Sedighe Alizadeh, Mohammad Nabi Shahiki Tash and Johannes Kabderian Dreyer
This paper aims to study the impact of liquidity risk and transaction costs on stock pricing in Iran, a closed market operating under a financial embargo and compare the results…
Abstract
Purpose
This paper aims to study the impact of liquidity risk and transaction costs on stock pricing in Iran, a closed market operating under a financial embargo and compare the results with those of an important neighboring market, namely, Turkey.
Design/methodology/approach
This study follows Liu et al. (2016) and incorporates liquidity risk and transaction costs into the traditional consumption-based asset-pricing model (CCAPM) from 2009 to 2017. Effective transaction costs are estimated a la Hasbrouck (2009) and liquidity risk according to eight different criteria.
Findings
According to the results, both liquidity risk and transaction costs are higher in Iran, possibly due to the financial embargo. Thus, relative to Turkey, this paper should expect a higher increase in the CCAPM pricing performance in Iran when accounting for these two variables. The results are in line with this expectation and indicate that adjusting the CCAPM significantly increases its pricing performance in both countries, but relatively more in Iran.
Originality/value
This study compares liquidity risk and transaction costs in an economy under the extreme case of a financial embargo to an open yet in other important aspects similar economy from the same region.
Details
Keywords
Mohammad Nabi Shahiki Tash, Saber Molaei and Kamran Barghandan
The purpose of this paper is to examine the level of cardinal welfare based on Sen’s index using both Pareto and non-Pareto states besides evaluating the effective factors on the…
Abstract
Purpose
The purpose of this paper is to examine the level of cardinal welfare based on Sen’s index using both Pareto and non-Pareto states besides evaluating the effective factors on the welfare changes according to a fuzzy least-squares regression model.
Design/methodology/approach
The social welfare functions express the optimal social allocations in the public economics. Therefore, they can be applied as a tool to represent the difference of utility allocations among consumers. There are various criteria on the literature pertaining to the social welfare functions such as those of Dasgupta et al. (1970), Sheshinski (1972), Sen (1974), Yitzhaki (1979), Shorrocks (1983), Kakwani (1984), Dagum (1990, 1993), Mukhopadhaya (2003), and Mukhopadhaya and Rao (2001). The Sen’s welfare function because of strong theoretical basis and enjoying the welfare axioms is more celebrated among others so that it is a function of individual utilities resulting from the individual’s social positions.
Findings
The findings indicate that the welfare level has increased by about 4.8 percent during the period 2002-2007; by nearly 3.1 percent during 1997-2001 and mature to 2.7 percent from 1992 to 1996 such that the period 1997-2007 has had the highest level of social welfare improvement in Iran. The results obtained from the fuzzy regression show that the unemployment rate, inflation rate and Gini coefficient variables have an adverse relation with the cardinal welfare in both Pareto and non-Pareto cases, while the literacy rate and government expenditures have a positive relation with the welfare index. The findings also imply that there is a positive relationship between economic growth and welfare level in Iran.
Originality/value
I verify that this manuscript is an original study.