Financial Market Segmentation Research Articles

Determining the leaders of Ukraine’s insurance market based on the adaptation of the DEA method

The escalating wartime risks in Ukraine has led to a rapid reduction in insurance coverage in life and non-life segments. The purpose of the study is to rank Ukraine’s insurance companies based on an adaptation of the DEA method to the insurance market conditions. The study utilized the Supervisory Statistics of the National Bank of Ukraine as data. The study also used ranking of insurance companies based on technical efficiency criteria. The output indicators include the profitability of total capital (Output1) and the occupied share of the insurance market (Output2). The input indicators comprise the volume of total assets of insurers (Input1), the share of equity capital in assets (Input2), the level of gross payments (Input3), and the level of payments to insurance reserves (Input4). The ranking of insurance companies is based on minimizing the distance of each from the bounds of technical efficiency by solving a set of optimization problems. Based on the modeling results, a list of market leaders (7 companies) was formed for the end of the third quarter of 2023. They served nearly 37% of the insurance market in Ukraine, accumulating 41.5% of the total assets of this financial market sector. So, the primary issue for insurance companies is the loss of solvency due to the absence of adequate levels of insurance reserves. Therefore, priority measures should include strengthening regulatory constraints in this financial market segment to facilitate its qualitative renewal.

Regional Development Funds: Creation Rationale and Models of Operation

Abstract Subject and purpose of work: The purpose of the article is to present the creation of Regional Development Funds (Regionalne Fundusze Rozwoju - RFR) in Poland, their organisational models and factors influencing their development and choice of model. The research is also focused on the analysis of the variety of RFRs and their sources. Materials and methods: The research collects and presents data on RFRs operating in Poland, and analyses these data in the context of selected legal and administrative conditions. Results: The analysis showed significant variation among RFRs in terms of functional/ organisational models and scale of operation. The choice of an operating model for an RDF is influenced by factors such as the maturity of regional financial markets, the amount of RDF funds and the types of financial instruments offered. Conclusions: The study highlights the development of the financial market segment working with local authorities and businesses over the past decade. It draws attention to an increasing importance of financial instruments and institutions in development policies implemented by voivodeship governments.

ACTIVITIES OF INSURANCE COMPANIES IN WARTIME

The article examines the functioning of insurance markets, which is based on the role of insurance markets in ensuring the stable functioning of business entities through insurance protection. Insurance also plays an important role in protecting property and personal interests of citizens. In addition, the insurance market is the second largest segment of the national financial market and has a certain influence on the stability of the economic system. The functioning of the insurance market of Ukraine after the introduction of martial law was analyzed, the main trends and problems of its development were determined, and the priority issues that needed to be resolved were outlined. Based on the experience of transformation and adaptation of their activities during the corona crisis, insurance companies have once again demonstrated the ability to fully restore the functioning of the market under force majeure circumstances and already offer modern insurance products with additional coverage of the consequences of war.

МЕЖДУНАРОДНЫЕ САНКЦИИ ПРОТИВ РОССИИ (2014–2024 гг.): ОЦЕНКА И ПОСЛЕДСТВИЯ ДЛЯ ФИНАНСОВОГО РЫНКА

In 2024, it has been exactly 10 years since the Russian financial market was under the influence of economic sanctions from the leading countries of the world economy. Despite attempts to destabilize and degrade the Russian market, the shocks from international sanctions have not had a serious destructive effect on it. The purpose of the study is to assess the impact of sanctions restrictions on various segments of the Russian financial market and determine the extent to which sanctions can contribute to its transformation and stable development. Statistical analysis for 2004–2023 showed that international sanctions have a negative impact: volatility in the money and capital markets has increased, the Russian ruble has devalued, and inflation has surged. At the same time, the sanctions contributed to the sovereignization of the Russian financial market, the growth of which began to be determined by internal sources of financing. The further development of the Russian financial market should be associated with reforms aimed at attracting domestic investment into the economy, unconventional monetary policy and reducing the outflow of private capital, as well as appealing to financial investments from friendly countries.

The Construction and Concept Validation of Indian Financial Market Composite Risk Index (IFM: CRI): A Vibrant Risk Indicator to Retail Investors

The financial market volatility has been a major interest to all the stakeholders of the market especially to the retail investors post 2020. In this backdrop, the study is focused on constructing a Composite Risk Index (CRI) for the Indian Financial Market and examining the various methods of weighting as well as types of volatility capture in the construction of the Financial Market Composite Risk Index. The study intends on giving its contribution on the methodological portion of the derivation of appropriate weights to each segment of financial market. The study is based on the daily price series from 1st January 2020 to 31st March 2023. The research develops nine (09) different Composite Risk Index based on the types of volatility capture [Standard Deviation (SD), Autoregressive Conditional Heteroskedastic (ARCH), Generalised Autoregressive Conditional Heteroskedastic (GARCH)] and method of deriving the weights [Principal Component Analysis (PCA), Analytic Hierarchy Process (AHP) and Data Envelopment Analysis (DEA)] of various sub markets [ Equity, Commodity and Forex] and its segments [Spot and Derivatives]. The inter and intra evaluation of nine CRI are carried out with the help of nonparametric statistical tool Kruskal Wallis Test, further the pairwise comparation is also preformed to analyze the homogeneity between the types of volatility capture and method of deriving the weights. The results reveal that, GARCH based DEA Composite Risk Index is better exhibiting the volatility of the Indian Financial Markets compared to their counterpart CRI and also having a high co-movement with India VIX.

PRIORITIES OF THE FINANCIAL SECTOR IN ARMENIA DURING THE SANCTION WAR: FOSTERING LENDING AND INVESTMENT THROUGH ONLINE PLATFORMS

The paper puts forward the claim that during the sanctions war, "P2P" lending and investment platforms can have priority demand and lead to a synergistic effect for the real sector of the economy. In times of sanctions and/or crisis, the entire economy, including financial market segments, require certain coping approaches that emerge in the form of new and related financial mechanisms, bringing forth new products and services. "P2P" lending and investment platforms can become an effective alternative to investing in shares in the financial market of Armenia, especially for small and novice investors. "P2P" lending platforms in RA are still in their infancy. The international practice of "P2P" lending platforms is presented. The comparative strengths and weaknesses of P2P lending and stock market shares are highlighted, according to their criteria of profitability, security, affordability, liquidity and volatility. Certain mechanisms are proposed for the formation of a matrix of "P2P" lending platforms in the Republic of Armenia. The problem of the competition of the newly created "P2P" lending platforms with the existing institutions of the financial market is considered.

Pattern, Source, Destination of Volatilities in Financial Market and Policy Lessons

This paper studies patterns of volatilities and their spillovers across six major segments of Indian financial market applying univariate GARCH model and estimating the Diebold and Yilmaz (DY) volatility spillover index. The study found increasing integration of financial market segments over time and that equity, bank index and corporate bond segments are net contributors while money, gsec and forex segments are net receivers of volatility. The study highlights the need for a healthy banking sector and the increasing significance of corporate bond market volatility and suggests segment specific policy responses to tackle financial market volatilities.

INVESTORS ATTITUDE TOWARDS ONLINE AND OFFLINE TRADING OF MUTUAL FUNDS

Mutual fund as an investment avenue provides a platform to the investor who do not want to take high risk on their hard earned investment. In India, mutual fund industry is growing rapidly and this industry has emerged as an important segment of financial market of India, especially in channelizing and mobilizing the savings of millions of individuals into the investment in equity and debt instruments. Mutual fund investment is less risky than investing directly in stocks and is therefore a safer option for risk averse investor. A competent fund manager should analyze investor behavior, perception, and attitude and understand their needs and expectations to gear up the performance to meet investor expectations and requirements. Investment in mutual fund is affected by the attitude of investors and hence the objective of the study is to identify the investor's attitude on mutual fund as an investment avenue and the major findings reveal the factors that influence buying behavior of mutual fund investors.

International Financial Markets of the Future: Technological Innovations and Their Impact on the Global Financial System

Today, international financial markets are becoming not only catalysts for global economic growth but also a spectrum of unpredictable challenges and opportunities. The presence of technological revolutions has always determined and influenced the development of the financial sector, determining its ability to adapt to new conditions and changes. Today, among modern innovations, technological progress plays a central role in transformational changes in international financial markets, creating opportunities for efficiency and innovative solutions. The purpose of the study is to establish the theoretical, conceptual, and practical foundations of the impact of technological innovations on the global financial system in the context of international financial market development. To achieve this goal, the study defines the essence of the concepts of “technological innovations” and “international financial market”, systemises the main types of modern technological innovations; provides a perspective overview of the evolution of technological innovations in the context of the international financial market formation, analyses the impact of modern technological innovations on the global financial system, and identifies the main trends that predict the development of technological innovations in the context of the international financial market formation in the future. For the purpose of the study, general scientific methods of cognition were used, including a critical analysis of the existing scientific literature on the topic, comparative analysis, systematisation of practical experience of introducing technological innovations, and the method of establishing cause and effect relationships. The research includes the identification of modern types of technological innovations in the international financial market (blockchain technologies, artificial intelligence of fintech platforms, electronic money and digital currencies, crowdfunding, and PR projects). The study offers its own view on the stages of development and formation of technological innovations in the international financial market, as well as an assessment of the development of modern technological innovations in the financial market, including a forecast for the future. The study presents the main trends that determine the future development of technological innovations in the global financial market. Artificial intelligence, open banking, hyper-personalised banking, blockchain, the Internet of Things, cybersecurity, immersive technologies, digital robots and bots, and quantum computing are defining a new dimension of the financial sector, opening up new opportunities for improving services and optimising processes. The adoption of these technologies will contribute to a more innovative and competitive international financial market that can better meet customer needs and ensure the stability and security of financial transactions. Future research in this area could include a deeper analysis of the impact of specific technological innovations on different segments of the international financial market and the development of adaptation strategies for financial institutions. The research could also expand its scope and explore the relationship between innovation in finance and the global economy.

Экономические интересы и риски участников операций с цифровыми финансовыми активами

Based on empirical materials on the investment practice of the Russian financial market, the article examines the economic interests of participants in operations with digital financial assets as well as the risks to which they are exposed in these investment relations. The authors identify coinciding and immanent to each of the participants in the operations target intentions that the participants are interested in implementing. The participants are the Bank of Russia, the investor, the operator of the information system in which the issue of digital financial assets is carried out, the recipient of the investment, and the bank of the operator of the information system. The risks specific to each of these participants are disclosed and analyzed, and the authors substantiate proposals for the prevention and relief of the identified risks likely when conducting operations and digital financial assets. The dynamics of the admission of information system operators and operators of the exchange of digital financial assets to the financial market are being studied, and the composition and volume of their operations for the issuance of digital financial assets for the period 2022–2023 are being critically assessed. The dynamics of the number of recipients of investments (persons issuing digital financial assets and the total volume of attracting resources from investors through the issuance of digital financial assets) are investigated. The dynamics of the growth of the number of individual investors in the Russian financial market are considered using the example of their client accounts with positions on securities; proposals are made on the need to adopt a targeted federal program to train citizens in behavior in the field of Internet investment. A methodological matrix of interests-risksmeasures has been formed for participants in operations with digital financial assets, which provides for the allocation of overlapping and immanent interests-risks-measures and discloses mandatory preventive measures. Which should be applied by each of the participants in operations with digital financial assets to ensure timely and full execution of settlements between them and stable turnover of digital financial assets in the investment segment of the Russian financial market.

Analysis of current trends in the development of the financial market in Russia

At the present stage, the Russian economy and the financial market have faced various challenges as a result of sanctions pressure, which has had a significant impact on their functioning. Given that the current circumstances are extraordinary and will have long-term structural implications, action needs to be taken to adapt and revise approaches, priorities and plans. It is important to keep only those that remain relevant and significant in the new conditions. In light of these changes, it is important to develop systemic solutions, the right strategy and take effective measures for the future development of the financial market and the economy of our country, which will help them become more sustainable and competitive. The deterioration of the economic situation in the financial market entailed the risk of a decrease in the level of profitability of financial instruments, as well as a loss of public confidence in investing free cash in securities. To maintain sustainable economic growth in our country, it is necessary to find an innovative solution to increase the activity of using financial resources through the mechanism of the financial market. The article discusses the theoretical and practical aspects of the functioning of the financial market, analyzes the dynamics of the level of profitability of various financial instruments and the degree of development of the financial market segments, and argues its place and role in the accumulation of investments to ensure high economic growth in the Russian Federation; the problems and factors hindering the development of the financial market and the directions for its improvement, taking into account national specifics, are identified.

INSTITUTIONAL AND SEGMENTAL ASPECTS OF UKRAINE’S FINANCIAL MARKET DIGITALIZATION

The article deals with the development analysis of certain segments of Ukraine’s financial market in the context of digitalization processes. The positions of modern foreign and domestic scientists regarding the digitalization impact on economic and financial relations are outlined. The key disproportions of the financial market at the institutional and segmental levels are highlighted. In particular, at the institutional level – the long-term and unchallenged dominance of banks over non-banking financial institutions; absence or minimal development of certain types of financial institutions; weakness of stock exchanges and exchange infrastructure in general; low level of financial inclusion. At the segmental level – imbalances in the lending market development, insufficient volume of the corporate securities market; weakness of leasing lending segments, factoring services, etc. It is argued that in the post-war reconstruction of Ukraine, the financial market should become an effective mechanism for the distribution of capital, therefore it is important to conceptually change the emphasis in its development on the digital technologies basis. It has been established that nowadays, the participants of various segments of the financial market are adapting their own strategies to the digital economy’s requirements. However, the degree of such adaptation and digitization level of certain segments of the financial market of Ukraine differ significantly. These disparities largely determine the strategic prospects of various segments of the domestic financial market. A similar conclusion was made regarding the digitalization strategy of financial institutions in Ukraine. For many financial institutions, the digitization of operations has become one of the important competitive advantages, but there are other approaches – in particular, in terms of digital technologies’ use for unfair competition and systemic violations of the rights of investors and consumers of financial services.

The effectiveness of the contrarian and momentum strategies on the US REIT market

When making investment decisions in financial markets, investors use various investment strategies. The traditional ones include the contrarian strategy and the moment strategy. In recent years, one of the dynamically developing segments of the global financial market has been the American REIT market. The literature on the subject lacks research on the effectiveness of investment strategies in this market. The aim of the article is therefore to compare the effectiveness of the contrarian strategy and momentum strategy on the US REIT market in different ranking periods. Based on the data on the rates of return of individual REITs listed on public capital markets in the US, the rates of return resulting from the application of the contrarian and momentum strategies were estimated. The results of the conducted analyses showed that for the three-year ranking period, the rates of return of the portfolio composed of loser REITs significantly exceeded the rates of return of the portfolio of winner REITs. This means that during this period the use of the contrarian strategy was more effective than the use of the momentum strategy. For other analysed ranking periods, the differences in rates of return were not statistically significant. The results of the conducted analyses may help investors in choosing the most effective investment strategy on the REIT market. This research also answers the question whether the REIT market should use investment strategies that, according to research, are effective on the broad stock market, or strategies that work well on the investment fund market.

Финансирование низкоуглеродного развития России: подходы и приоритеты текущего этапа

An economy with a low level of greenhouse gas emissions is presented today both as a tool for achieving the goal of structural transformation of the economy and its technological modernization, and as a factor of economic growth. But to date, the process of transition to a low-carbon economy in Russia has not yet been launched, since the formation of the institutional environment of the carbon market has not been completed and the mechanism for financing low-carbon development projects has not been determined. The subject of the study is the formation of a stable segment of the national financial market, which is reflected in the ongoing and planned expenditures of the state in accordance with budget plans. The purpose of the work is to form an objective opinion on the actions taken at the national level to form a new sustainable segment of the national financial market, which is designed to accumulate national climate finance. The study revealed a problematic situation: the perception of low-carbon development as a tool for solving accumulated problems, contributing to structural adaptation and technological re-equipment, is constrained by the politicization of the climate agenda, which slows down the process of forming a national carbon market and using its opportunities for the benefit of the national economy. It is concluded that Russia has prospects for achieving national priorities of socio-economic development through the possibilities of financing low-carbon development, but for this it is necessary to complete the formation of an institutional framework for the national carbon market and coordinate its development strategy with the national investment policy.

Islamsko osiguranje depozita u teoriji i praksi

The development and competitiveness of Islamic banking, as a relatively young segment of the global financial market, is conditioned, first of all, by the trust of current and potential investors in the ability of Islamic banks to manage entrusted funds by the contract and good business practice. Deposit insurance is one of the important instruments that can be used to strengthen depositors' confidence in the banking system's stability. This paper analyzes the model of Islamic deposit insurance. The paper's objectives are to review its theoretical basis and the features of its practice, possible deviations of business practice from theoretical postulates, and the challenges of applying Islamic deposit insurance in different legal systems. Analyzing the practice of Islamic deposit insurance, it concludes that in most countries it deviates from the Shariah-compliant model of deposit insurance. This was primarily contributed by banking regulations that generally do not recognize the specificity of an Islamic bank's relationship with its depositors and, therefore, the Islamic banks' need for an authentic approach to deposit insurance.

Current status of green finance in Kazakhstan

The article examines the development and formation of green finance in Kazakhstan. It is noted that green finance is now becoming an integral component of achieving global and national sustainable development goals and the formation of a green economy, defining new environmentally sustainable contours and prospects for the development of the international financial system through the active growth of the «green» segment of the global financial market and responsible investment. Financial and economic instruments in the «sphere» of green economy, specifics of formation of ?green? finance in the country, as well as factors impeding their development are analyzed. The article analyzes the current state of «green» finance in Kazakhstan, identifies the problems of «green» finance.

ЦИФРОВА ПАРАДИГМА ФУНКЦІОНУВАННЯ ГЛОБАЛЬНОГО ФІНАНСОВОГО РИНКУ

The article examines trends in the development of the global financial market under the influence of the development of digital technologies. It is emphasized that the development of digital technologies quantitatively and qualitatively changes the global financial market. First of all, its scaling is taking place, and financial capital is being transformed into the main driving force of the global economy. Digital technologies contribute to the quantitative growth of the global financial market, and capital mobility is becoming an extremely important factor in economic development at the level of nations. Along with this, the prerequisites for the active use of financial innovations are being formed. However, innovations that are diverse in nature cannot always be evaluated exclusively positively because some of them often increase imbalances in financial development. It is emphasized that the format of functioning of financial institutions is fundamentally changing, especially in terms of their interaction with financial services' consumers and participants in financial transactions. The formation of the FinTech sector is taking place, the activity of which represents the technological component of the development of the global financial market. Activity of FinTech companies in fact impersonates the digitalisation of the financial market. And velocity and dynamics of the development gradually transform FinTech companies into key participants of the global financial market, which form trends at its key segments. At the same time, digitalization leads to the emergence of new challenges for the global financial market participants. Among other things, the mentioned problems are related to the poor effectiveness of state regulation and the inability of the state regulator to provide supervision over specific segments of the global financial market. It is argued that today the financial market of the digital economy is forming, which determines the need to update the strategies of all its participants. However, it is extremely difficult to predict what will be the outlines of the digital economy’s financial market and its key parameters in the medium term.

Раціоналізація структури джерел інвестиційної активності промислових підприємств

It is determined that strategic investment flexibility, taking into account the causal-fractal method, is a potential opportunity for industrial enterprises to quickly adjust or develop new strategic financial and investment decisions under changed external or internal conditions of investment activity. Strategic financial decisions should be based on an investment-active search for alternative options, directions and forms, in particular methods of implementation of investment activities. An important condition for determining the period of formation of the general financial and investment strategy of industrial enterprises is the strategic level of economic development and, in particular, the conjuncture of financial market segments with which future financial risk is associated. The conditions for defining the period of rationalization of the structure of sources of investment activity of industrial enterprises with the help of the causal-fractal method are also the sectoral affiliation of enterprises, the level of development, the stage of the life cycle, and others. The use of methods of rationalization of the structure of sources of investment activity of industrial enterprises with the help of the causal-fractal method is proposed, which will increase the level of validity of investment decisions made at industrial enterprises, that in the future will ensure an efficient ratio between risk and profitability of their activities. This methodology can be applied in a very common case of uncertainty in the financial results of enterprises, or the lack of information about the function of distribution of the probability of profit after the implementation of the investment project (which is the basis for the construction of isovariational ellipses of the mathematical expectation of strategic income) and the efficiency of investment portfolios of industrial enterprises.

Detecting wash trading for nonfungible tokens

Nonfungible tokens have recently developed into a new financial market segment notorious for wash trading activity. Wash trades are made when users swap tokens between two or more of their own wallet addresses, most often to boost asset prices and volumes artificially, or to harvest marketplace rewards. The presence of wash trades can entirely distort the apparent fair value of tokens in a collection. They should therefore be detected and excluded from further financial assessments such as token valuations and appraisals. This letter introduces three novel strategies to flag transactions for suspicious wash activity, tailored to the NFT markets.

A note on financial literacy among literate people and their participation in different securities market segments

PurposeThis paper aims to investigate the relationship between perceived and actual financial literacy, among generally literate people, pertaining to market participation and market participation intensity. It examines such market participation in both the traditional segments of the financial markets and the new segments [cryptocurrencies, structured retail products (SRPs) and crowdfunding].Design/methodology/approachThe data are from a survey conducted in 2020 by the Portuguese Securities Commission in cooperation with 12 Portuguese universities. The final sample comprises 2,054 respondents. The basic and advanced financial literacy indexes were calculated following van Rooij et al. (2011). This paper uses probit regressions and ordinary least squares regressions with robust errors.FindingsThis study shows that even highly literate people are influenced by their perceived financial knowledge and its bias toward their actual skills. However, overconfidence has no significant association with securities market participation but rather is marginally correlated with the intensity of such participation. Underconfidence is negatively related to both. Moreover, the relationship between advanced financial literacy and overconfidence pertaining to participation in more complex market segments depends on the product type. Specifically, overconfidence has a positive relationship with participation in cryptocurrencies and SRPs but not with crowdfunding.Research limitations/implicationsThe securities market regulators should take note that participation in some complex market segments, even among literate people, is associated with investor overconfidence. Given that effective financial literacy correlates with participation in some more complex financial market segments and not others, the implication for future research is that the performance of individual investors may differ across these different segments. Additionally, this paper argues that the metrics used to assess financial literacy must take cognizance of the topics required to participate in the new market segments of financial markets.Originality/valueThis paper augments this stream of literature in several respects. First, it focuses on highly educated and trained people rather than the general population. Second, while the previous literature measures market participation using a simple dummy to identify respondents who invest in stocks, this paper also measures the intensity of participation. In addition, this study investigates the financial literacy effect from participation in the more complex segments of the securities markets, as in the case of cryptocurrencies and SRPs.