GCC countries' market risk premia and US monetary policy announcements

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hong Wu
Keyword(s):  
Monetary Policy ◽  
Global Economy ◽  
Capital Budgeting ◽  
Risk Premia ◽  
The State ◽  
Content Type ◽  
Portfolio Evaluation ◽  
Gcc Countries ◽  
Equity Indices ◽  
Us Monetary Policy

PurposeThis paper aims to examine if the market risk premiums of the Gulf Cooperation Council (GCC) countries are particularly higher on prescheduled US monetary policy announcement days. The findings shed light on the causality relationship from the state of the global economy to the GCC equity markets as well as their integration with the rest of the world.Design/methodology/approachThe author takes the standard event-study approach, following Fama et al. (1969). As the announcement days are prescheduled, the impact of the announcements on the GCC markets' risk premia allows for test of causality, while other studies address predictability and association.FindingsThe author finds that excess returns are higher, both economically and statistically, on announcement days in most individual GCC countries and the region overall. Moreover, additional compensations may not appear on the exact days of announcement in a few countries; rather, on the days right before or after announcements, possibly due to information leakage or gradual diffusion. My results show that there is a causal relationship from the state of the global economy to the GCC equity markets' risk premia. This new evidence supports integration between the Gulf region's and the world's financial markets.Practical implicationsThe evidence of risk–return transmission from US monetary policy announcements to GCC countries' equity indices supports integration between the region's and the world's financial markets. The study results will help guide investors' and corporations' investing, capital budgeting and portfolio evaluation decisions.Originality/valueThis paper extends the announcement literature (Savor and Wilson 2013, 2014) by examining the responses of the GCC countries, the major players of the global oil markets. The empirical analysis documents a causal relationship from the state of the global economy, as revealed by US monetary policy announcements, to the GCC equity indices. This new evidence supports increased integration between the Gulf region and the world, a finding that investors and corporations should consider when making investing, capital budgeting and portfolio evaluation decisions.

POLICY BRIEF: IMBALANCES WILL CONTINUE TO RULE OVER THE GLOBAL ECONOMY

2016 ◽  
Vol 61 (05) ◽  
pp. 1671002
Author(s):  
JOERGEN OERSTROEM MOELLER
Keyword(s):  
Monetary Policy ◽  
South Asia ◽  
Global Economy ◽  
Work Force ◽  
Global Order ◽  
Treasury Bonds ◽  
Institutional Frameworks ◽  
Main Driver ◽  
Us Monetary Policy

Global debt will keep growth subdued over the next decade. Falling work force will move labor intensive manufacturing out of China and into South Asia. Investment, not consumption, will be the main driver of growth, which primarily will take place in Asia and probably also Africa. New institutional frameworks such as AIIB emerge, but they will operate inside the existing global order. Falling albeit still tangible Chinese saving combined with fading interest for US treasury bonds will pose an awkward dilemma for US monetary policy. Under such circumstances current savings–investment balances will continue to rule the global economy.

Impact of firm-specific characteristics on managers’ identity disclosure

2014 ◽  
Vol 27 (2) ◽  
pp. 150-168
Author(s):  
Etumudon Ndidi Asien
Keyword(s):  
Chief Executive ◽  
The State ◽  
Annual Reports ◽  
Stock Exchanges ◽  
Original Research ◽  
Content Type ◽  
Listed Firms ◽  
Gcc Countries ◽  
Identity Disclosure ◽  
The Impact

Purpose – This paper aims to examine the impact of firm-specific characteristics on managers’ identity disclosure in the Gulf Cooperation Council (GCC) region. Design/methodology/approach – Research data were collected from 2010 annual reports and financial statements of 403 listed firms in the GCC countries. The data were analyzed by multiple regression models. Findings – Evidence suggesting that managers’ identity is significantly disclosed by firms that separate the office of chairman from that of chief executive officer was documented. It was also found that mature firms significantly disclose their managers’ identity. Our finding suggests that firms’ declaration that they comply with a set of corporate governance code leads them to disclose managers’ identity. However, we find that firms that are related to the state significantly disclose their managers’ identity, contrary to expectation. Research limitations/implications – One limitation is the lack of a uniform classification of industries by the stock exchanges in the GCC region. The implication of this is that researchers are lacking a uniform standard to apply in their research. Another limitation is the use of only 2010 annual reports and accounts; thus, there is a problem of inter-temporal generalizability. As markets in the GCC countries are evolving, it will be interesting to capture the state of managers’ identity disclosure after 2010. Practical implications – The paper has the potential to influence firms in the GCC region to begin disclosing managers’ personal details and other contact information. In addition, there is the prospect that market regulators in the GCC region and other emerging markets who may read this research may now require firms to disclose their managers’ identity. Originality/value – This is an Original research paper.

Central bank action will drive global equity markets

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Equity Markets ◽  
Economic Data ◽  
Equity Prices ◽  
Monetary Policies ◽  
Content Type ◽  
Market Sentiment ◽  
The Us ◽  
Us Monetary Policy

Significance This volatility is driven by expectations of further monetary stimulus in response to a slowing economy. Despite persistent concerns about the fallout from the anticipated tightening in US monetary policy and many country-specific risks, such as the standoff between Greece and its creditors, equity market sentiment remains supported by accommodative monetary policies worldwide and expectations of the US monetary policy tightening being gradual. Impacts Market volatility could increase further, as better-than-expected economic data in the euro-area vies with weaker-than-anticipated US data. Decoupling of surging equity prices and weak economic fundamentals threatens the rally's sustainability, increasing scope for volatility. This decoupling is most pronounced in China, where weak economic data prompt buying of equities in anticipation of stimulus measures. The greatest risk in equity markets is uncertainty surrounding US interest rates and their impact on emerging markets.

Competition will rise in global civil aerospace

2015 ◽  
Keyword(s):  
Supply Chains ◽  
Market Share ◽  
Global Economy ◽  
The State ◽  
Short Term ◽  
Content Type ◽  
Future Production

Subject Civil aerospace outlook. Significance The November Dubai Airshow may herald a slowdown in the global civil aerospace business as neither Airbus nor Boeing registered large airline orders. The falling cost of fuel has led many airlines to delay expensive modernisation plans. Concerns over the state of the global economy will also dampen short-term demand. Impacts Bottlenecks in supply chains may constrain future production expansions. Airbus will face an expensive decision in the early 2020s about launching an all-new narrow-body to replace the A320neo. New programmes will be affected harder by a downturn, with companies fighting for sales in the competitive regional airliner market. The battle for market share could force at least one contender out of business over the next five years.

Room for more rate cuts is limited in Central Europe

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Global Economy ◽  
Policy Implications ◽  
The Czech Republic ◽  
Content Type ◽  
Core Inflation ◽  
Market Sentiment ◽  
Financial Conditions ◽  
Downward Pressure ◽  
National Bank

Subject Policy implications of the downward pressure on inflation from the renewed oil price decline. Significance The National Bank of Poland (NBP) is under the most pressure to loosen monetary policy further, as the country's core inflation turned negative in January 2016, whereas in Hungary and the Czech Republic, core inflation remains in positive territory. Although the Hungarian Central Bank (MNB) has introduced a range of unconventional measures aimed at giving it greater control of short-term market rates without changing its benchmark rate, it has reached the limits of ultra-loose monetary policy, with fiscal loosening supplanting monetary easing as the main source of stimulus. Impacts Brexit's financial fallout is likely to stay contained, with equity markets rallying and gauges of financial volatility at historical lows. Germany's economy is likely to remain resilient post-Brexit, its composite purchasing managers' index rising to a seven-month high. This bodes well for Central Europe's economies, despite a recent slowdown in growth. Investors are losing confidence in the credibility and effectiveness of global monetary policy. However, very loose financial conditions in the global economy, particularly in Europe and Japan, will keep market sentiment favourable.

Threat of a downgrade hangs over Mexico

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Content Type ◽  
Borrowing Costs ◽  
Sovereign Credit ◽  
Credit Line ◽  
Mexican Government ◽  
Global Liquidity ◽  
The Government ◽  
Us Monetary Policy

Subject Mexico credit outlook downgrades. Significance On August 23, ratings agency Standard & Poor's (S&P) lowered the sovereign credit outlook of the Mexican government to negative from stable. The same day, the credit outlooks of state-owned enterprises Pemex (oil) and CFE (electricity) were also moved to negative. Moody's modified its outlook on Mexico's debt to negative in March. Impacts A rating downgrade would represent both a financial and a political blow for the government. The 'normalisation' of US monetary policy should moderately increase borrowing costs for emerging sovereigns, including Mexico. In the unlikely case of a global liquidity crunch, Mexico may activate its IMF credit line, borrowing up to 88 billion dollars immediately.

Spillover effects of the US monetary policy on the Indian trilemma

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Harpreet Singh Grewal ◽  
Pushpa Trivedi
Keyword(s):  
Monetary Policy ◽  
Event Study ◽  
Spillover Effects ◽  
Subject Area ◽  
Open Market ◽  
Content Type ◽  
Study Approach ◽  
The Us ◽  
The Impact ◽  
Us Monetary Policy

PurposeThe purpose of this paper is to investigate the impact of the US unconventional monetary policy surprises on the management of trilemma in India.Design/methodology/approachThis paper uses the event study approach along with OLS and MANOVA to examine the impact.FindingsThe results validate the existence of trilemma in India for the period from October 2008 to December 2017. The results also show that monetary policy independence still exists in India in the wake of greater spillover effects during the Federal Open Market Committee announcement days. The spillover effects on USD-INR exchange rates and capital flows are found to be statistically significant. The MANOVA results show that the trilemma in India is influenced by around 20% by the changes in the US monetary policy.Originality/valueThe above approach of event study combined with MANOVA in this subject area has not been used before to the best of the authors’ knowledge. Further, there are only a few studies that exist on the spillover effects of the US monetary policy actions on the management of trilemma in India.

The state of monetary policy and industrial asset allocation: the Ghanaian perspective

2018 ◽  
Vol 9 (4) ◽  
pp. 449-461
Author(s):  
Lord Mensah ◽  
Anthony Q.Q. Aboagye ◽  
Nana Kwame Akosah
Keyword(s):  
Monetary Policy ◽  
Asset Allocation ◽  
Optimization Technique ◽  
Investment Strategy ◽  
The State ◽  
Excess Returns ◽  
Content Type ◽  
Industrial Sectors ◽  
Food And Beverage ◽  
Allocation Decisions

Purpose The purpose of this paper is to investigate whether asset allocation across various industries listed on the Ghana Stock Exchange (GSE) varies across different monetary policy states. Design/methodology/approach This paper adopts the Markov Chain technique to split monetary policy into three different states. The authors further adopt the Markowitz portfolio optimization technique to find the minimum variance and optimum portfolio for the industries listed on the GSE. Findings The finding reveals a dynamic asset allocation, which varies the industry’s weight mix across the various monetary policy states enhance excess returns compared to the static asset allocation. Specifically, the authors find risk-return trade-off among industries listed on the GSE. Financial and Food and Beverage industries portfolios record high returns relative to the Government of Ghana 91-day Treasury bill. The Food and Beverage portfolio is the only portfolio that records relatively high excess returns across all the monetary policy states. The authors also find that, during expansionary state (high monetary policy rates) of the monetary policy, investors are to allocate about 69 and 30 percent of their investment into food and beverages and financials, respectively. Corner solution is found in the transient state where 100 percent of wealth is allocated to financial to obtain the optimum portfolio. The optimum portfolio in the contraction state assigns 52 percent to financials and 42 percent to manufacturing. In summary, the result supports the dependence of investors’ asset allocation decisions on monetary policy. Practical implications Therefore, the authors propose an investment strategy which is dynamic and takes into consideration the monetary policy states rather than static asset allocation which maintains the same industry weight mix over the investment period. Social implications In sum, the authors interpret the result as support for the dependence of investors’ asset allocation decisions on monetary policy. In Ghana, an increase in the monetary policy appears to support industries listed on the equity market. The result also gives knowledge about investors’ asset allocation decisions on the GSE, which is practical balanced source of information for investors’ risk and return choices. For a prudent monetary policy framework, the monetary policy committee should monitor industries listed on the GSE. The result from the analysis has also an implication for investors, portfolio managers and fund managers to consider the state of the monetary policy in Ghana when making investment decisions. Originality/value The study differs from earlier research on asset allocation by breaking new grounds on two levels. First of all, based on the notion that different industries have different exposures to monetary policy states, the authors extend the portfolios by grouping the equities listed on the GSE into their industrial sectors. Second, the authors examine how investors’ optimal portfolio allocation may change depending on the state of monetary policy.

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