Journal of Risk and Financial Management

19 pages, 1911 KiB

Open AccessArticle

The Relationship of Fiscal Policy and Economic Cycle: Is Vietnam Different?

by Dung Xuan Nguyen and Trung Duc Nguyen

J. Risk Financial Manag. 2023, 16(5), 281; https://doi.org/10.3390/jrfm16050281 - 22 May 2023

Cited by 1 | Viewed by 2877

Fiscal policy is one of the most crucial areas of government economic policy, and it has the potential to influence the economic growth of any nation. According to traditional Keynesian and Ricardian theories, fiscal policy should not be pro-cyclical, and counter-cyclical fiscal policy [...] Read more.

Fiscal policy is one of the most crucial areas of government economic policy, and it has the potential to influence the economic growth of any nation. According to traditional Keynesian and Ricardian theories, fiscal policy should not be pro-cyclical, and counter-cyclical fiscal policy is the most effective alternative. Furthermore, the periodicity of fiscal policy is also heavily influenced by the quality of political institutions and democracies. Thus, this paper examines the relationship between fiscal policy and economic cycle in Vietnam, a developing economy with dramatic change since 2000. The results support the causal relationship between the set of fiscal policy factors, such as public debt, government tax revenues, and government expenditures, by analyzing quarterly data over a twenty-year period beginning in 2000 by using the Vector Error-Correction Model (VECM). Therefore, the adaptation of fiscal policy to the phases of the economic cycle and the effective deployment of fiscal policy tools help the sustainability of public finances and stimulate economic growth. Full article

(This article belongs to the Special Issue Public Economics and Finance Pre-during-Post COVID-19 Pandemic)

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18 pages, 1566 KiB

Open AccessArticle

Precious Metals Comovements in Turbulent Times: COVID-19 and the Ukrainian Conflict

by Antonis A. Michis

J. Risk Financial Manag. 2023, 16(5), 280; https://doi.org/10.3390/jrfm16050280 - 20 May 2023

Viewed by 1167

Abstract

We examined the evolution of cross-market linkages between four major precious metals and US stock returns, before (Phase I) and after (Phase II) the COVID-19 outbreak. Phase II was also extended to encompass the Ukrainian conflict, which prolonged the period of uncertainty in [...] Read more.

We examined the evolution of cross-market linkages between four major precious metals and US stock returns, before (Phase I) and after (Phase II) the COVID-19 outbreak. Phase II was also extended to encompass the Ukrainian conflict, which prolonged the period of uncertainty in financial markets. Due to the increase in volatility observed in Phase II, we used a heteroskedasticity-adjusted correlation coefficient to examine the evolution of correlation changes since the COVID-19 outbreak. We also propose a relevant dissimilarity measure in multidimensional scaling analysis that can be used for depicting associations between financial returns in turbulent times. Our results suggest that (i) the correlation levels of gold, silver, platinum, and palladium returns with US stock returns have not changed substantially since the COVID-19 outbreak, and (ii) all precious metal returns exhibit movements that are less synchronized with US stock returns, with palladium and gold being the least synchronized. Full article

(This article belongs to the Special Issue Comovement of International Financial Markets II)

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26 pages, 1637 KiB

Open AccessFeature PaperArticle

Determinants Influencing the Application of Lean Accounting: The Case of Vietnamese Garment Firms

by Thi Minh Phuong Nguyen and Thi Hai Chau Ngo

J. Risk Financial Manag. 2023, 16(5), 279; https://doi.org/10.3390/jrfm16050279 - 19 May 2023

Viewed by 1684

Abstract

The shift towards lean production is gradually replacing traditional mass production, and lean accounting is also being mentioned to evaluate operational efficiency based on the lean philosophy, eliminating waste, and simplifying direct cost aggregation along the value stream to improve productivity, distribution, quality, [...] Read more.

The shift towards lean production is gradually replacing traditional mass production, and lean accounting is also being mentioned to evaluate operational efficiency based on the lean philosophy, eliminating waste, and simplifying direct cost aggregation along the value stream to improve productivity, distribution, quality, and service. This study aims to evaluate the impact of various factors on the adoption of lean accounting in Vietnamese garment firms based on data collected from 242 survey questionnaires completed by managers and accountants of Vietnamese garment firms. Through Cronbach’s Alpha test, EFA test, and multiple regression analysis to verify and forecast information, eight determinants affecting the adoption of lean accounting in Vietnamese garment firms are arranged in descending order of influence, including leadership, size, cost of implementation, resources, accounting department, education and training, culture, and competitive pressure. Based on the findings, recommendations are proposed to management businesses and agencies to address shortcomings in the process of applying lean accounting, contributing to making it one of the most effective tools in promoting product development and continuous improvement, enhancing quality and production efficiency. Full article

(This article belongs to the Section Business and Entrepreneurship)

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15 pages, 487 KiB

Open AccessArticle

Exponential Stability of Fractional Large-Scale Neutral Stochastic Delay Systems with Fractional Brownian Motion

by T. Sathiyaraj, T. Ambika and Ong Seng Huat

J. Risk Financial Manag. 2023, 16(5), 278; https://doi.org/10.3390/jrfm16050278 - 19 May 2023

Viewed by 876

Abstract

Mathematics plays an important role in many fields of finance. In particular, it presents theories and tools widely used in all areas of finance. Moreover, fractional Brownian motion (fBm) and related stochastic systems have been used to model stock prices and other phenomena [...] Read more.

Mathematics plays an important role in many fields of finance. In particular, it presents theories and tools widely used in all areas of finance. Moreover, fractional Brownian motion (fBm) and related stochastic systems have been used to model stock prices and other phenomena in finance due to the long memory property of such systems. This manuscript provides the exponential stability of fractional-order Large-Scale neutral stochastic delay systems with fBm. Based on fractional calculus (FC),

R^{n}

stochastic space and Banach fixed point theory, sufficiently useful conditions are derived for the existence of solution and exponential stability results. In this study, we tackle the nonlinear terms of the considered systems by applying local assumptions. Finally, to verify the theoretical results, a numerical simulation is provided. Full article

(This article belongs to the Special Issue Financial Data Analytics and Statistical Learning)

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16 pages, 381 KiB

Open AccessArticle

Consumption of Healthcare Services in the United States: The Impact of Health Insurance

by Raluca Elena Narita

J. Risk Financial Manag. 2023, 16(5), 277; https://doi.org/10.3390/jrfm16050277 - 17 May 2023

Cited by 1 | Viewed by 3573

Abstract

Over the past few decades, healthcare expenditures in the United States have increased due to a variety of different factors. Depending on their insurance plans, Americans have varying levels of health insurance coverage and may need to make co-payments or pay fully for [...] Read more.

Over the past few decades, healthcare expenditures in the United States have increased due to a variety of different factors. Depending on their insurance plans, Americans have varying levels of health insurance coverage and may need to make co-payments or pay fully for specific health services. According to multiple studies, health insurance does appear to increase the utilization of healthcare services, except emergency services. Demographic factors such as age, citizenship, and race/ethnicity, as well as the type of health service demanded, all appear to influence the consumption of healthcare in the United States. However, many existing studies conducted in this area are not experimental or randomized, which may result in a lack of validity of the estimated relationship between insurance and healthcare utilization due to confounding variables. A new experimental study, similar to the RAND HIE study, is needed to provide insight into the current relationships between insurance and healthcare utilization, taking into consideration changes in legislation. Full article

(This article belongs to the Special Issue Global Entrepreneurship and Strategic Management)

26 pages, 795 KiB

Open AccessArticle

A Stochastic Markov Chain for Estimating New Entrants into Professional Pension Funds

by Alessandro Fiori Maccioni

J. Risk Financial Manag. 2023, 16(5), 276; https://doi.org/10.3390/jrfm16050276 - 17 May 2023

Viewed by 873

Abstract

This paper presents a stochastic Markov chain model for estimating new entrants into professional orders and their related pension funds. The model considers the interactions between demographic, socio-economic and regulatory variables. The intuition behind it is that, in the medium term, trends in [...] Read more.

This paper presents a stochastic Markov chain model for estimating new entrants into professional orders and their related pension funds. The model considers the interactions between demographic, socio-economic and regulatory variables. The intuition behind it is that, in the medium term, trends in academic education can anticipate changes in the job market and preferences for highly skilled professions. Similarly, in the long term, fertility trends can anticipate the number of future young adults, thus influencing the overall occupational structure of employment. The model has been formalized mathematically and successfully validated by backtesting over historical data. The model’s predictions have been compared with the observed data of new entrants into the Italian order of chartered accountants (CNDCEC) between 2012 and 2021. The related professional pension fund (CNPADC) has also been analyzed under the additional assumption of stochastic returns with an evaluation of the impact of future new chartered accountants on its demographic and financial evolution between 2020 and 2070. Full article

(This article belongs to the Special Issue The Future of Banking Risk and Regulation)

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18 pages, 2649 KiB

Open AccessArticle

Surviving Black Swans III: Timing US Sector Funds

by Pankaj Topiwala

J. Risk Financial Manag. 2023, 16(5), 275; https://doi.org/10.3390/jrfm16050275 - 17 May 2023

Cited by 1 | Viewed by 1049

Abstract

The typical small investor makes on average about 5% a year in investment gains, just half of what the market does. Moreover, most investment funds also underperform compared to the broader market. In two previous papers, we explored how a specific and simple [...] Read more.

The typical small investor makes on average about 5% a year in investment gains, just half of what the market does. Moreover, most investment funds also underperform compared to the broader market. In two previous papers, we explored how a specific and simple approach to algorithmic trading can help both types of investors achieve strong results. For concreteness, we focused attention on investing in a single variable, in our case, a major US-based index such as SPX and IXIC, individually. For illustrative purposes, we also considered some highly traded tech stock examples. In this paper, we extend our work to study the US sector funds, and for the first time in our series, we also consider trading multiple variables at a time to see how that may differ from our single-variable investment strategy. To simplify matters, we consider an initial equal weighted portfolio of several sector funds, selected randomly without any analysis, and assume that each is traded independently. To simplify further, we do no rebalancing in our study, though that is an essential part of money management according to modern portfolio theory. We nevertheless obtain interesting and informative results. We can typically improve on the performance of most sector funds compared to buy-and-hold (hereafter referred to as BnH). Moreover, as an example of portfolio growth, a portfolio of five equal weighted sector funds in BnH achieves 6.5× growth over 20 years (ending in March 2023), whereas our approach achieves 12.4× growth—nearly 2× better, at roughly half the maximum drawdown. That is a strong win for both professional and home investors. Full article

(This article belongs to the Special Issue Low Frequency Algorithmic Trading)

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19 pages, 1397 KiB

Open AccessArticle

An Assessment of the Benefits of Optimizing Working Capital and Profitability: Perspectives from DJIA30 and NASDAQ100

by Tarek Eldomiaty, Nourhan Eid, Farida Taman and Mohamed Rashwan

J. Risk Financial Manag. 2023, 16(5), 274; https://doi.org/10.3390/jrfm16050274 - 16 May 2023

Cited by 3 | Viewed by 2552

Abstract

The objective of this paper goes beyond the boundaries of an exploratory analysis to operationalize the association between corporate working capital and return on assets. This paper optimizes the impact of the Cash Conversion Cycle (CCC) on Return on Assets (ROA). The paper [...] Read more.

The objective of this paper goes beyond the boundaries of an exploratory analysis to operationalize the association between corporate working capital and return on assets. This paper optimizes the impact of the Cash Conversion Cycle (CCC) on Return on Assets (ROA). The paper develops a mathematical formulation that connects the components of CCC to ROA. The sample includes the non-financial firms listed in DJIA30 and NASDAQ100. The data covers the quarterly periods from June 1992 to March 2018. The paper uses standard statistical tests including linearity (RESET), the Hausman test for fixed and random effects, and the Breusch–Pagan/Cook–Weisberg test for heteroskedasticity. The estimation is carried out using the GLS estimator. This study finds: (a) the optimal, rather than observed, components of CCC are robust and coherent, (b) if firms were to optimize the components of CCC, the ROA improves significantly, (c) the positive estimates of size show that the components of CCC help firms grow, (d) the effects of either observed or optimal CCC on ROA are reached in the short term (four quarters), (e) the results show that observed as well as optimal CCC are able to detect the structural break in the 2008 financial crisis, and (f) the results of a logit analysis show that the optimization algorithm results in significant increases in ROA that are associated with increases in degree of financial leverage and decreases in short-term debt ratio. This paper contributes to the related literature in two ways. First, the paper develops a mathematical structure that associates corporate CCC and ROA in a way that offers a guide to corporate financial managers regarding structural management of corporate CCC. Second, the paper examines the impacts of optimized CCC on ROA. Full article

(This article belongs to the Special Issue Advances in Financial Decisions Modeling and Analytics)

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23 pages, 3820 KiB

Open AccessArticle

Safe-Haven Currencies as Defensive Assets in Global Stocks Portfolios: A Reassessment of the Empirical Evidence (1999–2022)

by Marco Tronzano

J. Risk Financial Manag. 2023, 16(5), 273; https://doi.org/10.3390/jrfm16050273 - 15 May 2023

Viewed by 1284

Abstract

This paper reassessed the hedging properties of four major safe-haven currencies (US dollar, Swiss franc, euro, yen) in international stock portfolios covering most representative world macroeconomic areas. The main contribution to the existing literature is the emphasis on optimal hedging and asset-allocation strategies. [...] Read more.

This paper reassessed the hedging properties of four major safe-haven currencies (US dollar, Swiss franc, euro, yen) in international stock portfolios covering most representative world macroeconomic areas. The main contribution to the existing literature is the emphasis on optimal hedging and asset-allocation strategies. A further distinguishing feature is an accurate comparison, inside a multivariate framework, between value-at-risk simulations assuming equal or optimal asset weights in hedged global stock portfolios. The US dollar stands out as the best safe-haven currency, while adding the US currency to single-hedged global stock portfolios including either the Swiss franc or the euro yields smooth risk profiles during major financial crises, and average risk indicators lower than that of a benchmark fully hedged portfolio. Full article

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

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15 pages, 2459 KiB

Open AccessArticle

Hurst Exponent Analysis: Evidence from Volatility Indices and the Volatility of Volatility Indices

by Georgia Zournatzidou and Christos Floros

J. Risk Financial Manag. 2023, 16(5), 272; https://doi.org/10.3390/jrfm16050272 - 15 May 2023

Cited by 1 | Viewed by 1625

Abstract

In this study, we analyze the volatility of volatility indices and estimate the Hurst parameter using data from five international markets. For our analysis, we consider daily data from VIX (CBOE), VXN (CBOE Nasdaq 100), VXD (DJIA), VHSI (HSI), and KSVKOSPI (KOSPI). The [...] Read more.

In this study, we analyze the volatility of volatility indices and estimate the Hurst parameter using data from five international markets. For our analysis, we consider daily data from VIX (CBOE), VXN (CBOE Nasdaq 100), VXD (DJIA), VHSI (HSI), and KSVKOSPI (KOSPI). The period of analysis is from January 2001 to December 2021 and incorporates various market phases, such as booms and crashes. The novelty here is the use of recent methodology, including different range-based estimators for volatility analysis. We apply the Hurst exponent to the volatility measures V_gk,t, V_p,t, V_rs,t, and V_s,t, and then estimate the volatility of volatility indices through the GARCH(1, 1) model. Based on the values of the Hurst exponent, we analyze the trace of the behavior of three trading strategies, i.e., the momentum-based strategy, the random walk, and the mean-reversion strategy. The results are highly recommended for financial analysts dealing with volatility indices as well as for financial researchers. Full article

(This article belongs to the Section Applied Economics and Finance)

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14 pages, 921 KiB

Open AccessArticle

Phishing Attacks on Cryptocurrency Investors in the Arab States of the Gulf

by Marwa Alyami, Reem Alhotaylah, Sawsan Alshehri and Abdullah Alghamdi

J. Risk Financial Manag. 2023, 16(5), 271; https://doi.org/10.3390/jrfm16050271 - 13 May 2023

Cited by 3 | Viewed by 1678

Abstract

With the rapid development of technology in all fields, including the financial field, people have flocked to invest in cryptocurrencies, sometimes without prior knowledge or experience. This has prompted hackers to prey on inexperienced investors through many types of fraud and attacks, especially [...] Read more.

With the rapid development of technology in all fields, including the financial field, people have flocked to invest in cryptocurrencies, sometimes without prior knowledge or experience. This has prompted hackers to prey on inexperienced investors through many types of fraud and attacks, especially phishing attacks. Cryptocurrency investment transactions take place without intermediaries such as banks and monetary institutions. Investing in cryptocurrencies is a form of peer-to-peer transaction and takes place without the involvement of physical wallets. This study addresses cases where people may become victims of phishing attacks due to the nature of cryptocurrency investments. The aim of this study was to understand the concepts of various phishing attacks on cryptocurrencies and to measure the awareness of cryptocurrency investors in the Arab Gulf countries regarding the security risks associated with cryptocurrency investments. This research was conducted by distributing a questionnaire among cryptocurrency investors and collecting and analyzing all the survey responses. The results reveal a lack of awareness about how to deal with the security risks associated with cryptocurrency investments. The research concludes that the majority of cryptocurrency investors are unaware of how to deal with phishing attacks. Finally, we address future research directions and recommend actions that can be taken to increase investors’ awareness of this issue. Full article

(This article belongs to the Special Issue FinTech, Blockchain and Cryptocurrencies)

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14 pages, 659 KiB

Open AccessArticle

The Efficiency of Weekly Option Prices around Earnings Announcements

by Jonathan A. Milian

J. Risk Financial Manag. 2023, 16(5), 270; https://doi.org/10.3390/jrfm16050270 - 12 May 2023

Viewed by 1325

Abstract

This study examines the efficiency of weekly option prices around firms’ earnings announcements. With most of the largest firms now having options that expire on a weekly basis, option traders can hedge or speculate on earnings news using options that expire very close [...] Read more.

This study examines the efficiency of weekly option prices around firms’ earnings announcements. With most of the largest firms now having options that expire on a weekly basis, option traders can hedge or speculate on earnings news using options that expire very close to a firm’s earnings announcement date. For earnings announcements near an options expiration date, one can estimate a firm’s expected stock price move in response to its earnings news (i.e., its option implied earnings announcement move) as the price of its at-the-money straddle as a proportion of its stock price. This study tests whether differences between historical earnings announcement moves and option implied earnings announcement moves predict straddle returns. Through the analysis of portfolio returns and Fama–MacBeth regressions, this study finds that straddle returns are significantly higher (lower) when the historical earnings announcement move is high (low) relative to the option implied earnings announcement move. In contrast to prior research, this study does not find an association between straddle returns and historical volatility, historical earnings announcement volatility, implied volatility, or the difference between historical volatility and implied volatility. Overall, this study suggests that weekly straddle prices around earnings announcements are not optimally efficient. Full article

(This article belongs to the Special Issue Financial Markets, Financial Volatility and Beyond (Volume II))

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18 pages, 2711 KiB

Open AccessArticle

Asymmetric Effects of Financial Development on CO₂ Emissions in Bangladesh

by Anupam Das, Leanora Brown and Adian McFarlane

J. Risk Financial Manag. 2023, 16(5), 269; https://doi.org/10.3390/jrfm16050269 - 12 May 2023

Cited by 2 | Viewed by 1222

Abstract

Depending on how it functions and is organized, the financial system can have a negative, positive, or zero impact on the environment. For Bangladesh, the empirical relationship between financial development and the environment, measured in terms of carbon dioxide (CO₂) emissions [...] Read more.

Depending on how it functions and is organized, the financial system can have a negative, positive, or zero impact on the environment. For Bangladesh, the empirical relationship between financial development and the environment, measured in terms of carbon dioxide (CO₂) emissions per capita, is analysed over the period 1980 to 2020. This is the first such analysis for this country. We perform this within a non-linear bound testing framework while controlling for changes in energy consumption, gross domestic product, and trade volume. There are two key findings. One, we find that the relationship between CO₂ emissions per capita and financial development is cointegrating, with the direction of cointegration running from financial development to CO₂ emissions. Two, we find that positive and negative changes in financial development have asymmetric impacts on CO₂ emissions in the long and short run. The implications of these findings are discussed regarding their attendant environmental policy implications. Full article

(This article belongs to the Special Issue International Trade, Finance, and Development)

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17 pages, 342 KiB

Open AccessArticle

The Impact of Ownership Type on Labour Cost Stickiness

by Mohammed Arkan Sahib Tileal, Farzaneh Nassirzadeh, Mohammad Javad Saei and Davood Askarany

J. Risk Financial Manag. 2023, 16(5), 268; https://doi.org/10.3390/jrfm16050268 - 11 May 2023

Cited by 1 | Viewed by 1741

Abstract

This study investigates the effect of ownership type (state and family ownership versus non-state and non-family ownership) on labour cost stickiness in companies listed on the Tehran Stock Exchange (TSE). The study examines the labour cost stickiness in state and family businesses versus [...] Read more.

This study investigates the effect of ownership type (state and family ownership versus non-state and non-family ownership) on labour cost stickiness in companies listed on the Tehran Stock Exchange (TSE). The study examines the labour cost stickiness in state and family businesses versus non-state and non-family companies within a different environment with unique labour market characteristics. The sample consists of 151 companies listed on the TSE, spanning from 2011 to 2020. After controlling for industry and year fixed effects, the results of multiple regression analysis revealed that labour cost stickiness is higher in state and family companies compared to non-state and non-family businesses. This research contributes to the existing literature by being the first to investigate the impact of the type of ownership on labour cost stickiness in a developing country. Full article

(This article belongs to the Special Issue Diversity, Performance Measurement and the Diffusion of Innovative Practices in Management Accounting II)

17 pages, 1666 KiB

Open AccessArticle

Japanese Economic Performance after the Pandemic: A Sectoral Analysis

by Willem Thorbecke

J. Risk Financial Manag. 2023, 16(5), 267; https://doi.org/10.3390/jrfm16050267 - 11 May 2023

Viewed by 4499

Abstract

The COVID-19 crisis battered the Japanese economy. The purpose of this paper is to investigate whether the pandemic has left scars. To this end, it employs out-of-sample forecasting models and detailed stock market data for 30 sectors and disaggregated current account data for [...] Read more.

The COVID-19 crisis battered the Japanese economy. The purpose of this paper is to investigate whether the pandemic has left scars. To this end, it employs out-of-sample forecasting models and detailed stock market data for 30 sectors and disaggregated current account data for the 3 years after the first case occurred. The findings indicate that stock prices in sectors such as tourism, education, and cosmetics remain far below forecasted values after three years. Office equipment and semiconductor stock prices initially fell more than predicted but have since recovered. Other sectors such as bicycle parts and home appliances gained at first but are now performing as expected. Sectors such as home delivery and electronic entertainment continue to outperform. The results also indicate that income flows from Japanese investments abroad are much larger than forecasted, keeping the Japanese current account in surplus even as imports of oil and commodities have created persistent trade deficits. Since the travails of hard-hit sectors such as tourism reflect their exposure to the COVID-19 pandemic rather than bad choices made by firms, policymakers should consider employing cost-effective ways to stimulate economic activity in these sectors. Full article

(This article belongs to the Special Issue The Impact of COVID-19 on Economy, Energy, and Environment)

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22 pages, 691 KiB

Open AccessArticle

Modeling Risk for CVaR-Based Decisions in Risk Aggregation

by Yuriy Zinchenko and Alexandru V. Asimit

J. Risk Financial Manag. 2023, 16(5), 266; https://doi.org/10.3390/jrfm16050266 - 09 May 2023

Cited by 1 | Viewed by 1402

Abstract

Measuring the risk aggregation is an important exercise for any risk bearing carrier. It is not restricted to evaluation of the known portfolio risk position only, and could include complying with regulatory requirements, diversification, etc. The main difficulty of risk aggregation is creating [...] Read more.

Measuring the risk aggregation is an important exercise for any risk bearing carrier. It is not restricted to evaluation of the known portfolio risk position only, and could include complying with regulatory requirements, diversification, etc. The main difficulty of risk aggregation is creating an underlying robust probabilistic model. It is an irrefutable fact that the uncertainty in the individual risks is much lower in its complexity, as compared to modeling the dependence amongst the risks. As a result, it is often reasonable to assume that individual risks are modeled in a robust fashion, while the exact dependence remains unknown, yet some of its traits may be made available due to empirical evidence or “good practice”. Our main contribution is to propose a numerical procedure that enables the identification of the worst possible dependence scenario, when the risk preferences are modeled by the conditional value-at-risk in the presence of dependence uncertainty. For portfolios with two risks, it is known that CVaR ordering coincides with the lower-orthant stochastic ordering of the underlying bivariate distributions. As a by-product of our analysis, we show that no such extensions are possible to higher dimensions. Full article

(This article belongs to the Special Issue Risk Management and Forecasting Methods in Finance)

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16 pages, 456 KiB

Open AccessArticle

The Impact of Socioeconomic and Environmental Indicators on Economic Development: An Interdisciplinary Empirical Study

by Antonio Pacifico

J. Risk Financial Manag. 2023, 16(5), 265; https://doi.org/10.3390/jrfm16050265 - 06 May 2023

Cited by 2 | Viewed by 1497

Abstract

This paper aims to investigate the effects of environmental sources and health statistics on economic growth and other development indicators of interest. With population growth, urbanization, and industrialization of economies, the built environment for human health has emerged as an important and growing [...] Read more.

This paper aims to investigate the effects of environmental sources and health statistics on economic growth and other development indicators of interest. With population growth, urbanization, and industrialization of economies, the built environment for human health has emerged as an important and growing driver in interdisciplinary research and evidence-based policy development, improving a country’s growth prospects and the standard of living. A compressed structural Panel Vector Autoregression is used to address these issues. Methodologically, a hierarchical semiparametric Bayesian approach is involved to reduce the dimensionality, overtake variable selection problems, and model stochastic volatility. Policy-relevant strategies are also addressed to investigate causal relationships between sustainability indicators and economic growth. Full article

(This article belongs to the Special Issue Interdisciplinary Empirical Research in Financial Econometrics)

18 pages, 1556 KiB

Open AccessArticle

The Effects of Climate Change to Weather-Related Environmental Hazards: Interlinkages of Economic Factors and Climate Risk

by George Halkos and Argyro Zisiadou

J. Risk Financial Manag. 2023, 16(5), 264; https://doi.org/10.3390/jrfm16050264 - 05 May 2023

Cited by 3 | Viewed by 1675

Abstract

Climate change has become an increasingly intense global phenomenon in recent years. A great number of researchers support the idea that climate change is strongly connected to some environmental hazards, and specifically, those correlated to extreme weather events. Following the Paris Agreement, and [...] Read more.

Climate change has become an increasingly intense global phenomenon in recent years. A great number of researchers support the idea that climate change is strongly connected to some environmental hazards, and specifically, those correlated to extreme weather events. Following the Paris Agreement, and due to the increased concern regarding climate change impacts, several indices have been established. The Climate Change Performance Index (CCPI) includes 59 countries and the EU, which cumulatively emit 92% of global greenhouse gases (GHGs), while the Global Climate Risk Index (CRI) analyzes to what extend countries have been affected by impacts of weather-related loss events. Both indices provide annual scores to each country and rank them based on those scores indicating the existing environmental situation. Our main purpose is to examine whether there is an interconnection between those two indices as well as testify whether economic growth is a great contributor to country’s environmental performance and as a result to climate risk. Using a sample of the reported countries for the year 2019, the latest reported year for both indices, and following a cross-sectional econometric analysis, we provide evidence regarding the connection of CCPI and CRI by using graphs, mapping visualization and econometric estimations in order to draw lines between indices. Moreover, we examine the interlinkages, and we estimate the influence caused by socio-economic factors and emissions levels per country. We provide evidence regarding the high-ranked and low-ranked countries and how they perform not only to an environmental base, but also to an economic base. Regarding the major finding, based on our analysis, no proven causality between CRI and CCPI was observed. Economic growth appears to have a significant impact on CRI but not on the CCPI, for the year 2019, while population density has an impact on both indices. Regarding greenhouse gas emissions, the econometric estimations provide evidence of significance for CRI but not for CCPI. An in-depth understanding of the current situation as well as of the factors affecting the climate conditions will give us the needed elements in order to minimize the adverse impact, if not improve the current situation. It is well known and stated that climate action should be taken so that we bequeath a safer and more sustainable planet to the next generations. Full article

(This article belongs to the Special Issue Macroeconomic Modelling)

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14 pages, 1410 KiB

Open AccessArticle

Reputation as Capital—How Decentralized Autonomous Organizations Address Shortcomings in the Venture Capital Market

by Wulf Kaal

J. Risk Financial Manag. 2023, 16(5), 263; https://doi.org/10.3390/jrfm16050263 - 05 May 2023

Cited by 2 | Viewed by 1430

Abstract

Venture capital (VC) models can be optimized with emerging decentralized technology. There are many disadvantages that come with traditional VC fundraising including illiquidity and ownership struggles, as well as timing. This paper will discuss alternative funding mechanisms that may be available and advantageous [...] Read more.

Venture capital (VC) models can be optimized with emerging decentralized technology. There are many disadvantages that come with traditional VC fundraising including illiquidity and ownership struggles, as well as timing. This paper will discuss alternative funding mechanisms that may be available and advantageous to emerging businesses. After discussing the shortcomings of the existing VC market and the rise of alternative early round funding mechanisms, the paper highlights the evolution of VC businesses that are operated by a Decentralized Autonomous Organization (DAO). More specifically, models discussed in this article contribute to the much-needed experimentation with venture capital reputation models. Full article

(This article belongs to the Special Issue FinTech, Blockchain and Cryptocurrencies)

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15 pages, 961 KiB

Open AccessArticle

Impact of Financial Inclusion on India’s Economic Development under the Moderating Effect of Internet Subscribers

by Aman Pushp, Rahul Singh Gautam, Vikas Tripathi, Jagjeevan Kanoujiya, Shailesh Rastogi, Venkata Mrudula Bhimavarapu and Neha Parashar

J. Risk Financial Manag. 2023, 16(5), 262; https://doi.org/10.3390/jrfm16050262 - 03 May 2023

Cited by 1 | Viewed by 7617

Abstract

Financial inclusion is an emerging economic growth paradigm, especially in developing economies like India. It is an essential barometer for the all-encompassing growth of a country and its economy. However, there is still a debate regarding the effect of Financial Inclusion (FI) on [...] Read more.

Financial inclusion is an emerging economic growth paradigm, especially in developing economies like India. It is an essential barometer for the all-encompassing growth of a country and its economy. However, there is still a debate regarding the effect of Financial Inclusion (FI) on achieving sustainable development. This study aims to determine if FI helps achieve Sustainable Development Growth (SDG) in India and if internet subscribers significantly influence the connection between FI and SDG. Secondary data from 16 states and one UT in India have been collected for 2017–2019. Therefore, the sample data is recent and covers a large country span. The data source is NITI Aayog and PMFBY (“Pradhan Mantri Fasal Bhima Yojana”) reports. The findings of this research are that FI has a positively significant relationship with sustainable development goals (SDG) in India. However, when the internet subscribers are high, the FI’s positive association with SDG gets reduced. PMFBY and SDG have been used for the first time, along with internet subscribers as moderators. The outcome has direct policy implications for improving the nation’s financial inclusion and economic growth. Full article

(This article belongs to the Special Issue Financial Markets, Financial Volatility and Beyond (Volume II))

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20 pages, 944 KiB

Open AccessFeature PaperArticle

The Role of Loan-Related Risk Appetite in the Relationship between Financial Risk Considerations and MSME Growth Decision: A Mediation Analysis

by Ralph Stephen Leyeza, Mikka Marielle Boado, Obed Butacan, Donn Enrique Moreno and Lourdes Deocariza

J. Risk Financial Manag. 2023, 16(5), 261; https://doi.org/10.3390/jrfm16050261 - 03 May 2023

Viewed by 2474

Abstract

While many studies have focused on assessing performance, studies that pivot on growth itself are limited. To contribute in this area, this study used the Stimulus-Organism-Response (SOR) Model as its foundation in order to explore how inflation and access to finance affected loan-related [...] Read more.

While many studies have focused on assessing performance, studies that pivot on growth itself are limited. To contribute in this area, this study used the Stimulus-Organism-Response (SOR) Model as its foundation in order to explore how inflation and access to finance affected loan-related risk appetite, also known as their willingness to bear either debt-related or opportunity-related risks arising from loan acceptance or avoidance, respectively. Subsequently, the mediating effect of loan-related risk appetite between inflation and access to finance and growth decision was also investigated. The analysis of links between variables under scrutiny was premised on the utilization of partial least squares-structural equation modeling (PLS-SEM), with the data resulting from a purposive sampling method comprising 80 respondents who are owners and/or managers of their MSME business operating for at least two (2) years. The findings present that access to finance, as well as loan-related risk appetite, has direct links to growth decision. Access to finance was also found to have direct effects to loan-related risk appetite. On the other hand, it was found that loan-related risk appetite functions as a partial mediator between access to finance and growth decision. Contrarily, the aforementioned circumstances cannot be observed for inflation. Full article

(This article belongs to the Section Banking and Finance)

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18 pages, 571 KiB

Open AccessArticle

Digital Banking through the Uncertain COVID Period: A Panel Data Study

by Kuldeep Singh, Sam Goundar, Preetha Chandran, Amit Kumar Agrawal, Nimisha Singh and Prasanna Kolar

J. Risk Financial Manag. 2023, 16(5), 260; https://doi.org/10.3390/jrfm16050260 - 29 Apr 2023

Cited by 1 | Viewed by 1928

Abstract

This research investigates how the uncertainty caused by the COVID-19 pandemic has affected digital banking usage in India. The study is made by utilizing a panel of data consisting of 108 firm-month observations during covid period from 2020 to 2022, with data mainly [...] Read more.

This research investigates how the uncertainty caused by the COVID-19 pandemic has affected digital banking usage in India. The study is made by utilizing a panel of data consisting of 108 firm-month observations during covid period from 2020 to 2022, with data mainly collected to analyze the impact of COVID-19 uncertainty. Most of the determinants were collected from the RBI data website. The main emphasis of this study is on the utilization of digital banking services in the context of the pandemic, and the research assesses the factors that have influenced this trend, including the number of physical bank branches, the utilization of debit and credit cards at automated teller machines (ATMs) and points of sale (PoS), as well as the level of economic policy uncertainty (EPU). The analysis was conducted using panel regression analysis, a suitable method for handling the error components in the model that are either fixed or random. The findings indicate that the uncertainty caused by the pandemic has had a negative impact on the use of digital banking services. Additionally, the study highlights that the usage of debit and credit cards at PoS has significantly contributed to promoting the progress of digital banking services during the pandemic. Overall, this study provides valuable insights into how digital banking services have evolved during a period of significant uncertainty and disruption. Full article

(This article belongs to the Special Issue Digital Banking and Financial Technology)

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12 pages, 1459 KiB

Open AccessArticle

Do Automated Market Makers in DeFi Ecosystem Exhibit Time-Varying Connectedness during Stressed Events?

by Bikramaditya Ghosh, Hayfa Kazouz and Zaghum Umar

J. Risk Financial Manag. 2023, 16(5), 259; https://doi.org/10.3390/jrfm16050259 - 28 Apr 2023

Cited by 2 | Viewed by 2042

Abstract

We investigate the connectedness of automated market makers (AMM) that play a pivotal role in liquidity and ease of operations in the decentralized exchange (DEX). By applying the TVP-VAR model, our findings show higher level of connectivity during periods of turmoil (such as [...] Read more.

We investigate the connectedness of automated market makers (AMM) that play a pivotal role in liquidity and ease of operations in the decentralized exchange (DEX). By applying the TVP-VAR model, our findings show higher level of connectivity during periods of turmoil (such as Delta, Omicron variants of SARS-Covid, and the Russia Ukraine conflict). Furthermore, risk transmission/reception is found to be independent of the platform on which they typically run (Ethereum based AMMs were both emitters as well as receivers). Pancake (a Binance based AMM) and Perpetual Protocol (Ethereum based AMM) emerged as moderate to high receivers of risk transmission, whereas all of the other AMMs, including Ethereum, were found to be risk emitters at varying degrees. We argue that AMMs typically depend on the underlying smart contracts. If the contract is flexible, AMMs can vary (either receiver or emitter), otherwise AMMs behave in tandem. Full article

(This article belongs to the Special Issue FinTech, Blockchain and Cryptocurrencies)

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20 pages, 599 KiB

Open AccessArticle

The Effect of ECB Unconventional Monetary Policy on Firms’ Performance during the Global Financial Crisis

by Charalampos Basdekis, Apostolos Christopoulos, Evgenios Gakias and Ioannis Katsampoxakis

J. Risk Financial Manag. 2023, 16(5), 258; https://doi.org/10.3390/jrfm16050258 - 27 Apr 2023

Cited by 1 | Viewed by 1565

Abstract

This study aims to analyse and investigate the most important factors affecting the performance of listed firms in the Athens Stock Exchange, emphasising capital structure, size and sovereign debt rate as a proxy for firms’ borrowing rate. Yet, the most remarkable factor taken [...] Read more.

This study aims to analyse and investigate the most important factors affecting the performance of listed firms in the Athens Stock Exchange, emphasising capital structure, size and sovereign debt rate as a proxy for firms’ borrowing rate. Yet, the most remarkable factor taken into consideration to affect firms’ profitability is the delta of ECB assets as a proxy of the ECB’s strategy during the financial crisis. Indeed, the examination of the ECB’s delta is innovative for such analysis and differentiates this study from previous ones. The survey was conducted for the period 2005–2019, and the sample consisted of 49 firms from all sectors of the economic activity, except for the financial sector, as its companies’ capital structure is subject to supervisory restrictions. Thus, the financial sector’s inclusion in the sample would affect its homogeneity. The sample is divided into two sub periods, based on the statement of ECB’s president Mario Draghi “Whatever it takes,” in 2012, expressing the ECB’s strategy for backing and boosting the Eurozone economy. The empirical approach of our analysis is based on a panel data analysis, which allows the combination of both cross-section and time series data. In addition, we develop, test and analyse four specifications of our main model, each one with a different dependent variable as a proxy for profitability. These variables are EPS (earnings per share), ROE (return on equity), ROA (return on assets) and TOBIN’s Q. Our findings lead to some very interesting conclusions, which in most cases are consistent for the specification of all the examined models. More specifically, the results show a negative influence of debt-to-equity ratio and 10-year Greek yield bond on firms’ profitability regardless of the proxy used (EPS, ROE or TOBIN’s Q), while there is a positive impact of firms’ size and the delta of ECB’s total assets on firms’ profitability. However, the soundest outcome of this study shows that the expansion of the ECB’s balance sheet and the unconventional policy does contribute to the improvement of firms’ performance and economic stability. The findings become even more impressive, considering the turning of ECB’s strategy after the implementation of the unconventional policy in 2012. Our findings are useful for policymakers of international institutions and government authorities as we propose strategies favouring economic stability and economic activity but also for managers and stakeholders who can identify the factors which determine firms’ performance in order to apply the best policies for financing, investments and growth. Full article

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

14 pages, 849 KiB

Open AccessArticle

Equity Returns and the Output Shocks in a Dynamic Stochastic General Equilibrium Framework

by Bahram Adrangi and Juan Nicolás D’Amico

J. Risk Financial Manag. 2023, 16(5), 257; https://doi.org/10.3390/jrfm16050257 - 25 Apr 2023

Viewed by 1157

Abstract

We conducted a study analyzing the impact of productivity shocks on equity returns in the U.S. economy from Q1 1960 to Q1 2022 using an RBC DSGE model. Our results suggest that while initial productivity shocks lead to higher equity returns, this effect [...] Read more.

We conducted a study analyzing the impact of productivity shocks on equity returns in the U.S. economy from Q1 1960 to Q1 2022 using an RBC DSGE model. Our results suggest that while initial productivity shocks lead to higher equity returns, this effect fades within eight quarters. Nonetheless, such shocks can still provide valuable signals for investors to strategically allocate their investments in sectors that may benefit the most. Our study also found that the responses of key macroeconomic variables, including real GDP, are consistent with those observed in other calibration based DSGE models of the U.S. in previous research. Full article

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16 pages, 664 KiB

Open AccessArticle

An Event Study on the Reaction of Equity and Commodity Markets to the Onset of the Russia–Ukraine Conflict

by Pat Obi, Freshia Waweru and Moses Nyangu

J. Risk Financial Manag. 2023, 16(5), 256; https://doi.org/10.3390/jrfm16050256 - 24 Apr 2023

Cited by 4 | Viewed by 3492

Abstract

Using a standard event study methodology and the EGARCH model, this study examined the depth of market anomaly at the onset of the Russia–Ukraine conflict in 2022. Equity markets in Africa and G7 nations were analyzed for their varied political and economic connections [...] Read more.

Using a standard event study methodology and the EGARCH model, this study examined the depth of market anomaly at the onset of the Russia–Ukraine conflict in 2022. Equity markets in Africa and G7 nations were analyzed for their varied political and economic connections to the conflict. While the G7 nations were strongly opposed to Russia, African countries remained neutral. This study shows that abnormal losses in the initial period of the conflict were larger and more persistent in the G7 markets, contradicting the widely held notion that more developed equity markets are more efficient than the less developed markets. EGARCH results revealed that volatility persistence was widely present, although the leverage effect was only confirmed for U.S. and Canada. Throughout the period, commodity prices rose sharply, producing significant abnormal gains in the futures market. Unfortunately, this had a deleterious effect on African economies due to their heavy reliance on grain and fuel imports, all of which are priced in U.S. dollars, and which also rose sharply during the period. This study concludes with suggestions on how to mitigate currency and commodity price shocks to dollar-reliant and import-dependent economies. Full article

(This article belongs to the Special Issue Price Volatility in Financial and Commodity Markets)

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17 pages, 2199 KiB

Open AccessArticle

Analysis of Trends in Mortgage Lending in the Agricultural Sector of Ukraine

by Iryna Perevozova, Oksana Malynka, Vitalii Nitsenko, Halyna Kryshtal, Viktoriia Kostiuk and Vitaliia Mishchenko

J. Risk Financial Manag. 2023, 16(5), 255; https://doi.org/10.3390/jrfm16050255 - 24 Apr 2023

Cited by 5 | Viewed by 1678

Abstract

This study has the following objectives: to analyze the state of agrarian business lending and the market of banking services, establish the reasons for the insufficient level of mortgage lending implementation, and develop ways and tools to improve lending to the agrarian sector. [...] Read more.

This study has the following objectives: to analyze the state of agrarian business lending and the market of banking services, establish the reasons for the insufficient level of mortgage lending implementation, and develop ways and tools to improve lending to the agrarian sector. The research methodology considers a systematic approach to the statistical analysis of bank lending in the agricultural sector of Ukraine, the development of criteria, and the implementation of the hierarchy analysis method for the reasonable selection of a loan product and banking institution. We conducted an analysis of the current state of lending to agricultural enterprises. We also analyzed lending trends, loan products, and basic lending terms by banks of Ukraine to agricultural enterprises. The share of bank lending of the working capital of the agricultural industry was estimated. The dynamics of preferential lending to the agricultural sector were determined. Its essence is that banks with partial repayment of loan rates are given loans at the expense of the state budget. The directions and volumes of borrowed loan resources usage by agricultural enterprises were considered. It is recommended to use the hierarchy analysis method by T. Saaty for choosing an effective loan product. We developed the criteria that could be applied when selecting a loan product. We also determined potential directions for the development of mortgage lending for the agricultural sector. Full article

(This article belongs to the Special Issue Modeling Housing Market Search)

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24 pages, 901 KiB

Open AccessArticle

The Paradox of the Payday Borrower: A Case Study of the Role of Planned Behavior in Borrowers’ Motivations and Experiences

by Irene Herremans, Peggy Hedges, Fereshteh Mahmoudian, Anne Kleffner and Mahrukh Tahir

J. Risk Financial Manag. 2023, 16(5), 254; https://doi.org/10.3390/jrfm16050254 - 23 Apr 2023

Cited by 1 | Viewed by 1247

Abstract

This research used the theory of planned behavior as a framework to investigate the role of attitudes, behavioral control, norms, and previous behavior in payday loan borrowers’ difficulty or lack of difficulty in repaying loans. The data were collected from 138 respondents with [...] Read more.

This research used the theory of planned behavior as a framework to investigate the role of attitudes, behavioral control, norms, and previous behavior in payday loan borrowers’ difficulty or lack of difficulty in repaying loans. The data were collected from 138 respondents with payday loan experience via a questionnaire in a city in a western province in Canada as part of a campaign to change payday loan regulations. The research findings show that different approaches are necessary to address the needs of distinct types of payday borrowers, based on their repayment abilities and whether the loan improved their quality of life in the long term. Furthermore, we found, similar to previous literature, a group of payday borrowers who lack financial confidence. This sub-group is referred to as the “unsure” sub-group in our research and provides opportunities to improve the payday learning context. To accommodate the unsure group, payday lenders and conventional financial institutions can collaborate to offer innovative financial instruments, improve financial literacy through education, and provide better access to information about borrowers’ financial status. The confirmation of this unsure group also leads us to recommend further study to determine opportunities for payday borrowers to become better informed about their options, to increase financial confidence. Full article

(This article belongs to the Special Issue Financial and Economic Literacy—Implications for Education)

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J. Risk Financial Manag., Volume 16, Issue 5 (May 2023) – 28 articles

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