Market reaction to the COVID-19 pandemic: evidence from emerging markets

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Maretno Agus Harjoto ◽  
Fabrizio Rossi
Keyword(s):  
Financial Crisis ◽  
Emerging Markets ◽  
Global Financial Crisis ◽  
Market Reaction ◽  
Negative Impact ◽  
Equity Markets ◽  
Developed Countries ◽  
Market Reactions ◽  
Content Type ◽  
Developed Markets

PurposeThis study examines the market reaction to the World Health Organization (WHO) announcement of the novel coronavirus disease 2019 (COVID-19) as a global pandemic on the emerging equity markets and compares the reaction with developed markets. This study also compares the market reactions to the COVID-19 pandemic with the market reactions to the 2008 global financial crisis.Design/methodology/approachUsing the Morgan Stanley Capital International daily stock indices data and the Carhart and the GARCH(1,1) models for an event study, the authors examine the cumulative abnormal returns during 30 and 10 trading days and the extended 60 days before and after the WHO pandemic announcement. It also compares the market reactions during the COVID-19 pandemic with the reactions to the Lehman Brothers' bankruptcy announcement during the 2008 global financial crisis.FindingsThis study finds that the COVID-19 pandemic had a significantly greater negative impact to the stock markets in emerging countries than in the developed countries. The negative impact on the emerging markets is more pronounced for firms with small market capitalizations and for growth stocks. The negative impact of the COVID-19 pandemic is stronger in the energy and financial sectors in both emerging and developed markets. The positive impact of the COVID-19 pandemic occurred in healthcare and telecommunications for the emerging markets and information technology for the developed markets. This study also finds that the equity markets in both emerging and developed countries recovered faster from the COVID-19 pandemic relative to the 2008 global financial crisis.Social implicationsInvestors' desire to diversify their risks across different countries and sectors in the emerging markets could bring superior returns. The diversification strategies bring critical financial supports to forestall the contagion of COVID-19, to protect lives, and to save the emerging economies, especially for those financially constrained countries that are facing twin health and economic shocks by channeling their investments to countries with weak healthcare systems.Originality/valueThis study extends the literature that examines market reactions to stock market shocks by examining the market reactions to the COVID-19 outbreak on the emerging and developed equity markets across different market capitalizations, valuation and sectors. This study also finds that the markets recovered quicker from the COVID-19 pandemic announcement than during the 2008 global financial crisis.

Market efficiency and the global financial crisis: evidence from developed markets

2018 ◽  
Vol 35 (3) ◽  
pp. 362-385 ◽  
Author(s):  
Omid Sabbaghi ◽  
Navid Sabbaghi
Keyword(s):  
Financial Crisis ◽  
Market Efficiency ◽  
Global Financial Crisis ◽  
Weak Form ◽  
Content Type ◽  
Developed Markets ◽  
The Usa ◽  
Econometric Tests ◽  
The Impact ◽  
Empirical Investigations

Purpose This study aims to provide one of the first empirical investigations of market efficiency for developed markets during the recent global financial crisis. Design/methodology/approach Using the Morgan Stanley Capital International (MSCI) country indices as proxies for national stock markets, the study conducts a battery of econometric tests in assessing weak-form market efficiency for the developed markets. Findings The inferential outcomes are consistent among the different tests. Specifically, the study finds that the majority of developed markets are weak-form efficient while the USA is the sole equity market to be commonly diagnosed as weak-form inefficient across the different tests when using full period data spanning the January 2008-November 2011 period. However, when basing the analysis on one-year subsamples over the identical time period, this study fails to reject weak-form market efficiency for all of the developed markets and presents evidence consistent with the Adaptive Market Hypothesis as described by Urquhart and Hudson (2013). When applying technical analysis for the case of the USA over the full study period, the results indicate that the return predictabilities can be exploited for some horizon of variable length moving average (VMA) trading rules. Originality/value This study provides one of the first empirical investigations of market efficiency for developed markets during the recent global financial crisis using an extended set of econometric tests. The study contributes to the existing body of empirical research that formally assesses the impact of a financial crisis on stock market efficiency and underlines the significance and relevance of examining market efficiency through subsample analysis.

Accounting quality, governance standards, and syndicated loan contracts

2016 ◽  
Vol 28 (1) ◽  
pp. 2-15 ◽  
Author(s):  
Liang Song ◽  
Joel C Tuoriniemi
Keyword(s):  
Financial Crisis ◽  
Emerging Markets ◽  
Developed Countries ◽  
Bank Loan ◽  
Accounting Quality ◽  
Firm Level ◽  
Content Type ◽  
Loan Contracts ◽  
Loan Contracting ◽  
Syndicated Loan

Purpose – The purpose of this paper is to examine how firms’ accounting quality affects bank loan contracting in seven emerging markets and whether these relationships are affected by borrowers’ governance standards. Design/methodology/approach – The study sample period is 1999-2007 because the syndicated loan market was severely affected by the East Asian financial crisis of 1998 and the US financial crisis of 2008. The final sample includes 719 loan observations for 75 firms in seven emerging markets. Findings – The authors find that syndicated lenders provide loans with more favorable terms such as larger amounts, longer maturity and lower interest spread to borrowers in emerging markets with higher accounting quality. The authors also find that the influences of accounting quality on syndicated loan contracting for borrowers in emerging markets exist only with higher country- and firm-level governance rankings. The results of this paper suggest that lenders place more value on accounting numbers generated by borrowers in emerging markets with stronger internal and country governance frameworks. Originality/value – Overall, this research provides new insights about how accounting quality affects the contract design. Specifically, the extant literature has demonstrated the effects of accounting quality on financial contracts in developed countries (e.g. Bharath et al., 2008). The authors extend this analysis to borrowers in emerging markets and confirm a similar result. Most notably, the authors explore whether the relationship between accounting quality and syndicated loan contracts is influenced by borrowers’ country- and firm-level governance, and find that accounting quality matters only when accompanied by high-quality governance. This research provides new insights about how accounting quality and governance standards affect the terms of borrowing contracts in emerging markets.

scholarly journals Opportunities and challenges for multiple-embeddedness through mergers and acquisitions in emerging economies

2015 ◽  
Vol 28 (5) ◽  
pp. 817-831 ◽  
Author(s):  
Surender Munjal ◽  
Vijay Pereira
Keyword(s):  
Financial Crisis ◽  
Mergers And Acquisitions ◽  
Cultural Differences ◽  
Emerging Economies ◽  
Multinational Enterprises ◽  
Quantitative Methods ◽  
Global Financial Crisis ◽  
Developed Countries ◽  
Content Type ◽  
Practical Implications

Purpose – The purpose of this paper is to examine opportunities and challenges from multiple-embeddedness of developed countries multinational enterprises (DMNEs) in emerging economies. It further investigates the effect of global financial crisis on the DMNE’s embeddedness strategies. Design/methodology/approach – Utilising POLS regression on secondary data bases, such as World Bank Development Indicators, over two period, first, from 2003 to 2007 (pre global financial crisis period), and second, from 2008 to 2012 (post global financial crisis), this study models the advantages and challenges faced by DMNEs into emerging markets. Findings – Findings suggest that challenges in terms of institutional and cultural differences have decreased over time. This may be due to the DMNE’s experience of operating in emerging economies. Research limitations/implications – Since the global financial crisis is on-going, further changes in terms of opportunities and challenges are yet to be uncovered. Further investigations using qualitative designs are also warranted because many qualitative phenomena, such as cultural differences, cannot be captured through purely quantitative methods. Practical implications – There are two practical implications. First, policy makers can appreciate the change in the economic gravity in the current scenario. Openness of economies may further bring in economic equilibrium in favour of emerging economies. Second, managers of businesses looking to internationalise should pay attention towards changing market conditions and requirements in emerging economies. Social implications – This paper portrays the importance emerging economies which consist of a large proportion of the world’s population. Originality/value – In the current economic scenario, this paper seeks to highlight the opportunities and challenges for multiple embeddedness through mergers and acquisitions in emerging economies, which is seen to be timely and topical and at the same time advances the theoretical knowledge and practical implications.

Global financial crisis, foreign portfolio investment and volatility

2020 ◽  
Vol 32 (2) ◽  
pp. 177-195
Author(s):  
Abdelkader Derbali ◽  
Ali Lamouchi
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Emerging Markets ◽  
Global Financial Crisis ◽  
Portfolio Investment ◽  
Content Type ◽  
Foreign Portfolio Investment ◽  
Crisis Period ◽  
Asian Emerging Markets ◽  
The Impact

Purpose The purpose of this paper is to understand and compare the extent and nature of the impact of foreign portfolio investment (FPI) on the stock market volatility, particularly in the Southeast Asian emerging markets, and compare that against the corresponding experience of Indian economy, in the context of a global financial crisis of the recent past. Design/methodology/approach The Asian emerging markets are now being perceived as becoming financially more and more vulnerable to international events because of their growing exposure to unstable foreign investment flows. The daily net FPI inflow and the daily leading stock market composite index of four countries, namely, Thailand, the Philippines, Indonesia and India, have been analyzed using autoregressive conditional heteroscedasticity (ARCH)-generalized ARCH group of models dividing the study period from 2000 to 2014 among pre-crisis, crisis and post-crisis period separately. Findings The study reveals that the net inflow of FPI has been a significant determinant of stock market returns in all countries. The impact of volatility spillover from the FPI market to the stock market in the sample countries has been found to be different under different market conditions. The past information and volatility clustering have been significantly influencing the stock market return volatilities of all these Southeast Asian countries on average. Originality/value However, there are significant country-wise differences in the relative importance and direction of the relationship of each of these effects with the volatility of the FPI and the stock markets. These effects have been different in these four different markets and they have significantly altered in strength and significance during the global financial crisis and in the post-financial crisis period.

Intertemporal risk-return relationship in BRIC equity markets after the US financial crisis

2017 ◽  
Vol 59 (4) ◽  
pp. 547-570 ◽  
Author(s):  
Amanjot Singh ◽  
Manjit Singh
Keyword(s):  
Financial Crisis ◽  
Regime Switching ◽  
Global Financial Crisis ◽  
Equity Markets ◽  
Impulse Response Functions ◽  
Markov Regime Switching ◽  
Content Type ◽  
Risk Return ◽  
The Global Financial Crisis ◽  
Markov Regime Switching Model

PurposeThis paper aims to attempt to capture the intertemporal/time-varying risk–return relationship in the Brazil, Russia, India and China (BRIC) equity markets after the global financial crisis (2007-2009), i.e. during a relative calm period. There has been a significant increase in advanced economies’ equity allocations to the emerging markets ever since the financial crisis. So, the present study is an attempt to account for the said relationship, thereby justifying investments made by the international investors. MethodologyThe study uses non-linear models comprising asymmetric component generalised autoregressive conditional heteroskedastic model in mean (CGARCH-M) (1,1) model, generalised impulse response functions under vector autoregressive framework and Markov regime switching in mean and standard deviation model. The span of data ranges from 1 July 2009 to 31 December 2014. FindingsThe ACGARCH-M (1,1) model reports a positive and significant risk-return relationship in the Russian and Chinese equity markets only. There is leverage and volatility feedback effect in the Russian market because falling returns further increase conditional variance making the investors to expect a risk premium in the expected returns. The impulse responses indicate that for all of the BRIC markets, the ex-ante returns respond positively to a shock in the long-term risk component, whereas the response is negative to a shock in the short-term risk component. Finally, the Markov regime switching model confirms the existence of two regimes in all of the BRIC markets, namely, Bull and Bear regimes. Both the regimes exhibit negative relationship between risk and return. Practical implicationsIt is an imperative task to comprehend the relationship shared between risk and returns for an investor. The investors in the emerging economies should understand the risk-return dynamics well ahead of time so that the returns justify the investments made under riskier environment. Originality/valueThe present study contributes to the literature in three senses. First, the data relate to a period especially after the global financial crisis (2007-2009). Second, the study has used a relatively newer version of GARCH based model [ACGARCH-M (1,1) model], generalised impulse response functions and Markov regime switching model to account for the relationship between risk and return. Finally, the study provides an insightful understanding of the risk–return relationship in the most promising emerging markets group “BRIC nations”, making the study first of its kind in all the perspectives.

Oil price-inflation pass-through in OECD countries

2020 ◽  
Vol 14 (1) ◽  
pp. 126-147 ◽  
Author(s):  
Oluwasegun Babatunde Adekoya ◽  
Anthony Noah Adebiyi
Keyword(s):  
Developing Countries ◽  
Financial Crisis ◽  
Global Financial Crisis ◽  
Predictive Ability ◽  
Developed Countries ◽  
Oecd Countries ◽  
Oil Price ◽  
Price Inflation ◽  
Content Type ◽  
Distributed Lag

Purpose This paper aims to assess the relationship between oil price and inflation in the Organization for Economic Co-operation and Development (OECD) countries. This paper contributes to knowledge in a number of ways. Design/methodology/approach First, we carry out a comparative analysis between the developed and developing countries of the OECD. Second, we check if the global financial crisis (GFC) of 2008 altered the oil price–inflation relationship. We further extend our analysis to capture asymmetries using the non-linear autoregressive distributed lag model. Lastly, we use the Campbell and Thompson (2008) forecast evaluation test to comparatively assess the predictive ability of the symmetric (restricted) and asymmetric (unrestricted) models. Findings Our results show that asymmetries matter in the oil price–inflation nexus. Also, the effect of the GFC of 2008 is stronger for the developed countries in the short run, and the developing countries in the long run. Lastly, accounting for asymmetries in oil price yields a better forecast for inflation in both groups. Originality/value The paper adds some interesting innovations to the oil price–inflation relationship in the OECD countries. It is the study with the widest scope for such country group under two classifications of developed and developing countries. It also inculcates the role of asymmetries, financial crisis, as well as the predictive ability of oil price on inflation.

Consumer dispositions toward global brands

2018 ◽  
Vol 36 (6) ◽  
pp. 618-632 ◽  
Author(s):  
Ankur Srivastava ◽  
M.S. Balaji
Keyword(s):  
Emerging Markets ◽  
Negative Impact ◽  
Positive Impact ◽  
Emerging Market ◽  
Content Type ◽  
Global Brands ◽  
Developed Markets ◽  
Need For Uniqueness ◽  
Research Gap ◽  
Foreign Brands

PurposeDespite the increasing attention on consumers in emerging markets, there is limited research on the emerging market consumers’ evaluation of global brands. The purpose of this paper is to address this research gap by examining the role of consumer dispositions – cosmopolitanism, need for uniqueness and materialism in attitude and purchase intentions toward global brands from emerging vs developed markets.Design/methodology/approachA mall intercept method was used to collect responses from shoppers in four major cities in India. The intercept method produced a usable sample of 613 respondents. Each respondent was asked to mark his or her response concerning two global brands – one each from developed and emerging markets separately.FindingsThe findings show that cosmopolitanism and need for uniqueness determine emerging market consumers’ attitude toward global brands. Specifically, the authors find that while cosmopolitanism has a higher positive impact on global brands from the developed market, need for uniqueness has a negative impact on global brands from emerging market.Research limitations/implicationsThe study findings show that need for uniqueness negatively affects attitude toward global brands from emerging markets. This presents a significant challenge for global brands from emerging market when competing with the counterparts from developed markets.Practical implicationsThe findings show that managers of global brands in emerging markets should develop unique brand positioning that differentiates from international brands. By carefully managing their marketing mix elements (e.g. price, design, distribution), they can induce counter-conformity among consumers for brands that originate in emerging markets.Originality/valueWhile prior studies suggest that emerging market consumers prefer foreign brands than domestic brands, little attention was focused on the antecedents for such preference. This study considers consumer dispositions, which were not examined in prior research in addressing this research gap.

scholarly journals Examining the Behavior of Credit Rating Agencies Post 2008 Economic Turmoil

2017 ◽  
Vol 53 (4) ◽  
pp. 61-76
Author(s):  
Çağrı L. Uslu
Keyword(s):  
Financial Crisis ◽  
Emerging Markets ◽  
Credit Rating ◽  
Global Financial Crisis ◽  
Developed Countries ◽  
Credit Rating Agencies ◽  
Macroeconomic Variables ◽  
Rating Agencies ◽  
Macroeconomic Indicators ◽  
The Global Financial Crisis

AbstractThe demand for sovereign ratings has increased throughout last decades. Until the1990’s, credit rating agencies (CRAs) did not rate most of the emerging markets and the focus was almost only on developed countries, however, during this decade the number of sovereigns rated increased dramatically due to addition of emerging markets to the portfolio. The global financial crisis in 2008 led to the loss of credibility of these major credit rating companies. None of these three agencies showed any signal of macroeconomic problems in countries where the financial crisis created devastating macroeconomic results. It is believed that this failure has led credit rating agencies to behave more conservatively. This paper aims to determine whether CRAs tend to behave conservatively after the 2008 global financial crisis. If the downgrading is greater than the worsening of the economic situation in the given economies, then we can infer that CRAs tend to behave more conservatively. The good working model in estimating ratings assigned by CRAs before the crisis failed to estimate the ratings after 2008 crisis. This may have happened due to two reasons. First, as experienced in the aftermath of the former crisis, credit rating agencies may have added new macroeconomic variables in the process of assigning ratings or change the weight assigned to the already existing macroeconomic variables. Second, it is a known fact that ratings emerge from the combination of two distinct information; the quantitative part reflected by macroeconomic indicators and the qualitative judgements of the agency about the sovereign.

Global Financial Crisis and Its Impact on Russia

2009 ◽  
pp. 9-27 ◽  
Author(s):  
A. Kudrin
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Financial Crisis ◽  
Central Bank ◽  
Global Financial Crisis ◽  
Developed Countries ◽  
Real Economy ◽  
Energy Prices ◽  
Russian Government ◽  
The Real

The article examines the causes of origin and manifestation of the current global financial crisis and the policies adopted in developed countries in 2007—2008 to deal with it. It considers the effects of the financial crisis on Russia’s economy and monetary policy of the Central Bank in the current conditions as well as the main guidelines for the fiscal policy under different energy prices. The measures for fighting the crisis that the Russian government and the Central Bank use to support the real economy are described.

Macroeconomic Shocks and Unconventional Monetary Policy

2019 ◽  
Keyword(s):  
Interest Rate ◽  
Financial Crisis ◽  
Emerging Markets ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Developing Economies ◽  
Spillover Effects ◽  
Macroeconomic Shocks ◽  
Monetary Policies ◽  
Developed Economies

Barely two decades after the Asian financial crisis Asia was suddenly confronted with multiple challenges originating outside the region: the 2008 global financial crisis, the European debt crisis, and, finally developed economies’ implementation of unconventional monetary policies. Especially the implementation of quantitative easing (QE), ultra-low interest rate policies, and negative interest rate policies by a number of large central banks has given rise to concerns over financial stability and international capital flows. One of the regions most profoundly affected by the crisis was Asia due to its high dependence on international trade and international financial linkages. The objective of this book is to explain how macroeconomic shocks stemming from the global financial crisis and recent unconventional monetary policies in developed economies have affected macroeconomic and financial stability in emerging markets, with a particular focus on Asia. In particular, the book covers the following thematic areas: (i) the spillover effects of macroeconomic shocks on financial markets and flows in emerging economies; (ii) the impact of recent macroeconomic shocks on real economies in emerging markets; and (iii) key challenges for the monetary, exchange rate, trade, and macroprudential policies of developing economies, especially Asian economies, and suggestions and recommendations to increase resiliency against external shocks.

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