Singapore Stock Market Research Articles

Overinvestment, growth opportunities and firm performance: evidence from Singapore stock market

This paper aims to study the extent of overinvestment, underinvestment problem and measure its impact on corporate performance. Our sample consists of 7 years data (2005 to 2011) of 360 non-financial companies listed in the Singapore Stock Market. After panel data models appropriation tests (LM test, Hausman test, No Fixed effect test) we employed fixed effect regression methodology in our analysis. Our results show that 52% firms in our sample are engaged in proper investment projects, 29% firms are overinvesting, while 19% firms are underinvesting. Maximum overinvestment is taking place in Basic Material sector while maximum underinvestment happening in Healthcare sector. Further tests show that both overinvestment and underinvestment shows severe negative impact on firm performance. However, proper investment has positive impact on firm performance in Singapore Stock Market. The results highlight the extent of agency problem in Singapore Stock Market. Moreover, it depicts the importance of investment activities of Singaporean companies for the international investors and portfolio managers

Impact of Overinvestment & Underinvestment on Corporate Performance: Evidence from Singapore Stock Market

This paper aims to study the extent of overinvestment, underinvestment problem and measure its impact on corporate performance. Our sample consists of 7 years data (2005 to 2011) of 360 non-financial companies listed in the Singapore Stock Market. After panel data models appropriation tests (LM test, Hausman test, No Fixed effect test) we employed fixed effect regression methodology in our analysis. Our results show that 52% firms in our sample are engaged in proper investment projects, 29% firms are overinvesting, while 19% firms are underinvesting. Maximum overinvestment is taking place in Basic Material sector while maximum underinvestment happening in Healthcare sector. Further tests show that both overinvestment and underinvestment shows severe negative impact on firm performance. However, proper investment has positive impact on firm performance in Singapore Stock Market. The results highlight the extent of agency problem in Singapore Stock Market. Moreover, it depicts the importance of investment activities of Singaporean companies for the international investors and portfolio managers.

Regional stock market integration in Singapore: A multivariate analysis

This paper evaluates the time-varying integration of the Singapore stock market in the ASEAN-5 region based on a conditional version of the International Capital Asset Pricing Model (ICAPM) with c-DCC-FIAPARCH parameters. This model allows for dynamic changes in the degree of market integration, regional market risk premium, regional exchange-rate risk premium, and domestic market risk premium. Our findings show several interesting facts. First, the time-varying degree of integration in the Singapore market is satisfactorily explained by the level of trade openness and the term premium of US interest rates, which have recently tended to increase, however these markets remain substantially segmented from the world market. Second, the local market risk premium is found to explain a significant proportion of the total risk premium for emerging market returns. Our findings illustrate several important implications for portfolio hedgers for making optimal portfolio allocations, engaging in risk management and forecasting future volatility in equity markets. Our results are also of interest for both policymakers and investors, with respect to regional development policies and dedicated portfolio investment strategies in the ASEAN-5 region.

Response Asymmetry in Spillover Volatility: An Empirical Study in the Indonesia and Singapore Stock Market

In 2015, when the ASEAN Economic Community (AEC) is achieved, ASEAN will have a single market in which a freer flow of goods, services, investment and the capital flow among the nations in this area will take place. Many empirical studies have shown that the development of the integration of the capital market has resulted that the movement of the prime indicator of the stock market in a certain country can be transmitted easily and immediately to another country’s stock market (see for instance: Kanas, 1998; Rigobon and Sack, 2003; Savva et al., 2009; Ingyu, 2011). Facts have also shown that the global economic crisis of 2008, which at the beginning was initiated in the United States, within a short period has spread over to most of the hemisphere, especially to the developed countries which are economically and financially very integrated with the United States. In Asia, many countries have endured the negative side of the crisis, although the degree of the side effect has more variance among the countries, depending on the domestic economic condition and the degree of the integration of the country with the world economy. Singapore is a country which was at the beginning the most seriously affected by this crisis. This is not surprising because Singapore is a country which is fully integrated with the global market with regard to the business and finance. As a consequence, the country’s economy is very sensitive towards any economic shock initiated from outside. In the context of the ASEAN economic and financial integration, a shock that exists in a country can easily and quickly spread to other countries. Some people explained that Response Asymmetry in Spillover Volatility: An Empirical Study in the Indonesia and Singapore Stock Market

When Will STI Peak?

There have been numerous articles and reports describing different cyclical patterns according to the historical data and charts, as well as predictions about future movements of stock prices in the guidance of the realized cycles. Presently, cycle in Singapore stock market is a hot topic with some experts in this area predicting that the STI will peak in 2006, while there have been some other Investment Guru(s) who suggests that the Singapore stock market follows a 14-year cycle, taking on alternatively 7-year bull and 7-year bear runs in the market. According to the 14-year cycle theory, the Singapore stock market is now at the third year of the 7-year Bull Run, which will lead to a peak for STI in year 2008. Will STI peak in 2006 or 2008? This article gives readers our point of view.

The Dynamics Co-movement Toward Among Capital Markets in ASEAN Exchanges: C-D Vine Copula Approach

ASEAN Exchanges has target to develop the ASEAN asset class. Therefore, the knowledge of international capital market needs to study more. The ASEAN Exchanges is a collaboration of the seven country stock exchanges such as Malaysia's stock market, Vietnam's stock market (this country has 2 stock exchanges), Indonesia's stock market, Philippines's stock market, Thailand's stock exchange and Singapore's stock market. But in 2012 until 2013, the only three of them such as Thailand's stock exchange, Malaysia's stock market and Singapore's stock market have already started for collaboration. The copula approach was become more standard tool for business and economics analysis especially the tool for analysis in international capital market. The specific objective of research aims to investigate the dynamics co-movement between capital markets in ASEAN Exchanges for during period of 2012-2013. The results of this study based on C-D Vine copula approach found the dynamics co-movement among of capital markets in ASEAN Exchanges. In addition, the C-D Vine copula approach in Elliptical distribution based was cleared for dynamics co-movement among of them. ASEAN Stock Exchanges collaborate achieved through creating ASEAN investment promotion for more investors and protection investment. ASEAN countries have strengthened the economic opportunities and opened up the formation of economic securities in an ASEAN Stock Exchanges.

Linear and Nonlinear Trading Models with Gradient Boosted Random Forests and Application to Singapore Stock Market

This paper presents new trading models for the stock market and test whether they are able to consistently generate excess returns from the Singapore Exchange (SGX). Instead of conventional ways of modeling stock prices, we construct models which relate the market indicators to a trading decision directly. Furthermore, unlike a reversal trading system or a binary system of buy and sell, we allow three modes of trades, namely, buy, sell or stand by, and the stand-by case is important as it caters to the market conditions where a model does not produce a strong signal of buy or sell. Linear trading models are firstly developed with the scoring technique which weights higher on successful indicators, as well as with the Least Squares technique which tries to match the past perfect trades with its weights. The linear models are then made adaptive by using the forgetting factor to address market changes. Because stock markets could be highly nonlinear sometimes, the Random Forest is adopted as a nonlinear trading model, and improved with Gradient Boosting to form a new technique—Gradient Boosted Random Forest. All the models are trained and evaluated on nine stocks and one index, and statistical tests such as randomness, linear and nonlinear correlations are conducted on the data to check the statistical significance of the inputs and their relation with the output before a model is trained. Our empirical results show that the proposed trading methods are able to generate excess returns compared with the buy-and-hold strategy.

PENGARUH PASAR SAHAM DUNIA TERHADAP PASAR SAHAM INDONESIA

This research was intended to analyze the causality of the global stock markets to Indonesian stock market. The variables of this research were used stock price indices from nine countries. This research using Granger Causality and VAR from 2004 up to 2010. USA, Japan, and England were selected because those countries had strong economics. The results, there are causality Granger among the global stock markets to Indonesian stock market.The global stock markets that has bi-directional causality were Australian stock market, England stock market, Singapore stock market, and Philipine stock market. Meanwhile, the global stock markets that has uni-directional causality were Japan stock market, USA stock market, Hongkong stock market, and Malaysia stock market.DOI: 10.15408/etk.v11i2.1887

Dynamic Relatedness Analysis of Three Stock Market Return Volatility with a Factor of U.S. stock market:Empirical Study of Hong Kong, Japan, and Singapore Countries

This paper studies the associations among and the model construction of Hong Kong, Japan, and Singapore’s stock markets. In this paper we construct a dynamic conditional correlation (DCC) and a trivariate IGARCH (1, 1) model to evaluate the associations, and find that there does not exist an asymmetrical effect among the three stock markets with a factor of U.S. stock market. The result of empirical correlation analyses also shows that Japan’s stock market returns positively affect the Hong Kong and Singapore stock market returns, and the volatility of the three stock market returns interact with one another. Furthermore, the time lags of Hong Kong stock market returns do not affect the returns of the Japanese and Singapore stock markets. The variation risk of the Japan stock market returns’ volatility affects the variation risks of Hong Kong and Singapore stock market returns. Empirical results also show that both good and bad news will actually affect the variation risks of stock market returns. Therefore, based on the viewpoint of DCC, the explanatory ability of the trivariate IGARCH(1, 1) model is better than the model of the trivariate GARCH with a constant conditional correlation. The evidence suggests that stock market investors or international fund managers must evaluate the variation risk and relationships of the stock market returns’ volatility.

An examination of conditional effect on cross-sectional returns: Singapore evidence

This article empirically examines the usefulness of beta, firm size, book-to-market equity ratio (B/M) and earnings-to-price ratio (E/P), as risk proxies in explaining the cross-sectional returns in the Singapore stock market under both unconditional and conditional frameworks based on up and down markets. Consistent with previous studies, though beta plays no role under unconditional framework, there is evidence of a significantly positive (negative) risk premium on beta during periods of up (down) markets, supporting for the continuous use of beta as a risk measure. Interestingly, our results show that firm size is the only significant variable in explaining average returns under the unconditional framework but its impact becomes much less under the up and down market conditions. However, significant conditional effect of E/P is found. Although, B/M alone is not significantly conditionally related to returns, in various combinations with beta, it becomes significant and the joint role of beta and B/M, due to an interaction effect between them, has an ‘amplified’ gain in the explanatory power. Our study suggests that beta does not suffice to explain the cross-sectional variations of returns, but it is possible that the joint effect of beta and B/M may be a surrogate as an underlying and more fundamental factor that is missing in the conditional SLB model. We also find evidence that investors in the Singapore stock market react virtually the same to these firm-specific factors and to beta during up and down markets. Our results are robust for both beta-size and size-beta sorting procedures and for both value- and equally weighted market proxies.

Profitability of Technical Analysis in the Singapore Stock Market: before and after the Asian Financial Crisis

In the aftermath of the Asian financial crisis, a series of reform and liberalization measures have been implemented in Singapore to upgrade its financial markets. This study investigates whether these measures have led to less profitability for those investors who employ technical rules for trading stocks. Our results show that the three trading rules consistently generate higher annual returns for 1988-1996 than those for 1999-2007. Further, they generally perform better than the buy-and-hold (BH) strategy for 1988-1996 but perform no better than the BH strategy for 1999-2007. These findings suggest that the efficiency of the Singapore stock market has been considerably enhanced by the measures implemented after the crisis.

A DCC Analysis of Two Stock Market Returns Volatility with an Oil Price Factor: An Evidence Study of Singapore and Thailand’s Stock Markets

This paper uses the Singapore and the Thailand's stock prices of material from January 4, 2000 to July 20, 2007, discussing the model construction and their associations of between Singapore and Thailand's stock markets, and also uses Student's t distribution to analyze the proposed model. The empirical results show that the mutual affects of the Singapore and the Thailand's stock markets may construct in bivariate IGARCH (1, 1) model with a DCC. The empirical result also shows that between Singapore and Thailand's stock market returns exists the positive relations- namely two stock market return's volatility are synchronized influence, the average estimation value of the DCC coefficient of two stock market returns equals to 0.3876. Also, Singapore and Thailand's stock markets do not have the asymmetrical effect in the research data period. These evidences may suggest stock market investors or international fund managers- before investing in Singapore must consider the Thailand stock price return's volatility risk and its connection. Therefore, in the stock market, investors and managers may not neglect the influence of the foreign country's stock market return volatility behavior; otherwise, his decision will not achieve the anticipated effect.

Financial Liberalization and Stock Markets Integration for Asean-5 Countries

This paper examines the relationship of financial liberalization and stock markets integration among ASEAN-5 (Note 1) stock markets: Indonesia, Malaysia, the Philippines, Singapore and Thailand. Three sample periods are covered based on the progress of financial liberalization. By using Johansen and Juselius multivariate cointegration procedures, Granger-causality tests and variances decomposition analysis, the results indicate no long-run relationship during Singapore stock market liberalization in the first period. However, long-run relationship established between ASEAN-5 stock markets in the second period when Thailand, Malaysia and Indonesia have liberalized their stock markets and the third period following the Philippines liberalization. The long run integration relationships and the short-run causality relationships among ASEAN-5 markets have both increased after the financial liberalization. Thailand, Malaysia, Indonesia and the Philippines markets have received increased influences from other stock markets in the progress of financial liberalization whereas Singapore remains unaffected by the others. Stock markets that liberalize earlier will have greater influence on other stock markets.

How does the call market method affect price efficiency? Evidence from the Singapore Stock Market

On August 21, 2000, the Singapore Exchange (SGX) adopted the call market method to open and close the market while the remainder of the day’s trading continued to rely on the continuous auction method. The call method significantly improved the price discovery process and market quality. A positive spillover effect is observed from the opening and closing calls. Day-end price manipulation also declined after the introduction of the call market method. However, the beneficial impact from the call market method is asymmetric, benefiting liquid stocks more than illiquid stocks.

The Disappearing Calendar Anomalies in the Singapore Stock Market

This paper investigates the calendar anomalies in the Singapore stock market over the recent period from 1993-2005. Specifically, changes in stock index returns are examined surrounding January (the January effect), on different days of the week (the day-of-the-week effect), around the turn of the month (the turn-of-the-month effect) and before holidays (the pre-holiday effect). The findings reveal that these anomalies have largely disappeared from the Singapore stock market in recent years. The disappearance of these anomalies has important implications for the efficient market hypothesis and the trading behavior of investors.

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The risk–return relations in the Singapore stock market

This paper examines the risk–return relations in the Singapore stock market for the period April 1986 to December 1998. Though beta is significantly related to realized returns, the explanatory power is low. Adding other stock characteristics such as skewness and kurtosis provides limited incremental benefits. However, when a conditional framework based on up and down markets is introduced, the explanatory power increases more than 100 times and there is a significant positive (negative) relation between beta and returns when the market excess returns are positive (negative). The same relation applies when unsystematic risk, total risk and kurtosis are added separately to the beta–return relation during up and down markets with increased explanatory power. Our results indicate that other stock characteristics in addition to beta are also important in pricing risky assets and investors do not hold diversified portfolios. Our results are also checked and compared with another conditional model with time-varying betas conditional on a set of economic variables.

Stock Market Volatility: Examining North America, Europe and Asia

An understanding of volatility in stock markets is important for determining the cost of capital and for assessing investment and leverage decisions as volatility is synonymous with risk. Substantial changes in volatility of financial markets are capable of having significant negative effects on risk averse investors. Using daily returns from 1992 to 2002, we investigate volatility co-movement between the Singapore stock market and the markets of US, UK, Hong Kong and Japan. In order to gauge volatility comovement, we employ econometric models of (i) Univariate GARCH, (ii) Vector Autoregression and (iii) a Multivariate and Asymmetric Multivariate GARCH model with GJR extensions. The empirical results indicate that there is a high degree of volatility co-movement between Singapore stock market and that of Hong Kong, US, Japan and UK (in that order). Results support small but significant volatility spillover from Singapore into Hong Kong, Japan and US markets despite the latter three being dominant markets. Most of the previous research concludes that spillover effects are significant only from the dominant market to the smaller market and that the volatility spillover effects are unidirectional. Our study evinces that it is plausible for volatility to spill over from the smaller market to the dominant market. At a substantive level, studies on volatility co-movement and spillover provide useful information for risk analysis.

How rewarding is technical analysis? Evidence from Singapore stock market

This paper focuses on the role of technical analysis in signalling the timing of stock market entry and exit. Test statistics are introduced to test the performance of the most established of the trend followers, the Moving Average, and the most frequently used counter-trend indicator, the Relative Strength Index. Using Singapore data, the results indicate that the indicators can be used to generate significantly positive return. It is found that member firms of Singapore Stock Exchange (SES) tend to enjoy substantial profits by applying technical indicators. This could be the reason why most member firms do have their own trading teams that rely heavily on technical analysis.

Statistical analysis of strait time index and a simple model for trend and trend reversal

We analyze the daily closing prices of the Strait Time Index (STI) as well as the individual stocks traded in Singapore's stock market from 1988 to 2001. We find that the Hurst exponent is approximately 0.6 for both the STI and individual stocks, while the normal correlation functions show the random walk exponent of 0.5. We also investigate the conditional average of the price change in an interval of length T given the price change in the previous interval. We find strong correlations for price changes larger than a threshold value proportional to T ; this indicates that there is no uniform crossover to Gaussian behavior. A simple model based on short-time trend and trend reversal is constructed. We show that the model exhibits statistical properties and market swings similar to those of the real market.