What Drives Long-Term Equity Returns, January 2010

Purpose – This paper aims to investigate opportunities of the short- and long-run international portfolio diversification (IPD) benefits by investing in the Middle Eastern oil-producing countries. Over the past decades, IPD has been the integral feature of global capital markets. Several potential benefits like increasing returns and/or reducing risk have made investors to internationalize their portfolios. Solnik’s theory (1974) approved that gains can be achieved through IPD if returns in the different markets are not perfectly correlated. This may attribute to low correlations of equity returns among different economies. In this regards, there would be a large potential of diversification benefits for investors that diversify into new emerging group of economies such as equity markets of the main oil-producing countries. These markets are often segmented and they may ensure a superior return rate for a given risk level. Design/methodology/approach – In most of the previous studies, Pearson’s correlation test is used to analyze the short-run relationship of market prices. However, recent empirical studies indicate that correlations between equity returns vary over the time. To examine the time-varying conditional correlation, this paper used the dynamic conditional correlation (DCC) model to investigate opportunities of the short-run IPD benefits. In addition, for the long-run linkage analysis, the autoregressive distributed lag (ADRL) approach introduced by Pesaran et al. (2001) is applied. Findings – It is found that, the market returns of the sampled countries are not definitely correlated in the short- and long-term. So, international portfolio investors may get the short- and long-term diversification benefits by diversifying their portfolios among the Middle Eastern equity markets, namely, Iran, Bahrain, Qatar, Kuwait, Oman, Saudi Arabia and UAE. Originality/value – This paper departs from earlier studies by focusing on the dynamic characteristics of correlation. Two main issues are pursued in this paper. First, instead of modeling the correlation by methods like Pearson correlation coefficient that consider the constant-correlation assumption, this paper directly uses the DCC model. Second, to empirically estimate the long-run relationship among stock markets in the Middle Eastern oil-producing countries, the ARDL approach is utilized. The ARDL approach is more robust and performs well for small sample sizes than other co-integration techniques.

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Institutional Trade Persistence and Long-Term Equity Returns

The Journal of Finance ◽

10.1111/j.1540-6261.2010.01644.x ◽

2011 ◽

Vol 66 (2) ◽

pp. 635-653 ◽

Cited By ~ 89

Author(s):

AMIL DASGUPTA ◽

ANDREA PRAT ◽

MICHELA VERARDO

Keyword(s):

Equity Returns ◽

Institutional Trade

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Long‐term stock returns in Brazil: Volatile equity returns for U.S.‐like investors

International Journal of Finance & Economics ◽

10.1002/ijfe.2118 ◽

2020 ◽

Author(s):

Eurilton Araújo ◽

Ricardo Brito ◽

Antonio Z. Sanvicente

Keyword(s):

Stock Returns ◽

Equity Returns

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An Empirical Investigation of the Causal Relationship among Monetary Variables and Equity Market Returns

THE LAHORE JOURNAL OF ECONOMICS ◽

10.35536/lje.2009.v14.i1.a5 ◽

2009 ◽

Vol 14 (1) ◽

pp. 115-137 ◽

Cited By ~ 7

Author(s):

Arshad Hasan ◽

M. Tariq Javed

Keyword(s):

Exchange Rates ◽

Money Supply ◽

Negative Impact ◽

Equity Market ◽

Equity Returns ◽

Cointegration Analysis ◽

Dynamic Relationship ◽

The Interest Rate ◽

Multivariate Cointegration

This study explores the long-term dynamic relationship between equity prices and monetary variables for the period June 1998 to June 2008. Monetary variables include money supply, treasury bill rates, foreign exchange rates, and the consumer price index. The data have been examined using multivariate cointegration analysis and Granger causality analysis. Johansen and Juselius’ multivariate cointegration analysis indicates the presence of a long-term dynamic relationship between the equity market and monetary variables. Unidirectional Granger causality is found between monetary variables and the equity market. In the case of money supply, a positive relationship supports the liquidity hypothesis. Impulse response analysis indicates that the interest rate shock has a negative impact on equity returns in the Pakistani equity market. Exchange rates also have a negative impact on equity returns in the short run. However inflation has little impact on returns in the equity market. Variance decomposition analysis suggests that the interest rate, exchange rate, and money supply shocks are a substantial source of volatility for equity returns.

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New Equity Performance Following Chapter 11 Emergence

Journal of Business & Economics Research (JBER) ◽

10.19030/jber.v5i8.2574 ◽

2011 ◽

Vol 5 (8) ◽

Author(s):

Nicholas K. Wold ◽

Judith A. Laux

Keyword(s):

Equity Returns ◽

Capital Asset Pricing ◽

Font Size ◽

Public Companies ◽

Asset Pricing Model ◽

Price Momentum ◽

Short And Long Term ◽

Empirical Tests

This body of research investigates how the performance of exchange-traded common equity from firms in Chapter 11 bankruptcy emergence compares with common stock from non-bankrupt competitors and recently public peers in short and long-term time horizons.  Return data are gathered for a sample of sixteen financially restructured companies, each paired with two non-distressed industry competitors and one recently-public peer.  Using the Capital Asset Pricing Model as a primary analytical tool, empirical tests show a positive correlation in equity returns among the samples of restructured and non-distressed market competitors and a stock underperformance from the sample of IPO competitors.  These results suggest that markets are better at judging the value of post-Chapter 11 companies relative to newly public companies and refute the theory of IPO price momentum.

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