Amine Ben Amar, Amir Hasnaoui, Nabil Boubrahimi, Ilham Dkhissi and Makram Bellalah
This study aims to elucidate the volatility spillovers among commodities, equities and socially responsible investments, underpinning their dynamic correlations during the…
Abstract
Purpose
This study aims to elucidate the volatility spillovers among commodities, equities and socially responsible investments, underpinning their dynamic correlations during the economic instability wrought by the COVID-19 pandemic and associated financial crises.
Design/methodology/approach
This research quantitatively analyzes volatility transmission across various financial assets from January 2005 to October 2020 by employing the Diebold and Yilmaz (2012) spillover index. The methodology incorporates a temporal examination to capture the evolution of volatility dependencies pre and post the emergence of COVID-19.
Findings
The findings indicate substantial volatility spillovers among the assets in question, aligning with the current financialisation of commodity markets and a rise in financial market integration. These spillovers also show variation over time. Notably, the interconnectedness among the assets intensifies during periods of stress. For instance, the total spillover index significantly surpassed 80% toward the end of January 2020, following the onset of the COVID-19 crisis. Furthermore, the results imply that financial markets appear to be segmented.
Practical implications
The findings afford investors a more comprehensive insight into both the character and scale of the interdependencies across a broad array of financial markets. Indeed, grasping the extent to which financial markets are segmented or integrated during times of stress and stability is crucial for investors. Such understanding is key to more accurately evaluating risks, diversifying investment portfolios and devising more efficient hedging strategies.
Originality/value
This study contributes to financial literature by offering a comprehensive investigation into the spillover effects across a diverse set of asset classes during an unprecedented global health crisis, filling a gap in existing research on market behavior against the backdrop of a pandemic-induced financial crisis.
Details
Keywords
Ikrame Ben Slimane, Makram Bellalah and Hatem Rjiba
This paper aims to analyze the impact of the global financial crisis on the conditional beta in the region of North America and Western Europe and the effect on the behavior and…
Abstract
Purpose
This paper aims to analyze the impact of the global financial crisis on the conditional beta in the region of North America and Western Europe and the effect on the behavior and decisions of the investor.
Design/methodology/approach
The authors model the variations of volatility in financial markets during crisis using the bivariate GARCH model of Engle and Kroner (1995).
Findings
The empirical investigation identifies an additional effect of the crisis over the period of the test. Results indicate a rise in the beta in some cases and a fall in others. This rise had a direct impact on the systematic beta risk, which increased for the majority of the companies during the crisis period. The increase in beta during the crisis period has an effect on the behavior of the investor and his decisions.
Research limitations/implications
The increase in the beta during the period of crisis due to a high volatility returns has an effect on the behavior and decisions of the investor.
Originality/value
This paper examines the effects of the “subprime crisis” on the risk premium of companies in several sectors of activity.
Details
Keywords
Makram Bellalah and Sonia Ben Said
Purpose – This chapter studies a two-country model in which firms have the opportunity to invest directly both in home and foreign activities while operating in the context of…
Abstract
Purpose – This chapter studies a two-country model in which firms have the opportunity to invest directly both in home and foreign activities while operating in the context of imperfectly competitive markets for final goods and services. The model is an extension of Choi (1989).
Methodology approach – The firm is assumed to maximize the expected utility derived from the sequence of present and future levels of wealth, subject to budget constraint. We apply the Hamilton–Jacobi–Bellman approach.
Findings – In this chapter we show that the degree of imperfect competition may be different in the two countries and measured by the elasticity of the demand functions. In this model, we derive the optimal proportion of foreign investment, which is divided into two ratios. The first ratio is a hedging position. The second one is a speculative position.
Originality – Our model shows the role of alternative finance in the presence of differences between investment in two cases, namely, the case of market competition and the case of no market imperfections. This effect is shown by investment proportion and asset pricing relation.
Details
Keywords
William A. Barnett and Fredj Jawadi
Since the recent global financial crisis began in 2008–2009, there has been strong decline in financial markets and investment, huge losses and bankruptcies that have led to a…
Abstract
Since the recent global financial crisis began in 2008–2009, there has been strong decline in financial markets and investment, huge losses and bankruptcies that have led to a major financial downturn, and a significant economic recession for most developed and emerging economies. Some economists and financial analysts now consider this crisis to be more harmful in some ways than the Great Depression of 1929. Those economists and analysts point to a number of technical issues and limitations associated with the present financial systems, monetary institution rules, accounting and rating formulas, and investment strategies and choices. To try to overcome the financial downturn and, at the same time, to protect the banking systems and financial markets and to reassure investors, central banks have attempted various solutions, governments have introduced new plans (e.g., the Paulson plan), policymakers have included these topic in their political programs, and several conferences and political summits have been organized to discuss the issues. There have been two prevailing lines of thought. According to one line of thought, the extreme risk associated with speculation in sophisticated financial products, the nature of the credit-banking economic system, the gap between real and financial economies, and the strategic errors of monetary institutions constitute the main sources of the financial crisis.1 On the other hand, it is now argued that this trend needs to be altered. According to that view, monetary institutions, banking and trading systems, rating agencies, and asset pricing modeling need to be reassessed (Barnett, 2012).