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The IUP Journal of Applied Economics
ISSN: 0972-6861
A ‘peer reviewed’ journal indexed on Cabell’s Directory,
and also distributed by EBSCO and Proquest Database

Jan'17

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The IUP Journal of Applied Economics is a quarterly economics journal that analyzes the issues of micro, macro, development and energy economics. IJAE provides research articles on industrial economics, public finance, industry, and agricultural and rural economics.

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  • Development Economics
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Impact of Natural Disasters on Cointegration and Diversification: A Study of World’s Major Stock Indices
Allocation of Stocks in a Portfolio Using Antlion Algorithm: Investor’s Perspective
Wind Energy Establishments in Karnataka: Determinant Factors for Effective Diffusion
Global Imbalances, Financial Crises, and Central Bank Policies
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Contents
(Jan 2017)

Impact of Natural Disasters on Cointegration and Diversification: A Study of World’s Major Stock Indices

--Taufeeque Ahmad Siddiqui and Isha Rawal

This study identifies the impact of three natural disasters on cointegrating relationship among selected world stock market indices. The study further suggests the best international diversification strategy in case of the occurrence of an extreme event from the perspective of an Indian investor. A vast amount of research suggests that international portfolio diversification helps to spread the risk of any adversity occurring in a particular country as the correlations among stocks in various countries are lower as compared to local securities. But the disagreement nevertheless is that in a number of instances, diversifying internationally might not be effective. To fill this research gap, the study employs Johansen multivariate cointegration test to evaluate change in the financial linkages between selected stock market indices during the pre- and post-one year event period for three events to include China Earthquake of 2008, Japan earthquake and tsunami of 2011 and the US Hurricane Sandy of 2012. The study further compares performance of different portfolio diversification strategies, viz., Naive 1/N portfolio construction technique, Markowitz modern portfolio theory and cointegration-based portfolio construction method with the aid of Sharpe’s ratio. The study finds that with the help of cointegration analysis, effective portfolio selection can be done to seek maximum diversification benefit.

Allocation of Stocks in a Portfolio Using Antlion Algorithm: Investor’s Perspective

--Kshma Kaushal and Sukhdev Singh

An investment is a commitment of funds made in the expectation of some positive rate of return. A fundamental principle of investments is diversification, where investors diversify their investments into different types of financial assets. The different stocks can be clubbed in one portfolio. The most important investment decision which the investor of a portfolio must make is the portfolio’s asset allocation. Asset allocation refers to the percentage of amount invested in various choices available. This paper presents the design of optimal portfolio using a new stochastic nature inspired computing technique—Antlion Algorithm (ALO). ALO mimics the hunting mechanism of antlions in nature and can be used as an optimization technique to solve various problems in management and engineering. The stocks of top 45 Indian companies listed on Bombay Stock Exchange (BSE) have been selected on the basis of market capitalization. The problem has been modeled as a fitness function which minimizes risk and maximizes the return of the portfolio. The optimal weights indicating the amount of money to be invested in each stock has been calculated using ALO. Two different sets of portfolio have been constructed and optimized. The results obtained using ALO have been compared with those obtained using conventional Genetic Algorithm (GA) and it has been found that ALO outperforms GA for portfolio designing.

Wind Energy Establishments in Karnataka: Determinant Factors for Effective Diffusion

--B Prasanna Kumar, K M Murugesha and B P Veerabhadrappa

Diffusion of wind energy is necessary for sustainable development. Country like India has also adopted this technology for economic development. Therefore, this study attempts to analyze the determinant factors and their extent of impact on wind energy diffusion using binary and multi-logit models for the state of Karnataka. The empirical results indicate that Karnataka has inappropriate sites for wind energy production at higher socioeconomic cost, where the present wind technology is causing lower probability of diffusion. The results emphasize on public-private participation in wind energy generation, transmission, and distribution considering more the economic, social, and environmental aspects than the geographical nature of the region. Therefore, this study gives a strong signal to the policy makers of developing as well as developed countries.

Book Review
Global Imbalances, Financial Crises, and Central Bank Policies

--Andreas Steiner
Reviewed by Ivaturi Murali Krishna

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Automated Teller Machines (ATMs): The Changing Face of Banking in India

Bank Management
Information and communication technology has changed the way in which banks provide services to its customers. These days the customers are able to perform their routine banking transactions without even entering the bank premises. ATM is one such development in recent years, which provides remote banking services all over the world, including India. This paper analyzes the development of this self-service banking in India based on the secondary data.

The Information and Communication Technology (ICT) is playing a very important role in the progress and advancement in almost all walks of life. The deregulated environment has provided an opportunity to restructure the means and methods of delivery of services in many areas, including the banking sector. The ICT has been a focused issue in the past two decades in Indian banking. In fact, ICTs are enabling the banks to change the way in which they are functioning. Improved customer service has become very important for the very survival and growth of banking sector in the reforms era. The technological advancements, deregulations, and intense competition due to the entry of private sector and foreign banks have altered the face of banking from one of mere intermediation to one of provider of quick, efficient and customer-friendly services. With the introduction and adoption of ICT in the banking sector, the customers are fast moving away from the traditional branch banking system to the convenient and comfort of virtual banking. The most important virtual banking services are phone banking, mobile banking, Internet banking and ATM banking. These electronic channels have enhanced the delivery of banking services accurately and efficiently to the customers. The ATMs are an important part of a bank’s alternative channel to reach the customers, to showcase products and services and to create brand awareness. This is reflected in the increase in the number of ATMs all over the world. ATM is one of the most widely used remote banking services all over the world, including India. This paper analyzes the growth of ATMs of different bank groups in India.
International Scenario

If ATMs are largely available over geographically dispersed areas, the benefit from using an ATM will increase as customers will be able to access their bank accounts from any geographic location. This would imply that the value of an ATM network increases with the number of available ATM locations, and the value of a bank network to a customer will be determined in part by the final network size of the banking system. The statistical information on the growth of branches and ATM network in select countries.

Indian Scenario

The financial services industry in India has witnessed a phenomenal growth, diversification and specialization since the initiation of financial sector reforms in 1991. Greater customer orientation is the only way to retain customer loyalty and withstand competition in the liberalized world. In a market-driven strategy of development, customer preference is of paramount importance in any economy. Gone are the days when customers used to come to the doorsteps of banks. Now the banks are required to chase the customers; only those banks which are customercentric and extremely focused on the needs of their clients can succeed in their business today.

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