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The IUP Journal of Financial Risk Management
ISSN: 0972-916X
A ‘peer reviewed’ journal indexed on Cabell’s Directory,
and also distributed by EBSCO and Proquest Database

June'18

Previous Issues

The IUP Journal of Financial Risk Management is a quarterly journal that focuses on identifying financial risk, risk management models, accounting for derivatives, risk-hedging techniques, asset liability management. The journal provides a platform for cutting edge research in the field of financial risk management.

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Editorial Board
Information to Authors
  • Identifying Financial Risk
  • Risk Management Models
  • Accounting for Derivatives
  • Risk-Hedging Techniques
  • Asset Liability Management
Articles
   
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Exchange Rate Forecast Enhancement Using Sentiments from Google Trends
Did BREXIT Lead to a Structural Break in Stock Returns of Select EU Countries? – A Time Series Econometric Investigation
An Analysis of Mutual Fund Performance with Respect to Investor Decision Making
The Relationship Between Return and Capital Structure of Bank Stocks: A Study in Indian Capital Market
Risk Weighted Assets Density as a Parameter of Risk Profile of Bank Assets: A Study of Indian Banks
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Contents
(June'18)

Exchange Rate Forecast Enhancement Using Sentiments from Google Trends

--Hussain Yaganti and Yash Manpuria

Does incorporation of sentiments from credit, financial and price markets add to the forecasting abilities of the models using fundamental factors in exchange rate forecasting? The present study attempts to answer this question by introducing a different method of exchange rate forecasting by considering sentiments from Google Trends along with macroeconomic fundamentals. It attempts to increase the predictive powers of foreign exchange forecasting models based on macroeconomic observable fundamental factors by incorporating the sentiments from the above-mentioned three markets. This work is based on Principal Component Analysis (PCA) and Vector Autoregression (VAR). The study has extracted sentiments by preserving 90% cumulative variance in principle components from each of these three markets. Further, it estimated VARs with and without sentiments. It is observed that the estimates of VAR model with sentiments provide better results as compared to fundamental VAR model. Finally, this study concludes that sentiments can enhance predictive content of foreign exchange rate along with macroeconomic variables.

Article Price : Rs.50

Did BREXIT Lead to a Structural Break in Stock Returns of Select EU Countries? – A Time Series Econometric Investigation

--Rakesh Shahani and Muhammad Subhan

The present study is an attempt to investigate the impact of an important event ‘Britain’s exit from the EU, BREXIT, i.e., whether or not this even, whose referendum took place on June 23, 2016 with the result being reported in the early morning of June 24, 2016, resulted in causing any structural break in the stock index movement in the select five EU member countries, namely, UK, France, Germany, Finland and Spain. The period of study was 45 days (June 2, 2016-July 15, 2016) with a 30-day event cycle; 15 days before the event and 14 days after the event (–15 to +14). The analysis is carried out on the closing prices of the major indices of these five EU nations. The tools used to analyze the impact of the event, BREXIT, are CUSUM and CUSUMSQ plots and Chow dummy variable test. The results of CUSUMSQ plots give an indication of a break in four out of five markets: UK, Germany, Finland and Spain in the time period 16-18 (between June 23 and 25, 2016). However for France, the plot reveals a break somewhere in between the time periods 14-16 (between June 21 and 23, 2016). The Chow Breakeven test however could not confirm any structural break for time series of UK, Spain and Finland, as the null hypothesis of no structural break is accepted. On the other hand, for two countries, France and Germany, there is some evidence of break at 5% and 10% confidence levels, respectively, and the date of break identified is June 23, 2016; this was the same date when the referendum on UK’s withdrawing from the EU took place.

Article Price : Rs.50

An Analysis of Mutual Fund Performance with Respect to Investor Decision Making

--Rashi Goplani and Vishal Bohra

The present paper is an attempt to analyze the performance of various mutual fund schemes with respect to investor decision making. The mutual funds have been selected on the basis of CRISIL rankings for the period ending December 2016. The top three ranked schemes under various categories of mutual funds have been selected for analysis. The data compiled from CRISIL is used to predict the future performance which will aid the investor in making an attainable portfolio where his risk and return are optimized. Measures like standard deviation and returns are put to chi-square analysis and further used for basing the future investment decisions with respect to investor perspective. The results of the research display optimum risk-return relationship and identify a diversified portfolio which an investor can make so far as his decisions regarding investments in mutual funds are concerned. The paper attempts to predict the future performance of mutual funds based on the assumptions that are available in the financial markets.

Article Price : Rs.50  

The Relationship Between Return and Capital Structure of Bank Stocks: A Study in Indian Capital Market

--Bhaskar Biswas

The objective of the present study is to find out the relation between bank stock returns and dividend per share, debt equity ratio and fixed assets turnover ratio of the select seven bank stocks included in the Nifty index for a period of 10 years from 2008 to 2017. Statistical techniques like correlation, multiple correlation and regression have been used for analyzing the data. The results show that only in the case of HDFC bank, there is positive correlation between stock return and dividend payout ratio, debt equity ratio and fixed assets turnover ratio.

Article Price : Rs.50  

Risk Weighted Assets Density as a Parameter of Risk Profile of Bank Assets: A Study of Indian Banks

--Kamal Kishore

Capital Adequacy Ratio (CAR) signifies the proportion of capital funds of banks in relation to Risk Weighted Assets (RWAs). Bank assets carry risk of delinquency depending upon the nature and volume of assets. Any loss arising from failure of assets has to be borne by capital funds. The capital must, therefore, bear prescribed ratio in relation to risk assessed assets in order to meet regulatory norms. RWAs constitute the risk profile of bank’s assets portfolio. The ratio of RWAs to total asset exposure provides a measure of riskiness of assets. The ratio has come to be known as RWA density and its variance from year to year indicates change in risk profile of asset portfolio of the bank. An increase in RWA density over a period shows that overall risk profile of bank assets has deteriorated. This may arise due to asset with higher risk weight substituting lower risk assets, without any change in risk weight factors. Similarly, a decrease in RWA density of bank would indicate that risk quality of assets has improved. The paper examines the variations in risk profile of bank assets using the parameter of RWA density, both for public and private sector banks in India.

Article Price : Rs.50  
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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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