Search

Bali et al. (2011) document a maximum daily returns (MAX) premium in the US where stocks with the highest MAX underperform stocks with the lowest MAX in the subsequent month. However, the source of this MAX premium is contentious. Fong and Toh (2014) find that the MAX premium exclusively follows high sentiment periods suggesting that it is driven by investor optimism during high sentiment periods. In contrast Cheon and Lee (2017) find that the MAX premium is stronger following low sentiment periods suggesting that it is driven by the attention‐grabbing characteristic of high MAX stocks in low sentiment periods. We present evidence from China consistent with the MAX premium being driven by investor optimism during high sentiment periods. [ABSTRACT FROM AUTHOR]

We examine the cross-sectional relationship between the expected stock return and both the maximum daily return (MAX) and the idiosyncratic volatility (IVOL) in the five largest emerging African stock markets over the period from 2001 to 2015. First, we find that there is a robust and significantly negative MAX effect in the pooled African stock markets. Second, though we initially document a negative IVOL effect, it disappears after controlling for MAX. Finally, the negative MAX effect is only significant in the small-SIZE, high-illiquidity and high-skewness portfolios. Our results suggest risk-seeking behaviour among African investors similar to that in other parts of the world. [ABSTRACT FROM AUTHOR]

Recent evidence on momentum returns shows that the time series (TS) strategy outperforms the cross‐sectional (CS) strategy. We present new evidence that this happens only when the market continues in the same state, up or down. In fact, we find that the TS strategy underperforms the CS strategy when the market transitions to a different state. Our results also show that the difference in momentum returns between TS and CS strategies is related to both the net long and net short positions of the TS strategy. [ABSTRACT FROM AUTHOR]

We search for differences in both unconditional and conditional momentum returns of Islamic and Non-Islamic stocks and test implications of competing behavioural theories that aim to explain momentum returns. Our results show that there is no significant difference in momentum returns between Islamic versus Non-Islamic stocks with respect to both cross-sectional (CS) and time-series (TS) momentum strategies even when we condition momentum returns on market dynamics, information uncertainty and idiosyncratic volatility. We also find that the TS strategy outperforms (underperforms) the CS strategy in market continuations (transitions) consistent with the recent evidence in the U.S. market. Furthermore, we find that CS and TS strategies of both Islamic and Non-Islamic stocks are profitable only when the market continues in the same state consistent with overconfidence driving momentum returns of both Islamic and Non-Islamic stocks. [ABSTRACT FROM AUTHOR]

We test the behavioural theories of overconfidence and underreaction on cross-sectional (CS) and time-series (TS) momentum returns in the Japanese stock markets. Both CS and TS momentum returns are large and significant when the market continues in the same state and turns into losses when the market transitions to another state, consistent with the overconfidence but not the underreaction model. We find that TS conditional momentum returns exceed conditional CS momentum returns because of its active position since TS takes a net long (short) position following UP (DN) markets while CS is a zero-cost strategy irrespective of the market state. Finally, we find no relation between idiosyncratic volatility (IV) and momentum returns which is not supportive of either the overconfidence or underreaction model but implies that IV is not a significant limit to arbitrage in Japan. [ABSTRACT FROM AUTHOR]

This paper evaluates how microcredit affects rural households in the Mekong River Delta of Vietnam using the propensity score matching methods. The results show that the Vietnam Bank for Social Policies (VBSP) microcredit program has a significant positive impact on household consumption but no significant impact on household income. In addition, the findings show greater consumption and income impact for the ‘true poor’ when only the poor group is included in the analysis. This implies that this group benefits more from participating in the microcredit program than low-income households. [ABSTRACT FROM AUTHOR]

Purpose – The purpose of this paper is to re-examine the presence of rational speculative bubbles in the Malaysian stock market in light of contradictory results presented in previous studies. Design/methodology/approach – The authors use descriptive statistics, explosiveness tests and the duration dependence test. They use an expanded data set that encompasses at least two alleged bubble episodes addressing a significant limitation of previous studies. The authors use both monthly and weekly returns addressing concerns about the sensitivity of duration dependence test results to the use of monthly versus weekly returns, as well as a battery of alternative measures of returns. Findings – The authors detect bubble footprints but they do not appear to be rational. They found no evidence of rational speculative bubbles over the sample period regardless of whether monthly or weekly returns was used. The authors suggest that if there were bubbles in the Malaysian stock market, they might have been caused by irrational investor behaviour. The authors’ results do not support the suggestion that the duration dependence test is sensitive to the use of monthly versus weekly returns. Practical implications – Despite the absence of rational bubbles in the Malaysian stock market, the faint bubble footprints detected still suggest caution for investors, as the authors cannot categorically rule out the presence of irrational bubbles. Originality/value – This paper clarifies conflicting results of previous studies. It also contributes to the literature on bubble testing by presenting new evidence from an emerging market refuting the claim that duration dependence test results are sensitive to the use of either weekly or monthly returns. [ABSTRACT FROM AUTHOR]

We investigate the significance of extreme positive returns (MAX) in the cross-sectional pricing of stocks in South Korea. Our results provide important out-of-sample evidence of a strong negative MAX effect similar to that documented by Bali et al. (2011) in the US stock market. For equal-weighted portfolios, the difference between returns on the portfolios with the highest and lowest maximum daily returns is −1.87% per month. The corresponding difference in alpha is −1.41% per month. The results are robust to controls for size, value, skewness, momentum, short-term reversal and idiosyncratic volatility. We also sort the portfolios by the average of the five highest daily returns within the month and report return and alpha spreads of −2.21% and −2.01% per month, respectively. However, unlike in Bali et al. (2011), the MAX effect cannot reverse the idiosyncratic volatility effect in the South Korean stock market. Our results imply investor preference for high-MAX stocks, consistent with cumulative prospect theory (CPT) where investors sub-optimally overweight the possibility that extreme returns will persist. The MAX effect is also consistent with the optimal expectations framework where investors derive utility from overestimating the probabilities of events in which their investments pay off well. [ABSTRACT FROM PUBLISHER]

We examine the role of idiosyncratic risk in five ASEAN markets of Malaysia, Singapore, Thailand, Indonesia, and the Philippines. Our research was motivated by the findings of of a 'puzzling' negative relation between idiosyncratic volatility and 1-month ahead stock returns in developed markets and the suggestion of the ubiquity of these results in other markets. In contrast, we find no evidence of an idiosyncratic volatility puzzle in these Asian stock markets; instead, we document a positive relationship between idiosyncratic volatility and returns in Malaysia, Singapore, Thailand, and Indonesia and no relationship in the Philippines. The idiosyncratic volatility trading strategy could result in significant trading profits in Malaysia, Singapore, Thailand, and to some extent in Indonesia. Our study underscores the fact that generalizing empirical results obtained in developed stock markets to new and emerging markets could potentially be misleading. [ABSTRACT FROM AUTHOR]

Purpose – This paper aims to confirm the existence of size, book to market (BM) and momentum effects in the New Zealand (NZ) stock market. It also aims to compare the performance of the CAPM, the Fama-French (FF) model, and Carhart's model in explaining the variation of stock returns. Design/methodology/approach – The paper adapts the Fama and French methodology using a 2x3 size-BM ratio sort. It also forms three portfolios based on past returns to verify the momentum effect. Findings – The paper documents significant BM and momentum effects but a relatively weaker size effect. The paper finds some improvement in explanatory power provided by the FF model relative to the CAPM but it still leaves a large part of the variation in stock returns unexplained. The FF model is also unable to explain the strong momentum effect in New Zealand. Practical implications – The findings imply that: cost of capital estimates would be more accurate using Carhart's model; portfolio managers can increase returns by investing in small and high BM firms that are recent winners; performance evaluation should take into account the size, BM, and momentum effects; and the existence of size and BM return premia appear to be rewards to risk bearing. Originality/value – The existing literature testing the robustness of the FF model in markets outside the USA is sparse, especially in emerging markets, with most of these studies suffering from data problems. The NZ stock market provides an interesting setting for such a study because of its unique characteristics. [ABSTRACT FROM AUTHOR]

A data envelopment analysis of a sample of 76 Nepalese rice farmers reveals average relative economic, allocative, technical, pure technical and scale inefficiencies as 34, 13, 24, 18 and 7 per cent, respectively. The significant variations in the level of inefficiency across sample farms are attributed to the variations in the ‘use intensities’ of resources such as seed, labour, fertilisers and mechanical power. In addition, a second stage Tobit regression shows the variation is also related to farm-specific attributes such as the farmers’ level of risk attitude, the farm manager's gender, age, education and family labour endowment. Based on the empirical findings, policy implications and development strategies for improving efficiency of Nepalese rice farms are briefly discussed. [ABSTRACT FROM AUTHOR]