Philippine Stock Market Research Articles

Portfolio Size on Profit Optimization: The Case of Large-Cap Companies in the Philippine Stock Market

Portfolio Size on Profit Optimization: The Case of Large-Cap Companies in the Philippine Stock Market

Understanding and Forecasting Selected Philippine Stock Market Prices from Different Companies Before and During Covid-19 Pandemic using Multiple Linear Regression and Arima Model

COVID-19 became one of the most devastating pandemics in history. The loss of jobs, businesses, and even life had a huge impact on the world and at the same time, the economy of every country was jeopardized. Finding different ways to earn during the pandemic might be hard, but a reliable way could be investing. In the pandemic setting, the study aims to answer the question: is investing in the stock market an effective source of income with all the negative effects causing a financial crisis? On the other hand, out of the many companies in the stock market, a cluster sampling method was used to get a company from each of the clusters or sectors in the Philippine Stock Exchange Index (PSEi). From the chosen companies namely: PLDT, JFC, MPI, BPI, and MEG, each company’s stock prices before the pandemic (2016-2019) and during the pandemic (2020-2021) were correlated using multiple linear regression to show the relationship of the stock prices to economic indicators such as GDP, Inflation Rate, and Unemployment. Furthermore, the study uses ARIMA modeling to forecast 30-day stock prices for December 2019 and March 2021. To supplement the forecast of the data, performance indicators of each company for the 5-year range were obtained to further give analysis on the better investment. The study showed significant returns for the stock prices of each corporation based on MAPE, before and during the pandemic. The forecasted models are below 10% MAPE except for MPIs before the pandemic model. Forecasting the stock prices of these companies can help investors to buy low and sell high, which is taking advantage of the situation to earn higher returns while alleviating businesses as well as the economy to recover. Keywords: COVID-19, ARIMA, Multiple Linear Regression, Stock Market, PSEi

COVID-19 PANDEMIC EVENTS AND PHILIPPINE STOCK MARKET PERFORMANCE: TESTING FOR MULTIPLE BREAKPOINTS

<p>This study examined several PSEi breakpoints to determine if COVID-19-related headlines or events cause significant stock market breaks. From December 2, 2019 to May 5, 2022 (T=632), time-series data revealed that the stock market performed the worst during the first four months of 2020. Regression with ordinary least squares on PSEi values revealed the Philippine stock market has random walk characteristics for the same time period. The Breusch-Godfrey serial correlation LM test at two lags demonstrated serial correlation in the mean equation residuals. During COVID-19 pandemic events, the Chow test was applied to daily stock market data to identify structural breaks and PSEi shifts. The Bai-Perron test identified four noteworthy multi-breakpoints. On April 17, 2020, Leyte reported the first confirmed case of COVID-19, and Johns Hopkins University reported that the global death toll exceeded 50,000. This event is likely related to the cutoff dates of November 5 and 6, 2020, when the Philippines will have an average of 1,000 COVID-19 cases per day and the government will have identified specific sectors to receive free vaccines under the initial procurement. On March 23, 2021, 17 mayors of Metro Manila and neighbouring cities voted unanimously to close recreational establishments for two weeks, indicating a possible parallel to the breakpoints on September 3, 2021, when the Philippine Food and Drug Administration approved Moderna vaccines for 12–17-year-olds. Another breakpoint found was on October 11, 2021924,300 COVAX vaccines donated by the United States arrived at Ninoy Aquino International Airport. Breakpoint events and their implications for the study of financial economics were discussed. </p><p><strong>JEL</strong>: E32; G11; G14; G17</p><p> </p><p><strong> Article visualizations:</strong></p><p><img src="/-counters-/soc/0048/a.php" alt="Hit counter" /></p>

Risk Aversion and Investment Intentions of Filipino Investors: A Moderation Study

A survey was conducted amongst a sample of Filipino retail investors residing in NCR. All at the ages of 21-60 with at least 1 year of investing experience in the Philippine stock market and cryptocurrency market. Risk Aversion, Long Term Investment Intention (LTII), and Short Term Investment Intention (STII) are the variables that were measured using Risk Aversion Scale and Investment Intentions Scale and moderation analysis of the setting of stocks and cryptocurrency was done. The study showed significant correlation of Risk Aversion and STII in the setting of cryptocurrency. The data manifested significant moderation in Risk Aversion and LTII in the setting of stock investing and Risk Aversion and STII in the setting of cryptocurrency investing.

Stock market optimization amidst the COVID-19 pandemic: Technical analysis, K-means algorithm, and mean-variance model (TAKMV) approach

The Philippine stock market, just like most of its neighbors in the region, was seriously impacted by the global pandemic COVID-19. Investors remain hopeful while continuing to seek great ones in the damaged market. This paper developed a methodology for portfolio selection and optimization with the use of technical analysis, machine learning techniques, and portfolio optimization model. The combined methods of technical analysis, K-means clustering algorithm, and mean-variance portfolio optimization model will result in the development of the proposed TAKMV method. The study aims to integrate these three important analyses to identify portfolio investments. This paper uses the average annual risk and annual rate of return data for the years 2018 and 2020 to form the clusters and assessed the stocks that correspond to the investor's technical strategy such as Moving Average Convergence/Divergence (MACD) and Hybrid MACD with Arnaud Legoux Moving Average (ALMA). This paper solved the risk minimization problem on selected shares of the companies, based on the mean-variance portfolio optimization model. There are 230 and 239 companies for 2018 and 2020, respectively, listed in Philippine Stock Market, and all simulations were performed in MATLAB environment platform. Results showed that MACD strategy dominates the MACD-ALMA strategy in terms of the number of assets with a positive annual rate of return. The MACD works efficiently in the pre-COVID-19 condition while MACD-ALMA works efficiently during-COVID-19 condition, regardless of the number of assets with a positive annual rate of return. The results also show that the maximum expected portfolio return (RP) can be achieved using the MACD and MACD-ALMA in the pre-and during-COVID-19 conditions, respectively. The MACD-ALMA shows an advantage during high-risk market conditions and can also provide maximum RP. The performance of the TAKMV method was validated by applying its results and comparing it to the next year's historical price. The 2018 results were compared to 2019 data and the 2020 results were compared to 2021 data. For consistency, the comparison was applied to the same company per portfolio. Simulation results show that the MACD strategy is more effective compared to MACD-ALMA.

Forecasting the Daily Stock Prices of the Philippine Stock Exchange Index During the Opening and Closing of the Market

While there are many factors and other alternative methods to forecast the future performance of the Philippine Stock Market Index, the researchers have elected to utilize a quantitative approach based on technical market factors available which consists mainly of intra-day daily trading levels of the index.

Impact of Macroeconomic Variables on Stock Market Price Levels: Evidence from the Philippines

The study investigates the short and long-run relationship between the Philippine Stock Exchange Index and macroeconomic variables interest rate, foreign direct investment (FDI), and exchange rate. Specifically, the paper analyzed annual secondary data from the inception of PSEi in 1985 to 2019. This study's theoretical and empirical research finds diverse perspectives on how each macroeconomic variable factors into the stock market price levels. The Philippine stock market has also grown remarkably during the past few decades. However, there is little to no comparable study in Philippine literature. So, by employing the ARDL bounds testing approach, the research adds to the body of literature by examining the macroeconomic factors influencing the growth of the Philippine stock market. The study adopted the Autoregressive Distributed Lag (ARDL) model to estimate the causality function, F-Bounds Test to establish long-run causal significance, and Error Correction Term (ECT) to determine how long until the adjustment of short-run errors to re-equilibrate to the long-run equilibrium. The results show that FDI has a positive cointegration in both the short and long run, the exchange rate has a positive cointegration both in the short and long run, and the lag of interest rate is positively significant in the short run and negatively significant in the long run.

Predicting Long-Run and Short-Run Movement of Sectoral Index: Evidence From Philippine Stock Market

The financial markets provide a viable avenue for investors who wants to invest their idle resources. Investors need accurate information to minimize investment risk and make the right investment decision. This study attempted to test the predictability of the Philippine Stock Exchange (PSE) sectoral indices. The data used in this study are the daily closing price of the six sectoral indices from January 2010 to December 2019. Augmented Dickey-Fuller (ADF) for stationarity test and Johansen Cointegration and Granger Causality analysis were used to test the long-run and short-run relationship among the six sectoral indices. The results showed that all indices are not predictable at the index level (I(0)) but predictable at the first difference (I(1)). The study found no long-run relationships between sectoral indices. The result also revealed that the sectoral indices have a short-run relationship in both directions.

Reaction of the Philippine Stock Market to Domestic Monetary Policy Surprises: An Event Study Approach

This paper uses an event study analysis to assess how stock prices in the Philippines have reacted to domestic monetary-policy changes using data at a daily frequency from 2017 to 2022. A major contribution of this paper is the construction of a monetary-policy surprise measure for the Philippines, as the difference between the actual change in the monetary policy rate and the change anticipated by professional forecasters. My results are consistent with the literature, suggesting that unanticipated monetary policy changes exert a significant influence on stock prices in the Philippines. Overall, I find that an unexpected increase of 25 basis points in the monetary policy rate increases stock prices by about 1.09% on average. These results are robust to the inclusion of additional control variables in the baseline regression model, such as the implementation of restrictions to economic activity to curb the spread of the COVID-19 outbreak or revisions to macroeconomic forecasts released concomitantly with the monetary-policy rate announcement.

INTEGRATION OF SOUTHEAST ASIAN STOCK MARKETS WITH THE WORLD STOCK MARKET: APPLICATION OF INTERNATIONAL ASSET PRICING MODEL

This study aims to determine the integration level of Southeast Asian stock market with the world stock market using an international capital asset pricing model. The countries that were sampled in this study were Indonesia, Malaysia, Philippines, Singapore and Thailand. The sample period starts from January 2000 until August 2016. This study uses an partially-segmented international capital asset pricing model by including the assumption of residual that were correlated between asset pricing equations. Because of this assumption, the seemingly unrelated regression (SUR) estimation method is more appropriately compared to the ordinary least square (OLS) method. The results of this study indicate that the integration level of Southeast Asian stock market varies. The Singapore and Thailand stock markets are fully integrated with the world stock market, the Indonesian and Malaysian stock markets are partially integrated with the world stock market, while the Philippine stock market is segmented with the world stock market. This finding shows the difference in the effectiveness of the stock market liberalization process in Southeast Asia

The Contagion Effect from U.S. Stock Market to the Vietnamese and the Philippine Stock Markets: The Evidence of DCC – GARCH Model

Using a DCC – GARCH model analysis, this paper examines the existence of financial contagion from the U S stock market to the Vietnamese and the Philippine stock markets during the global financial crisis and the COVID-19 pandemic crisis We use daily data from the S&P 500 (U S ), VN-Index (Vietnam), and the PSEi (the Philippines) As a result, there is no evidence of contagion from the U S stock market to the Philippine stock market that can be found during global financial crisis, while the Vietnamese market is influenced by this effect Besides, both these developing stock markets (the Vietnamese and Philippine stock markets) are influenced by the contagion effect in COVID-19 pandemic crisis Another finding is that the contagion effect during the coronavirus pandemic crisis in Vietnam is smaller than that during the global financial crisis, however, the opposite is the case for the Philippines It is noticed that the Philippines seems to be more affected by the contagion effect from the COVID-19 pandemic than Vietnam at the time of this study Because financial contagion is important for monetary policy, asset pricing, risk measurement, and portfolio allocation, the findings in this paper may give some useful information for policymakers and investors © Copyright: The Author(s) This is an Open Access article distributed under the terms of the Creative Commons Attribution Non-Commercial License (https://creativecommons org/licenses/by-nc/4 0/) which permits unrestricted non-commercial use, distribution, and reproduction in any medium, provided the original work is properly cited

AN ANALYSIS OF HERDING BEHAVIOR IN THE STOCK MARKET: A CASE STUDY OF THE ASEAN-5 AND THE UNITED STATES

We construct a new dataset to examine herding behavior in the ASEAN-5 (Indonesia, Singapore, Malaysia, the Philippines and Thailand) and the US stock market. Our dataset consists of daily closing prices on the most liquid stock indices in the ASEAN-5 and the US stock market. Based on the Newey–West estimator, we show that the dominant global factor influencing herding behavior is the US federal funds rate, while the cross-market herding of the Singaporean stock market is the dominant regional factor that influence the other ASEAN stock markets. We find that herding behavior, caused by stock market index, spikes only occur in the Philippine stock market.

The Existence of Random Walk in the Philippine Stock Market: Evidence from Unit Root and Variance-Ratio Tests

The efficient market hypothesis explains the random walk hypothesis suggesting that stock prices are independent of each other, hence, it is impossible to earn abnormal profits. The positive effect of a well-functioning and highly efficient stock market on the performance of an economy motivated the Philippine Stock Exchange to pursue massive modernization initiatives. This research provides evidence of the existence of random walk in the Philippine stock market employing the Augmented Dickey-Fuller (1981) and Phillips-Perron (1988) unit root tests, the Lo-MacKinlay's (1988) conventional variance ratio test, and Chow-Denning's (1993) simple multiple variance ratio test. Results of the ADF and PP unit root tests confirm the necessary condition for a random walk. The Chow-Denning (1993) maximum /z/ statistic and the Wald test statistic as in Richardson and Smith (1991) for the joint hypotheses and the Lo and MacKinlay (1988) individual statistics variance ratio test generally accepted the null hypothesis of a random walk. That is, the unit root and variance ratio tests consistently indicate that the null hypothesis of random walk cannot be rejected. The existence of a random walk in weak-form efficiency can be attributed to market liquidity as a result of continuous development and modernization of the Philippine equity market.

Capturing the Short-run and Long-run Causal Behavior of Philippine Stock Market Volatility under Vector Error Correction Environment

Capturing the Short-run and Long-run Causal Behavior of Philippine Stock Market Volatility under Vector Error Correction Environment

Forming Cooperatives in Municipalities

Cooperatives generate employment, household income of the members has been increasing, and improve their shelters. Cooperatives undertake participatory development programs for poverty alleviation and improvement of quality of life of the poor. There is a need for cooperatives to encourage and gather other people to join their movement. It is highly recommended that the government must invest to shoulder the capital aside from the paid-up capital of the members. A seminar on how to manage a cooperative, farming techniques and livelihood program are also recommended. Cooperatives should be spread out particularly in the fourth or fifth class municipalities of Cebu province for total development. In order for the members to compete in world market, the Government should finance cooperatives. The cooperative should be developed to become similar to publicly-listed corporations to give opportunity to small investors who cannot invest stocks in Philippine stock market. Keywords : cooperative, classes of municipalities, development, economy

Modeling Long-Term Relationships in Philippine Stock Market (PSE) Indices: A Cointegration Analysis

Over previous decades, market participants have been unsure about how to forecast the movement of the stock market. Coming up with a good forecasting model could lead stock market participants towards a less risky investment portfolio. This study attempts to explore the haphazard nature of Philippine Stock indices and the long-term relationship between Philippine Stock Exchange (PSE) sectoral indices and the PSE index. The data series used are the daily closing values of the PSE index and six sectoral indices between July 2010 to December 2019. This study employs an Augmented Dickey-Fuller (ADF) unit root test and a Johansen cointegration test. The results revealed that all indices are non-stationary at index level, but stationary at first difference. The results showed that all indices followed a random walk; however, no long-term relationships between the PSE index and five sectoral indices were found. Therefore, long-term investors are able to diversify their portfolio to reduce investment risk.

Examining risk and return profiles of renewable energy investment in developing countries: the case of the Philippines

This paper examines the risk and return profiles of energy companies with renewable energy (RE) investment in developing countries taking the Philippines as our country case study. First, we analyze the impact of the global RE project specific risk and country risk on RE projects using a simple capital asset pricing model (CAPM) by benchmarking stock returns of these companies to either the global S&P Global Clean Energy (S&P GCE) index or to the local Philippine Stock Exchange (PSE) index. Our findings show that the Energy Development Corporation (EDC), a pure RE company, is affected by both these risks examined on short- and mid- to long-term investment interval, while those with partial investment in renewables are affected only on the short-term. Next, we calculated these companies' abnormal returns by using the Jensen's alpha. Results show that EDC's alpha values are positive on all short- and medium-to-long term investments and on both indices, suggesting that Philippine RE companies are possibly underestimated on both the global RE market and the Philippine stock market. Lastly, we examined the latest feed-in tariff (FIT) level by using the beta results of EDC and the FIT structure of solar PV. Results show that the FIT rate generates profit to both the global and local RE companies' risk and returns from the investors' perspective, but is higher than the desired FIT rate from the policymakers' perspective. This paper aids in investment decision-making by showing that differences in investment timeframes and RE shares could impact investment outcomes in developing countries.

Analysing the macroeconomic drivers of stock market development in the Philippines

This paper analyses the macroeconomic drivers of stock market development in the Philippines during the period 2001Q4–2016Q4. In particular, the paper examines the impact of banking sector development, inflation rate, exchange rate, economic growth, trade openness and stock market liquidity on the development of the Philippine stock market. Theoretical and empirical literature reveals diverse views on the relationship between each determinant and stock market development. In addition, the Philippine stock market has experienced remarkable growth in recent decades. However, there is no similar study on this country in the literature. The paper, therefore, enriches the literature by investigating the macroeconomic drivers of stock market development in the Philippines using the ARDL bounds testing procedure. The results show that trade openness has had a negative impact on Philippine stock market development in the long run, whereas banking sector development and the exchange rate have had positive impacts on the development of the Philippine stock market in the short run. These findings are robust to alternative specifications of the model.

A Quantitative Risk Management Tool for the Equity Market in Philippines

The Philippine stock market is now the most expensive stock market in the Southeast Asia region. As of July 10, 2017, the total market capitalization is about 101 percent of the gross domestic product (GDP). Normally, the ratio between 75 percent and 90 percent is considered fairly valued. Thus, a risk management tool, which can quantitatively estimate the potential odds of a financial crisis, would be particularly useful for market participants. In this paper, we showed the Skewed t distribution could provide best goodness-of-fit for the Philippine stock market returns compared with several other widely used statistical distributions. The scenarios generated by the Skewed t distribution would be valuable for further risk analysis of the stock market.

Trade openness and stock market volatility in the ASEAN-5 countries: New evidence using SUR

ABSTRACTThe present study investigates the relation between trade openness and stock market volatility in the ASEAN-5 countries, using data of the composite price indices and trade openness in these countries from 1990 to 2013. A two-step methodology is employed. Firstly, the volatilities of stock indices are estimated using GARCH family. Then panel and the seemingly unrelated regression (SUR) methods are utilised to find the linkage between trade openness and stock market volatility. The results prove that the SUR method can efficiently handle certain limitations of the panel regression method in the present study. The results concerning the whole sample period demonstrate that trade openness affects the stock market volatility in Indonesia and Malaysia positively; and in Thailand negatively. Although the effect of trade openness on the Philippine and Singaporean stock market volatilities is not significant during the whole sample period, trade openness is found to influence stock market volatility in the Philippines and Singapore in the subsamples.