|
Intertemporal Risk-Return Relationship in Stock Indices with Alternative Model Specifications
-- K N Badhani
Intertemporal Capital Asset Pricing Model (ICAPM) of Merton (1973) postulates a positive relationship between time-varying conditional risk and conditional return on securities. However, empirical evidence is inconclusive on this issue. On the other hand, there is strong evidence that volatility increases disproportionately with negative shocks in stock returns. This paper examines the relationship between time-varying return and volatility in two NSE-based stock indices-S&P CNX Nifty and CNX Nifty Junior, using four alternative model specifications i.e., GARCH-M, EGARCH, TGARCH and the Hamilton's Two-Regime Markov-Switching Model. Although this study finds strong evidence of asymmetric volatility adjustments, there is no significant relationship between conditional volatility and expected returns. Unconditional volatility and returns in two switching regimes are found negatively associated. In contrary to what is suggested by volatility-feedback hypothesis, the negative association between volatility and return is persistent rather than transitory and reversible.
© 2007 IUP . All Rights Reserved
The Explanatory Power of Capital Structure Theories: A Panel Data Analysis
-- Zélia Serrasqueiro and Paulo Maçãs Nunes
This paper investigates whether the main capital structure theories-Pecking Order, Trade-off, Agency, and Signaling theories-could explain the determinants of debt for a panel data covering 162 Portuguese companies for the period 1999-2003. A better understanding of the determinants of debt in a relatively small, open, and industrialized economy of a less developed country may shed further light on Portuguese companies' capital structure decisions. The results have mixed evidences. A negative relationship between profitability and debt confirms the Pecking Order theory while a positive relationship between size and debt, confirms the Trade-off and Signaling theories. The opposite relationships between tangibility and short-term debt and long-term debt, suggest that the determinants of debt vary depending on the analyzed form of debt. On the whole, the results seem to support the capital structure theories in explaining the determinants of corporate debt.
© 2007 IUP . All Rights Reserved.
Towards Predicting Financial Information Manipulation
-- Ramazan Aktaª, Ali Alp, M Mete Doganay
Manipulation is one of the important issues in securities markets because manipulative actions send false signals to the investors and make them buy or sell securities they otherwise would not buy or sell. There are different types of manipulations that can deceive investors. One type of manipulation is financial information manipulation. Manipulators, who use this type of manipulation, distort information in the financial statements in order to give false information about the prospects of the issuing firms. This paper attempts to predict financial information manipulation by using the multivariate statistical techniques and neural networks. A number of financial ratios are used as explanatory variables. The multivariate statistical techniques used are discriminant analysis, logistics regression (logit), and probit. Unlike other studies, the present study takes multicollinearity between financial ratios into account and conclude that the estimated multivariate statistical models rather than the neural networks can be used as early warning systems to detect possible financial information manipulations.
© 2007 IUP . All Rights Reserved.
Emerging Equity Markets: A Cross-country Time Series Study
-- Joydeep Biswas
The paper examines the development of the Asian stock markets in the post-liberalization period. For the purpose of comparing the development of stock markets among the sample countries during 1996-2005, a comparative index has been constructed by considering indicators such as market size, liquidity, risk, and market integration. The study reveals that big stock markets are highly volatile and trade in high volumes, while the stock markets that are more integrated globally are likely to be less volatile.
©2007 IUP . All Rights Reserved.
|
