The Impact of Stock Market Crash Shock on the Real Economy:
An Empirical Investigation Based on Vector Autoregressive Model
--Haifa Hammami and Younes Boujelbene
This paper uses the Vector Autoregressive (VAR) model to investigate the impact of a stock market crash shock on the real economy in Tunisia. Analysis reveals that the real investment growth rate negatively reacted to a stock market crash shock of 2003. The impact of stock market crash shock helps explain the fluctuations of the real investment growth rate. It also explains a small proportion of the variability in real industrial production growth rate, real Gross Domestic Product (GDP) growth rate and real private consumption growth rate.
© 2015 IUP. All Rights Reserved.
The Impact of Sentiments on Stock Market:
A Fuzzy Logic Approach
--A Sarath Babu and R Ramesh Kumar
This paper analyzes the impact of national sentiment and investors’ sentiment on stock market. Facebook Gross National Happiness (FGNH) Index is taken as a national sentiment score as the people of a country post comments reflecting their moods status. Initial analysis of national sentiment and NSE index return confirmed that there is no significant impact. Further analyzing the impact of negative sentiment on NSE index return and the impact of positive sentiment on NSE index return revealed that negative sentiments have greater bearing on NSE index return than positive sentiments. The stock returns and national sentiments are characterized by complex systems. In this study, ANFIS method is employed to understand the relationship between sentiments and stock returns. Comparing the performance of VAR and ANFIS, ANFIS better explains the relationship than VAR, and ANFIS also makes it possible to infer linguistic interpretations about the relationship more concretely.
© 2015 IUP. All Rights Reserved.
Value Investing with Price-Earnings Ratio in India
--Gunjan Chhaya and Prashant Nigam
Researchers and investment professionals have argued that ‘value strategies’ based on low price relative to earnings,
dividends, book value and other fundamental measures, have outperformed the corresponding ‘growth strategies’ and
the market. In this study, we endeavor to explore this premise in the Indian context by forming equity portfolios based
on price-earnings ratios and evaluate their ex post returns on both absolute and risk-adjusted measures. During the
study period, i.e., October 2000 to September 2013, we sample the market each quarter, a total of 48 iterations, and
examine the portfolio returns for holding periods up to five years. We find evidence of statistically significant value
premium in the Indian stock market.
© 2015 IUP. All Rights Reserved.
Tax Policy Reforms and Economic Growth in Nigeria
--H A Adefeso and T O Tawose
The aim of this paper is to examine the relative effect of tax policy reforms on economic growth with a view to analyzing whether tax burden and tax mix have direct or indirect association with economic growth in Nigeria using annual data from 1970-2012. Error Correction Mechanism (ECM) and cointegration technique of analysis are utilized to analyze the data and draw policy inferences. The empirical results show that both tax burden (t = 17.78, p < 0.05) and tax mix (t = 7.48, p < 0.05) are found to be statistically significant but negatively associated with economic growth in Nigeria. The study found that higher taxes are strongly correlated with reduced economic growth and that the policy reforms that reduced tax burden and tax mix by shifting from direct tax to indirect and equally improving on tax administration and tax collections would enhance economic growth in Nigeria.
© 2015 IUP. All Rights Reserved.
Market Evaluations and Strategic Alliances
of Japanese Financial Institutions in Survival Waves
--Yoko Shirasu
This paper empirically examines the effects of the changing business strategies (e.g., new stock tie-up alliances, expanding tie-up alliances, and Mergers and Acquisitions (M&A) of Japanese financial institutions listed on the stock market. Different market effects on banks, security companies, and insurance companies are considered. In the analysis of new stock tie-ups, based on the research of Altunbas and Marques (2008) on strategic factors, it has been found that when information asymmetries exist between insurance companies and market investors, market players cannot accurately estimate insurance liabilities or value insurance companies. Market players expect that new equity tie-up strategies will encourage Japanese insurance companies to restructure from high cost, low capital ratio organizations to low cost, high capital ratio ones. In contrast, relatively sound Japanese banks have finished resolving their nonperforming loan problems, and are forging ahead with new global business initiatives.
© 2015 IUP. All Rights Reserved.
An Analysis of Active Fund Allocation
Decision of Mutual Funds in India
--M S Narasimhan and Manas Shah
By evaluating the performance of 772 funds, this study seeks to examine whether fund managers add any value by their fund allocation decision. After selecting the securities for investment, fund managers need to decide as to how much to be invested in the selected securities. They can actively decide on how much to be invested or passively invest equal amount in the selected stocks. Using monthly portfolio details of equity-oriented mutual fund schemes, this study compares the return generated by the funds under active fund allocation and passive fund allocation, and finds that the active fund allocation strategy on an average records lower return to an extent of 0.18% per month compared to passive fund allocation strategy. The study concludes that there is no significant value addition by pursuing active fund allocation strategy and the results hold good for most of the fund houses, fund managers and funds categories.
© 2015 IUP. All Rights Reserved.
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