Bank Stock Research Articles

The Portfolio Analysis in Hong Kong Stocks

Maximizing returns is always peoples investment goal. Stocks have some hedging capabilities, and their prices also fluctuate widely, making them popular in-vestments for investors. As a result, Stock prices have fluctuated wildly, leading to uncertain investments and uncertain returns. To compute and analyze the maximum returns of stocks in Hong Kong stocks, this paper takes The Hang Seng index, an important indicator of Hong Kong stock market prices as the scene. We calculate the variance of these stocks using the Fama experiment. And We examined the normal distribution and i.i.d. of the data. To test whether the hypothesis of independence and the same distribution in the data is reasonable, and then con-duct an ACF test on the five selected stocks to observe their time-series stability. Then, this paper uses Markowitz's effective frontier decision-making process to simulate stock trading and use the Sharp ratio risk analysis to select mid-risk and high-yield portfolios. The results show that: The weight of the five stocks shows an approximate trend with their average return rate. The larger the average value is, the larger the investment proportion will be. stock investment with low-risk accounts for a relatively high proportion, while stock investment with high-risk accounts for a relatively small proportion. Among the selected several representative stocks, Techtronic Industries and Long for Group have more investment value, while the investment value of bank stocks is on the low side.

Comparing Atlantic Cod Temporal Spawning Dynamics across a Biogeographic Boundary: Insights from Passive Acoustic Monitoring

AbstractAtlantic Cod Gadus morhua, which are overfished in the United States, are potentially vulnerable to disturbance from offshore wind energy (OWE) construction and operation during their spawning period. While many aspects of Atlantic Cod biology are well studied, little is known of their habitat use and spawning behavior at the extreme southern extent of the species' range. As Atlantic Cod form dense spawning aggregations and produce sounds associated with courtship behaviors, we used a combination of fixed‐station and glider‐based passive acoustic monitoring methods to evaluate the spatiotemporal spawning dynamics of Atlantic Cod in the Georges Bank stock. Additionally, we assessed potential interactions with OWE in designated offshore wind lease areas within southern New England waters of the western North Atlantic Ocean. Generalized linear modeling was used to evaluate correlations between cod grunt activity and multiple environmental cycles. Results from the southern New England spawning grounds were compared to similar data describing the geographically separated Massachusetts Bay winter‐spawning subpopulation within the western Gulf of Maine stock. Temporal patterns in Atlantic Cod grunts suggest that spawning in southern New England waters is concentrated in November and December and is greatest near the new and full moons. Although there were fine‐scale differences in the temporal dynamics of grunt presence between the two regions, the overall seasonality of inferred spawning was similar. Results suggest that Atlantic Cod spawning in southern New England overlaps with planned OWE construction in time and space. An understanding of cod spawning phenology in the western North Atlantic can be used to minimize disturbance to spawning through limiting construction timelines and consideration of turbine or cable placement.

Impact of Financial Market Development, Financial Crises and Deposit Insurance on Bank Risk

This paper examines the impact of financial market development, financial crises and deposit insurance on bank risk based on macro data of 86 countries during the period 1998-2014. The results show that banking sector development and stock market development have opposing effects on bank risk measured as bank non-performing loan ratio. The introduction of an explicit deposit insurance system plays a significant role in reducing banks’ risk. However, the bank market development after the introduction of this system also increases banks’ risk. The impact of financial market development and deposit insurance system on banks’ risk was more significant before the 2008 financial crisis. It is found that there is a nonlinear relationship between financial market development, deposit insurance, financial crises and banks’ risk. The stock market development has an asymmetric effect on banks’ risk.

Central Bank Independence and stock market outcomes: An event study on Borsa Istanbul

This study explores the importance of central bank independence on stock market outcomes. Specifically, we examine the effects of President Recep Tayyip Erdogan’s decree, which removes the top officials of the Central Bank of Turkey, on Borsa Istanbul returns. We use a well-established event study methodology for five events from 20 July 2018, to 11 November 2021. The results show that the market is sensitive to the dismissal decrees in that they have positive effects on cumulative abnormal returns in the first two events, while the three events that follow have negative effects on cumulative abnormal returns. Our results support the importance of central bank independence, revealing that political intervention in central banks has a robust, positive, negative, and significant impact on stock market outcomes.

Does the source of uncertainty matter? The impact of financial, newspaper and Twitter-based measures on U.S. banks

This study examines if the source of uncertainty (newspaper, Twitter, financial market) matters in its impact on bank stock returns in the United States. By applying discrete wavelet transformation, we model directional spillovers and Granger causality between uncertainty and bank returns for different time horizons. Our results demonstrate that this distinction between time horizons is crucial. Although newspaper and Twitter-based measures are correlated, they capture a different source of investor perception. Twitter-based uncertainty adversely affects bank stocks in the short run, while newspaper-based policy uncertainty is relevant in the medium run. Financial-based uncertainty, VIX, is the most important factor. Moreover, we find that the impact of uncertainty on bank returns is stronger during the COVID-19 pandemic and for banks with a high ratio of loans to total assets and large off-balance-sheet activities.

Characteristics of the Board of Directors and Dividend Policy: A Case Study of Banks in Western Balkans

Abstract This paper examines the influence of the size and participation of women in the board of directors on the dividend policy of banks in Western Balkans. The research covered 104 banks, observing their dividend policy from 2017 to 2019. The dividend payout ratio was measured by the dividend policy. A relatively small number of banks paid dividends during the observation period. By applying the Fixed-Effect model, it was determined that the size of the board of directors has a statistically significant positive impact on the dividend policy of observed banks. Concerning the participation of women on the board of directors, a statistically significant impact on the dividend policy of banks was not identified. In addition to contributing to the existing literature on corporate finances, the research results can be crucial to investors when deciding to invest funds in bank stocks.

Climate change-related risks and bank stock returns

Climate change-related risks and bank stock returns

Banks’ return reaction to freedom, sentiment, and uncertainty

The paper aims to investigate the impact of freedom dimensions, investor sentiment, and uncertainty on bank stock returns. Additionally, this study examines the interaction between economic freedom dimensions and oil prices. To meet the study’s objectives, a two-step GMM estimator was applied to the data collected from 173 banks in 18 Middle East and North Africa (MENA) region countries during 2010–2020. The findings revealed that the influence of economic, business, and labour freedoms on banks’ stock returns was negative and significant, but government spending was positive and significant. The results for the region’s monarchies indicated similar effects to those of the entire MENA region, except for lagged bank stock returns that were negative. Besides, both investor sentiment and uncertainty positively impact bank stock returns. In addition, it was found that the interaction between freedom and oil price significantly and positively impacted bank performance. The robustness testing results confirmed this finding. Moreover, this research stands out as one of the limited investigations that have scrutinized the 18 MENA countries, which are predominantly Islamic and characterized by their distinct social norms, geography, and cultural identities.

Heterogeneity of investor sentiment, geopolitical risk and economic policy uncertainty: do Islamic banks differ during COVID-19 pandemic?

PurposeThis study examined the impact of; COVID-19 investor sentiment, COVID-19 cases, geopolitical risk (GPR), economic policy uncertainty (EPU), oil returns and Islamic banking on bank stock returns. In addition, it examined whether Islamic bank stock returns differed from conventional banks when interacting with selected variables.Design/methodology/approachThis study consisted of 137 conventional and Islamic stock market listed banks in 16 Middle East and North Africa (MENA) countries from February 2020 to July 2021. Monthly data were used for bank stock returns, number of COVID-19 cases, COVID-19 investor sentiment, oil price and EPU, while GPR data were obtained annually. This paper used unconditional quantile regression (UQR) in its analysis.FindingsCOVID-19 investor sentiment and EPU negatively influenced bank stock returns. However, oil returns were only positive and significant in first quantile. Conversely, GPR negatively impacted bank returns up to the median quantile, while the impact was positive in upper quantiles. Islamic banks outperformed conventional banks in all quantiles. Additionally, GPR negatively influenced Islamic bank returns up to 75th quantile, while oil returns negatively impacted Islamic bank returns up to 95th quantile. Ultimately, COVID-19 investor sentiment and EPU positively influenced Islamic bank returns up to 95th quantile.Practical implicationsMarket conditions must be considered when implementing investment decisions and policies, as the effects of market shocks are mostly asymmetrical. For example, it is important for international investors to take into consideration asymmetric factors, such as market uncertainty in oil market. Especially in bearish Islamic markets, bad news concerning uncertainty can be perceived as riskier than good news.Social implicationsA change in health sentiment, such as COVID-19 cases and COVID-19 investor sentiment, can be used to determine future direction of conventional and Islamic stock markets. Asymmetric effects associated with market news can make portfolio management more effective. COVID-19 investor sentiment states can be used to predict Islamic market index dynamics in MENA region.Originality/valueThis paper offered insight into heterogeneity of market conditions and dependencies of Islamic banks' stock market returns on COVID-19 investor sentiment and uncertainty, among others that should be considered when implementing investment decisions and policies.

Financial architecture: main components, comparative analysis, and current challenges

The concept of financial architecture describes the structure and mechanisms by which financial resources and capital move in the economy. The financial architecture includes various financial instruments and markets, legislation and regulatory authorities, and international financial institutions. The main objective of the financial architecture is to ensure the stability and efficiency of the financial system, as well as access to capital and financial services for all sectors of the economy. To achieve these goals, the financial architecture requires constant modernization and adaptation to changes in the global economy and financial industry. The article considers the key components of the financial architecture, such as the banking system, stock market, and regulatory framework, as well as their interaction and impact on economic performance. The challenges and opportunities associated with financial architecture (the effects of technology and globalization) on financial systems, the role of politics, and others are explored. The financial architecture of Ukraine is considered, as well as the main characteristics of the financial architecture of different countries, including the United States, China, Japan, the European Union, Brazil, and India. Information is provided on the studied countries' financial sector and financial stability. The study of the financial architecture in different countries allows for comparing different approaches and understanding how they affect the state of the economy and financial stability. Since the financial system is constantly changing under the influence of technological progress, unstable economic conditions, and regulatory reforms, we believe it is advisable to identify current trends in the financial system: digital transformation, fintech innovations, regulatory reform, sustainable finance, cross-border integration, a brief description of which is provided in the article. The study's results may be helpful to economists, finance, and investment professionals, as well as anyone interested in the economic system in general and the financial system. Keywords: financial architecture, banking system, stock markets, digital innovations.

How Does Financial Performance Boost Indonesian Bank Stock Returns

How Does Financial Performance Boost Indonesian Bank Stock Returns

Economic policy uncertainty, non-financial enterprises' shadow banking activities and stock price crash risk

At present, the structural contradiction between Economic Financialization and the real economy's long-term weakness has become increasingly prominent. As China enters a “new normal” stage of economic growth, the real investment rate drops, non-financial enterprises continuously allocate resources to the shadow banking system. The financial economy becomes increasingly divorced from reality. This leads us to the questions: will the shadow banking behavior of non-financial companies exacerbate the risk of stock price crash risk? How does the increase in economic policy uncertainty affect the relationship between non-financial companies' shadow banking activities and stock price crash risk?This article uses non-financial listed companies' data from 2007 to 2017 and conducts empirical analysis to answer this question. The study finds that companies engaged in high-leverage, high-risk shadow banking business exacerbate stock crash risk. This effect is only pronounced in non-state-owned enterprises and low social trust regions. The increase in the degree of economic policy uncertainty positively impacts the relationship between non-financial companies' shadow banking business and stock price crash risk. The theoretical mechanism is as follows: the rise in economic policy uncertainty amplifies the positive relationship between shadow banking activities of non-financial companies and stock price crashes by increasing bank loans, investors' sensitivity to external information, risk cross-contagion, and inefficient investment mechanisms. Various robustness tests do not change the research conclusion. This paper has important theoretical and policy guidance significance for reviewing the existing diversified shadow banking system and preventing systemic risks.

Interest rate, foreign exchange and stock performance in a dual banking industry: evidence from Saudi Arabia

PurposeThis study aims to extend the literature by extensively investigating the impact of foreign exchange and interest rate changes on the returns and volatility of bank stocks in Saudi Arabia, which is the largest dual banking industry.Design/methodology/approachThis study employs the generalized autoregressive conditional heteroscedasticity (GARCH) model on stock returns of four fully Islamic Saudi banks and eight conventional Saudi banks.FindingsThe results showed that the foreign exchange rate return has a positive impact on Saudi conventional bank returns, while it has an adverse impact on Saudi Islamic bank returns. Moreover, a higher interest rate return has a positive impact on Saudi bank stock returns implying that the assets side is more sensitive to changes in interest rates than the liability side. Finally, higher foreign exchange and interest rates volatility increases the volatility of Saudi bank returns, where the former has the largest significant impact. Therefore, Saudi regulators should pay more attention to the risk management of their banks because this could threaten the stability of their financial system.Originality/valueTo the best knowledge of the author, this is the first study that tries to extensively analyze the joint impact of foreign exchange and interest rates on bank stock returns and volatility in Saudi Arabia by applying the GARCH model. The study uses a long data set from 2010 to 2019 that includes all Saudi banks and employs four measures of interest rates to increase the robustness of the results.

PENGARUH PROFITABILITAS, PRICE TO BOOK VALUE, BOOK VALUE PER SHARE TERHADAP HARGA SAHAM PERUSAHAAN PERBANKAN

Composite Stock Price Index (JCI) during 2017-2020 has increased due to the increasing number of investors and also reflected in the high stock prices of banks. Increase of the Bank stock price is result of investor purchases influenced by supply and demand. Study based on data of banking companies listed on the Indonesia Stock Exchange (IDX). There are nine bank stocks on the Indonesia Stock Exchange (IDX) 80 index used as a sample in this study, The Sample is selected using saturation sampling. This study aims to determine the effect of Return on Equity (ROE), Price to Book Value (PBV), and Book Value Per Share (BVPS) on stock pricesin bankingcompanies at IDX 2017-2020. Data analysis used multiple linear regression. Results showed PBV and BVPS had positive significant effect on stock prices. Partially ROE variable hasa negative effect on stock prices in banking companies on the IDX, but partially PBV and BVPS each have positive significant effect on stock prices. This research implies that PBV and BVPS can considered as one the determinants of stock prices, but ROE shows there is no effect on stock prices in banking companies on the IDX 2017-2020.
 Keywords: Profitability, Book Value Per Share, Price to Book Value, Stock Price, Banking Stocks.

Social capital, trust, and bank tail risk: The value of ESG rating and the effects of crisis shocks

Using a global sample of 244 banks in 52 stock markets, we investigate the effect of corporate social responsibility (CSR) on bank tail risk in normal and turbulent times. Our analysis shows no significant evidence that CSR intensity protects banks from tail risks ex ante or during the global financial crisis of 2007–2009. However, investors appear to become more tolerant and more lenient towards banks with stronger CSR post ante economic recession by reducing the likelihood of extreme devaluation of banking stocks. Socially responsible banks with higher social capital and trust (associated with superior CSR performance) experience lower idiosyncratic and systematic tail risks even in the context of the COVID-19 pandemic in 2020. Our empirical evidence implies that the trust between banks and investors started to build through banks’ investments in social capital through committed CSR performance since the credit crunch erupted.

Market reaction to the Russian Ukrainian war: a global analysis of the banking industry

PurposeThe purpose of this paper is to study the market reactions of the banking industry to the Russian–Ukraine war.Design/methodology/approachThis paper uses an event study methodology, regression analyses and interaction effects to study the effect of the war on banks stock prices and analyze factors that explain the cumulative abnormal return.FindingsFirst, this study finds a significant decline of almost 1.5% in return on the war date. Similar patterns were observed for all continents, but Europe had the most severe drop of about 4%. Second, after excluding the contemporaneous influence of the whole market using the market model, global bank equities returns fell by about 1% on the war date, indicating that bank stocks were more severely impacted by the war than the average stock market. Net-of-market return approach further reveals that bank stock prices decreased 1.4% more on the event day compared to the prewar market average. Third, the impacts of the war and sanctions were persistent when the war continued. Banks stocks were most hit in Europe, Asia and North America.Originality/valueThis paper pioneers the study of the effect of the Russia–Ukraine war on the banking industry. This paper also analyzes the reaction pattern of bank stocks before, during and after the war to explain the behavior and expectations of investors toward the war.

Enhanced Bollinger Band Stock Quantitative Trading Strategy Based on Random Forest

Constructing applicable automated stock trading strategies has become one of the best ways that people can earn profits from their underlying assets' investments now. Automated stock trading, also called quantitative trading, contains sets of human-defined rules, which are written in codes to make decisions to go long or short on stocks on a computer. Investment banks, brokerages, private equity funds, and other financial institutions around the world are keen on investigating and developing quantitative trading strategies with sustainable profitability to yield higher returns than the normal market. This research aims to observe the trading performance and profits of financial banking stocks in the Hong Kong stock market by building a quantitative trading strategy named Enhanced Bollinger Band Strategy based on Random Forest and Bollinger Bands. In experiments, the Random Forest algorithm is applied to predict the Weighted Moving Average the next day. Meanwhile, Bollinger Bands are the trading signals used to make decisions on going long or short positions based on the historical moving average lines and standard deviation. Performances of the Enhanced Bollinger Band Strategy are evaluated by test sets of ten financial banking stocks. We also compare the performance of the Enhanced Bollinger Band Strategy and Traditional Bollinger Band Strategy and find that the Enhanced Bollinger Band Strategy can earn 10-30% profits on a variety of stocks although these stocks are losing 10-50% original amount of investment in Traditional Bollinger Band Strategy and basic investment. Therefore, a combination of Random Forest and Bollinger Bands in the quantitative trading strategy generates higher returns than simply investing in stocks.

Bank funding constraints and stock liquidity

This paper examines the relationship between bank marginal funding constraints and stock liquidity. Using bank credit default swap (CDS) spreads we show that increased funding constraints weaken bank stock liquidity (as measured by liquidity tightness, depth, and resilience). This effect strengthens during crises periods. Deteriorating bank stock liquidity is in turn priced into excess stock returns. In addition, we find that during liquidity crises, monetary expansion can break the relationship between funding costs and stock liquidity. Heightened monetary policy uncertainty, however, strengthens this relation.

Regulations, Bank Stability Measures and Stock Market

Regulations directed at bank stability affect the entire financial system because of the strategic role banks play in the economy. The impact of regulations on bank performance have been examined. However, the use of bank regulatory stability indicators and aggregate financial regulatory instruments to account for stock market returns in Nigeria post-global financial crisis is limited, which is the gap this study seeks to fill. Data for this study was collected from investigated banks’ audited annual reports, the Central Bank of Nigeria Statistical Bulletin and Nigerian Stock Exchange official daily price list. Thirteen (13) banks listed in the Nigerian Exchange Limited for the 2010 to 2020 were investigated. The Difference Generalized Method of Moments was applied to the dynamic model to examine the effect of regulations, bank stability indicators on the returns of bank stocks. The Arrelano and Bond procedure was used to test for autocorrelation in the regression output, while the J.statistic enunciated by Hansen was employed to evaluate the existence or otherwise of over/under constraints in the instrumental variables incorporated in the estimation tool. E-view 9.0 econometric computer application was used for the analysis. This study found that bank liquidity ratio, an indicator of bank stability in this study positively and significance determines stock market returns. Also, capital adequency ratio, another bank stability indicator in this study positively and significantly drives stock returns. Similarly, monetary policy rate, an indicator used by the Central Bank of Nigeria to regulate aggregate liquidity positively and significantly influence bank stock returns. This study also revealed that the prescribed cash reserve ratio used by the Central Bank to regulate the capacity of banks to grant credits is negatively and significantly related to stock returns in Nigeria. This implies that a rise in cash reserve ratio limits the ability of banks to create credits, thereby reducing interest income from loans, thus reducing bank earnings. These findings imply that: (i) Investors should incorporate bank stability indicators and aggregate monetary policy regulatory instruments in their investment strategies if they hope to achieved maximum returns on investment. (ii) The regulatory authority can influence stock market performance through the concurrent utilization of bank stability indicators enunciated in Basel regulatory accord and monetary policy instruments (iii) The use of Cash reserve ratio as the regulatory instrument is potent in ensuring bank stability but it has adverse effect on bank stock returns because of its effect on interest income and earnings through its limitation on credit creations. Therefore, the central bank should reconsider the current cash reserve ratio and make it more friendly for banks' credit creation.

Financial Inclusion and Markets

The period 2015–2020 has seen major events Indian banking history. The period saw high levels of Non-Performing Assets (NPAs), bank mergers as well as enormous thrust of financial inclusion. In this article we explore how the stock prices of banks react financial inclusion as more bank accounts are opened under the financial inclusion mandate. The study has two distinct parts. In the first part, an analytical summary of Indian banking is presented. The study then considers financial inclusion data from Pradhan Mantri Jan Dhan Yojana (PMJDY) intervention. the financial inclusion data. We consider the data involving 34 banks covering the period January 2015-March 2020. Our sample has 23 public sector banks and 11 private banks. Monthly data for these banks were obtained for share prices, number of PMJDY beneficiaries, deposits in the accounts, Rupay cards, payments made at POS, mobile payments. Thereafter we use panel regression technique to establish the relationship between financial inclusion and banking stocks. We find that, banking returns decrease as bank sizes increase or NPAs mount. Our results also establish a positive relationship between financial inclusion and share price. While the evidence of financial inclusion affecting stock prices is weak, it does establish that growth in payment instruments do have positive effects. We also find a positive relationship between financial inclusion and cashless payments. However, we do not find a strong evidence of the market rewarding cashless payments. We also find that as number of cashless instruments (cards) and the payments in such accounts increase, more and more individuals make cashless payments. This once again highlights the importance of payments into the accounts of the beneficiary. Our findings suggest that while the market doesn’t reward how many new beneficiaries are added, it does reward the banks if the newly opened accounts attract deposits. This certainly augurs well as financial inclusion must play an integral part of the Indian financial system. Most importantly, our study suggests that new accounts must see deposits for the financial system to be rewarded. We also find that the market may not reward bank consolidation and hence any further consolidation may have to be relooked at.