The Impact of Unsystematic Risk on Stock Returns in an Emerging Capital Markets (ECM’s) Country: An Empirical Study

Masry, Mohamed; Menshawy, Heba El

doi:10.5430/ijfr.v9n1p189

Cited by 7 publications

(7 citation statements)

References 33 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…A study by Grinblatt and Titman (1989) also document that only systematic risk is important to holders of diversified portfolios. The irrelevance of idiosyncratic risk is further supported in a recent study by Masry & Menshawy (2018) who show that unsystematic risk measured by individual share price volatility is not a significant predictor of Egyptian stock market returns over the period 2006 to 2015. In contrast some studies show that for incompletely diversified funds, idiosyncratic may still influence returns (Moreno & Rodrıguez, 2013;Kinnunen & Martikainen, 2017).…”

Section: Introductionmentioning

confidence: 74%

“…However their returns are also more uncertain due to political instability, exchange controls or if restrictions in repatriation of funds are imposed by that country. As a result of these uncertainties, their shares prices tend to be more volatile compared to mature economies (Masry & Menshawy, 2018). Prior studies have also shown that fund managers can influence the market risk exposure of the fund.…”

Section: Idiosyncratic Risk As a Moderating Variablementioning

confidence: 99%

See 1 more Smart Citation

The Interaction of Market Risk and Idiosyncratic Risk on Equity Mutual Fund Returns

Murugesu

Sakaran

2019

IJFR

View full text Add to dashboard Cite

This study examines the importance of idiosyncratic and systematic risks in explaining equity fund returns in Malaysia. The level of market and idiosyncratic risk in a mutual fund depends on what asset class it invests in. Equity type asset classes are exposed to both systematic and idiosyncratic risk but research generally suggest that only systematic risk is relevant in mutual fund selection since idiosyncratic risk can be reduced through fund diversification. This study attempts to expand the insights of the risk-return relationship by providing additional evidence on the direct and indirect effects of investment risk on equity mutual fund returns. Employing partial least squares structural equation modelling (PLS-SEM), we also explore if idiosyncratic risk moderates the relationship between market risk and mutual fund returns. A sample of 150 Malaysian domestic equity mutual funds comprising of large, mid & small-cap equity funds were selected from the Morningstar website. The results indicate that market risk does not influence mutual funds returns but idiosyncratic risk has a significant and positive effect. Idiosyncratic risk is proxied by fund characteristics comprising of size, age, expenses and fund manager ability. This study shows that fund size, age or expenses are not significant and only the fund alpha which measures fund manager ability is relevant in predicting fund returns. The study also finds that the fund alpha moderates the influence of market risk on returns by changing the nature of the relationship from positive to negative.

show abstract

Section: Introductionmentioning

confidence: 74%

Section: Idiosyncratic Risk As a Moderating Variablementioning

confidence: 99%

The Interaction of Market Risk and Idiosyncratic Risk on Equity Mutual Fund Returns

Murugesu

Sakaran

2019

IJFR

View full text Add to dashboard Cite

show abstract

“…A robustness check in this study will examine the link between daily returns on Bitcoin and signals generated by the trading rules used (hypothesis H3). TA assumes that investors follow signals emitted at time t − 1, and that trades are executed at time t. That is, the demand (supply) of any particular security will exceed supply (demand) at time t, which will cause the price to either increase, thereby activating buy signals, or decrease to trigger sell signals at time t: The momentum effect is backed by one of the basic beliefs in TA, where the market is said to discount all types of information like fundamentals, non-fundamentals and even rumours (Masry, 2018). Since the early 1990s, the only other paper that has attempted to study the relationship between returns and signals is that of Bessembinder and Chan (1995) which applied a similar framework as in Eqn (9):…”

Section: Consistency and Robustness Checkmentioning

confidence: 99%

Technical trading rules' profitability and dynamic risk premiums of cryptocurrency exchange rates

Masuku

Gopane

2022

JCMS

View full text Add to dashboard Cite

PurposeThe study considers time-varying risk premium in investigating the capability of technical analysis (TA) to predict and outperform a buy–hold strategy in Bitcoin exchange rate returns.Design/methodology/approachThe study tests the technical trading rule of fixed moving average (FMA) on daily actual and equilibrium returns of Bitcoin exchange rates. The equilibrium returns are computed using dynamic CAPM in conjunction with a VAR-MGARCH (1, 1) system. The empirical evaluation of the study uses a case study of four Bitcoin exchange rates (BTC/AUD, BTC/EUR, BTC/JPY and BTC/ZAR) for the period 19 June 2010 to 30 October 2020.FindingsThe findings are consistent with related studies in conventional foreign exchange markets that find TA to be profitable, especially in emerging markets. Nevertheless, the consideration of risk premium has the effect of reducing the abnormal returns. Also, further robust tests reveal that Bitcoin returns possess a momentum effect which prompts further study in efficient market hypothesis research.Practical implicationsThe empirical findings of this study should benefit portfolio managers and active investors on the strength of TA to predict returns in a speculative market like the Bitcoin exchange rate market.Originality/valueThe study takes cognisance that cryptocurrency trading is speculative in nature which renders it a good candidate for TA methods. While there are studies that have explored the value of TA in Bitcoin exchange rates, these studies fail to incorporate the effects of time-varying risk premiums, the strength and focus of the current paper.

show abstract

“…The capital structure of ECM companies is generally characterised by a significant low share of long-term debt, and because of the underdeveloped bond market, banks are the main source of debt financing in general. This implies that ECM companies are subject to more financial restrictions (Masry and Heba, 2018). Fazzari et al (1988) showed that companies with larger financing constraints retain the majority of their income.…”

Section: Financial Riskmentioning

confidence: 99%

“…They are often of more recent origin, have less information efficiency, and are smaller and more volatile. ECMs also differ from these developed markets due to other characteristics, such as corporate governance, taxation of capital gains, unsystematic risk and dividends, and ownership structure (Masry and Heba, 2018). In addition, ECMs, including Egypt, are typically characterised by a concentration of ownership and financial systems that are more bank-oriented than market-oriented.…”

Section: Introductionmentioning

confidence: 99%

Factors Affecting Dividend Policyin an Emerging Capital Markets (ECM’s) Country: Theoratical and Empirical Study

Masry¹,

Ahmed²,

Amer³

2018

IJEFM

Self Cite

View full text Add to dashboard Cite

The dividend decision is taken after careful consideration of a number of factors, such as legal and financial. This is because it is impossible to develop a dividend policy set that applies to all companies. The decision about dividends differs from company to company in the light of company considerations. The dividend is partly dependent on the current earning of the company and partly on the dividend from the previous year. Therefore, the main changes in profit with the existing rate of dividends were the main determinants of corporate dividend policy. The research showed that the profitability aspects and their indicators for each of the return on equity return on asset, and earning per share without dividend yield, have the greatest impact on share price performance, followed by the financial risks aspect of financial leverage without gains variation which comes in the second rank. Then, the factor of size, investment opportunity for each of investment opportunity and net profit standard deviation without assets volume comes in the third place and finally, the liquidity and signals factor represented in the cash ratio without signals index. While the profitability aspects and its indicators for each of the return on equity, return on asset, earning per share without dividend yield are the most effective on pay-out ratio (first rank), followed by financial risks aspect and gains variation coefficient without financial leverage in the second rank, then the liquidity factor of index without the signals in the third place and finally size and investment opportunity factor for each of investment opportunity and assets volume without net profit standard deviation.

show abstract

The Impact of Unsystematic Risk on Stock Returns in an Emerging Capital Markets (ECM’s) Country: An Empirical Study

Cited by 7 publications

References 33 publications

The Interaction of Market Risk and Idiosyncratic Risk on Equity Mutual Fund Returns

The Interaction of Market Risk and Idiosyncratic Risk on Equity Mutual Fund Returns

Technical trading rules' profitability and dynamic risk premiums of cryptocurrency exchange rates

Factors Affecting Dividend Policyin an Emerging Capital Markets (ECM’s) Country: Theoratical and Empirical Study

Contact Info

Product

Resources

About