Investment, Idiosyncratic Risk, and Ownership

Papanikolaou, Dimitris; Panousi, Vasia

doi:10.2139/ssrn.1319596

Cited by 11 publications

(5 citation statements)

References 57 publications

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“…, 6) is the correlation coefficient function of the control variables, and ε i (t) is the random perturbation term. To test the significance of the control variables, we use (6) to examine the five control variables in Table 1 with the variable EPU taken out, and the results are shown in Figure 2.…”

Section: Model Specification and Empirical Resultsmentioning

confidence: 99%

“…e firm-level measures of economic policy uncertainty by most scholars include variability in expected growth rates of demand [4,5], individual firm share price volatility changes [6], and implications of changes in top company or country leadership [7,8]. In accordance with the economic policy uncertainty index constructed by Baker et al [9], the existing literature investigates the impact of economic policy uncertainty on different firms' investment decisions of using GMM models [10], constructing time-varying parametric VAR models [11], and so on.…”

Section: Introductionmentioning

confidence: 99%

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Identifying the Dynamic Influence of Economic Policy Uncertainty on Enterprise Investment Using Functional Data Analysis

Wang

Liu

et al. 2022

Mathematical Problems in Engineering

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Economic policy uncertainty (EPU) is one of the important influencing factors for enterprise investment. By its nature, enterprise investment is dynamically affected by uncertainty. We examine the time-varying impact of EPU on the level of corporate investment by introducing functional data analysis (FDA). Based on smoothing the discrete data of 106 China Securities Index (CSI) 300 firms into the continuous curve, we examine the dynamic relationship between EPU on corporate investment level and investment efficiency. In addition, we explore the effect of EPU on the level of corporate investment and investment efficiency after grouping regressions in a functional model. The findings show the following: Firstly, there is a suppressive effect of rising EPU on the level of corporate investment. However, when the EPU is low, it has a significant promoting effect on the level of corporate investment and gradually decreases with the increase of uncertainty level. Secondly, elevated EPU has a promoting effect on the efficiency of corporate investment. The inhibitory effect on firm investment efficiency is observed at low EPU and changes to a promotional effect at high EPU. Thirdly, increasing EPU has a greater inhibitory role in the investment level of nonstate firms and a greater promotional role in the investment efficiency of state firms. We seek to expand the research on the impact of macrouncertainty on microfirm investment and introduce FDA to provide a meaningful reference to solve the current controversial issue.

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Section: Model Specification and Empirical Resultsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Identifying the Dynamic Influence of Economic Policy Uncertainty on Enterprise Investment Using Functional Data Analysis

Wang

Liu

et al. 2022

Mathematical Problems in Engineering

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“…Many studies shed light on the impact of uncertainty on firms. Papanikolaou and Panousi (2012), Byrne et al (2016) and Rashid and Saeed (2017), point out the significant effect of uncertainty on companies survivals. Other studies focus on the influence of uncertainty on investor’ behavior.…”

Section: Introductionmentioning

confidence: 99%

Financial uncertainty valuation: does Shariah compliant screening matter?

Alahouel

Loukil

2020

IMEFM

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Purpose This paper aims to investigate the financial uncertainty vary according to different financial assets type: conventional and Islamic. Design/methodology/approach Common factors are related to risk or known information. For this, the authors use general dynamic factor model to extract common variation between both types of indexes. Then they calculate stochastic volatility for each idiosyncratic component. They also carry out the study on three different family indexes respectively, Dow Jones, S&P and MSCI indexes, for the period going from January 1, 2008 to June 30, 2018. Through a comparison analysis with uncertainty index designed for conventional assets, the authors examine the similarity between the two indexes via mean, median and variance tests. They decrypt the interrelation between them by using OLS linear regression, vector autoregressive model. Findings The findings show that Islamic assets uncertainty is different from conventional uncertainty level. This difference can be due to the Shariah screening and the prohibition of gharar. The main findings suggest that Islamic financial uncertainty is lower than conventional one. The OLS results prove that conventional financial uncertainties have no impact on their Islamic counterparts. In addition, Islamic financial uncertainty appears to have no significant influence on conventional one exception for Dow Jones pair. Overall, the findings support the decoupling hypothesis in term of uncertainty only for SP and MSCI indexes. Practical implications Risk averse investors can find their claim in Shariah-compliant assets, as it offers a low level of financial uncertainty. A portfolio manager may benefit from the long run non-association in uncertainty between Islamic and conventional assets especially in time of crisis. Originality/value In this work, the authors measured financial uncertainty differently and take into account the specific features of each index type to improve the results quality.

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“…Economic policy uncertainty (EPU) refers to the risk associated with the independence of a country's regulatory framework and the unpredictability of future government policies, such as fiscal, monetary and regulatory policies (Al-Thaqeb and Algharabali, 2019;Wang et al, 2019). This uncertainty can restrict investment flows and decisions (Bernanke, 1980;Kido, 2016;Chu and Fang, 2021) and the impact of uncertainty on individual companies is often driven by investors' fear of potential loss, a phenomenon known as risk-aversion behavior (Kang et al, 2017;Papanikolaou and Dimitris, 2012).…”

Section: Introductionmentioning

confidence: 99%

The COVID-19 pandemic, economic policy uncertainty and the hedging role of cryptocurrencies: a global perspective

Aftab,

Haq,

Albaity

2023

CFRI

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PurposeThe COVID-19 pandemic has led to global economic policy uncertainty, which has increased the need to investigate ways to mitigate the uncertainty. This study aims to examine the potential of cryptocurrencies as a hedge and safe haven avenue against economic policy uncertainty.Design/methodology/approachThis study investigates the behavior of the five leading cryptocurrencies in relation to country-level and group-level economic policy uncertainty indices, as measured by the text-based method developed by Baker et al. (The Quarterly Journal of Economics, 2016, 131, 1593–1636). The research covers a broad range of emerging and developed economies from July 2013 to September 2020. The study employs the approach of Narayan et al. (Economic Modelling, 2016, 53, 388–397) to examine the hedging and safe-haven properties of cryptocurrencies.FindingsThis study finds that the top cryptocurrencies play a hedging role against economic policy uncertainty, with some exceptions. Additionally, there is evidence to support the idea that cryptocurrencies can serve as a safe haven during the COVID-19 pandemic. As a result, investors may benefit from using cryptocurrencies as a risk-management avenue during times of uncertainty.Originality/valueThis research contributes to the existing literature by testing the cryptocurrencies' hedging and safe haven properties in a new way, by analyzing their lead and lag behaviors using a recent and innovative approach. Additionally, it examines a wide range of emerging and advanced markets, providing insight into the potential of using cryptocurrencies as a risk mitigation avenue.

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Investment, Idiosyncratic Risk, and Ownership

Cited by 11 publications

References 57 publications

Identifying the Dynamic Influence of Economic Policy Uncertainty on Enterprise Investment Using Functional Data Analysis

Identifying the Dynamic Influence of Economic Policy Uncertainty on Enterprise Investment Using Functional Data Analysis

Financial uncertainty valuation: does Shariah compliant screening matter?

The COVID-19 pandemic, economic policy uncertainty and the hedging role of cryptocurrencies: a global perspective

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