The COVID-19 Stock Market Downturn: Expected Growth or Discount Rate?

2020 ◽  
Author(s):  
Pascal Böni ◽  
Heinz Zimmermann
Keyword(s):  
Stock Market ◽  
Discount Rate

High Discounts and High Unemployment

2017 ◽  
Vol 107 (2) ◽  
pp. 305-330 ◽  
Author(s):  
Robert E. Hall
Keyword(s):  
Labor Market ◽  
Stock Market ◽  
Discount Rate ◽  
Job Creation ◽  
Discount Rates ◽  
Present Value ◽  
High Unemployment ◽  
Business Income ◽  
New Hire

Unemployment is high when financial discounts are high. In recessions, the stock market falls and all types of investment fall, including employers' investment in job creation. The discount rate implicit in the stock market rises, and discounts for other claims on business income also rise. A higher discount implies a lower present value of the benefit of a new hire to an employer. According to the leading view of unemployment—the Diamond-Mortensen-Pissarides model—when the incentive for job creation falls, the labor market slackens and unemployment rises. Thus high discount rates imply high unemployment. (JEL E24, E32, E44, J23, J31, J63)

scholarly journals The Impact of Monetary Policy on Financial Market in South Africa: A VAR Analysis

2014 ◽  
Vol 6 (8) ◽  
pp. 636-646 ◽  
Author(s):  
Flavien Fokou Noumbissie
Keyword(s):  
South Africa ◽  
Monetary Policy ◽  
Stock Market ◽  
Money Supply ◽  
Discount Rate ◽  
Financial Market ◽  
Negative Impact ◽  
Consumer Price Index ◽  
Wealth Creation ◽  
The Impact

Like in many other countries, the South African financial market facilitates the process of raising capital by channelling funds to more productive economic activity, thereby building the nation's economy while enhancing job opportunities and wealth creation. The aim of this paper is to assess the impact of monetary policy on financial market in South Africa. It is important to constantly look into this interaction since policy decisions have a direct influence on financial market. A negative response from the market side may jeopardise economic stability. The study uses the vector autoregressive (VAR) model to evaluate the impact of monetary policy on financial market in South Africa. The model consists of five policy instruments as variables; namely: money supply (M3), real exchange rate(ER), discount Rate (R), consumer price index (CPI), gross domestic product (GDP) and the two market related variables: Stock market turnover (S) and Bond market turnover (B). Data is obtained from SARB and OECD databases for a period of 53 quarters from 2000:Q1 to 2013:Q1. By the use of impulse response function (IRF), the study found that given current economic situation in South Africa, stock market turnover reacts positively to money supply; discount rate; real exchange and GDP shocks. On the other hand stock market turnover reacts negatively to CPI economic shocks. To correct CPI negative impact on markets, we suggest that the policymakers could envisage a contractionary monetary policy translated by a proportional cut in money supply through the sales of government securities.

scholarly journals 6.3. The problems of the determinating of the discount rate for the non-public companies

2020 ◽  
Author(s):  
Ж.Х. Темукуева
Keyword(s):  
Stock Market ◽  
Discount Rate ◽  
External Environment ◽  
New Method ◽  
Public Companies

Целью исследования является разработка модели определения ставки дисконтированная, применимой в условиях слаборазвитого фондового рынка для малого и среднего бизнеса. В работе рассматриваются существующие методы определения ставки дисконтирования. Анализируются их основные недостатки. Также был выведен абсолютно новый метод, основанный на стратегических методах анализа внешней среды организации. The aim of the study is to develop a discount rate determination model that is applicable in an underdeveloped stock market for small and medium-sized busi-nesses. The paper discusses existing methods for determining the discount rate. Their main disadvantages are analyzed. Also, a completely new method was developed based on strategic methods for analyzing the organization’s external environment.

scholarly journals 6.1. Modern techniques of behavioral analysis of financial instruments on the stock market

2020 ◽  
Author(s):  
С.Ю. Богатырев
Keyword(s):  
Stock Market ◽  
Discount Rate ◽  
Stock Markets ◽  
Market Value ◽  
Behavioral Analysis ◽  
Financial Instruments ◽  
Behavioral Factors ◽  
Behavioral Pricing ◽  
Specific Calculations ◽  
Capm Model

В статье рассматриваются диапазоны конкретных значений поправки к бэта-коэффициенту, используемому при расчете ставки дисконтирования по модели CAPM для получения поведенческой ставки дисконтирования и расчета рыночной стоимости акций на рынках с учетом поведенческих факторов. В статье продемонстрировано применение инструментария поведенческого ценообразования. Представлены конкретные расчеты, предложены ориентиры для расчета поправки компонентов формулы расчета ставки дисконтирования для расчета стоимости с учетом эмоционального настроения на фондовых рынках. The article discusses the ranges of specific values of the beta correction ‒ the coefficient used in calculating the discount rate using the CAPM model to obtain a behavioral discount rate and calculating the market value of shares in the markets, taking into account behavioral factors. The article demonstrates the use of behavioral pricing tools. Specific calculations are presented, guidelines are proposed for calculating the amendments to the components of the formula for calculating the discount rate for calculating value, taking into account the emotional mood of stock markets.

scholarly journals INVESTING THE PRICING OF EXCHANGE RATE RISK IN THE STOCK MARKET: EVIDENCE FROM PAKISTAN STOCK MARKET

2016 ◽  
Vol 12 (2) ◽  
Author(s):  
Muhammad Tariq ◽  
Keyword(s):  
Exchange Rate ◽  
Stock Market ◽  
Term Structure ◽  
Discount Rate ◽  
Risk Premium ◽  
Foreign Currency ◽  
Stock Exchange ◽  
Exchange Rate Risk ◽  
Rate Risk ◽  
Currency Exposure

Objective: This paper is designed to empirically examine the pricing of exchange rate risk in the stock market in Pakistan. Methodology: The study is based on two-factor and multi-factor arbitrage pricing models. The empirical evidences are based on 15 years monthly data from January 1998 to December 2015, for exchange rate, discount rate, inflation, t bill and the Karachi Stock Exchange (KSE) 100 indexes is collected from State Bank of Pakistan and Karachi Stock Exchange. Results: The results, however, conclude that the exchange rate risk is priced in the stock market. Whereas, the remaining factors such as risk premium attached to foreign currency exposure and the term structure of discount rate appear to have significant effect on exchange rate risk. We can generalize that the exchange market in Pakistan are influenced by the stock market. Policy implication: This paper provides empirical evidence that the risk exposure of exchange rate is largely influenced by the changes in stock market. Therefore, the concerned persons are proposed for the consideration of this issue.

Stock Market Returns and GDP News

2020 ◽  
pp. 0148558X2091341
Author(s):  
Panos N. Patatoukas
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Stock Returns ◽  
Discount Rate ◽  
Gdp Growth ◽  
Market Returns ◽  
Stock Market Returns ◽  
Consensus Forecasts ◽  
Macro Finance ◽  
Discount Rate News

What is the link between stock returns and news about economic growth? Using consensus forecasts from the Philadelphia Fed’s Survey of Professional Forecasters, I find that the univariate association between stock returns and gross domestic product (GDP) growth forecast surprises is indistinguishable from zero. Although consistent with prior macro-finance research, this phenomenon is intriguing if one believes that the stock market should move in sync with the economy. I consider two non–mutually exclusive hypotheses for this puzzling phenomenon. The first hypothesis is that GDP growth forecast surprises are correlated with offsetting cash flow news and discount rate news. The second hypothesis is that GDP growth forecast surprises measure news about economic growth with noise. I extract a measure of market-level discount rate news using accounting data and find evidence consistent with the hypothesis of offsetting value-relevant news. Overall, this article makes an important step toward resolving evidence of a disconnect between stock market returns and news about economic growth. More broadly, this article illustrates how accounting constructs and methods can be applied to inform macro-finance questions.

scholarly journals Influence of monetary information signals of the USA on the Ukrainian stock market

2020 ◽  
Vol 17 (4) ◽  
pp. 327-340
Author(s):  
Roman Pavlov ◽  
Tetiana Grynko ◽  
Tetiana Pavlova ◽  
Oksana Levkovich ◽  
Dariusz Pawliszczy
Keyword(s):  
Stock Market ◽  
Discount Rate ◽  
Market Reaction ◽  
Financial Information ◽  
Stock Index ◽  
Stock Market Volatility ◽  
Research Information ◽  
Financial Cycle ◽  
Stock Market Reaction ◽  
The Usa

The stronger the level of economic integration between countries, the greater the need to study the formation patterns of the stock market reaction to the financial information signals. This concerns the Ukrainian stock market, which is now in its infancy, and which reaction to financial information signals is sometimes ambiguous. The research aims to identify the formation patterns of return and volatility indicators of the Ukrainian stock market reaction to the US financial information signals. To assess the direct nature of US financial information signals effect on the PFTS stock index, the GARCH econometric modeling toolkit was applied. The research information base is the PFTS stock index and the Federal Reserve System financial information signals at the discount rate for 2000–2019. The fetch is divided into intervals corresponded to the ascent and decline phases of the financial cycle. It was found that an unforeseen increase in the discount rate at the financial cycle decline phase by 25 basis points decreases the PFTS stock index return, on average by 2.9%. Besides, the hypothesis about the general change stabilizing effect in the discount rate on the Ukrainian stock market volatility at the financial cycle growth phase was confirmed. Nevertheless, for investors, the most essential is the regulator’s monetary signals in the discount rate at the financial cycle decline phases rather than at the ascent phases because there is a more significant increase in the volatility level.

Predicting Stock Market Performance

2020 ◽  
pp. 1-10
Author(s):  
Thomas Plieger ◽  
Thomas Grünhage ◽  
Éilish Duke ◽  
Martin Reuter
Keyword(s):  
Stock Market ◽  
Risk Taking ◽  
Life Stress ◽  
Price Volatility ◽  
Individual Characteristics ◽  
Self Report ◽  
Financial Behavior ◽  
Market Simulation ◽  
Stock Market Performance ◽  
Risk Taking Behavior

Abstract. Gender and personality traits influence risk proneness in the context of financial decisions. However, most studies on this topic have relied on either self-report data or on artificial measures of financial risk-taking behavior. Our study aimed to identify relevant trading behaviors and personal characteristics related to trading success. N = 108 Caucasians took part in a three-week stock market simulation paradigm, in which they traded shares of eight fictional companies that differed in issue price, volatility, and outcome. Participants also completed questionnaires measuring personality, risk-taking behavior, and life stress. Our model showed that being male and scoring high on self-directedness led to more risky financial behavior, which in turn positively predicted success in the stock market simulation. The total model explained 39% of the variance in trading success, indicating a role for other factors in influencing trading behavior. Future studies should try to enrich our model to get a more accurate impression of the associations between individual characteristics and financially successful behavior in context of stock trading.

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