Journal of Risk and Financial Management

22 pages, 6403 KiB

Open AccessArticle

The COVID-19 Housing Boom: Is a 2007–2009-Type Crisis on the Horizon?

by Diamando Afxentiou, Peter Harris and Paul Kutasovic

J. Risk Financial Manag. 2022, 15(8), 371; https://doi.org/10.3390/jrfm15080371 - 22 Aug 2022

Cited by 6 | Viewed by 3059

While the current housing market remains relatively strong, with housing prices setting records, concerns are growing of a potential housing bubble similar to that of 2007–2009; this paper compares the current housing market environment with that of 2007–2009 and concludes that the many [...] Read more.

While the current housing market remains relatively strong, with housing prices setting records, concerns are growing of a potential housing bubble similar to that of 2007–2009; this paper compares the current housing market environment with that of 2007–2009 and concludes that the many of the factors that caused the 2007–2009 crisis do not exist today. Factors associated with subprime mortgages, poor and non-existent underwriting loan requirements, weak regulatory oversight, exaggerated credit ratings, under-capitalization in the banking sector and excessive speculative activity in the housing market have been addressed by regulation, which is aimed at preventing another financial crisis similar to 2007–2009. Equally important, major fundamental factors affecting real estate valuation are providing support for the housing market and housing prices; these factors are impacting both the demand and supply side of the housing market. The factors include the lack of inventories of homes available for sale, the underproduction of housing, decreased household mobility limiting supply and the increase in housing demand from millennials and institutional investors; these fundamental factors were not evident during the 2007–2009 period. Despite a number of indicators signaling a potential topping out and overvaluation of housing prices, the authors conclude that the fundamental factors will limit the extent that the housing market weakens over the next few years. Full article

(This article belongs to the Special Issue Infectious Disease Outbreaks, Uncertainties, Firms, and Financial Markets)

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17 pages, 1309 KiB

Open AccessArticle

The Pervasive Role of Campaign and Product-Related Uncertainties in Inhibiting Crowdfunding Success

by Christian Hopp, Stefan Rose and Jermain Kaminski

J. Risk Financial Manag. 2022, 15(8), 370; https://doi.org/10.3390/jrfm15080370 - 22 Aug 2022

Cited by 1 | Viewed by 1519

Abstract

In this research, we study the funding decision in crowdfunding from the perspective of potential backers. We assess whether perceived uncertainty affects the decision to contribute to crowdfunding campaigns. For this purpose, we conduct a 2 × 2 between-subjects experiment with different stages [...] Read more.

In this research, we study the funding decision in crowdfunding from the perspective of potential backers. We assess whether perceived uncertainty affects the decision to contribute to crowdfunding campaigns. For this purpose, we conduct a 2 × 2 between-subjects experiment with different stages of product development and the perceived innovativeness of products depicted in campaigns. Our findings show that an early development stage positively affects perceived uncertainty, adversely affecting the willingness to contribute. Simultaneously, higher perceived innovativeness elicits higher uncertainty perceptions, negatively influencing the willingness to contribute. Our research furthers an understanding of entrepreneur perspective taking to overcome uncertainty perceptions from the indeterminacy of crowdfunding campaigns. Full article

(This article belongs to the Special Issue Crowdfunding)

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16 pages, 449 KiB

Open AccessArticle

Spreads and Volatility in House Returns

by Peter Chinloy, Cheng Jiang and Kose John

J. Risk Financial Manag. 2022, 15(8), 369; https://doi.org/10.3390/jrfm15080369 - 19 Aug 2022

Cited by 1 | Viewed by 1811

Abstract

Underlying idiosyncratic and illiquidity risks are suppressed in infrequently reported indexes of house prices and rents. Idiosyncratic risks result from bid–ask spreads for prices and rents. Time series autocovariances generate a distribution of prices and rents. Capital gains and rent-price ratios are transforms [...] Read more.

Underlying idiosyncratic and illiquidity risks are suppressed in infrequently reported indexes of house prices and rents. Idiosyncratic risks result from bid–ask spreads for prices and rents. Time series autocovariances generate a distribution of prices and rents. Capital gains and rent-price ratios are transforms of these distributions, generating cross-sectional idiosyncratic volatility. Housing data are infrequent and usually made available every month. The monthly–quarterly volatility ratios of house prices and rents and their spreads estimate unobserved daily fluctuations and illiquidity risks. Including idiosyncratic and illiquidity risks, a U.S. house has a standard deviation in returns of 8.7% annually for three decades after 1990. With a mean excess return of 3.7%, the Sharpe ratio of 0.42 is comparable to the S&P 500. Excluding spreads, the house Sharpe ratio is 0.69. House returns respond to liquidity. A 1% increase in volume raises returns by 0.8%. Full article

(This article belongs to the Section Financial Markets)

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21 pages, 1117 KiB

Open AccessArticle

Earnings Less Risk-Free Interest Charge (ERIC) and Stock Returns—A Value-Based Management Perspective on ERIC’s Relative and Incremental Information Content

by Rainer Lueg and Jon Svennesen Toft

J. Risk Financial Manag. 2022, 15(8), 368; https://doi.org/10.3390/jrfm15080368 - 19 Aug 2022

Cited by 1 | Viewed by 1581

Abstract

This paper investigates the relative and incremental information content of KPMG’s recently developed metric for shareholder value creation: earnings less risk-free interest charge (ERIC). We assess if ERIC has a better ability to predict stock returns than earnings, cash flow from operations [...] Read more.

This paper investigates the relative and incremental information content of KPMG’s recently developed metric for shareholder value creation: earnings less risk-free interest charge (ERIC). We assess if ERIC has a better ability to predict stock returns than earnings, cash flow from operations (CFO), earnings before extraordinary items (EBEI), residual income (RI), or economic value added (EVA). We evaluate data from 214 companies listed on the U.S. Standard & Poor’s 500 Index from 2003 to 2012 (2354 firm-year observations). Similar to previous studies, we confirm that CFO and EBEI have the strongest association with stock returns in the short term, while EVA trails behind all other metrics. In terms of new findings, ERIC is the best predictor of stock returns over a 5-year period, as well as during times of crises (from 2009 to 2010). In this period, ERIC also adds incremental information content beyond that of EBEI. However, the low-short-/mid-term predictive ability of shareholder value metrics (EVA, ERIC) raises concerns regarding their reliable use in future research on shareholder value creation. We consequently propose a research agenda that focuses less on the measurement and more on the management of shareholder value. Full article

(This article belongs to the Special Issue Business Performance)

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16 pages, 1311 KiB

Open AccessArticle

Bubble in Carbon Credits during COVID-19: Financial Instability or Positive Impact (“Minsky” or “Social”)?

by Bikramaditya Ghosh, Spyros Papathanasiou, Vandita Dar and Konstantinos Gravas

J. Risk Financial Manag. 2022, 15(8), 367; https://doi.org/10.3390/jrfm15080367 - 17 Aug 2022

Cited by 6 | Viewed by 3496

Abstract

Incentivizing businesses to lower carbon emissions and trade back excess carbon allowances paved the way for rapid growth in carbon credit ETFs. The use of carbon allowances as a hedging alternative fueled this rally further, causing a shift to speculation and forming repetitive [...] Read more.

Incentivizing businesses to lower carbon emissions and trade back excess carbon allowances paved the way for rapid growth in carbon credit ETFs. The use of carbon allowances as a hedging alternative fueled this rally further, causing a shift to speculation and forming repetitive bubbles. Speculative bubbles are born from euphoria, yet, they are relatively predictable, provided their pattern matches the log periodic power law (LPPL) with specific stylized facts. A “Minsky moment” identifies a clear speculative bubble as a signal of financial system instability, while a “Social bubble” is regarded as relatively positive, increasing in the long run, infrastructure spending and development. The aim of this paper is to investigate whether various carbon credit bubbles during the pandemic period caused financial instability or had a positive impact (“Minsky” or “Social”). Particularly, we investigate the carbon credit bubble behavior in the ETF prices of KRBN, GRN (Global Carbon Credit tracking ETFs), and the SOLCARBT index during the COVID-19 pandemic period by adopting the log-periodic power law model (LPPL) methodology, which has been widely used, over the past decade, for detecting bubbles and crashes in various markets. In conclusion, these bubbles are social and propelled by the newfound interest in carbon credit trading, for obvious reasons. Full article

(This article belongs to the Special Issue Global Trends and Challenges in Economics and Finance)

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17 pages, 361 KiB

Open AccessArticle

Factors Influencing the Take-Up of Agricultural Insurance and the Entry into the Mutual Fund: A Case Study of the Czech Republic

by Sofia Kislingerová and Jindřich Špička

J. Risk Financial Manag. 2022, 15(8), 366; https://doi.org/10.3390/jrfm15080366 - 16 Aug 2022

Cited by 4 | Viewed by 3074

Abstract

The objective of the study was to identify the main factors influencing farmers’ willingness to take up agricultural insurance and participate in a mutual fund for non-insurable risks in the Czech Republic. Responses from 214 representative farms were processed using descriptive statistics, paired [...] Read more.

The objective of the study was to identify the main factors influencing farmers’ willingness to take up agricultural insurance and participate in a mutual fund for non-insurable risks in the Czech Republic. Responses from 214 representative farms were processed using descriptive statistics, paired t-tests, binary logistic regression, and contingency analysis. The regression model showed the influences of agricultural area, distrust in insurance companies, the probability of losing more than 20% of production, the price of insurance premiums, and having a developed formal strategy on the likelihood of taking up agricultural insurance. Unlike previous empirical studies, this study did not attempt to look at agricultural insurance as an isolated risk management tool but rather to show the interrelationship between farmers’ decisions to join a mutual fund and their choice of agricultural insurance. Farmers expect most agricultural production risks to become significantly more important. With the ongoing economic crisis in the EU, there is growing pressure to reduce ad hoc public spending on coverage of non-insurable risks and to seek alternative solutions. The study also shows the need for a holistic approach to the design of risk management support systems in EU countries. Full article

(This article belongs to the Section Risk)

15 pages, 393 KiB

Open AccessArticle

Hedging Policies to Reduce Agency Costs in Brazil

by Vinícius Medeiros Magnani, Marcelo Augusto Ambrozini, Rafael Moreira Antonio and Rafael Confetti Gatsios

J. Risk Financial Manag. 2022, 15(8), 365; https://doi.org/10.3390/jrfm15080365 - 16 Aug 2022

Viewed by 1668

Abstract

Given the recent Brazilian economic scenario, characterized by political uncertainties and economic instabilities, it is essential for companies to engage in hedging as part of their financial policy in order to prevent their results from being affected by market frictions. In this context, [...] Read more.

Given the recent Brazilian economic scenario, characterized by political uncertainties and economic instabilities, it is essential for companies to engage in hedging as part of their financial policy in order to prevent their results from being affected by market frictions. In this context, the present study aimed to verify the impact of hedging on the agency costs of Brazilian companies. The methodology used was that of panel data contemplating a manually collected database of 154 companies between 2010 and 2017 (all companies that use derivatives for hedging). The results obtained agree with the literature on hedging and agency costs, indicating that the greater the use of hedging, the lower the agency costs faced by shareholders, expanding on the discussions involving developed markets. This relationship shows that by using hedging in a company’s financial policy, managers can minimize the impacts of market frictions and reduce the residual losses of shareholders in relation to what would otherwise occur. Full article

(This article belongs to the Section Mathematics and Finance)

18 pages, 496 KiB

Open AccessArticle

How Did Amazon Achieve CSR and Some Sustainable Development Goals (SDGs)—Climate Change, Circular Economy, Water Resources and Employee Rights during COVID-19?

by Wenxuan Yu, Abeer Hassan and Mahalaxmi Adhikariparajuli

J. Risk Financial Manag. 2022, 15(8), 364; https://doi.org/10.3390/jrfm15080364 - 16 Aug 2022

Cited by 6 | Viewed by 29793

Abstract

Stakeholders’ demand for corporate social responsibility (CSR) not only creates pressure on the corporation, but corporations are also themselves aware about leading CSR activities’ reporting and embedding sustainable activities to create value for the short, medium, and long-term. This research investigates the sustainable [...] Read more.

Stakeholders’ demand for corporate social responsibility (CSR) not only creates pressure on the corporation, but corporations are also themselves aware about leading CSR activities’ reporting and embedding sustainable activities to create value for the short, medium, and long-term. This research investigates the sustainable development and corporate social responsibility of Amazon as one of the most influential multinational enterprises in the world. In this regard, this study sheds light on how Amazon has combined its own interests with corporate social responsibility and sustainable development, and how they have responded to a series of challenges brought by economic globalization to corporate social responsibility and sustainable development. The results of this detailed investigation of Amazon from 2018 to 2020 show that Amazon has performed very well in terms of social responsibility and sustainable development. In particular, climate, environment, carbon emissions and other natural measures. However, there are some shortages in terms of human rights, such as insufficient protection and care for employees during the COVID-19 pandemic, and labor union issues. In addition, the study concluded that Amazon has sufficient experience to balance profit and corporate social responsibility. In response to the challenges of globalization, Amazon has also adjusted its sustainable development strategy in a timely manner, which can be used as a reference for other multinational enterprises. Full article

(This article belongs to the Special Issue Business Performance)

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23 pages, 387 KiB

Open AccessArticle

Management Control Systems and International Entrepreneurship in Small, Young Firms from Resource-Based Theory, Contingence, and Effectuation Approach Perspectives

by Marta Pérez Sigüenza, Laura Rodríguez-León Rodríguez, Juan Manuel Ramon Jeronimo and Raquel Flórez López

J. Risk Financial Manag. 2022, 15(8), 363; https://doi.org/10.3390/jrfm15080363 - 15 Aug 2022

Viewed by 2591

Abstract

This study analyses how entrepreneurs adapt or change international control management and organisation structures in response to their resources and capabilities and the context of the situation, from the resource-based theory (RBT) and contingency and effectuation framework approaches, taking the dynamism from knowledge-intensive [...] Read more.

This study analyses how entrepreneurs adapt or change international control management and organisation structures in response to their resources and capabilities and the context of the situation, from the resource-based theory (RBT) and contingency and effectuation framework approaches, taking the dynamism from knowledge-intensive services (KIS) into consideration. A multiple case study has been performed, based on semi-structured interviews with nine founders (entrepreneurs) of less-than 5-year-old international businesses who are actively involved in the management. All the interviews have been recorded, coded, and analysed through factsheets. The findings suggest that there is a relation between entrepreneurship and the characteristics of the entrepreneur; the character of owners or founders is key to embarking on this kind of business challenge. Furthermore, the age and nature of the manager—entrepreneur or non-entrepreneur—influence the business direction. This research analyses the role of the founder, owner, and/or management depending on the resources, capabilities, and uncertain contexts of the small, young firms. The age of the organisation’s and the degree of professionalism of the management’s impact on the management style and the use of control mechanisms are scarcely analysed yet, which could improve the relationships in MCS to achieve local and global control needs. Full article

(This article belongs to the Special Issue Advances in International Management Research)

12 pages, 307 KiB

Open AccessCommunication

Corporate Financial Strategy in an Emerging Market: Evidence from Indonesia

by Erik Syawal Alghifari, Atang Hermawan, Ardi Gunardi, Agus Rahayu and Lili Adi Wibowo

J. Risk Financial Manag. 2022, 15(8), 362; https://doi.org/10.3390/jrfm15080362 - 15 Aug 2022

Cited by 4 | Viewed by 3350

Abstract

This paper focuses on strategic corporate financial decisions related to capital structure to increased firm value, moderated by the COVID-19 pandemic under MM theory, trade-off theory, and pecking order theory. The analytical method used is panel data analysis, with observations of 1828 non-financial [...] Read more.

This paper focuses on strategic corporate financial decisions related to capital structure to increased firm value, moderated by the COVID-19 pandemic under MM theory, trade-off theory, and pecking order theory. The analytical method used is panel data analysis, with observations of 1828 non-financial companies on the Indonesia Stock Exchange from the years 2019 to 2021. The results show that there is an effect of capital structure on firm value in a positive direction, and the moderating role of the COVID-19 pandemic weakens the effect of capital structure on firm value. The findings show that capital structure only has a significant effect on firm value for the debt-dominant group, but not for the equity-dominant group. The moderating effect of the COVID-19 pandemic affects firm value for the debt-dominant group, but not for the equity-dominant group. Full article

(This article belongs to the Special Issue Corporate Governance in Global Shocks and Risk Management)

21 pages, 632 KiB

Open AccessArticle

Risk Management in the Internationalization of Small and Medium-Sized Spanish Companies

by Ana Cruz González Calzadilla, María Segovia Villarreal, Juan Manuel Ramón Jerónimo and Raquel Flórez López

J. Risk Financial Manag. 2022, 15(8), 361; https://doi.org/10.3390/jrfm15080361 - 15 Aug 2022

Cited by 3 | Viewed by 3264

Abstract

The aim of this study is to analyze how Spanish small and medium-sized enterprises (hereinafter SMEs) manage risks derived from internationalization to improve performance. For this purpose, a case study was elaborated to understand the different risk management strategies used by Spanish SMEs [...] Read more.

The aim of this study is to analyze how Spanish small and medium-sized enterprises (hereinafter SMEs) manage risks derived from internationalization to improve performance. For this purpose, a case study was elaborated to understand the different risk management strategies used by Spanish SMEs in order to improve performance. Data were collected through sixteen semi-structured interviews. Findings suggest that although the internationalization process involves risk, SMEs, despite their size, can develop a proper risk management which leads to improve performance. Additionally, it is suggested that internationalization risks are not an impediment for SMEs to become involved in international activity, but that it is the way they manage them which makes SMEs improve their performance. Furthermore, the internationalization strategy becomes more efficient when a differentiation and innovation strategy are followed simultaneously. Full article

(This article belongs to the Special Issue Advances in International Management Research)

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24 pages, 5872 KiB

Open AccessArticle

Multiple Neighborhood Cellular Automata as a Mechanism for Creating an AGI on a Blockchain

by Konstantinos Sgantzos, Ian Grigg and Mohamed Al Hemairy

J. Risk Financial Manag. 2022, 15(8), 360; https://doi.org/10.3390/jrfm15080360 - 12 Aug 2022

Cited by 2 | Viewed by 7520

Abstract

Most Artificial Intelligence (AI) implementations so far are based on the exploration of how the human brain is designed. Nevertheless, while significant progress is shown on specialized tasks, creating an Artificial General Intelligence (AGI) remains elusive. This manuscript proposes that instead of asking [...] Read more.

Most Artificial Intelligence (AI) implementations so far are based on the exploration of how the human brain is designed. Nevertheless, while significant progress is shown on specialized tasks, creating an Artificial General Intelligence (AGI) remains elusive. This manuscript proposes that instead of asking how the brain is constructed, the main question should be how it was evolved. Since neurons can be understood as intelligent agents, intelligence can be thought of as a construct of multiple agents working and evolving together as a society, within a long-term memory and evolution context. More concretely, we suggest placing Multiple Neighborhood Cellular Automata (MNCA) on a blockchain with an interaction protocol and incentives to create an AGI. Given that such a model could become a “strong” AI, we present the conjecture that this infrastructure is possible to simulate the properties of cognition as an emergent phenomenon. Full article

(This article belongs to the Special Issue Smart Cities Research in Enabling Technologies and Tools)

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32 pages, 458 KiB

Open AccessArticle

Net Impact of COVID-19 on REIT Returns

by Yongpei Cai and Kuan Xu

J. Risk Financial Manag. 2022, 15(8), 359; https://doi.org/10.3390/jrfm15080359 - 12 Aug 2022

Cited by 8 | Viewed by 3985

Abstract

Using an extended Fama–French model for REIT returns, we examine how the net impact of the COVID-19 pandemic differs from that of recessions. We find that, as anticipated, recessions have a negative net impact on office and residential REIT returns but that the [...] Read more.

Using an extended Fama–French model for REIT returns, we examine how the net impact of the COVID-19 pandemic differs from that of recessions. We find that, as anticipated, recessions have a negative net impact on office and residential REIT returns but that the COVID-19 pandemic has a positive net influence on industrial REIT returns because of e-commerce and the demand for storage, distribution, and shipping. Contrary to what we anticipated, there are no negative net effects of the COVID-19 pandemic on office and residential REIT returns, perhaps caused by both existing office and residential leases, the percentage rent clause for commercial properties, and the grace period for residential properties during the COVID-19 pandemic. In contrast to moving solely during recessions and the COVID-19 pandemic, we find that retail REIT returns fluctuate along with ongoing macro/asset-pricing conditions throughout the boom and bust cycle. Full article

(This article belongs to the Special Issue Dynamic Portfolio Investment with Changing Economic States)

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18 pages, 674 KiB

Open AccessArticle

The Impact of Banking Sector Development on Economic Growth: The Case of Vietnam’s Transitional Economy

by Phuc Tran Nguyen

J. Risk Financial Manag. 2022, 15(8), 358; https://doi.org/10.3390/jrfm15080358 - 11 Aug 2022

Cited by 11 | Viewed by 11700

Abstract

The objective of this paper is to examine the role of the banking system in the growth of the Vietnamese economy in the process of the transition that started in the early 1990s. An ARDL approach-based multivariate regression technique is applied to shed [...] Read more.

The objective of this paper is to examine the role of the banking system in the growth of the Vietnamese economy in the process of the transition that started in the early 1990s. An ARDL approach-based multivariate regression technique is applied to shed light on the impact on the growth of banking development, which is measured by broad money and bank credit. The empirical findings confirm a positive long-term effect of banking development on growth, reflecting the important role of the banking system in a typical bank-based financial system in mobilizing and supplying capital to the economy, thus contributing to growth throughout the process of economic transition. The empirical findings also indicate a nonlinear effect and a diminishing marginal effect of banking development in the sub-period 2007–2020. The thresholds for the two measures of banking development are estimated to be around 107% and 101% of the GDP, respectively. This finding suggests that bank credit expansion needs to be closely controlled to be adaptive to the capital-absorptive capacity of the economy. To a certain extent, this finding is also an indicator of the ongoing extensive growth model adopted in Vietnam, which relies heavily on the quantity of invested capital. Full article

(This article belongs to the Special Issue Bank Lending and Monetary Policy)

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14 pages, 582 KiB

Open AccessArticle

How Market Orientation Impacts Customer’s Brand Loyalty and Buying Decisions

by Elizabeth Serra, Mariana de Magalhães, Rui Silva and Galvão Meirinhos

J. Risk Financial Manag. 2022, 15(8), 357; https://doi.org/10.3390/jrfm15080357 - 11 Aug 2022

Cited by 1 | Viewed by 2035

Abstract

As retail management has become increasingly demanding, it is imperative that retailers use market orientation to promote and increase loyalty to their private labels. This can be important in efforts to differentiate themselves from their competition. The focus of this study is to [...] Read more.

As retail management has become increasingly demanding, it is imperative that retailers use market orientation to promote and increase loyalty to their private labels. This can be important in efforts to differentiate themselves from their competition. The focus of this study is to understand how these factors impact the loyalty of customer purchase decisions, through the link between the potential for brand risk and brand commitment, in order to facilitate customer orientation and brand loyalty. An online survey was conducted with a sample of 2900 consumers in Portugal and Spain. This study analyzed two distinct and high involvement product categories: Denomination of Origin (DOC) wine and anti-wrinkle cream. Structural equation modeling methodology was used to analyze the relationship between different constructs. It was found that there is no direct correlation between customer orientation and brand loyalty. However, this connection is critical when the two mediating variables of brand risk and brand commitment are accounted for. Another important finding relates to the values and differences identified between the two product categories. The results obtained show the importance of risk and commitment for high involvement products. In practice, this justifies brands explicitly managing these factors, because they can translate into loyalty behaviors. The results also contribute to demystifying the market for more complex products, particularly when the choice and risk process is more complex. Full article

(This article belongs to the Special Issue Accounting and Information Management)

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16 pages, 314 KiB

Open AccessArticle

An Analysis of Whether Privately Owned Financial Planning Practices Are Transitioning to Fully Independent Advice Providers

by Darren Pawski, Robert Powell and Anna Golab

J. Risk Financial Manag. 2022, 15(8), 356; https://doi.org/10.3390/jrfm15080356 - 09 Aug 2022

Viewed by 1723

Abstract

In Australia, there are over 20,000 financial advisers, with only 1% registered as independent financial advisers. This study investigates why there has been no significant transition to independent advising. The importance of the study is underlined by the substantial losses suffered by thousands [...] Read more.

In Australia, there are over 20,000 financial advisers, with only 1% registered as independent financial advisers. This study investigates why there has been no significant transition to independent advising. The importance of the study is underlined by the substantial losses suffered by thousands of consumers from advice that has been found to be influenced by conflicts of interest. Using a qualitative technique, the study undertook exploratory semi-structured interviews among financial advisers. The study found that over 90% of privately owned advisers will not be transitioning to independent advising due to the belief that clients will not pay fees for insurance advice. The study finds strong evidence that the affordability of paying fees for insurance advice arguably outweighs the conflicts of interest associated with non-independent insurance advice. Full article

(This article belongs to the Section Energy and Environment: Economics, Finance and Policy)

26 pages, 2984 KiB

Open AccessArticle

Oil Price Uncertainty Shocks and Global Equity Markets: Evidence from a GVAR Model

by Afees A. Salisu, Rangan Gupta and Riza Demirer

J. Risk Financial Manag. 2022, 15(8), 355; https://doi.org/10.3390/jrfm15080355 - 09 Aug 2022

Cited by 3 | Viewed by 2174

Abstract

This paper examines the propagation of oil price uncertainty shocks to real equity prices using a large-scale Global Vector Autoregressive (GVAR) model of 26 advanced and emerging stock markets. The GVAR framework allows us to capture the transmission of local and global shocks, [...] Read more.

This paper examines the propagation of oil price uncertainty shocks to real equity prices using a large-scale Global Vector Autoregressive (GVAR) model of 26 advanced and emerging stock markets. The GVAR framework allows us to capture the transmission of local and global shocks, while simultaneously accounting for individual-country peculiarities. Utilising a recently developed model-free, robust estimate of oil price uncertainty, we document a statistically significant and negative effect of uncertainty shocks emanating from oil prices on the large majority of global stock markets, with the adverse effect of oil price uncertainty shocks found to be stronger for emerging economies as well as net oil-exporting nations. Interestingly, however, global stock markets exhibit a great deal of heterogeneity in their recovery following oil uncertainty shocks as some experience rapid corrections in stock valuations while others suffer from extended slumps. While the results are sensitive to the oil uncertainty measure utilised, they suggest that country diversification in the face of rising oil market uncertainty can still be beneficial for global investors as global stock markets exhibit a rather heterogeneous pattern in their recovery rates against oil market shocks. Full article

(This article belongs to the Special Issue Commodity Market Finance)

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28 pages, 513 KiB

Open AccessArticle

COVID-19 Mortality and Economic Losses: The Role of Policies and Structural Conditions

by Weichen Wang, Andrea Gurgone, Humberto Martínez, Maria Cristina Barbieri Góes, Ettore Gallo, Ádam Kerényi, Enrico Maria Turco, Carla Coburger and Pêdra D. S. Andrade

J. Risk Financial Manag. 2022, 15(8), 354; https://doi.org/10.3390/jrfm15080354 - 08 Aug 2022

Cited by 5 | Viewed by 2451

Abstract

The response of governments to the COVID-19 outbreak was foremost oriented to two objectives: saving lives and limiting economic losses. However, the effectiveness and success factors of interventions were unknown ex-ante. This study aims to shed light on the drivers of countries’ performances [...] Read more.

The response of governments to the COVID-19 outbreak was foremost oriented to two objectives: saving lives and limiting economic losses. However, the effectiveness and success factors of interventions were unknown ex-ante. This study aims to shed light on the drivers of countries’ performances during the first year of the COVID-19 pandemic. We measure performances by excess mortality and GDP growth adjusted for additional fiscal stimulus. We conduct an empirical analysis in two stages: first, using hierarchical clustering, we partition countries based on their similarity in health and economic outcomes. Second, we identify the key drivers of outcomes in each country cluster by regression analysis, which include linear, least absolute shrinkage and selection operator (LASSO), and logit models. We argue that differences in countries’ performances can be traced back both to policy responses to COVID-19 and structural conditions, the latter being immutable over the pandemic. Three relevant structural conditions emerge from the results: trade reliance on services, corruption, and the size of the vulnerable population (elderly, low-income, smoking, or cardiovascular-failing). Policies such as large-scale open public testing and additional fiscal stimulus in non-health could help reduce excess mortality, which might lead to lower economic losses. Full article

(This article belongs to the Special Issue Systemic Recovery: Lessons from COVID-19, Modeling, Analysis, and Policy Implications)

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25 pages, 1358 KiB

Open AccessArticle

Algorithm Aversion as an Obstacle in the Establishment of Robo Advisors

by Ibrahim Filiz, Jan René Judek, Marco Lorenz and Markus Spiwoks

J. Risk Financial Manag. 2022, 15(8), 353; https://doi.org/10.3390/jrfm15080353 - 08 Aug 2022

Cited by 4 | Viewed by 2387

Abstract

Within the framework of a laboratory experiment, we examine to what extent algorithm aversion acts as an obstacle in the establishment of robo advisors. The subjects had to complete diversification tasks. They could either do this themselves or they could delegate them to [...] Read more.

Within the framework of a laboratory experiment, we examine to what extent algorithm aversion acts as an obstacle in the establishment of robo advisors. The subjects had to complete diversification tasks. They could either do this themselves or they could delegate them to a robo advisor. The robo advisor evaluated all the relevant data and always made the decision which led to the highest expected value for the subjects’ payment. Although the high level of efficiency in the robo advisor was clear to see, the subjects only entrusted their decisions to the robo advisor in around 40% of cases. In this way, they reduced their success and their payment. Many subjects orientated themselves towards the 1/n-heuristic, which also contributed to their suboptimal decisions. As long as the subjects had to make decisions for others, they noticeably made a greater effort and were also more successful than when they made decisions for themselves. However, this did not have an effect on their acceptance of robo advisors. Even when they made decisions on behalf of others, the robo advisor was only consulted in around 40% of cases. This tendency towards algorithm aversion among subjects is an obstacle to the broader establishment of robo advisors. Full article

(This article belongs to the Special Issue Advanced Portfolio Optimization and Management)

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20 pages, 2892 KiB

Open AccessArticle

The Impacts of the Russia–Ukraine Invasion on Global Markets and Commodities: A Dynamic Connectedness among G7 and BRIC Markets

by Md. Kausar Alam, Mosab I. Tabash, Mabruk Billah, Sanjeev Kumar and Suhaib Anagreh

J. Risk Financial Manag. 2022, 15(8), 352; https://doi.org/10.3390/jrfm15080352 - 08 Aug 2022

Cited by 58 | Viewed by 14182

Abstract

The conflict between Russia and Ukraine has been causing knock-on effects worldwide. The supply and price of major commodity markets (oil, gas, platinum, gold, and silver) have been greatly impacted. Due to the ongoing conflict, financial markets across the world have experienced a [...] Read more.

The conflict between Russia and Ukraine has been causing knock-on effects worldwide. The supply and price of major commodity markets (oil, gas, platinum, gold, and silver) have been greatly impacted. Due to the ongoing conflict, financial markets across the world have experienced a strong dynamic regarding commodities prices. This effect can be considered the biggest change since the occurrence of the financial crisis in the year 2008, which explicitly influenced the oil and gold markets. This study attempts to investigate the impacts of the Russian invasion crisis on the dynamic connectedness among five commodities and the G7 and BRIC (leading stock) markets. We have applied the time-varying parameter vector autoregressive (TVP-VAR) method, which reflects the way spillovers are shaped by various crises periods, and we found extreme connectedness among all commodities and markets (G7 and BRIC). The findings show that gold and silver (commodities) and the United States, Canada, China, and Brazil (stock markets) are the receivers from the rest of the commodities/market’s transmitters of shocks during this invasion crisis. This research has policy implications that could be beneficial to commodity and stock investors, and these implications could guide them to make many decisions about investment in such tumultuous situations. Policymakers, institutional investors, bankers, and international organizations are the possible beneficiaries of these policy decisions. Full article

(This article belongs to the Special Issue Commodity Market Finance)

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14 pages, 1264 KiB

Open AccessArticle

How Have District-Based House Price Earnings Ratios Evolved in England and Wales?

by David Paul Gray

J. Risk Financial Manag. 2022, 15(8), 351; https://doi.org/10.3390/jrfm15080351 - 07 Aug 2022

Cited by 2 | Viewed by 1294

Abstract

The central aim of this paper is to provide a baseline framework for describing the evolution of an affordability indicator at a district level, before and after the financial crisis of 2008. From the mid-1990s to 2019 house price-earnings ratio for England and [...] Read more.

The central aim of this paper is to provide a baseline framework for describing the evolution of an affordability indicator at a district level, before and after the financial crisis of 2008. From the mid-1990s to 2019 house price-earnings ratio for England and Wales appear to have ratcheted-up, with the growth rate more rapid just before and a temporary decline just after the crisis. This masks a significant variation in evolutionary profiles. Following Turok and Mykhnenko in 2007 who set about exploring population trends in European cities, districts are classified into groups. Matching each district against ten stylised profiles, rather than cycles, persistent trends and single turning point paths in ratios are the norm. An asset-price model projects that finance will favour those bright futures so that spatial-sorting of those with high human capital leads to some districts benefitting from lending criteria out of line with others. Full article

(This article belongs to the Special Issue Shocks, Public Policies and Housing Markets)

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16 pages, 1373 KiB

Open AccessArticle

Can Ensemble Machine Learning Methods Predict Stock Returns for Indian Banks Using Technical Indicators?

by Sabyasachi Mohapatra, Rohan Mukherjee, Arindam Roy, Anirban Sengupta and Amit Puniyani

J. Risk Financial Manag. 2022, 15(8), 350; https://doi.org/10.3390/jrfm15080350 - 07 Aug 2022

Cited by 6 | Viewed by 2437

Abstract

This paper develops ensemble machine learning models (XGBoost, Gradient Boosting, and AdaBoost in addition to Random Forest) for predicting stock returns of Indian banks using technical indicators. These indicators are based on three broad categories of technical analysis: Price, Volume, and Turnover. Various [...] Read more.

This paper develops ensemble machine learning models (XGBoost, Gradient Boosting, and AdaBoost in addition to Random Forest) for predicting stock returns of Indian banks using technical indicators. These indicators are based on three broad categories of technical analysis: Price, Volume, and Turnover. Various error metrics like Mean Absolute Error (MAE), Mean Squared Error (MSE), Mean Absolute Percentage Error (MAPE), Root-Mean-Squared-Error (RMSE) have been used to check the performance of the models. Results show that the XGBoost algorithm performs best among the four ensemble models. The mean of absolute error and the root-mean-square -error vary around 3–5%. The feature importance plots generated by the models depict the importance of the variables in predicting the output. The proposed machine learning models help traders, investors, as well as portfolio managers, better predict the stock market trends and, in turn, the returns, particularly in banking stocks minimizing their sole dependency on macroeconomic factors. The techniques further assist the market participants in pre-empting any price-volume action across stocks irrespective of their size, liquidity, or past turnover. Finally, the techniques are incredibly robust and display a strong capability in predicting trend forecasts, particularly with any large deviations. Full article

(This article belongs to the Special Issue Predictive Modeling for Economic and Financial Data)

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18 pages, 762 KiB

Open AccessArticle

The Impact of Digitalization in Supporting the Performance of Circular Economy: A Case Study of Greece

by Stavros Kalogiannidis, Dimitrios Kalfas, Fotios Chatzitheodoridis and Stamatis Kontsas

J. Risk Financial Manag. 2022, 15(8), 349; https://doi.org/10.3390/jrfm15080349 - 07 Aug 2022

Cited by 22 | Viewed by 4544

Abstract

Digitalization has the potential to hasten the economic transition towards a more resource-efficient as well as robust circular production system. However, there is a paucity of empirical research on the influence that digitalization has on the ability of a circular economy to function [...] Read more.

Digitalization has the potential to hasten the economic transition towards a more resource-efficient as well as robust circular production system. However, there is a paucity of empirical research on the influence that digitalization has on the ability of a circular economy to function effectively. The objective of this study was to investigate the effect that digitalization has on the performance of the circular economy. The research was based on an empirical analysis of quantitative data obtained from a sample size of 200 investors and entrepreneurs in the financial sector of Kozani, Greece. Regression results showed that there is a positive relationship between digital practices and performance of a circular economy, and that digital business innovations have a positive effect on performance of a circular economy. Even while a sizeable proportion of Greek companies apply new business innovations to support the strategy of resource efficiency, it is abundantly obvious that this percentage is far higher among industrial organizations that place a heavy focus on digitalization. According to the findings of the research, there is a favorable correlation between the adoption of digital business practices and innovations and the success of circular economies. This demonstrates very clearly that digitalization has the potential to function as a driving force behind the development of circular business models. Full article

(This article belongs to the Special Issue Sustainable Development and CSR – Perfect Match?)

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16 pages, 693 KiB

Open AccessArticle

A Synergy Value Analysis of Sustainable Management Projects: Illustrated by the Example of the Aesthetic Medicine Industry

by Tyrone T. Lin, Hui-Tzu Yen and Shu-Yen Hsu

J. Risk Financial Manag. 2022, 15(8), 348; https://doi.org/10.3390/jrfm15080348 - 05 Aug 2022

Cited by 1 | Viewed by 1835

Abstract

This study aims to construct a mathematical model to determine the dimensions of an economic, social, and environmental project with the goal of sustainable management. By identifying the optimal weights, the synergy values for sustainable management can be maximized. Taking aesthetic medicine companies [...] Read more.

This study aims to construct a mathematical model to determine the dimensions of an economic, social, and environmental project with the goal of sustainable management. By identifying the optimal weights, the synergy values for sustainable management can be maximized. Taking aesthetic medicine companies as examples, this study attempts to construct the index projects of the economic, social, and environmental dimensions of sustainable management in an uncertain environment. Linear relationships (a combination of fixed synergistic values and varying synergistic values) are used to calculate the import optimal weight under optimistic, normal, and pessimistic circumstances. This study helped companies to introduce triple bottom line (TBL) indices to plan their issues under sustainable management and development, thus, enabling the parent company to achieve the optimal weight for the project costs to put in its subsidiaries. Additionally, this study prioritizes the weight of the influence on the management of the aesthetic medicine industry according to the risk probabilities, to minimize the uncertainties of risk management in corporate management and reduce the possibility of direct and indirect cost losses caused by financial distress, functional fluctuations, and negative impact on the medical equipment market, thereby maximizing the estimated total project value under sustainable management. This study constructs an aesthetic medicine-specific mathematical model concept using the triple bottom line model as the basis for sustainable corporate management and proposes an approach to obtain sustainable weight in uncertain conditions. By doing so, companies can add various managerial methods for the same industry, and new ideas are provided to the academic community to discuss the development of decision-making assessment criteria for risk assessments in sustainable management. Full article

(This article belongs to the Special Issue International Business Management and Sustainability)

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20 pages, 345 KiB

Open AccessArticle

Reforms of Corporate Governance Codes in Bangladesh: Developments and Future Directions

by Md Tariqul Islam, Mahfuzur Rahman and Shrabani Saha

J. Risk Financial Manag. 2022, 15(8), 347; https://doi.org/10.3390/jrfm15080347 - 05 Aug 2022

Cited by 2 | Viewed by 3586

Abstract

This research investigates corporate governance (CG) norms in Bangladesh, a developing nation. This study assesses the codes’ key aspects and how they have evolved since the first code was released in 2006. This analysis shows that BSEC changed its recommendations from voluntary to [...] Read more.

This research investigates corporate governance (CG) norms in Bangladesh, a developing nation. This study assesses the codes’ key aspects and how they have evolved since the first code was released in 2006. This analysis shows that BSEC changed its recommendations from voluntary to mandatory in the subsequent revisions in 2012 and 2018. The modified versions increased board independence compared to the original code, although it is still lower than in some other emerging nations. Recent changes to the rules include conditions on the nomination and remuneration committees, along with some other amendments. However, critical governance components, such as choosing an independent board member as chair, improving board independence, and assuring gender diversity, could be implemented in future code development. It is believed that investors would be more interested in Bangladesh’s capital market if the policymakers could make the proposed modifications in accordance with the distinctive institutional features of an emerging economy. Full article

(This article belongs to the Special Issue A New Era of Strategic Investment Decision-Making and Governance Mechanisms)

28 pages, 1795 KiB

Open AccessArticle

Assessing the Risk Characteristics of the Cryptocurrency Market: A GARCH-EVT-Copula Approach

by Pascal Bruhn and Dietmar Ernst

J. Risk Financial Manag. 2022, 15(8), 346; https://doi.org/10.3390/jrfm15080346 - 05 Aug 2022

Cited by 6 | Viewed by 3238

Abstract

The cryptocurrency market offers significant investment opportunities but also entails higher risks as compared to other asset classes. This article aims to analyse the financial risk characteristics of individual cryptocurrencies and of a broad cryptocurrency market portfolio. We construct a portfolio comprising the [...] Read more.

The cryptocurrency market offers significant investment opportunities but also entails higher risks as compared to other asset classes. This article aims to analyse the financial risk characteristics of individual cryptocurrencies and of a broad cryptocurrency market portfolio. We construct a portfolio comprising the 20 largest cryptocurrencies, which cover 82.1% of the total cryptocurrency market. The returns are examined for extreme tail risks by the application of Extreme Value Theory. We utilise the GARCH-EVT approach in combination with a novel algorithm to automatically determine the optimal threshold to model the tail distribution. Furthermore, we aggregate the individual market risks with a t-Student Copula to investigate possible diversification effects on a portfolio level. The empirical analysis indicates that all examined cryptocurrencies show high volatility in their price movements, whereby Bitcoin acts as the most stable cryptocurrency. All return distributions are heavy-tailed and subject to extreme tail risks. We find strong, positive intra-market correlations, in particular with the two largest cryptocurrencies Bitcoin and Ethereum. No diversification effect can be achieved by aggregating market risks. On the contrary, a negligibly lower expected return and higher joint extreme returns can be observed. From this analysis, it can be concluded that investments in individual cryptocurrencies as well as in a portfolio show extreme risks of losses. From the investor’s point of view, a possible strategy of risk reduction through portfolio formation within cryptocurrencies is only promising to a limited extent and does not offer a satisfactory solution to significantly reduce the risk within this asset class. Full article

(This article belongs to the Special Issue Recent Developments in Cryptocurrency Markets)

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14 pages, 313 KiB

Open AccessArticle

The Influence of Information Transparency and Disclosure on the Value of Listed Companies: Evidence from Vietnam

by Loc Dong Truong, Thai Xuan Le and H. Swint Friday

J. Risk Financial Manag. 2022, 15(8), 345; https://doi.org/10.3390/jrfm15080345 - 04 Aug 2022

Cited by 8 | Viewed by 2563

Abstract

This analysis examines the influence of information transparency and disclosure on the value of companies listed on the Vietnamese stock market. Data employed in this study were primarily gathered from the audited financial statements, management reports and other related documents of 430 publicly [...] Read more.

This analysis examines the influence of information transparency and disclosure on the value of companies listed on the Vietnamese stock market. Data employed in this study were primarily gathered from the audited financial statements, management reports and other related documents of 430 publicly traded firms listed on the Ho Chi Minh Stock Exchange (HOSE) and Ha Noi Stock Exchange (HNX) for the time period from 2014 through 2016. Using the GMM (Generalized Method of Moments) approach, the empirical findings indicate that the level of transparency and disclosure of the companies has a significant positive effect on firm value as measured by Tobin’s Q. Full article

(This article belongs to the Section Economics and Finance)

42 pages, 656 KiB

Open AccessArticle

R&D, Industrial Policy and Growth

by Alicia H. Dang and Roberto Samaniego

J. Risk Financial Manag. 2022, 15(8), 344; https://doi.org/10.3390/jrfm15080344 - 04 Aug 2022

Cited by 1 | Viewed by 1736

Abstract

An issue with estimating the impact of industrial support is that the firms that receive support may be politically connected, introducing omitted variable bias. Applying fixed-effects regressions on Vietnamese panel data containing several proxies for political connectedness to correct this bias, we find [...] Read more.

An issue with estimating the impact of industrial support is that the firms that receive support may be politically connected, introducing omitted variable bias. Applying fixed-effects regressions on Vietnamese panel data containing several proxies for political connectedness to correct this bias, we find that firms that receive industrial support in the form of tax holidays experience more rapid productivity growth, particularly in R&D-intensive industries, and less so among politically connected firms. These findings do not appear to be due to the presence of financing constraints. We then develop a second-generation Schumpeterian growth model with many industries, and show that tax holidays disproportionately raise productivity growth in R&D-intensive industries. These results are significant and important for governments, especially those in transition and developing countries, in better targeting their industrial policy to facilitate higher productivity growth. Full article

(This article belongs to the Special Issue Macroeconomics, Market Power, and Industrial Policy)

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13 pages, 326 KiB

Open AccessArticle

Systematic and Idiosyncratic Risks of the U.S. Airline Industry

by Rafiqul Bhuyan, André Varella Mollick and Md Ruhul Amin

J. Risk Financial Manag. 2022, 15(8), 343; https://doi.org/10.3390/jrfm15080343 - 03 Aug 2022

Cited by 1 | Viewed by 1556

Abstract

Understanding the risky nature of the airline industry has received attention in the tourism literature from separate angles. Although the systematic risk of the airline industry has been examined before, idiosyncratic risk has largely been ignored. This study fills this gap in the [...] Read more.

Understanding the risky nature of the airline industry has received attention in the tourism literature from separate angles. Although the systematic risk of the airline industry has been examined before, idiosyncratic risk has largely been ignored. This study fills this gap in the tourism literature by investigating the effect of passengers’ air travel on systematic and idiosyncratic risks of the U.S. airline industry. Using historical air travel data and utilizing both OLS and fixed-effect models, this paper documents negative relationships between the occupancy of airline seats and idiosyncratic risks for 21 U.S. airline companies. This negative effect of occupancy is more pronounced if air travel distances are shorter, companies have lower leverage ratios, and companies are smaller in size. Policy implications for both airline managers and investors are provided. Full article

(This article belongs to the Special Issue The Systematic Nature of COVID: A Journey towards a New Economic and Financial Paradigm)

24 pages, 3160 KiB

Open AccessArticle

HF-SCA: Hands-Free Strong Customer Authentication Based on a Memory-Guided Attention Mechanisms

by Cosimo Distante, Laura Fineo, Luca Mainetti, Luigi Manco, Benito Taccardi and Roberto Vergallo

J. Risk Financial Manag. 2022, 15(8), 342; https://doi.org/10.3390/jrfm15080342 - 03 Aug 2022

Cited by 4 | Viewed by 1795

Abstract

Strong customer authentication (SCA) is a requirement of the European Union Revised Directive on Payment Services (PSD2) which ensures that electronic payments are performed with multifactor authentication. While increasing the security of electronic payments, the SCA impacted seriously on the shopping carts abandonment: [...] Read more.

Strong customer authentication (SCA) is a requirement of the European Union Revised Directive on Payment Services (PSD2) which ensures that electronic payments are performed with multifactor authentication. While increasing the security of electronic payments, the SCA impacted seriously on the shopping carts abandonment: an Italian bank computed that 22% of online purchases in the first semester of 2021 did not complete because of problems with the SCA. Luckily, the PSD2 allows the use of transaction risk analysis tool to exempt the SCA process. In this paper, we propose an unsupervised novel combination of existing machine learning techniques able to determine if a purchase is typical or not for a specific customer, so that in the case of a typical purchase the SCA could be exempted. We modified a well-known architecture (U-net) by replacing convolutional blocks with squeeze-and-excitation blocks. After that, a memory network was added in a latent space and an attention mechanism was introduced in the decoding side of the network. The proposed solution was able to detect nontypical purchases by creating temporal correlations between transactions. The network achieved 97.7% of AUC score over a well-known dataset retrieved online. By using this approach, we found that 98% of purchases could be executed by securely exempting the SCA, while shortening the customer’s journey and providing an elevated user experience. As an additional validation, we developed an Alexa skill for Amazon smart glasses which allows a user to shop and pay online by merely using vocal interaction, leaving the hands free to perform other activities, for example driving a car. Full article

(This article belongs to the Special Issue Smart Cities Research in Enabling Technologies and Tools)

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J. Risk Financial Manag., Volume 15, Issue 8 (August 2022) – 53 articles

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