchical regression and mediation analysis. The results indicate that vertical collaboration, horizontal collaboration, and competitor collaboration are positively and directly related to the firm’s R&D intensity, R&D human capital, and firm growth capability. Furthermore, the firm’s R&D intensity and R&D human capital are positively and directly related to growth capability. The results of mediation analyses showed that R&D intensity mediated the relationship between external collaboration and firm growth capability. However, the results failed to support the mediating role of R&D human capital in the relationship between external collaboration and firm growth capability. This study enriches the literature on open innovation and organizational growth, and provides valuable insights for firm managers and policymakers.

Exploring the causal links between investor sentiment and financial instability: A dynamic macro-financial analysis

Investor sentiment may not only influence financial instability, it may also be shaped by it. Moreover, such causal links may differ over time, in crisis and non-crisis periods. This is a groundbreaking paper that tests these two hypotheses from a macro-financial perspective using the bootstrap rolling window sub-sample Granger causality approach to look at the case of the U.S. financial market between January 1990 and January 2021. We find that bullish sentiment can reduce financial instability as it promotes financial market entry and then liquidity during non-crisis periods, while higher financial instability is associated with less bullish sentiment leading to a shift to crisis periods. The results also reveal a positive (negative) effect of bearish (bullish) investor sentiment on financial instability during crisis periods, including the 2007–2008 financial crisis, the 2010 flash crash, the 2015–2016 Chinese stock market turbulence, and the February 2020 stock market crash. Finally, the study highlights the important role of the “betting against beta” strategy in the U.S. financial market, showing a negative effect of financial instability on bearish investor sentiment during several pre- and post-crisis periods.

From sentiment to systemic risk: Information transmission in Asia-Pacific stock markets

This study provides a comprehensive sentiment connectedness analysis in Asia-Pacific. We implement a time-frequency framework and a quantile connectedness approach while analyzing the impact of three crises: the global financial crisis, the Chinese Stock market turbulence (2015–2016), and the COVID-19 pandemic. We find a significant sentiment spillover across markets, though the magnitude is more pronounced in the long run. Although sentiment connectedness is higher during extreme states of the sentiment than in the average state, the systemic risk intensifies further when the sentiment is exceptionally high. Notably, Japan appears to contribute moderately to the sentiment network, while China is the lowest contributor. The three crises strengthened the total sentiment connectedness, while the COVID-19 pandemic had the most substantial impact. Our sentiment network findings have insightful implications on cultural and behavioral factors that drive sentiment systemic risk in Asia-Pacific.

Hedging and safe haven properties of Ethereum: evidence around crises

ABSTRACT Given the broad scope of Ethereum and the wide range of its decentralized applications, this paper investigates its hedging and safe haven capabilities against main fiat currencies, stock and bond indices in the US and Europe, and crude oil and gold markets. We use daily data from January 2016 until February 2021 and apply percentile regressions and crisis event interaction analysis by selecting four worldwide events including US presidential elections, the Brexit referendum, and COVID-19. We reveal that Ethereum does not act as a hedge or a safe haven against fiat currencies, stock and bond indices, and gold. However, it does act as a strong safe haven against crude oil in calm and turbulent periods and against European bonds during market turbulence. The study provides insights to regulators and investors into the potential role of Ethereum in investment decision-making and protecting financial market participants in the US and EU.

Investor sentiment based on scaled PCA method: A powerful predictor of realized volatility in the Chinese stock market

In this study, we construct an investor sentiment indicator (SsPCA) to predict stock volatility in the Chinese stock market by applying the scaled principal component analysis (sPCA). As a new dimension reduction technique for supervised learning, sPCA is employed to extract useful information from six individual sentiment proxies and obtain the common variations to characterize the investor sentiment (SsPCA). The empirical results indicate that SsPCA is a significant and powerful volatility predictor both in and out of sample. We also employ the partial least squares (PLS)-based investor sentiment index, three extra sentiment measures in past studies, and six individual sentiment proxies for comparison, and find SsPCA outperforms them on predicting stock volatility in the Chinese stock market. More importantly, the predictability of SsPCA remains significant before and after the famous financial crises (the sub-prime mortgage crisis and Chinese stock market turbulence) and the spread of the pandemic (COVID-19). Additionally, our findings imply that SsPCA still plays an essential role in predicting sock volatility after considering the leverage effect. The robustness of SsPCA in volatility forecasting is further verified in various industry indices of the Chinese stock market. Finally, we state that the strong predictability of SsPCA is highly related to its dimensionality reduction. Our results indicate that SsPCA is a robust volatility predictor from various aspects and performs better compared with existing sentiment indicators.

Fat tails and network interlinkages of crude oil and cryptocurrency during the COVID-19 health crisis

PurposeThe authors attempt to explore fat tails and network interlinkages of oil prices and the six largest cryptocurrencies from 1st January 2018 and 1st August 2021. The authors also investigate the influences of the COVID-19 pandemic on these network interlinkages.Design/methodology/approachThe authors follow Diebold and Yilmaz (2012) to calculate the spillover index the dynamic correlation coefficient model firstly employed by Engle (2002) to study how the volatility of oil prices are transmitted to those of cryptocurrency return and liquidity and vice versa.FindingsThe results confirm the presence of time-varying interlinkages between the volatilities of the oil market and the cryptocurrency market. Notably, uncertain events like the COVID-19 health crisis significantly influence the time-varying interlinkages they augment dramatically during the COVID-19 health crisis. The turbulence of the cryptocurrency market, especially from Bitcoin and Ethereum, significantly impacts those of the oil market. The role of the oil market in transmitting the effect of respective shocks to the cryptocurrency market, on the other hand, is time-varying, which is only reported when the COVID-19 pandemic first appeared at the beginning of 2020. The turbulence of the cryptocurrency market in the system is greatly explained by themself rather than a transmission mechanism of shocks to the oil market.Practical implicationsInsightful knowledge about key antecedents of contagion among these markets also help policymakers design adequate policies to reduce these markets' vulnerabilities and minimize the spread of risk or uncertainty across these markets.Originality/valueThe most significant benefit of the approach is how simple it is to calculate net pairwise connectivity, which identifies transmission channels between these commodity and financial markets. The authors are also the first to use the quasi-maximum likelihood (QML) estimator to estimate the DCC model to measure the volatility spillover index to reflect the level of interdependence between the different markets. By using a daily and up to date database, the authors can observe the role of each market in transmitting and receiving the shocks between two different sub-periods: (1) before and (2) during the COVID-19 pandemic crisis.

Value innovation and marketing capabilities in dynamic environments: a dynamic capability perspective

ABSTRACT In highly competitive markets, organizations need to engage in the disruptive type of innovation to create superior value for customers. Drawing on the dynamic capabilities view; this paper explores value innovation as a dynamic capability for reconfiguring the resource-base of the organization in pursuit of competitive advantage. This paper first investigates the mediating role of operational marketing capabilities, namely pricing, product development, channel management, and marketing implementation, in the relationship between value innovation and organizational outcomes. Secondly, it explores the moderating effects of environmental dynamism in terms of market turbulence and technological turbulence in the relationship between value innovation and marketing capabilities. The study, employing structural equation modelling, is based on data from 414 senior managers. The findings indicate that value innovation positively affects these operational marketing capabilities, which in turn leads to enhanced organizational outcomes. Further, in more turbulent environments, the relationship between value innovation and operational marketing capabilities is stronger.

Exploring the Relationship between WeChat Usage and E-purchase Intention During the COVID-19 Pandemic Among University Students in China.

Young generations, especially students, are increasingly turning their attention to e-purchasing apps. However, little has been investigated regarding students' tendencies during market turbulence or a pandemic situation such as COVID-19. To address this knowledge gap, this study develops a model from the perspective of e-purchase intention for university students during the COVID-19 pandemic based on one of the most famous social network sites (SNSs), WeChat, in China. The model is tested using survey data from 608 students studying in China. The results indicate that WeChat, as a popular and commonly used social media, affects users in their e-purchase intention during the COVID-19 pandemic in China through information shared by various users. Further, the effect of trust moderates the relationship between market turbulence and e-purchase intention among university students in China. Despite some limitations, such as survey data collected from students only in a single country, the study contributes to theory and practice by shedding light on SNS-based e-purchase intention among students in China during market turbulence. Theoretical contributions and managerial implications gleaned from this study and its empirical results are discussed.

The moderating role of market turbulence beyond the Covid-19 pandemic and Russia-Ukraine crisis on the relationship between intellectual capital and business sustainability

This paper examines the role of Intellectual Capital (IC) and its contribution to Business Sustainability (BS) among Large Manufacturing Firms (LMF) in Malaysia. It seeks to explain the relationship between them under turbulent market conditions. The study used the survey method to collect data from 203 large companies, and the hypotheses were tested using Partial-Least Squares-Structural Equation Modeling. Based on the findings, two dimensions of IC, namely Human capital (HC) and Structural Capital (SC), had a significant effect on business sustainability, but Relational Capital (RC) did not. Also results indicate that Market Turbulence (MT) moderates the relationship between two IC dimensions, HC and RC but not that between SC and BS. The study findings can be used as guidelines by CEOs of LMFs, policy makers and researchers to comprehend positive the influence of MT and IC on BS.

Does alliance orientation matter for new product success? An empirical study of Taiwanese electronics firms

PurposeFirms report varied levels of success in relation to using alliances to aid in new product development (NPD). This study aims to investigate internal processes that might influence the experience of alliance success. Specifically, this study investigates the role of mediating and moderating mechanisms underlying the alliance orientation (AO)–new product success relationship, while also investigating the impact of the level and consistency of AO. The primary goal is to understand the importance of a firm’s maintaining a consistent focus upon alliance scanning, coordination and learning.Design/methodology/approachA survey was conducted to collect data from 141 Taiwanese electronics companies. The proposed model and hypotheses were tested using path analysis in analysis of moment structures.FindingsAO improves the success of new products indirectly through the enhancement of product program innovativeness and NPD decision-making flexibility. The positive effect of AO on product program innovativeness and NPD decision-making flexibility is heightened when a firm consistently carries out a series of alliance management activities, including alliance scanning, coordination and learning. Market turbulence and the intensity of competition differentially affect the association between product program innovativeness and NPD decision-making flexibility and new product success.Research limitations/implicationsThe measures were self-reported and may result in the threat of common method bias. While this study focused upon protecting against and assessing this bias, collecting data from multiple sources would have helped to eliminate the bias. Further, the sample consisted of Taiwanese electronics firms. This makes it difficult to generalize this study’s findings to other industrial contexts.Practical implicationsWhile AO may be viewed as a dynamic capability, product program innovativeness and NPD decision-making flexibility represent competitive advantage in NPD program and process, respectively. Managers should not focus only on competitive advantage in NPD while overlooking the development of dynamic capabilities, as this study’s results demonstrate that both elements must work in tandem. AO is relevant at higher levels of the organizational hierarchy, while product program innovativeness and decision-making flexibility are operational, demanding cross-functional coordination and involvement within a firm. Senior executives ought to not only confirm the appropriate provision of their resources to activities and actions associated with product program innovativeness and decision-making flexibility in NPD but also continually monitor and assess whether the inputs of AO lead to desirable competitive advantage in the context of NPD.Originality/valueThis study sheds light on the underlying mechanism through which AO improves new product success. This research proposes two different aspects of AO, level and consistency, and empirically identifies their interactive effect in the context of NPD. The findings offer specific guidelines for the assessment and implementation of AO to improve new product success. Consistency, especially, has not been investigated in relation to alliance-generated new product success.

Managerial networking and competitive advantage: the moderating influence of competitive intensity

Because economic action is embedded in networks of inter-personal relations, many scholars have highlighted the importance of social ties in resource exchange for competitive advantage. Thus, through their networking activities and personal interactions, firm executives build social ties not only with business players but also with political entities. Conversely, at the centre of every industry’s environment is the concept of competitive intensity defined by Barnett (1997) as the “effect that an organization has on other’s survival, regardless of tactics involved”. Taking into consideration that managerial networking is widely viewed as far more common, relevant and effective in emerging markets such as Kenya, and further noting that market turbulences in Kenya are generally attributed to competitive pressure brought about by trade liberalization, this study sought to first establish the influence of managerial networking on competitive advantage in medium and large garment companies in Kenya. Subsequently, the study sought to determine the moderating influence of competitive intensity on the managerial networking-competitive advantage relationship in the forestated companies. A cross-sectional survey design was adopted with a sample of 83 firms being drawn from a population of 170 firms. Data was collected through questionnaires where a response rate of 86.7% was attained. Descriptive analysis was undertaken to establish the characteristics of the industry in relation to levels of managerial networking, competitive intensity and competitive advantage. Inferential analysis thereafter, aided in establishing relationships between the variables. The study had hypothesised that competitive intensity negatively moderates the managerial networking - competitive advantage relationship. The findings, however showed that competitive intensity positively moderated the relationship. Consequently, this study recommends that under intense competitive pressure, firms need to identify redundant networks to abandon and strategic networks to retain and join. Further, organizations need to focus on utilizing network resources more effectively for greater ability to adapt and thrive.

Forecasting the variability of stock index returns with the multifractal random walk model for realized volatilities

We adapt the multifractal random walk model by Bacry et al. (2001) to realized volatilities (denoted RV-MRW) and take stock of recent theoretical insights on this model in Duchon et al. (2012) to derive forecasts of financial volatility. Moreover, we propose a new extension of the binomial Markov-switching multifractal (BMSM) model by Calvet and Fisher (2001) to the RV framework. We compare the predictive ability of the two against 10 classical and multifractal volatility models. Forecasting performance is evaluated out-of-sample based on the empirical MSE, MAE, and QLIKE criteria as well as using model confidence sets following the methodology of Hansen et al. (2011). Overall, our empirical study for 14 international stock market indices has a clear message: The RV-MRW is the best model throughout under the MAE criterion, i.e., for all indices and forecast horizons between one day and 100 days, with uniform results for forecast evaluations against both realized volatilities and squared returns or during tranquil/turbulent market periods. Based on the evaluation of MSE and QLIKE forecast errors, the RV-MRW, RV-BMSM, and RV-ARFIMA provide the most accurate forecasts during our tranquil sample from 2016–2018, where we can observe a transition from RV-MRW dominating long-term forecasts to RV-BMSM and RV-ARFIMA dominating in the short term. The new RV-BMSM takes the lead in phases of more turbulent market dynamics (sample 2010–2012), when it appears throughout in the 90% model confidence set at horizons ≤10 days and for 13 out of 14 indices at 20 days. These results are very promising if we consider that this is the first empirical application of the RV-MRW and RV-BMSM. Moreover, whereas RV-ARFIMA forecasts are often a time-consuming task, the RV-MRW stands out due to its fast execution and straightforward implementation.

When to become an electronic business venture after the COVID-19 pandemic? The role of strategic orientation and perceived environmental turbulence in determining online market entry timing.

After the COVID-19 epidemic, a growing number of commercial entities have decided to enter the online platform and operated as an electronic business venture. However, the timing of entering the online market is a strategically important issue. On the basis of social capital theory and resource-based view, this study attempts to understand the different impacts of two strategic orientations (i.e., Guanxi orientation and entrepreneurial orientation) and perceived environmental turbulence (i.e., market turbulence and political turbulence) on online market entry timing. We test four hypotheses using data collected from 174 Chinese companies. Our results confirm that entrepreneurial orientation negatively impacts online market entry timing, and this effect is moderated by perceived market turbulence such that the negative relationship between entrepreneurial orientation and online market entry timing will be strengthened in higher market turbulence. By contrast, Guanxi orientation positively impacts online market entry timing, and the positive relationship between Guanxi orientation and online market entry timing will be weakened in higher political turbulence. Implications and future research directions are discussed.

Do High Fuel Prices Pose an Obstacle to Economic Growth? A Study for Poland

Great attention has been paid in recent months to high energy prices, including fuel prices. Numerous studies present the threat this poses to economic growth, but history already knows such situations. Therefore, the elementary question was posed: How do fuel prices affect trade and economic growth? The research was based on the Polish economy between 2000 and 2020. Poland is an importer of energy commodities, so it should exhibit strong sensitivity to fuel price changes. A VAR model was created for the Polish economy, including fuel prices, seaborne trade, gross domestic product, and inflation. The results demonstrate that the Polish economy is quite resilient to fuel market turbulence. Obviously enough, it is easier to function in the conditions of lower fuel prices, but high prices are not a reason to panic. Moreover, ongoing technological progress allows economies to weather fuel market crises more easily than was the case back in the 20th century. Therefore, one may unequivocally state that low fuel prices are not a prerequisite for a country’s development. An economy may develop under conditions of higher fuel prices, and panic over high fuel prices only further fuels the inflationary spiral.

The performance of zero-cost option derivative strategies during turbulent market conditions in developing and developed countries

The performance of zero-cost option derivative strategies during turbulent market conditions in developing and developed countries

How environmental, social, and governance disclosure promotes sales? Empirical evidence from global firms

ABSTRACT This paper investigates the influence of environmental (E), social (S) and governance (G) disclosure, and composite ESG on sales performance. The study analyses 826 global firms across 7 years spanning the 2008 financial crisis to understand how firms use ESG to promote sales in normal and disruptive periods. The effects of ESG and S alone on sales are significantly positive, while no significant effect of E and/or G is found. ESG has a significant effect on sales in the time of market turbulence, but the effect is not robust in normal time. The interaction of E*S/E*G/S*G is also analysed. Even the effect of E alone on sales tends to be negative, the interactive effect of S and E positively affects sales. This paper is among the first to investigate the influence of ESG in whole or in part on sales, taking into account a contextual factor, i.e. market turbulence time.

A Comparative Analysis of Equity and Balanced Unit Trust Funds before and During COVID-19 Pandemic

This paper aims to examine the comparative performance of equity and balanced unit trust funds before and during the COVID-19 pandemic, which is from January 2014 to December 2018 and January 2019 to December 2020. To achieve the aforementioned study objective, the study conducted by using three model measures, Sharpe, Treynor and Jensen’s alpha Index. The findings of this study carry out the COVID-19 pandemic does not affect the performance of equity and balanced unit trust funds. Investors gain a return from equity funds and balanced funds into a well-diversified domestic investment portfolio. To be concluded that unit trust funds help investors to put their money in different baskets of investment avenues to minimize the risk of loss of money, especially during a turbulent market. Future studies may investigate the features of fixed-income-based unit trusts, such as government and corporate bonds with commercial and social goals and as a mechanism for promoting environmental, social and governance (ESG) considerations towards establishing a low-carbon economy.

Forecasting crude oil risk: A multiscale bidirectional generative adversarial network based approach

The crude oil market is known to be subject to the influence of transient and extreme events. The rare and infrequent nature of these events leads to problems such as a lack of data for the estimation of reliable risk measures in the crude oil market. In this paper, an innovative MEMD-BiGAN risk forecasting methodology combining the power of multi scale analysis and Generative Adversarial Network has been proposed. BiGAN has been introduced as an innovative method from the machine learning field to produce the augmented dataset with sufficient number of observations. Then Historical Simulation method can be employed to estimate market risk level in the multiscale domain, where the final risk forecasts taking into account the transient risk factors are more accurate and reliable. MEMD-BiGAN has been applied to model the portfolio of daily trading data in the major crude oil markets including West Texas Intermediate, Brent and OPEC markets. Results suggest that the MEMD-BiGAN model can achieve improved risk coverage. This implies that the incorporation of the transient risk factors using the BiGAN model is essential to more accurate modeling of the risk measures in the turbulent market environment.