ASEAN-5 Stock Price Index Valuation after COVID-19 Outbreak through GBM-MCS and VaR-SDPP Methods

Round 1

Reviewer 1 Report

Please see the attached file.

Comments for author File: Comments.pdf

Author Response

Dear Reviewer 1 IJFS 1948861

Hereby i have revised in according to your suggestions, especially in terms of in English language and style, comments and suggestions for authors: yes we have seen the attached file. I hope this revision is enough to give you satisfaction, thank you.

 

 

Reviewer 2 Report

The paper is generally well-written. But the novelty of this study is not well demonstrated.

Soon after the COVID-19 outbreak, there have been many related studies on the shock to the financial market as well as the macroeconomy. For example, Wang and Liu (2022) have done very similar research to this paper using data from the stock market in China. In addition, Liu et al. (2022) study the real shock of COVID-19 on the economy. And there are also many other studies. The dynamic method is also used in these two studies, especially Wang and Liu (2022).

Therefore, the authors need to reshape the current paper and include more recent studies. Most importantly, highlight the novelty and value of the current studies.

 

References:

Wang, Q., Liu, L. Pandemic or Panic? A Firm-Level Study on the Psychological and Industrial Impacts of COVID-19 on the Chinese Stock Market. Financial Innovation, 8(1) (March 2022), 36.

Liu, L., Huang, J., Li, H. Estimating the real shock to the economy from COVID-19: The example of electricity use in China. Technological and Economic Development of Economy, 28(5) (September 2022), 1221-1241.

Author Response

Dear Reviewer 2 IJFS 1948861

I am hereby i have revised it according to your suggestion, especially in terms the introduction, it is sufficient to provide background with support the references relevant to the topic of this research. The method according to the author quite relevant and has been very clear and has been very clear in the result and conclusion. I have the revision is enough to give your satisfaction, thank you.

 

• English language and style are fine/minor spell check required 
  Answer: Yes we have checked the English spell 
   
• The paper is generally well-written. But the novelty of this study is not well demonstrated. 
• Soon after the COVID-19 outbreak, there have been many related studies on the shock to the financial market as well as the macroeconomy. For example, Wang and Liu (2022) have done very similar research to this paper using data from the stock market in China. In addition, Liu et. (2022) study the real shock of COVID-19 on the economy. And there are also many other studies. The dynamic method is also used in these two studies, especially Wang and Liu (2022). 
  
  Therefore, the authors need to reshape the current paper and include more recent studies. Most importantly, highlight the novelty and value of the current studies. 
  
  Answer: (we have attached this sentence on page 3) 
  
  Wang and Liu (2022) use the stochastic volatility model to predict stock market volatility on the China stock market after the Covid-19 pandemic based on 3 variables, that are firm-level fundamentals, psychological factors, and industry factors. From the empirical results, they got the conclusion that the terms for these differences will eventually dominate the marginal effect, which confirms the fading impulse of the shock. Finally, this study highlights some important policy implications of stock market volatility and returns to work in the industry. Then, Liu, Huang, and Li (2022) estimate the real shock to the China economy from COVID-19 by take electricity use for case study. We find that, although manufacturing and consumption are affected, the services are more vulnerable to the shock from the COVID-19 pandemic. In this study, the movement of the return of stock price index is considered as Geometric Brownian Motion, which can indirectly be used to predict the value of the stock price index in the next period. Therefore, stock price index predictions only refer to one variable, namely historical stock returns. However, because the single GBM model tends to give less stable prediction results, we choose GBM-MCS as an alternative model to get more stable and accurate prediction results. The main novelty in this study is the combination of the GBM-MCS model with VaR-VC to predict the value of the risk of loss. The main value of this research is to evaluate the condition of the ASEAN Top-5 stock market in terms of price movements and the estimated risk of loss. These two indicators can be used by investors to determine the investment strategy they will choose so that investment can provide optimal returns. 

 

Reviewer 3 Report

The paper is very well-written. 

The authors clearly present their research aims. Also, the use widely accepted econometric techniques. I propose a professional English proof reading. 

I recommend to accept this manuscript at this form. 

Author Response

Dear Reviwer 3 IJFS 1968861

Hereby i have revised to your suggestion, in especially this revision in terms the introduction, it is sufficient to provide background with the support references relevant to the topic this research. The method according to the authors quite relevant has been very clear and has been presented very clearly in the result and conclusion. I hope the revision is enough to give your satisfaction, thank you.

 

 

Reviewer 4 Report

The submission entitled “ASEAN FiveStock Price Index Valuation AfterCOVID-19 Out- 2 break through GBM-MCS and VaR-SDPP Methods” reported that the GBM-MCS model was more accurate than the GBM model because it had a more stable MAPE value.  Referring to the VaR-VC  value, the prediction of losses in the ASEAN Top-5 stock market for 21/04/2022–25/04/2022 ranged from 1% to 15%.

Although the research issue is interesting, I remain rather lukewarm on the innovation and the contribution of the submission to the literature.  Below are my comments and suggestions

There are several typos e.g. FiveStock, AfterCovid in title. The file must be proofread and corrected.

The Skewness and Kurtosis must be reported in the descriptive stat to see the market behavior.

The graphs are not clear. Use some better quality. I cannot comment on these images right now.

How returns formula is missing.

The formatting is not standard. Some figures have captions above while other have below the images.

 

Why ASEAN markets? Is there anything interesting in ASEAN countries w.r.t. covid-19?

I have a serious concern on the sample period ranging from 05/05/2021 – 20/04/2022. What is the logic of this time period? It should be linked with COVID-19 spread/pandemic declaration etc.

How the data cleaning is done?

The in-out ratio is not clearly mentioned. It should be checked with 2-3 different samples and reported in the index to see the model reliability.

The paper totally ignore the practical/managerial implications of this study. It should be clearly mentioned in light of main findings.

The presence of NULL data is a very common and part of data cleaning process. It is not the limitation of the study. The limitations/implications and future research need serious revision.

The literature on the linkage of COVID-19 and financial markets is not comprehensive and fail to clarify the linkage of a pandamic and financial markets. There is a need to add more relevant.

 

Finally, the contribution is not convincing. It should be very clear and enough for this publication.  

Author Response

Dear

Reviewer 4 IJFS 1948861

Hereby i have revised it according to your suggestion, especially to upgrade in the result and conclusion. In the background with the support the references relevant with this research topic. The method to the author is quite relevant and has been very clear and has been presented very clearly. in the result and suggestion upgraded. Thank you, i hope this revision is enough to give to your satisfaction.

 

1. There are several typos e.g. Five Stock, After Covid in title. The file must be proofread and corrected. 
   Answer: We have corrected the typo on the research title section 
2. The Skewness and Kurtosis must be reported in the descriptive stat to see the market behavior. 
   Answer: The additional of skewness and kurtosis value for each variable has been added on page 8. 

Table 2. Descriptive Statistics of ASEAN TOP 5 Stock Price Index. 

	JKSE	PSEI	KLSE	SET	STI
Mean	6,457.62	6,999.64	1,552.77	1,625.95	3,195.99
St. Dev	383.28	284.027	35.57	45.45	105.06
Variance	146,902.65	8,0671.51	1,264.91	2,065.44	11,038.21
Min	5,760.58	6,164.89	1,480.92	1,521.72	3,041.29
Max	7,275.29	7,502.48	1,659.22	1,713.20	3,445.01
Skewness	-0.04105	-0.59469	0.10485	-0.32426	1.06988
Kurtosis	-1.39921	-0.15153	-0.81168	-0.42561	0.82092

 

Based on Table 2, the majority of stock price indexes have a negative skewness value, this indicates that the stock price index tends to have a value greater than the average. Then two stock price indexes have positive values, namely KLSE and STI. This means that most stock prices in these two stock markets are less than the mean value. Similar with Skewness, the majority of kurtosis has negative value. This means that the characteristic of data distribution is platikurtic. The largest kurtosis value is 0.82092 (STI) and the lowest kurtosis value is -1.39921 (JKSE) 

 

Table 3. Descriptive Statistics of ASEAN TOP 5 Stock Price Index Return. 

	JKSE	PSEI	KLSE	SET	STI
Mean	0.00082	0.000342	0.00005	0.00035	0.00021
Volatilitas	0.00732	0.012691	0.00765	0.00693	0.00765
Variance	0.00005	0.000161	0.00006	0.00005	0.00006
Min	-0.02078	-0.04352	-0.04457	-0.02730	-0.03507
Max	0.02035	0.04981	0.03548	0.01843	0.02023
Skewness	-0.07136	-0.16557	-0.40624	-0.66140	-0.60239
Kurtosis	0.14717	1.98984	5.76267	1.51419	2.08011

The Skewness of all stock price index is less than 0, so the return value tends to be greater than the average. In contrast to Skewness, the kurtosis value for every stock price index return has a positive value. It means that the characteristic of data distribution is leptokurtic. The most considerable kurtosis value is KLSE (5.76267), and the lowest kurtosis value is JKSE (0.14717) 

 

3. The graphs are not clear. Use some better quality. I cannot comment on these images right now. 
   Answer:  The graphs have been revised on page 9. 
   
   
4. How returns formula is missing. 
   Answer: we have been added the return formula on page 7. 
5. In predicting the price index along with the loss value, historical return data as a reference were needed; therefore, the initial characteristics of the return value also needed to be known. The return value for each stock price index are calculated by log return methods. Suppose that and be stock price index at t and t-1 periods. So, the return of stock price index at the t period is given by the following equation (Miskolczi, 2017): 

  

6. The formatting is not standard. Some figures have captions above while other have below the images. 
   Answer: we have corrected the figure caption on pages 8, 10, and 12. 
   
   
7. Why ASEAN markets? Is there anything interesting in ASEAN countries w.r.t. covid-19? 
   Answer: (we have attached this sentence on page 2) 
   
   . ASEAN is a developing country region that has experienced an increase in the financial investment sector in the last ten years. Then, according to Chong (2021), when the COVID-19 pandemic occurred, ASEAN became a region that received a moderately severe impact. Some ASEAN member countries have higher positive and death rates than the WHO report (ASEAN Biodiaspora Virtual Center, 2020). This situation directly impacts to the economic sector, including investment activity in the stock market. According to Rizvi, Juhro, and Narayan (2021), Ullah (2022), and Celik, et al (2020), the effects of the COVID-19 pandemic on financial markets include reduced market capitalization values, reduce daily stock trading volumes, and reduced stock price index values. Many companies experienced a decrease in production, so their stock prices plummeted. The decline in stock prices also causes investors to suffer losses. In the early quarter of 2021, the positive rate of COVID-19 in ASEAN experienced a significant decrease (ASEAN Biodiaspora Virtual Center, 2021), and this caused economic activity is gradually starting to back in normal condition (Suriyankietkaew and Nimsai 2021.). This study aims to analyze stock price movements through the stock price index in the post-COVID-19 period (new normal era).
   
    
8. I have a serious concern on the sample period ranging from 05/05/2021 – 20/04/2022. What is the logic of this time period? It should be linked with the COVID-19 spread/pandemic declaration etc. 
   Answer: (we have attached this sentence on page 3) 
   
   In 2021 first quartal, most ASEAN countries have declared a new normal situation announced through the government's official press release. So we used the data on that period to be a reference in analyzing stock market conditions at the beginning of the new normal era
   
    
9. How the data cleaning is done? 
   Answer :  
   
   From 05/05/21 to 20/04/2022, each variable has a different missing value date. This causes the total data that can be used for analysis is not the same. So, we did the data cleaning by deleting periods that do not have stock price index data records. 
   
    
10. The in-out ratio is not clearly mentioned. It should be checked with 2-3 different samples and reported in the index to see the model reliability. 
    
    Answer: We have attached this sentence on page 7 
    
    Abidin and Jaffar (2014) suggest that in an analysis that requires an accuracy test model, we must divide our data into in-sample and out-sample. The minimum size of the out-sample data is 5% of the total data. In this study, the total data is between 233-235. Then to simplify the accuracy test, we decided to uniform the amount of out-sample data. By selecting sample out-sample date = 20, we have reached the minimum size for it.
11. The paper totally ignores the practical/managerial implications of this study. It should be clearly mentioned in light of the main findings. 
    
    Answer: (We have attached this sentence on page 15) 
    
    The practical implications based on the result of the stock price index and loss risk prediction is that this model can directly be a reference for investors to choose which stock market to invest in. The most ideal stock market to invest in is SET (Thailand), because it has the smallest loss risk value than other markets. Then, the managerial implications from this research are to be a guideline for determining the best risk management strategy so that the investments that have been made in the stock market can provide optimal benefits 
    
    
12. The presence of NULL data is very common and part of the data cleaning process. It is not the limitation of the study. The limitations/implications and future research need serious revision. 
    
    Answer: (We have attached this sentence on page 15) 
    
    The limitation of this research is related to the assumption of normality of the data, which causes the number of periods used for analysis to be limited so that the assumption of normality is still met. Therefore, in future research, we suggest using the GBM with the Jump (Jump Diffusion Model) model. This model is a development of the GBM, which does not suggest the assumption of normality, making it possible for us to use more periods. 
    
    
13. The literature on the linkage of COVID-19 and financial markets is not comprehensive and fails to clarify the linkage of a pandemic and financial markets. There is a need to add more relevance. 
    
    Answer: (We have attached this sentence on page 2) 
    
    According to Rizvi, Juhro, and Narayan (2021), Ullah (2022), and Celik, et al (2020), the effects of the COVID-19 pandemic on financial markets include reduced market capitalization values, reduce daily stock trading volumes, and reduced stock price index values. Many companies experienced a decrease in production, so their stock prices plummeted. The decline in stock prices also causes investors to suffer losses. In the early quarter of 2021, the positive rate of COVID-19 in ASEAN experienced a significant decrease (ASEAN Biodiaspora Virtual Center, 2021), and this caused economic activity is gradually starting to back in normal condition (Suriyankietkaew and Nimsai 2021.). This study aims to analyze stock price movements through the stock price index in the post-COVID-19 period (new normal era).
    
     
14. Finally, the contribution is not convincing. It should be very clear and enough for this publication. 
    
    Answer: The main contribution of this research is giving numeric proof that GBM-MCS is more accurate than single GBM model (based on MAPE value). GBM-MCS also clearly more stable on prediction result (the discussion about this contribution can be seen on page 10 – 14) 

Round 2

Reviewer 4 Report

Best of Luck.