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This study examines the Phillips curve for Bulgaria. The relationship between the unemployment rate and the rate of inflation has been studied. On the basis of the constructed regression model, the non-accelerating inflation rate of unemployment (NAIRU) in Bulgaria is assessed.
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Purpose: In this paper we try to explain US stock market variations and cash flow fundamentals by employing three different book-valued based ratios. First, we explore the explanatory capacity of the simple book-market ratio on time-varying expected returns, and procced on altering its construction so as to enhance its performance. We then run the extra mile by constructing two new ratios, the book-dividends and book-earnings ratios based on the long-run equilibrium relationships between book, dividends and earnings. Our analysis includes evidence of predictability on dividend and earnings growth rates on the S&P 500 for the most recent sample period 1926-2018. We also investigate the ratios’ forecastability by sub-sampling. Design/methodology/approach: We commence our analysis with the conventional book-market (bm) ratio and by failing to reject the hypothesis of a unit root, we propose the modified book-market (mbm) ratio, whose construction is based on the long-run equilibrium relationship between book (b) and market (m) values. We proceed on associating book values to dividends and earnings series and fix the book-earnings (be) and the dividend-book (db) ratios. We similarly modify be and db, and examine their forecasting performance on returns, dividend and earnings growth. Findings: In-sample evidence suggests that an investor who employs mbm can improve its forecasts by 37% and 41% in the 7- and 10-year return horizon, while the modified dividend-book (mdb) proves even more beneficial by explaining 53% and 59% in similar return horizons. Our modified book-earnings (mbe) has a very good in-sample fit to the earnings growth data unlike the rest of the predictors. With respect to the out-of-sample performance, mbm manages to surpass the simplistic forecast benchmark only at the 10-year horizon by 15% while mdb attains an impressive of 47% and 71% at the 7- and 10-year return horizon. Research limitations/implications: Further research is required so as to solve the earnings puzzle in terms of forecasting along with the necessity to understand the economical sources behind non-stationarity in valuation ratios. Originality/value: We believe that our paper may prove enlightening to investors focused on portfolio allocation and asset pricing and scholars interested in return forecasting, capital budgeting and risk identification.
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Purpose: Modelling security prices seem to be an ending debate in finance literature due to no clearconsensus on behavioral patterns. Knowledge of stock price movement has always been an important source of information that is much needed in asset pricing and trading strategies. The aim of this study was to model stock market prices using six international markets as a sample. Design/methodology/approach: This study made use of the Bayesian Time-Varying coefficient for a five-year period from January 2, 2018, to January 2, 2023. Finding: The findings of this study revealed that there is strong empirical evidence that the returns of a security can be modelled using the open, high and low prices. Research limitations/implications: This implies that the drift in stock price movement can be better explained by observing the lag values of the open, high and low prices which may be an important tool for short term traders and incorporated in volatility estimation. Also, the lag values of the open, high and low price movements explain more than 98% of changes in the closing price. Originality/value: As per the author’s knowledge, this study is the first to model stock market prices using the open, high and low prices for multiple international markets.
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Purpose: This paper analysed the effects of bank’s risk on capital buffer in Namibia, in the absence of the consensus on the cyclical behavior of capital buffers. Design/methodology/approach: The study employed the autoregressive distributed lag (ARDL) modelling technique on quarterly data for the period 2001 to 2019. Findings: The study found the following: First, there is a long run relationship between the dependent variable and the independent variables. Second, the study showed that the ratio of NPLs to gross total loans negatively affect capital buffers in the short run, while it positively affects capital buffers in the long run. Furthermore, return on assets and liquidity negatively affects capital buffers in both the short and long run. On the contrary, bank size in form of log of total loans positively affects capital buffers in both the short and long run. Research limitations/implications: The unavailability of data of a long-term span is not desirable. Moreover, the limited data of certain variables narrowed the choice of a variety of variables that could be included in the study. Originality/value: The paper contributes to the hypothesized theory of countercyclical. The policy implication from these findings is that the presence of countercyclical relationship is in support of the transition from Basel II to Basel III to mitigate the procyclical as experienced under Basel II accords as documented in the literature. Future studies should focus on using a variety of variables to assess this relationship and see whether or not the outcome will be different.
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This study examines the relative effectiveness of bank-based and market-based financial development on the economic growth of Nigeria with data from 1989 to 2018 using the Auto-Regressive Distributive Lag (ARDL) estimation technique. The study found that bank-based financial development exerts positive and significant influence on Nigeria’s economic performance while stock market-based, rather than contributing positively to the economic prosperity, was found to have an insignificant negative effect. Using GDP per capita growth for sensitivity analysis also showed a somewhat similar result. From this finding, the study concludes that bank-based financial development drives growth in Nigeria more than market-based. The study therefore recommends intensive financial literacy and inclusion campaign to create awareness and bolster public confidence in the stock market and the financial sector.
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Investors are gearing up to invest their money into wide range of cryptocurrency choices. However, investors are still somewhat hesitant about the adoption of this virtual currency. Therefore, there is a strong need to find out the reasons by identifying the factors that affect the investors’ perceptions towards adoption decisions for investing in cryptocurrencies. New constructs have been identified that will provide value and utility for users of cryptocurrencies. The factors proposed in the model have the greatest influence on the behavioral intention of the investors. Findings highlighted the concerns regarding trust, risk factors, ease of use, and supportive technologies.
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This study examines the cross-country relationships of investor sentiments. Discoveries of linkages across fourteen developed and emerging markets provide evidence of interdependencies. Employing CCI as a proxy for investor sentiments and ARIMA-EGARCH models, this study has successfully captured multiple instances of spillover of sentiments and volatilities. The results suggest that most markets have at least one-directional association with another market by either spreading or being exposed to investor sentiments. Moreover, the division of the sample into pre and post-global crisis periods suggests that the sentiments are becoming more contagious as technologies advance, leading to further integration between the markets.
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Our study aims to narrow the existing gap in the academic literature on cultural determinants of stock market liquidity by addressing the problem through a completely new lens - that of the international investor’s point of view. To do this, we resort to bringing together the financial and psychological concepts and use a proxy that can measure the perception an individual investor has upon the differences between his/her home country and other countries. The motivation behind this decision is as follows: despite there being a waste majority of studies analyzing the cross-country cultural distance effects upon the stock market liquidity, they only resume to describing those effects through the perspective of the domestic investor. We decided to go one step further and employ a proxy to capture the effects of the difference between the home country and the target country upon an investor’s decisions to trade internationally, which in turn, can affect the overall liquidity of the stock market in the target country. This proxy is called psychic distance stimuli and was first measured and used by Douglas Dow. We performed the analysis on a rather extensive sample of 21 developed and 24 developing countries, spanning an interval of 21 years, beginning in 1996. The results confirm our hypothesis that the measure of psychic distance plays a significant role in explaining the liquidity of the stock market in the target country.
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Whenever Indian Economy had to tackle significant inflationary pressure, Securities Exchange Board of India (SEBI), which is the apex regulator of capital and commodity markets, has time and again resorted to stop the trade in futures of essential agricultural commodities while allowing trade in futures of essential energy commodities. SEBI has justified the step on the grounds that, doing so prevents volatility in agricultural spot market. Our study tries to analyze the nature of correction in the two segments with the help of vector error correction model in the backdrop of inflationary and non-inflationary periods. In energy segment, among select commodities, the speed of error correction was 1 to 2 days more as compared to non-inflationary period. With regards to commercial agricultural segment, the rate of error correction among select commodities was 4 to 7 days more as compared to non-inflationary period. Given the underdeveloped nature of agricultural futures market, SEBI’s action seems bit too stringent. Although prior studies have been undertaken about Indian spot and derivative markets, empirical studies which have focused on analyzing economic rationale of SEBI’s decision of restricting trade in agricultural futures during inflation are scarce. Our study tries to bridge the gap regarding the same.
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The article is about the dynamics of the development of the capital market in Bulgaria. The period covered in this research is 2001 – 2021. The study of the established trends is based on the analysis of basic stock market indicators such as market capitalization, market capitalization to national GDP ratio, annual turnover, number of concluded transactions, number of issues of financial instruments listed for trading, basic stock exchange indices. The key factors that impact the dynamics of the capital market in this country have been extrapolated. Based on that, the main particularities of the Bulgarian capital market have been outlined.
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This study investigates the application of fair value accounting in companies in Bosnia and Herzegovina. The study was conducted on a sample of 190 companies. The application of fair value accounting causes a lot of controversy related to the relevance and reliability of fair value information. It is believed that the extent to which fair value measurement is used reflects attitudes of financial statement preparers about the usefulness of this model at its best. The findings of this study suggest that most companies in Bosnia and Herzegovina do not have tendency to apply fair value accounting. It is found that half of the companies in the sample do not use fair value accounting at all. Almost half of the companies that use fair value accounting use it just because they own assets that require fair value measurement. Fair value accounting is much more used in financial and larger companies than in non-financial and smaller companies. Companies mostly use fair value accounting for the measurement of investment property. However, they use it for the measurement of intangible assets at a minimum. The findings also suggest that the application of fair value accounting increases the uncertainty in financial statements. The quality of fair value disclosures is very low. Numerous companies do not disclose information on fair value hierarchy and valuation techniques that were used for fair value measurement. Companies that disclose this information mostly use indirectly observable inputs (Level 2) for fair value measurement and these create a lot of room for earnings management.
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Integrated costs management through the value chain represents a comprehensive approach which observes the activities of purchasing, production and distribution as a single, undividable whole. This opens a wide range of possibilities for costs optimization of all processes and activities going on both within and outside of the company limits, and consequently, for improvement of the business results. The main precondition for successful cost management in such complex system is connecting of the program for management of costs incurring during the entire life cycle of the product and the program for management of costs of the suppliers and buyers. The optimal combination of conventional and modern costs management methods depends primarily on characteristics of the company, on one side, and identified needs for lowering the costs incurring on relation buyer-supplier, on the other side. On the sample of companies from Bosnia and Herzegovina, it was researched if the factors of internal environment require changes in the approach to management of internal costs, or if the management of these companies has clear vision that the improvement of relations with the suppliers and buyers creates more space for even better competitive position on the market.
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In the inactive capital market value of company is not easy to determine. It is evident that in the case of inactive markets, the process of input determination for assessing the value is more complicated, and the value of the company itself, for reasons of lack of transparency, unavailability of information and other inherent risks is less relevant than it would be in active capital markets. In companies’ appraisal in terms of inactive capital markets, the level of importance attached to transaction prices is inevitably analyzed, compared to other indicators of fair value. The level of transaction significance depends on the facts and circumstances, such as: transaction volume, transaction temporal proximity to the measurement date and transactions comparability with asset or liability whose fair value is measured. In the paper we have started from two hypotheses. The first one is that the capital market in the Republic of Srpska is inactive and underdeveloped. The second hypothesis is that the inactive capital market significantly restricts and determines the ability of using approaches and methods of appraisal, the cost of capital and the concepts of value. Accordingly, in the inactive capital markets precondition of relevant appraisal is previous analysis of transactions prices significance and aspects of market inactivity. The aim of research is to emphasize the importance of the examination of capital markets characteristics in the process of appraisal that thereby will be relevant and useful for purchasers in making the right business and investment decisions.
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Purpose – The purpose of the research is to investigate the links between concentration of ownership and control of analysed companies and the value of their financial and market performance, as well as to test whether this performance depends on the presence of owners of large, but non -controlling blocks of votes among shareholders.Research method – The article presents an analysis of data contained in financial statements and Management Board’s reports. Pearson’s correlation coefficient, one -way ANOVA test and Kruskal -Wallis test were also used to investigate the links between concentration of ownership and control of analysed companies and the value of their financial and market performance.Results – The conducted studies showed theconcomitance of concentration of owner-ship and control in hands of shareholders holding over 5% of votes at the general meeting and the financial performance in the analysed entities.The research also showed that the relation between the market value of shares and their book value in companies in which shares of two largest shareholders were the same or comparable was higher than in entities in which a difference between these shares was observed. Moreover, ownership and control structure in such entities allowed them for a better use of resources.Originality / value / implications / recommendations – The article emphasises not only the role of ownership and control concentration as regards the value of financial and market performance of companies, but also presents the desired scope of concentration in the hands of the individual shareholders. It draws attention to the role of large, but non -controlling shareholders in corporate governance, especially in the mitigation of the horizontal agency conflict.
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The purpose of this article was a description and justification of the direction of changes which inevitably await the area of the functioning of the internal audit within the territorial self-government units in Poland. The analysis was preceded by a review of the evolution of the functioning and the definition of the internal audit within the territorial self-government units in Poland over the last twenty years. The sources and causes of the planned legislative changes in the act on public finance concerning the internal audit in the sector of public finance in Poland are presented with a special emphasis on the territorial self-government units. The conducted research is based on the study of literature on public finance, internal audit, and managerial control. A detailed analysis and interpretation of legal acts in force in the researched area was conducted, particularly including the draft bill amending the public finance act and certain other acts (no UD327 in the list of legislative and programme works of the Council of Ministers as of 1st March 2022) to justify the direction of the changes.
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Economic value added as a method for company performance measurement for time periods of one year is firstly analyzed in the paper. After that we discuss market value added as a difference between company market value and value of invested capital. Then the interdependence between economic value added and market value added is explained. Finally, we point out that there is relationship between net present value as a method for investment rentability evaluation and company market value.
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The concept of value at risk (Value at Risk - VaR) is a measure that is increasingly used for assessing the level of exposure of financial markets’ participants. The aim of this concept, which has begun to prevail in the world of risk management since 1994, is estimation of the maximum loss of financial position at a given time for a given probability. Many methods have been developed to quantify risk. There are a number of measures to quantify the risk, and the aim of this paper is to expose these measures, with special emphasis on VaR. Also, when measuring financial risk, characteristics of financial time series should be taken into account, and therefore are particularly prominent in the work. The second part of the paper explains how these risk measures are covered by the regulations in risk control. The task of this paper is to analyze the risk control in Montenegro, and the importance of standards in force in contribution to the improvement of risk control. The idea of this paper is motivated by the desire to approach quantifying and managing risk in Montenegro more seriously. In the future, within the framework of the measures of the Central Bank to strengthen the financial system, the situation in the banking system will be continuously monitored and analyzed, by taking timely corrective measures in risk management in banks, as well as the further implementation of internationally accepted standards and principles in this field.
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CAPM (Capital Assets Pricing Model) has been developed by William Shape, John Lintner and Jan Mossion in the early 1960s, on foundations of earlier works of Harry Markowiz and the model itself is in the core of economics’ theory and modern finance. Model was introduced by William Shape, who received Nobel prize in economics in 1990. This model of equity assessment enables investors to forecast precise risk and yield relation in financial instrument and it is being used in three main purposes. First, enables investors to calculate the expected rate of return of financial instrument. Second, CAPM assist in share price determination in initial public offering (IPO). Third use of CAPM is determination of equity price as own source of funding. Although the model is not empirically verified and it is the subject of critiques by some authors, its use is broad because of precise determination of risk and yield relation in financial instruments and his appropriate accuracy.
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The case study highlights the importance of post-listing conduct in line with investor expectations through statistical research on the market impact of high compliance. In this way, it explores whether a proactive approach and the quality of organisational culture can be strategic pillars for companies listed on AeRO market administered by Bucharest Stock Exchange in relation to the capital market. The main finding based on the regression methodology shows that there is a positive and statistically significant relationship between the corporate governance quality score and investor relations, i.e. the liquidity score. The regression coefficient obtained supports the hypothesis that 46% of the investment behaviour manifested in the market, expressed by the value traded, can be explained by the quality of corporate governance and investor interaction supported by issuers.
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