Estimating Financial Volatility with High-Frequency Returns

Research Article

The primary value of a time series model lies in its ability to provide reliable approximations of the modelled variable, both in-sample (where data are used to estimate model parameters) and out-of-sample (where the model is updated with new information and produces forecasts). In this paper, an overview of the various models in the GARCH family is followed by their application in estimating the daily volatility of Citigroup Inc., a major player in the US. sub-prime mortgage crisis. Fitting these estimates to the ex-post realized volatility measure constructed from high-frequency returns provides superior goodness-of- t than tting them to the [...]

Illusory Nature of Pricing of Illiquidity Effect: The Test Case of Australian Stock Market

Research Article

Positive illiquidity premium is documented to be linked with the illiquidity effect across global markets. This evidence is generally suggested through some asset pricing model, such as Acharya and Pedersen (2005) or others. Our study shows that the success of any such model in terms of magnitude of predicted risk premium is linked with a measure of illiquidity used in the study. The main implication of this evidence is that the variety of illiquidity related risk premiums can be reported for the same market, or for the number of markets. To elaborate this point, the test case of Australian stock [...]

The Impact of Islamic Banks and Takaful Companies on Economic Growth: A Case of Pakistan

Research Article

The purpose of this study is to examine the impact of Islamic Banks and Takaful on economic growth of Pakistan. Using panel data from 2009 to 2014 of five Islamic Banks and five Takaful Companies, and taking Gross Domestic Product (GDP) as dependent variable, Total Deposits (TD) of Islamic Banks and Total contribution (TC) of Takaful companies as independent variables, analysis is done to find the impact of Islamic Banks and Takaful companies on the economic growth of the country. The study employs Fixed Effect Model for the econometric analysis. The study concluded that there is a significant role of [...]

Financial Literacy, Behavioral Biases and Investor's Portfolio Diversification: Empirical Study of an Emerging Stock Market

Research Article

The purpose of this study is to check the impact of financial literacy and behavioral biases on investor's portfolio diversification. Data were collected through questionnaire using sample size of 181 investors trading in Pakistan Stock Market. The results indicate that financial literacy has insignificant and positive influence on investor's portfolio diversification, behavioral biases such as familiarity and availability biases have insignificant and negative while overconfidence bias has significant negative impact on investor's portfolio diversification. Portfolio size also has significant positive impact on portfolio diversification. The findings suggest the implementation of financial literacy programs to facilitate the investors, trading in different [...]

Does Balance of Payments Constrained Growth Model Hold in Saudi Arabia?

Research Article

The paper aims to examine whether or not the balance of payments constrained growth model holds in Saudi Arabia. Also, the paper seeks to examine whether the balance of payments constrained growth model can predict Saudi Arabia's real GDP growth rate. In the long-run, the estimation results show that Saudi Arabia has an elastic income elasticity of demand for imports and an inelastic price elasticity of demand for imports. The McCombie test shows that the hypothetical income elasticity of demand for imports, which assumes balance of payments is in equilibrium, is not significantly different from the estimated income elasticity of [...]

Impact of Capital Structure on Firms? Financial Performance: Evidence from United Kingdom

Research Article

The purpose of this paper is to examine empirically the impact of capital structure on financial performance of United Kingdom (UK) firms' during the period from 2006 to 2015. The investigation is performed using data of 739 UK very large and large listed companies on London Stock Exchange. The study uses four performance measures, including return on equity - ROE, return on assets - ROA, Tobin's Q and earnings per share EPS as dependent variables. The two capital structure ratios, namely long-term liabilities and short-term liabilities as well as growth rate of total assets are applied as independent variables. Size [...]

Relationship between Trade Openness and Energy Consumption in Oil Importing Asian Countries

Research Article

The present study intended to examine the impact of trade on energy consumption using data of four oil importing, heavily populated, and developing economies of Asia namely Pakistan, India, China and Bangladesh. The study covers the period of 1972 to 2011. The data was checked for the Cross-sectional Dependency using CD-test, then CIPS panel unit root test, Panel cointegration, and Pooled Mean Group estimates approaches were used. Empirical results confirmed the Long-run relationship between energy consumption and trade openness. This study confirms the influence of trade on energy consumption and that they are positively related. International trade increases the energy [...]

Remittances, Foreign Direct Investment and Growth in SADC: A Panel Co-integration Approach

Research Article

The current growth in per capita gross domestic product for countries within Southern Africa Development Community (SADC) has been below the target of 7% as provided by the sustainable development goals. This study uses panel co-integration techniques to establish the presence of non-linearity between long term growth and remittances, the substitutability or complementarity between foreign direct investment (FDI) and remittances as sources of long term growth. Annual data for 12 SADC member states for the period 1970 to 2014 was employed. Findings show that remittances promote long term growth and the connection between the two is nonlinear. Remittances positively affect [...]

Herding Behaviour among Credit Rating Agencies

Research Article

The aim of this paper is to identify the influence degree among the main rating agencies and the other variables that affect rating changes for sub-sovereign entities in Germany, Austria, Belgium, France, Italy and Spain, using a total of 32 territorial entities between 1996 and 2012. Due to the shortage of European sub-sovereigns with more than 2 ratings, we estimated six binary probit regressions as a combination of 3 rating agencies two to two. We conclude that Fitch is the most influential agency on the other two rating agencies, but Standard and Poor's is the leader. There are other relevant [...]