Moderating role of political stability and economic policy uncertainty between country governance practice and stock market performance. A comparative analysis of Pakistan and Kurdistan Region of Iraq
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SUBMITTER: Maghdid R
PROVIDER: S-EPMC11020357 | biostudies-literature | 2024 Jan
REPOSITORIES: biostudies-literature
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Project description:This research examines the effect of economic policy uncertainty (EPU) indices on Pakistan's stock market volatility. Particularly, we examine the impact of the economic policy uncertainty index for Pakistan and bilateral global trading partner countries, the US, China, and the UK. We employ the GARCH-MIDAS model and combination forecast approach to evaluate the performance of economic uncertainty indices. The empirical findings show that the US economic policy uncertainty index is a more powerful predictor of Pakistan stock market volatility. In addition, the EPU index for the UK also provides valuable information for equity market volatility prediction. Surprisingly, Pakistan and China EPU indices have no significant predictive information for volatility forecasting during the sample period. Lastly, we find evidence of all uncertainty indices during economic upheaval from the COVID-19 pandemic. We obtained identical results even during the Covid-19. Our findings are robust in various evaluation methods, like MCS tests and other forecasting windows. Supplementary Information The online version contains supplementary material available at 10.1007/s10690-023-09410-1.
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Project description:The stock market is the barometer of the economy that reflects the overall health and direction of the economic development and is affected by different factors including social, environmental and political. It is important to investigate the effect of the political instability on the stock market performance, especially on emerging economies. Therefore, we aim to study the relationship between political instability and stock market performance in Pakistan. To meet our objectives, we used past data from 1996 to 2021. Data are collected from the DataStream data base. MSCI indices are used as the proxy for the Stock market performance of the selected country. World governance six indicators are used in the study as the explanatory variable concentrating the political instability index as the main explanatory variable. Regression analysis is used but two-way robustness analysis was done for the accuracy of the findings through GMM methods and taking GDP as another endogenous variable. Our findings shows that the political stability has significant positive impact on the stock market performance while, political instability has negative impact on stock market performance. Moreover, other governance indicators has a significant positive impact on performance. However, political instability disrupts the operations and economical activities that leads to decrease the investor confidence and also decrease the foreign investment with the increment of the risk in the country. Moreover, our study has some implications for investors to develop the diversified portfolio to minimize the risk and policy makers can increase their foreign direct investment within the economy by controlling the political instability.
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Project description:In this paper, we have examined the impact of COVID-19 on the volatility spillovers among ten major sector indices listed in BSE India. We found that total volatility spillovers reached 69% during COVID-19. Energy sector followed by oil & gas were the major net volatility transmitters.•COVID-19 has magnified the volatility spillovers in the stock market.•Socks to energy sector significantly spills over to other sectors.•FMCG remains the largest net recipient of the volatility spillovers from other sectors.
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Project description:We analyze whether oil price uncertainty and U.S. stock uncertainty can simultaneously provide additional information to volatility forecast of six major stock indexes. For model settings, we find not only the uncertainty information of previous day, but that of previous week and month will also provide incremental predictive power for the stock market volatility. Based on that, from in-sample and out-of-sample perspective, the empirical evidences imply separately incorporating oil price uncertainty into the model can significantly improve the stock market volatility forecasting performance, but the improvements vanish after controlling the effects of volatility spillover from U.S. stock market while the effect of U.S. stock uncertainty is nonnegligible and sustainable for stock volatility forecasting. We confirm this finding from average and dynamic perspective. We further proceed the process in longer-horizon volatility forecasting, the evidences cannot overturn our conclusion. This conclusion implies that we should be cautious about the stock volatility predictability based on the oil price uncertainty, which further provide some important implications for researchers, regulators and investors.
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Project description:Based on the literature, it is commonly understood that stock prices (SP) are influenced by economic policy uncertainty (PU), with a rise in PU typically having a negative impact on SP. However, the relationship between PU and SP may not always be linear due to the varying risk preferences of individuals. Risk preference theory posits that individuals respond differently to different levels of risk. Therefore, this study aims to investigate whether PU determines SP asymmetrically (i.e., in a non-linear manner) by considering risk preferences and addressing a gap in the literature. To answer this question, the study employs a panel threshold approach to examine the effect of PU on SP in the Group of Seven (G7) countries, namely Canada, France, Germany, Italy, Japan, UK, and the US. In contrast to previous research, this study finds evidence of an asymmetric effect of PU on SP in the G7 countries. Specifically, the panel threshold results reveal that the impact of increased PU on SP is positive up to a certain level (Threshold1), beyond which it becomes negative (Threshold2). These findings are in line with information asymmetry hypothesis, prospect theory, behavioural finance hypothesis, and market liquidity hypothesis and shed light on the asymmetric behaviour of SP in response to varying levels of PU. The implications of these findings are significant for understanding how to manage risks effectively in the financial markets.
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Project description:The paper explores the role of business models in the link between uncertainty and bank risk. From the perspective of banks, given that future outcomes tend to be less predictable if banking uncertainty rises, we highlight a framework that a larger dispersion of bank shocks to bank-specific variables might mirror such decreased predictability as a consequence of increasing uncertainty. To compensate for the persistence of bank risk and address the endogeneity issue, we applied the system generalized method of moments (GMM) estimator as the main regressions. Analyzing a panel of commercial banks from Vietnam between 2007 and 2019, we find that higher levels of banking uncertainty may increase bank risk, as gauged by banks' credit risk (loan loss reverses and non-performing loans) and default risk (Z-score index). This detrimental influence of uncertainty appears to be most pronounced with banks relying on pure lending, and it decreases with more non-interest income. A deeper investigation after estimating the marginal effects with plots reveals an asymmetric pattern that bank risk is immune to uncertainty in banks with the highest level of income diversification. Interestingly, we also provide evidence that uncertainty may lower the default risk level when income diversification exceeds a sufficiently high level. Our findings demonstrate that diversified business models are an efficient buffer against higher bank risk in times of increased uncertainty.
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Project description:This study investigated in cross-country and panel form the interactions of bank development, stock market development and global equity index, focusing on the BRICS countries covering the period 1990 to 2018. We found a bidirectional causation between bank development (CPSGDP) and stock market performance as proxied by the depth of the markets (MCAPGDP) in the BRICS countries. Cointegration was also found using the panel cointegration framework and the bounds test for the ARDL estimators. This largely proves that a long-run relationship of both direct and reverse nature exists between bank development and stock market performance. For the bank development and market performance models respectively, all the error-correction terms were found to be negatively significant, indicating that they both share dynamic profile and adjust appreciably to deviations from equilibrium between the short run and the long run. The global equity index showed that stock market development interacts more with the global financial environment than bank development in the BRICS countries. Our findings support the complementarity and coevolution hypothesis in the stock market and bank development nexus.
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Project description:This article presents a dataset on political connections, Sharia, and abnormal returns surrounding the M&A announcement of listed firms on Indonesia Stock Exchange (IDX) during the period 2010-2016. The dataset provides both short-run and long-run abnormal returns. Using an event study methodology, I calculate cumulative abnormal returns (CAR) as short-run abnormal returns and buy-and-hold abnormal returns (BHAR) as long-run abnormal returns. This dataset may be useful for researchers who study political connections, Sharia, and M&A performance. The data presented in this article are related to the research article entitled "Political connections, Sharia and M&A performance: Evidence from Indonesia" (Wahyono, 2021) [1].
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Project description:BackgroundThe Joint United Nations Programme on HIV/AIDS (UNAIDS) has recently set the ambitious "90-90-90 target" of having 90% of people living with HIV (PLHIV) know their status, receive antiretroviral therapy (ART), and achieve viral suppression by 2020. This ambitious new goal is occurring in a context of global "scale-down" following nearly a decade of heightened investment in HIV prevention and treatment efforts. Arguably international goals spur action, however, setting unrealistic goals that do not take weak health systems and variations in the nature of the epidemic across countries into consideration may set them up for failure in unproductive ways that lead to a decline in confidence in global governance institutions. This study explores how policy actors tasked with implementing HIV programs navigate the competing demands placed upon them by development targets and national politics, particularly in the current context of waning international investments towards HIV.MethodsTo examine these questions, we interviewed 29 key informants comprising health experts in donor organizations and government employees in HIV programs in Pakistan, a country where HIV programs must compete with other issues for attention. Themes were identified inductively through an iterative process and findings were triangulated with various data sources and existing literature.ResultsWe found both political and governance challenges to achieving the target, particularly in the context of the global HIV scale-down. Political challenges included, low and heterogeneous political commitment for HIV and a conservative legal environment that contributed towards a ban on opiate substitution therapy, creating low treatment coverage. Governance challenges includedstrained state and non-governmental organization (NGO) relations creating a hostile service delivery environment, weak bureaucratic and civil society capacity contributing to poor regulation of the health infrastructure, and resource mismanagement on both the part of the government and NGOs.ConclusionOur findings suggest that in a context of waning international attention to HIV, policy actors on the ground face a number of practical hurdles to achieving the ambitious targets set out by international agencies. Greater attention to the political and governance challenges of implementing HIV programs in low- and middle-income countries (LMICs) could help technical assistance agencies to develop more realistic implementation plans.
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Project description:This paper studies the US and global economic fundamentals that exacerbate emerging stock markets volatility and can be considered as systemic risk factors increasing financial stability vulnerabilities. We apply the bivariate HEAVY system of daily and intra-daily volatility equations enriched with powers, leverage, and macro-effects that improve its forecasting accuracy significantly. Our macro-augmented asymmetric power HEAVY model estimates the inflammatory effect of US uncertainty and infectious disease news impact on equities alongside global credit and commodity factors on emerging stock index realized volatility. Our study further demonstrates the power of the economic uncertainty channel, showing that higher US policy uncertainty levels increase the leverage effects and the impact from the common macro-financial proxies on emerging markets' financial volatility. Lastly, we provide evidence on the crucial role of both financial and health crisis events (the 2008 global financial turmoil and the recent Covid-19 pandemic) in raising markets' turbulence and amplifying the volatility macro-drivers impact, as well.Supplementary informationThe online version supplementary material available at 10.1007/s10479-021-04042-y.
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