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This study analyzes systemic risk contagion across the euro area by employing the Diebold-Yilmaz and the frequency connectedness methodologies with data from January 1, 1999, to January 25, 2021. We use the daily Composite Indicator of Systemic Stress (CISS) series for 11 countries in the euro area developed by Holló et al. (2012) and calculate the overall connectedness between the series by employing two pioneering approaches. Additionally, we estimate the short-, medium-, and long-cycle connectedness of systemic risk over the study period that covers three financial burst periods: the global financial crisis (GFC), the European sovereign debt crisis (ESDC), and the COVID-19 pandemic. Overall, spillover indexes notably rise around well-known financial/geopolitical events over the study period. Finally, we examine the network connectedness of systemic risk spillovers during the GFC, the ESDC, and COVID-19 periods and thereby compare them. Our results highlight an efficient regulatory mechanism to control systemic risk contagion.

Aviation stock sensitivity to crude oil prices has raised a suspicion of nexus between aviation stocks and crude oil prices. In this paper, the sustainable nexus between oil Prices and aviation stocks in India are analysed. In particular, it is tested whether there is any sustainable long-term co-movement between the stocks of three aviation companies listed on the Indian stock market and crude oil. The oil prices and aviation stocks are decomposed into different time horizons using the methodology of wavelets. The nexus is studied at shorter, medium, and longer time horizons. Broadly, results show that there is some nexus in the short-run, however, sustainable long-run nexus is missing. The results are found to be robust and approximately similar when data from three Indian aviation stocks are used. It is inferred that sustainable long-run movements in aviation stocks should be attributed to the reasons not related to crude oil price changes.

The main purpose of this comprehensive study is to determine the optimal hedge ratios and hedging effectiveness of different futures contracts traded on the Borsa Istanbul (BIST), namely the BIST 30 equity index, US dollar–Turkish lira currency futures (USD-TRY), euro–Turkish lira (EUR-TRY) currency futures, and gold futures. The efficiency of hedge ratios estimated through constant and time-varying econometric models, such as ordinary least squares (OLS) and diagonal VECH—a multivariate generalized autoregressive conditional heteroskedasticity (GARCH) model—are compared with a minimum variance hedge ratio framework. The periods before and after the merger of the Turkish Derivatives Exchange are analyzed with the models to capture changes in the hedging effectiveness of the contracts. We find that the diagonal VECH and constant models produce almost identical positive results for both periods, suggesting similar high hedging effectiveness for BIST 30 equity futures contracts. We conclude that BIST 30 equity futures contracts provide an efficient hedging mechanism for investors aiming to protect their spot equity portfolios. However, after Turkey's foreign exchange regulation amendment in 2017, the percentage of variance reduction improves greatly for the dynamic GARCH model, compared to the static OLS model, for USD-TRY and EUR-TRY futures contracts. Furthermore, the hedging effectiveness of currency futures contracts is negatively affected during the COVID-19 pandemic period beginning in 2020. Unlike other contracts, the hedging effectiveness of gold contracts is low in all periods.

Provision of weather and climate services are expected to improve the capacity for rural households’ preparedness and response plans to weather shocks. With increase in public investments in developing and communicating weather information on local scale in Nigeria, uncertainty in timescales that meet farmers’ needs and economic value of the information is still poorly understood. It is now a policy concern on whether farmers’ preferences and demands might increase its uptake. This study analyzed the economic value, latent demand, and emerging market of weather and climate information in Central-Southern Nigeria. Farm-level cross-sectional data reveals that 76% of the respondents were willing to pay for improved weather information and early warnings in taking climate smart decisions. Within farmers who showed positive responses, 86% would pay for sub-seasonal to seasonal weather information while 38% would pay for medium and short range weather information respectively. The economic value of sub-seasonal to seasonal weather information was estimated at N1600 ($3.60) per year per capita with total aggregated value of N1.3 billion ($2.9 m) yearly for the derived savannah area. Predictive total market value of N17.43billion ($39 m) would be obtained from improved weather information in Nigeria. Simulated results of 5% increase in the uptake with better dissemination channel through mobile phones in addition to robust farmers’ oriented features will generate additional annual market value at N86m ($193,360) for service providers. Large farm size, good farm-income, mobile phone dissemination channels, and location-specific information were drivers of farmers’ uptake decisions of weather information in the dry savannah area. The huge emerging market for improved weather information should be developed into a public–private market to efficiently facilitate uptake and use in Nigeria.

The recent COVID-19 pandemic or Global Health Crisis (GFH) has distorted the normal functioning of the global economies and financial markets. Previous research has shown that Islamic equities were relatively more stable than conventional ones during the 2008 Global Financial Crisis (GFC). So, this study aims to assess the effect of the COVID-19 pandemic on the performance and co-movement of the leading Islamic finance markets by employing MGARCH-DCC on daily frequency data spanning from January 01, 2017 to October 22, 2021. The findings suggest that, as expected, the pandemic outbreak has increased the volatility across the sample markets, but it faded relatively soon, indicating that Islamic equities carry hedging features and offer portfolio diversification benefits to investors. Moreover, the sample countries are less correlated during the sample period than expected. The findings have important implications for policymakers and diverse investors deciding on portfolio diversification. Global ethical and Islamic investors, including fund managers, could benefit by focusing on more stable markets and building optimal portfolios of Shari’ah-complaint equities during turbulent market conditions, such as the COVID-19 pandemic.

Purpose – Fama–French model (FFM) has been successful in helping to predict the financial markets, but investors have been interested in creating more sophisticated models to better predict the performance of the stock market. The objective of the extended version is to create a more robust econometric model to better predict the performance of the Mexican Stock Market. Design/methodology/approach – The study divides the Mexican Stock Market into six different portfolios. The criteria to build those portfolios are the same one used in Fama–French (1992). The study comprises 78 stocks listed in the Mexican Stock Market that are analyzed monthly during 1997–2018. The study analyzes the period before and after the 2008–2009 financial crisis to identify whether there are important changes. The estimation applies the traditional and an extended version of the FFM that include macroeconomic variables such as country risk, economic activity, inflation rate, and exchange rate and some financial variables recommended in the literature. Findings – Results indicate that classic FFM variables are statistically significant in most cases, but relevant macroeconomic variables such as the interest rate, exchange rate and country risk stand out for being weakly relevant in most of the portfolios. However, it is noticed that some of these macroeconomic variables became relevant for different portfolios only after the 2008–2009 crisis, especially in portfolios which include small market capitalization firms. Research limitations/implications – The study includes the stocks listed in the Mexican Stock Market. One limitation is the small number of stocks available, which reduces the possibility of creating well diversified portfolios. This study includes 78 stocks. The stocks removed from the sample are from firms that were not listed during six consecutive months or whose market capitalization did not change in the same period. Outlier data were removed from the sample to capture in better way the general performance of the stock market. Practical implications – The objective of the extended version is to create a more robust econometric model than the traditional model. It is expected that such estimations can be helpful to investors to make better decisions when they try to predict performance in the stock market. Social implications – An extended version of the FFM can be helpful to investors to make better decisions when they try to predict performance in the stock market. Originality/value – To the best of our knowledge there are no more studies in the literature of the Mexican financial market that apply the same methodology.

The purpose of this study is to examine the role of options volatility and bid-ask spread as microstructural variables in determining whether the foreign exchange market’s price formation process in response to macroeconomic announcements is characterised by changes in risk perception and transaction costs. The findings suggest that behavioural characteristics of market participants appear to trump macroeconomic considerations. The volatility indices and bid-ask spreads were found more sensitive to announcements than forex returns, which directly imply weak assimilation of common knowledge into exchange rates. The forex returns, bid-ask spread, and volatility indices demonstrated less vulnerability towards Chinese announcements than the USA, UK, Japan, and Euro. Moreover, findings distinctly signify the role of China as a global liquidity provider by reducing trading costs in the foreign exchange markets. The implications suggest that core macroeconomic models should incorporate agents’ heterogeneous expectations based on risk perceptions than the order flow approach.

This study examines the time-frequency connectedness of food commodities (cereals, dairy, food, meat, vegetable oil, and sugar) in the Food and Agriculture Organization's world food indices. With a monthly-frequency dataset covering February 1990 to October 2021, we utilise the returns spillover index approach of Baruník and Křehlík (2018). The results are robust to the time-varying parameter vector autoregressive (TVP-VAR) connectedness approach. The findings explicate that food commodities are highly connected in the short- and long-term horizons. The dynamic total connectedness varies from 15% to 80% in the short term, 1% to 70%, in the medium-term, and 1% to 75% in the long-term, with high fluctuations in notable crisis periods. Contagious returns spillovers between food commodities are propagated by vegetable oil. Diversification and safe-haven properties of food commodities are consistently found in the meat market across tranquil and exuberant trading periods, respectively. The safe-haven role of sugar in recent episodes of financial crises is highlighted by our findings. The economic, policy, and portfolio implications of our results are discussed.