This article examines the risk and return profiles of stock indices composed of companies meeting environmental, social and governance (ESG) screening criteria [such as the Dow Jones Sustainability Indices (DJSI)] and conventional composite indices of eight Asian countries from 2002 to 2014. The results indicate that there are no significant differences in the returns or risk-adjusted returns between the ESG indices and the composite indices within countries. The results do reveal that the market volatility of the ESG indices is higher than the market volatility of the conventional indices. Market betas of DJSI and ESG equity indices are significantly lower than betas of the composite equity indices. The overall results indicate that the performance of ESG equity indices of many Asian countries is similar to the performance of conventional indices, suggesting that investors can pursue socially responsible investing objectives without a material difference in portfolio performance from conventional investing.
A recent major development in international finance has been
the growing interest of the portfolio managers in emerging stock
markets. The interest in the emerging markets has been accelerated by
global trends towards the opening up of economies and financial markets,
the free flow of capital and the privatisation of financial
institutions. The integration of emerging markets globally has been
hindered so far as, besides other several factors, participating in
emerging securities markets has posed serious problems for international
investors. "These markets lack the depth, regulatory framework, and
structural safeguards that characterise equity markets in the 'United
States and in a few industrial countries," [Medewitz et al. (1991)]. A
peculiar risk of investing in the emerging markets, besides the
currency, political and investment risk, is the "risk arising out of the
development stage of emerging markets," [Errunza and Losq (1987)].
Compounding the difficulties for the international investor is the lack
of information pertinent for making investment decisions. A study of
emerging markets, therefore, becomes important in shedding light on the
economic and institutional characteristics of these markets.
This article examines how better discipline can be brought to fiscal policy, first, through enhanced institutional checks and balances, and second, through better market discipline. We examine the political institutions and budgetary processes that can affect fiscal policy in Pakistan. A sound fiscal policy feeds bond market development, while the bond market provides signals in relation to the prudent conduct of fiscal policy. A common dimension in this mutual relationship is the governance environment. The article concludes that instilling fiscal discipline will remain intractable unless approached comprehensively. Long-term solutions must be found in the development of political institutions and improved governance. An active and liquid bond market can play a crucial role in bringing about fiscal discipline. The real challenge lies in summoning the political will and raising public awareness to implement the required measures.
The objective of the study is to examine possible presence of
nonlinear speculative bubbles in the Karachi Stock Exchange (KSE).
Bubbles are argued to exist when there are substantial deviations of
market value from the estimated fundamental values. We estimate a series
of fundamental values from a four variable Vector Autoregression Model
(VAR) using the main KSE100 index along with measures of world stock
prices, the Pakistani exchange rate, and the Pakistani short-term
interest rate. Residuals of this estimated fundamental time series are
then tested for possible speculative deviations using a Hamilton regime
switching test and a rescaled range Hurst coefficient test, with a
further test for nonlinearity beyond the ARCH effects using the BDS
statistic. For all of these, we reject the null hypotheses of the
absence of speculative bubbles and nonlinearities beyond ARCH in these
series. While these results suggest the possible presence of such
bubbles, we note methodological limits on proving that due to the
problem of mis-specified fundamentals. We further discuss some
characteristics of the regulatory environment that may make it
especially susceptible to such phenomena and may be considered by the
policy-makers for the attenuation of speculative and manipulative
behaviour. Keywords: Bubble, Pakistan, Stock Market, Regime Switching,
Rescaled Range Analysis, Nonlinearity
We examine the experience of the Islamic banks with respect to the global financial crisis of 2007-09 (GFC) and find that these were not immune from the ravages of the GFC. In particular, our analysis of the banking sector in Malaysia shows that the Islamic banks were adversely affected by it to a greater extend then were the conventional banks. Post-December 2008, the capital adequacy ratios for these banks were significantly lower, the loan loss ratios significantly higher, and their total loss reserves and secondary liquidity positions deteriorated.
Reports concerns that the lifting of restrictions on portfolio investment by foreigners would lead to overheating or excessive volatility in the capital markets of developing countries. Describes the abrupt lifting of restrictions on the Karachi Stock Exchange in Pakistan, given six notable developments in 1991. Examines the homogeneity of variance on weekly returns on the market index from 1988 to 1993 (over the period of liberalization). Finds that stock market volatility will reflect economic variables in the long run, while the market is shown to be information‐efficient.
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