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Volume 13
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J. Risk Financial Manag., Volume 13, Issue 1 (January 2020) – 17 articles

Cover Story (view full-size image): Cryptocurrencies have increasingly been discussed as alternatives to traditional fiat currencies. The market for cryptocurrencies has experienced extremely turbulent conditions in recent times, and we can clearly identify strong bull and bear market phenomena over the past year. In this paper, we utilise algorithms for detecting turnings points to identify both bull and bear phases in high-frequency markets for the three largest cryptocurrencies of Bitcoin, Ethereum, and Litecoin. We also examine the market efficiency and liquidity of the selected cryptocurrencies during these periods using high-frequency data. View this paper.
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14 pages, 2250 KiB  
Article
News-Driven Expectations and Volatility Clustering
by Sabiou M. Inoua
J. Risk Financial Manag. 2020, 13(1), 17; https://doi.org/10.3390/jrfm13010017 - 20 Jan 2020
Cited by 6 | Viewed by 4196
Abstract
Financial volatility obeys two fascinating empirical regularities that apply to various assets, on various markets, and on various time scales: it is fat-tailed (more precisely power-law distributed) and it tends to be clustered in time. Many interesting models have been proposed to account [...] Read more.
Financial volatility obeys two fascinating empirical regularities that apply to various assets, on various markets, and on various time scales: it is fat-tailed (more precisely power-law distributed) and it tends to be clustered in time. Many interesting models have been proposed to account for these regularities, notably agent-based models, which mimic the two empirical laws through a complex mix of nonlinear mechanisms such as traders switching between trading strategies in highly nonlinear way. This paper explains the two regularities simply in terms of traders’ attitudes towards news, an explanation that follows from the very traditional dichotomy of financial market participants, investors versus speculators, whose behaviors are reduced to their simplest forms. Long-run investors’ valuations of an asset are assumed to follow a news-driven random walk, thus capturing the investors’ persistent, long memory of fundamental news. Short-term speculators’ anticipated returns, on the other hand, are assumed to follow a news-driven autoregressive process, capturing their shorter memory of fundamental news, and, by the same token, the feedback intrinsic to the short-sighted, trend-following (or herding) mindset of speculators. These simple, linear models of traders’ expectations explain the two financial regularities in a generic and robust way. Rational expectations, the dominant model of traders’ expectations, is not assumed here, owing to the famous no-speculation, no-trade results. Full article
(This article belongs to the Special Issue LIQUIDITY: Efficiency and Stability in Financial Markets - Selected papers from 4th Chapman Conference on Money and Finance.)
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18 pages, 474 KiB  
Article
Equity Option Pricing with Systematic and Idiosyncratic Volatility and Jump Risks
by Zhe Li
J. Risk Financial Manag. 2020, 13(1), 16; https://doi.org/10.3390/jrfm13010016 - 17 Jan 2020
Cited by 2 | Viewed by 2972
Abstract
Recently, a large number of empirical studies indicated that individual equity options exhibit a strong factor structure. In this paper, the importance of systematic and idiosyncratic volatility and jump risks on individual equity option pricing is analyzed. First, we propose a new factor [...] Read more.
Recently, a large number of empirical studies indicated that individual equity options exhibit a strong factor structure. In this paper, the importance of systematic and idiosyncratic volatility and jump risks on individual equity option pricing is analyzed. First, we propose a new factor structure model for pricing the individual equity options with stochastic volatility and jumps, which takes into account four types of risks, i.e., the systematic diffusion, the idiosyncratic diffusion, the systematic jump, and the idiosyncratic jump. Second, we derive the closed-form solutions for the prices of both the market index and individual equity options by utilizing the Fourier inversion. Finally, empirical studies are carried out to show the superiority of our model based on the S&P 500 index and the stock of Apple Inc. on options. The out-of-sample pricing performance of our proposed model outperforms the other three benchmark models especially for short term and deep out-of-the-money options. Full article
(This article belongs to the Special Issue Mathematical Finance with Applications)
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5 pages, 298 KiB  
Editorial
Acknowledgement to Reviewers of Journal of Risk and Financial Management in 2019
by JRFM Editorial Office
J. Risk Financial Manag. 2020, 13(1), 15; https://doi.org/10.3390/jrfm13010015 - 13 Jan 2020
Viewed by 1590
Abstract
The editorial team greatly appreciates the reviewers who have dedicated their considerable time and expertise to the journal’s rigorous editorial process over the past 12 months, regardless of whether the papers are finally published or not [...] Full article
11 pages, 231 KiB  
Article
Cultural Distance and Entry Modes in Emerging Markets: Empirical Evidence in Vietnam
by Nguyen Minh Ha, Quan Minh Quoc Binh and Pham Phi Dang
J. Risk Financial Manag. 2020, 13(1), 14; https://doi.org/10.3390/jrfm13010014 - 10 Jan 2020
Cited by 7 | Viewed by 6286
Abstract
Cultural distance is acknowledged as a crucial factor that significantly affects the entry mode selection of multinational enterprises. The purpose of this article is to analyze the relationship between cultural distance and entry mode choice by exploring a novel dataset of 5236 firms [...] Read more.
Cultural distance is acknowledged as a crucial factor that significantly affects the entry mode selection of multinational enterprises. The purpose of this article is to analyze the relationship between cultural distance and entry mode choice by exploring a novel dataset of 5236 firms in Vietnam with foreign investment during the period 2005–2016. Although many studies were conducted about the cultural distance and entry mode nexus, most of the research mainly focuses on developed and developing countries, where a market economy is already established. It is important to expand the research to a transition economy such as Vietnam, where the government is committed to attracting foreign investment. The results indicate that, when the cultural difference between Vietnam and their home country is high, foreign-invested firms prefer wholly-owned subsidiaries (WOS) over equity joint ventures (EJV). The study contributes to the general understanding about cultural distance and entry mode decision of foreign-invested firms in emerging markets. Full article
(This article belongs to the Special Issue Contemporary Issues in Business and Economics)
37 pages, 17289 KiB  
Article
Local Extremes of Selected Industry 4.0 Indicators in the European Space—Structure for Autonomous Systems
by Milena Botlíková and Josef Botlík
J. Risk Financial Manag. 2020, 13(1), 13; https://doi.org/10.3390/jrfm13010013 - 07 Jan 2020
Cited by 10 | Viewed by 2960
Abstract
In the past, the social and economic impacts of industrial revolutions have been clearly identified. The current Fourth Industrial Revolution (Industry 4.0) is characterized by robotization, digitization, and automation. This will transform the production processes, but also the services or financial markets. Specific [...] Read more.
In the past, the social and economic impacts of industrial revolutions have been clearly identified. The current Fourth Industrial Revolution (Industry 4.0) is characterized by robotization, digitization, and automation. This will transform the production processes, but also the services or financial markets. Specific groups of people and activities may be replaced by new information technologies. Changes represent an extreme risk of economic instability and social change. The authors described available published sources and selected a group of indicators related to Industry 4.0. The indicators were divided into five groups and summarized by negative or positive impact. The indicators were analyzed by precedence analysis. Extremes in the geographical dislocation of factor values were found. Furthermore, spatial dependencies in the distribution of these extremes were found by calculating multiple (long) precedencies. European countries were classified according to individual groups of indicators. The results were compared with the real values of the indicators. The indicated extremes and their distribution will allow to predict changes in the behavior of the population given by changes in the socio-economic environment. The behavior of the population can be described by the behavior of autonomous systems on selected infrastructure. The paper presents research related to the creation of a multiagent model for the prediction of spatial changes in population distribution induced by Industry 4.0. Full article
(This article belongs to the Special Issue International Trends and Economic Sustainability on Emerging Markets)
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19 pages, 449 KiB  
Article
Marketing Islamic Financial Services: A Review, Critique, and Agenda for Future Research
by Intekhab Alam and Pouya Seifzadeh
J. Risk Financial Manag. 2020, 13(1), 12; https://doi.org/10.3390/jrfm13010012 - 04 Jan 2020
Cited by 11 | Viewed by 7963
Abstract
Islamic finance has experienced rapid growth globally, surpassing the USD 2 trillion mark in 2017. As a result, the literature related to Islamic finance and banking is rather rich. Despite the richness of the literature, our knowledge of the marketing issues related to [...] Read more.
Islamic finance has experienced rapid growth globally, surpassing the USD 2 trillion mark in 2017. As a result, the literature related to Islamic finance and banking is rather rich. Despite the richness of the literature, our knowledge of the marketing issues related to Islamic finance is modest and somewhat ambiguous. Therefore, we review several decades of research about the Islamic finance in various parts of the world. We identify and discuss three main research themes that draw on different conceptualization and theoretical lenses. After synthesizing their respective findings, we propose several avenues for future research that integrate these three research themes with the goal of developing a more nuanced understanding of Islamic finance and its marketing. While we believe that our review will mainly serve as a crucial reinvigoration and launch point for future research on Islamic finance marketing, it is also of great practical benefit for policymakers of various countries and especially managers of financial service firms interested in marketing Islamic banking and financial services to their customers. Full article
(This article belongs to the Special Issue Islamic Finance)
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11 pages, 1670 KiB  
Brief Report
QE versus the Real Problems in the World Economy
by Adrian Blundell-Wignall
J. Risk Financial Manag. 2020, 13(1), 11; https://doi.org/10.3390/jrfm13010011 - 04 Jan 2020
Cited by 2 | Viewed by 3609
Abstract
These notes are based on parts of a keynote address to the Fourth Annual Conference on Money and Finance at Chapman University on 6–7 September 2019. Quantitative easing (QE) policies have been pushed to extremes and extended well beyond their use-by dates to [...] Read more.
These notes are based on parts of a keynote address to the Fourth Annual Conference on Money and Finance at Chapman University on 6–7 September 2019. Quantitative easing (QE) policies have been pushed to extremes and extended well beyond their use-by dates to little plausible effect in achieving the goal of raising inflation and growth. Instead, they are damaging the interbank market (as exemplified by the liquidity crisis in September 2019), adding to the risk of financial crises in the future and taking pressure off policy-makers to deal with the real causes of poor investment, growth and deflation pressure. The shift in where investment is occurring and the special problems of Europe and Brexit are focused upon. Full article
(This article belongs to the Special Issue LIQUIDITY: Efficiency and Stability in Financial Markets - Selected papers from 4th Chapman Conference on Money and Finance.)
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15 pages, 506 KiB  
Article
Exchange Rate Regime and Economic Growth in Asia: Convergence or Divergence
by Dao Thi-Thieu Ha and Nga Thi Hoang
J. Risk Financial Manag. 2020, 13(1), 9; https://doi.org/10.3390/jrfm13010009 - 03 Jan 2020
Cited by 11 | Viewed by 7683
Abstract
Exchange rates and exchange rate regimes in a constantly changing economy have always attracted much attention from scholars. However, there has not been a consensus on the effect of exchange rate on economic growth. To determine the direction and magnitude of the impact [...] Read more.
Exchange rates and exchange rate regimes in a constantly changing economy have always attracted much attention from scholars. However, there has not been a consensus on the effect of exchange rate on economic growth. To determine the direction and magnitude of the impact of an exchange rate regime on economic growth, this study uses the exchange rate database constructed by Reinhart and Rogoff. This study also employs the GMM (Generalized Method of Moments) technique on unbalanced panel data to analyze the effect of the exchange rate regime on economic growth in Asian countries from 1994 to 2016. Empirical results suggest that a fixed exchange rate regime (weak flexibility) will affect economic growth in the same direction. As such, results from the study will serve as quantitative evidence for countries in the Asian region to consider when selecting a suitable policy and an exchange rate regime to attain high economic growth. Full article
(This article belongs to the Special Issue Contemporary Issues in Business and Economics)
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14 pages, 782 KiB  
Article
On the Market Efficiency and Liquidity of High-Frequency Cryptocurrencies in a Bull and Bear Market
by Yuanyuan Zhang, Stephen Chan, Jeffrey Chu and Hana Sulieman
J. Risk Financial Manag. 2020, 13(1), 8; https://doi.org/10.3390/jrfm13010008 - 03 Jan 2020
Cited by 21 | Viewed by 7473
Abstract
The market for cryptocurrencies has experienced extremely turbulent conditions in recent times, and we can clearly identify strong bull and bear market phenomena over the past year. In this paper, we utilise algorithms for detecting turnings points to identify both bull and bear [...] Read more.
The market for cryptocurrencies has experienced extremely turbulent conditions in recent times, and we can clearly identify strong bull and bear market phenomena over the past year. In this paper, we utilise algorithms for detecting turnings points to identify both bull and bear phases in high-frequency markets for the three largest cryptocurrencies of Bitcoin, Ethereum, and Litecoin. We also examine the market efficiency and liquidity of the selected cryptocurrencies during these periods using high-frequency data. Our findings show that the hourly returns of the three cryptocurrencies during a bull market indicate market efficiency when using the detrended-fluctuation-analysis (DFA) method to analyse the Hurst exponent with a rolling window. However, when conditions turn and there is a bear-market period, we see signs of a more inefficient market. Furthermore, our results indicated differences between the cryptocurrencies in terms of their liquidity during the two market states. Moving from a bull to a bear market, Ethereum and Litecoin appear to become more illiquid, as opposed to Bitcoin, which appears to become more liquid. The motivation to study the high-frequency cryptocurrency market came from the increasing availability of higher-frequency cryptocurrency-pricing data. However, it also comes from a movement towards higher-frequency trading of cryptocurrency. In addition, the efficiency of cryptocurrency markets relates not only to whether prices are predictable and arbitrage opportunities exist, but, more widely, to topics such as testing the profitability of trading strategies and determining the maturity of cryptocurrency markets. Full article
(This article belongs to the Special Issue Blockchain and Cryptocurrencies)
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3 pages, 166 KiB  
Editorial
Alternative Assets and Cryptocurrencies
by Christian M. Hafner
J. Risk Financial Manag. 2020, 13(1), 7; https://doi.org/10.3390/jrfm13010007 - 03 Jan 2020
Cited by 3 | Viewed by 3077
Abstract
Alternative assets, defined by their low correlation with classical financial assets, have become an important investment vehicle in times of negative interest rates and in the aftermath of the global economic and financial crisis. Hedge funds increasingly invest in physical assets such as [...] Read more.
Alternative assets, defined by their low correlation with classical financial assets, have become an important investment vehicle in times of negative interest rates and in the aftermath of the global economic and financial crisis. Hedge funds increasingly invest in physical assets such as fine art, wine, or diamonds. Although digital and not physical, cryptocurrencies share many features of alternative assets, but are hampered by high volatility, sluggish commercial acceptance, and regulatory uncertainties. This special issue covers a broad variety of topics in financial technology, and provides a state-of-the-art overview of cryptocurrencies from economic, financial, statistical and technical points of view. Full article
(This article belongs to the Special Issue Alternative Assets and Cryptocurrencies)
3 pages, 169 KiB  
Editorial
Editorial for the Special Issue on “The Belt and Road-Risks and Financial Management Issues Faced by Enterprises’ Internationalization”
by Xue-Feng Shao, Wei Liu and Xiao-Guang Yue
J. Risk Financial Manag. 2020, 13(1), 10; https://doi.org/10.3390/jrfm13010010 - 03 Jan 2020
Cited by 2 | Viewed by 2714
Abstract
In recent years, deglobalization and protectionism have been prevalent in different regions of the world (Evenett 2019; Prashantham et al [...] Full article
(This article belongs to the Special Issue Enterprise Internationalization under the Theme of the Belt and Road Initiative)
3 pages, 178 KiB  
Editorial
Empirical Finance
by Shigeyuki Hamori
J. Risk Financial Manag. 2020, 13(1), 6; https://doi.org/10.3390/jrfm13010006 - 02 Jan 2020
Cited by 1 | Viewed by 2336
Abstract
The research field related to finance has made great progress in recent years due to the development of information processing technology and the availability of large-scale data. This special issue is a collection of 16 articles on empirical finance and one book review. [...] Read more.
The research field related to finance has made great progress in recent years due to the development of information processing technology and the availability of large-scale data. This special issue is a collection of 16 articles on empirical finance and one book review. The content is six articles on machine learning, five articles based on traditional econometric analysis, and five articles on emerging markets. The large share of articles on the application of machine learning is in line with recent trends in finance research. This special issue provides a state-of-the-art overview of empirical finance from economic, financial, and technical points of view. Full article
(This article belongs to the Special Issue Empirical Finance)
18 pages, 487 KiB  
Article
Are Family Firms Financially Healthier Than Non-Family Firm?
by Lious Agbor Tabot Ntoung, Helena Maria Santos de Oliveira, Benjamim Manuel Ferreira de Sousa, Liliana Marques Pimentel and Susana Adelina Moreira Carvalho Bastos
J. Risk Financial Manag. 2020, 13(1), 5; https://doi.org/10.3390/jrfm13010005 - 29 Dec 2019
Cited by 13 | Viewed by 3447
Abstract
This study examines the whether or not family firms are financially healthier than non-family in terms of capital structure and leverage. It therefore takes into consideration the existence of any significant differences between the leverage and risk choices of family and non-family firms. [...] Read more.
This study examines the whether or not family firms are financially healthier than non-family in terms of capital structure and leverage. It therefore takes into consideration the existence of any significant differences between the leverage and risk choices of family and non-family firms. Using a panel data set of 888 firms and 7104 firm-year observations of unlisted small and medium size firms over the period 2007–2014, we present that family owned businesses have lower financial structure than those of non-family owned businesses. This indicates that most family firms use less debt financing than non-family firms, and as such maintain a lower level of debt. Secondly, family firms demonstrate lower risk as illustrated by the Altman Z-score. The Altman Z-score scale illustrates a contrary relationship of significance with respect to family firms and their counterparts in terms of the operation aspect of the business’s risk factors. Family firms managed their business operations with lower risk and are generally healthier financially than their counterpart firms. Lastly, findings from the robust tests for the hypotheses using a sample of bankrupt firms in Iberian Balance sheet Analysis System (SABI) reveal that the proportion of failure of family firms as opposed to their counterpart firms is relatively low. Analyzing the bankruptcy files of firms from 2002 to 2014 shows a considerably low ratio of family firms at the 5% significant level. This affirms that the low risk illustrated in the Altman Z-score regression is consistent to the lower ratio of family firms that were declared bankrupted over the study period, which makes Spain an important case in this study. Full article
(This article belongs to the Special Issue Corporate Finance)
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22 pages, 1488 KiB  
Article
The Impacts of Selling Expense Structure on Enterprise Growth in Large Enterprises: A Study from Vietnam
by Van Cong Nguyen, Thi Ngoc Lan Nguyen, Thanh Hang Pham and Song Hoa Vu
J. Risk Financial Manag. 2020, 13(1), 4; https://doi.org/10.3390/jrfm13010004 - 28 Dec 2019
Cited by 2 | Viewed by 5261
Abstract
This study intends to examine the impact of selling expense structure on the business growth of 255 Vietnamese large-scale enterprises in three different industries (Consumer Staples, Industrials, and Manufacture) listed on the Vietnamese Stock Exchange over four years from 2015 to 2018. By [...] Read more.
This study intends to examine the impact of selling expense structure on the business growth of 255 Vietnamese large-scale enterprises in three different industries (Consumer Staples, Industrials, and Manufacture) listed on the Vietnamese Stock Exchange over four years from 2015 to 2018. By using STATA software (StataCorp LLC, 4905 Lakeway Drive, College Station, Texas 77845-4512, USA), the research outcomes indicate that both labour expense and depreciation expense have a negative influence on revenue growth and firm size growth but positive influence on profit growth while materials and tools expenses negatively affect all three dependent variables. Furthermore, an increase in the proportion of outsourcing expenses and other selling expenses would result in a significant increase in revenue but a decline in the profit of these companies. From this research results, large-scale enterprises should consider changing the selling expense structure as they spend too much on outsourcing and other selling expenses (60%–70% total selling expense) but too little on labour, which plays an important role in upgrading the profitability of these enterprises. Full article
(This article belongs to the Special Issue Empirical Finance Research)
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33 pages, 1596 KiB  
Article
A Quantitative Analysis of Risk Premia in the Corporate Bond Market
by Sara Cecchetti
J. Risk Financial Manag. 2020, 13(1), 3; https://doi.org/10.3390/jrfm13010003 - 20 Dec 2019
Cited by 2 | Viewed by 3412
Abstract
Measures of corporate credit risk incorporate compensation for unpredictable future changes in the credit environment and compensation for expected default losses. Since the launch of purchases of government securities and corporate securities by the European Central Bank, it has been discussed whether the [...] Read more.
Measures of corporate credit risk incorporate compensation for unpredictable future changes in the credit environment and compensation for expected default losses. Since the launch of purchases of government securities and corporate securities by the European Central Bank, it has been discussed whether the observed reduction in corporate credit risk was due to the decrease in risk aversion favored by the monetary easing or by expectations of lower losses due to corporate defaults. This work introduces a new methodology to break down the factors that drive corporate credit risk, namely the premium linked to cyclical and monetary conditions and that linked to the restructuring of the companies. Untangling these two components makes it possible to quantify the drivers of excess returns in the corporate bond market. Full article
(This article belongs to the Special Issue Corporate Debt)
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9 pages, 346 KiB  
Article
Managing Shariah Non-Compliance Risk via Islamic Dispute Resolution
by Maria Bhatti
J. Risk Financial Manag. 2020, 13(1), 2; https://doi.org/10.3390/jrfm13010002 - 18 Dec 2019
Cited by 15 | Viewed by 14633
Abstract
This article discusses Shariah non-compliance risk as a form of operational risk intending to ensure that operations in the Islamic and banking finance industry comply with Shariah procedures. In the field of Islamic finance, Shariah non-compliance risk refers to the possibility that Islamic [...] Read more.
This article discusses Shariah non-compliance risk as a form of operational risk intending to ensure that operations in the Islamic and banking finance industry comply with Shariah procedures. In the field of Islamic finance, Shariah non-compliance risk refers to the possibility that Islamic finance transactions may be challenged based on Shariah non-compliance. This article uses a comparative and normative approach as well as a legal analysis of the case of Beximco. The article proposes the management of Shariah non-compliance risk by augmenting the effectiveness of Shariah governance systems with Islamic banking and finance arbitration; arbitration should be an enforced part of Islamic finance institutional arrangements—as it always has been classically—to provide flexibility for dispute resolution. To this end, the article examines contemporary implementations of Shariah arbitration rules to assess how Shariah non-compliance risk can be better managed via Islamic dispute resolution procedures. Full article
(This article belongs to the Special Issue Islamic Finance)
6 pages, 1282 KiB  
Editorial
Regulatory Responses by Countries to Banking/Financial Crises
by James R. Barth
J. Risk Financial Manag. 2020, 13(1), 1; https://doi.org/10.3390/jrfm13010001 - 18 Dec 2019
Viewed by 2717
Abstract
Banking/financial crises have occurred in countries at all levels of income and in all parts of the world. These crises not only occur too frequently, but also are too costly. Countries everywhere therefore have enacted laws that established regulatory authorities with responsibility to [...] Read more.
Banking/financial crises have occurred in countries at all levels of income and in all parts of the world. These crises not only occur too frequently, but also are too costly. Countries everywhere therefore have enacted laws that established regulatory authorities with responsibility to implement appropriate regulations and supervisory practices to promote healthy and stable banking systems. However, relatively recent information has become available that indicates that countries do not choose to regulate and supervise their banks in exactly the same way. Such information helps enable researchers to examine what regulations and supervisory practices work best. The results of these examinations can be extremely important to policy makers when considering changes to make in regulatory regimes in response to the most recent banking crisis. Full article
(This article belongs to the Section Banking and Finance)
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