Huson Joher Ali Ahmed

Is the efficient market hypothesis day-of-the-week dependent? Evidence from the banking sector

In this article, we propose a new hypothesis: that the efficient market hypothesis is day-of-the-week-dependent. We apply the test to firms belonging to the banking sector and listed on the NYSE. We find significant evidence that the efficient market hypothesis is day-of-the-week-dependent. Overall, for only 62% of firms, the unit root null hypothesis is rejected on all the five trading days. We also discover that when investors do not account for unit root properties in devising trading strategies, they obtain spurious profits.

Oil Price Volatility And Sectoral Returns Uncertainties: Evidence From A Threshold Based Approach For The Australian Equity Market

ABSTRACT:This paper examines the existence of a non-linear relationship between oil price volatility and equity market uncertainty. The study specifically analyses the pattern of effects of oil price volatility on the broader equity market as well as the sectoral equity returns volatility within Australian Economy. We use a logistic transition based autoregressive model (LSTR) developed by Terasvirta and Anderson (1992) and Terasvirta, (1994). We find that the hypothesis of linearity between oil price volatility and equity market uncertainty is rejected for six out of 10 sectors of the Australian economy. The retention of LSTR model suggests that the oil return volatility has high and low regimes that affect equity markets differently across the sectors. The transition functions suggest that switching of oil price volatility from low to high regime is abrupt for consumer discretion, financial and material sectors while such transition is smooth for consumer staple, energy, and industrial sectors. The results also show that some sectors are quicker in responding to heightened volatility. From the VAR framework, the impulse response functions show that a one period increase or a shock in oil price volatility raises volatility of equity in consumer discretion, consumer staple, finance, industry, telecom and consumer staple sectors. Of these, equity volatility in industries and financial sectors seem to exhibit a prolonged positive response following the oil price volatility shock. Also, equity volatility of industries seems to rise by much larger proportion compared to the equity volatility response of other sectors. These findings are helpful as a guide for sectoral rotation strategies. In view of the increased volatility of oil prices due to a negative impact of oil price shock and the resultant surge of uncertainty, Australian firms could formulate their short and long run investment plans based on volatility threshold level. Firms in consumer discretion, financial and industrial sector could consider postponement of investment if the volatility in oil price exceeds certain threshold. Also, firms in the consumer staple, energy and materials industry need to make prudent business decisions in situations where oil price volatility falls within the threshold range as identified by the LSTR2 models. Based on the findings, there is a need for public policy formulation to reduce the adverse impacts of increased oil price uncertainties on the Australian economy during periods of unforeseen random events including depressions and crises.

Dividend policy choice: do earnings or investment opportunities matter?

The aim of this paper is to analyse the influence of a companys level of earnings and growth opportunities in determining the dividend policy choice of Malaysian-listed firms. The analysis is based on a sample of 136 firms listed on the Bursa Malaysia Index over a period of six years, from 1990 to 1996. The evidence suggests that the payers are more profitable than non-payers. Likewise, investment opportunity, which is measured by (∂At /At-1) and (Vt /At), differed for both payers and non-payers. The regression estimates from Logit model suggest that the average coefficient for EATA is a significant determinant for firms dividend policy choice in Malaysia. This is consistent with the supposition that profitable firms are more likely to pay dividends than less profitable firms. Although investment opportunities, the firms size and leverage were not found to be statistically significant, they provided some explanation for the dividend policy choice.

An investigation on asset allocation and performance measurement for unit trust funds in Malaysia using multifactor model: a post crisis period analysis

This study examines the pattern of asset allocation and the performance of unit trust in Malaysia over the post crisis period by using risk-adjusted performance measures and multi-factor model from the year 2000 to 2004. Evidence from the statistics suggests that an active asset allocation strategy had been observed among Malaysian fund managers during the post Asian financial crisis. It is also suggested that investment allocation in equity remained a dominant vehicle for investment and asset allocation. Findings from multifactor model suggest that all funds of different objectives registered positive alphas except for income funds, with growth funds being among the top. While balanced funds registered highest diversification effectively, diversifying away about 70%-80% of unsystematic risk, the momentum factor is not among the important elements to explain unit trust performance in Malaysia.

The Day of the Week, Turn of the Month and January Effect on Stock Market Volatility and Volume: Evidence from Bursa Malaysia

This paper focuses on three important calendar events namely day of the week, turn of the month and January effect. Using both a GARCH (1 1)-M model and a mixture of distribution hypothesis (MDH) this paper investigates the return and conditional volatility pattern of the Malaysian stock index over the period from 1994 to 2004. In an attempt to isolate the effect of the 1997 crisis, the sample period is divided into three sub periods namely “pre-crisis”, “during crisis” and “post crisis”. Findings indicate the presence of a week-end effect suggesting Monday returns to be significantly negative across the three sub periods and provide strong explanation for both return volatility pattern on Malaysian capital market. While No clear pattern of January or turn of the month effect was observed for the full sample. However, when the sample period is subdivided based on economic conditions, the turn of the month effect is found to be positive and significant for the pre crisis period and negative and significant for post crisis period. The January effect appeared to be present in the post crisis period only. While volume serves as mixture of distribution explaining return distribution and volatility pattern. While study lend some support to the mixture of distribution hypothesis, The findings imply that the behavioral pattern of Malaysian traders has been changed since the 1997 Asian crisis period, hence shed new light on anomalies study literature.

Oil price volatility, investment and sectoral responses: The Thai experience

ABSTRACT:This paper investigates the nexus between investment and oil price volatility in the context of a developing industrialised economy, Thailand. In the post Asian Crisis era, Thailand has been on a steady phase of recovery with industrial expansion as well as revival of investment and output growth. A significant portion of such growth is attributable to investment growth in metal products, machineries and other transportable goods which are the energy dependent industries. Implicit in these phenomena is the need to further scrutinise the impact of the exogenous shock emanating from uncertainty in oil market on the scale of investment in various sectors of the Thai economy. Using a threshold-based components generalized autoregressive conditional heteroskedasticity (CGARCH) model, the oil price volatility is decomposed into permanent and transitory volatilities. The oil price volatility components are then analysed in a structural vector autoregression (SVAR) framework, along with investment and other key macroeconomic variables. Dynamic impulse response functions obtained from the SVAR model reveal significant dampening effects of the conditional and transitory oil price volatility shocks on Thailand’s aggregate and sectoral level investments. The impulse responses clearly indicate that as the temporary volatility in oil price rises, total investment decreases significantly. At sectoral level, the responses of investments in food and textiles products suggest a significant dampening effect on investments due to shocks in both the conditional and transitory volatilities of oil prices. In contrast, a shock in the permanent volatility leads to only a small decline in investment in this sector, and for only about a quarter. Similar effects were also observed for other transportable goods, consisting primarily of wood products, furniture, and cork, straw and plaiting materials. The investment in the business services sector, which comprises investment in real estate services, does not exhibit any significant effects of shocks in the conditional, permanent and transitory volatilities of oil prices. The findings of this study have important implications for policy. Firstly, since the Thai economy is relatively energy intensive, any dynamic shock emanating from energy market will be detrimental to investment and economic growth. Secondly, the significant and stronger adverse effects of the temporary oil volatility point to the absence of insurance markets for guarding against any volatility risks, or the lack of managerial expertise for identifying and accommodating the negative impacts of a heightened transitory or permanent oil price volatility. Thirdly, firms operating in energy-dependent industries ought to remain vigilant especially in regards to weather adverse impacts of any transitory volatility of oil prices.

Market based performance : do ownership structures, or firm policy choice matter?

This study examines whether the structure of share ownership or firms dividend and debt policies provide explanation for firm performances in Malaysia. Firm performance, measured as Tobins Q is modelled in a dynamic panel framework to estimate effects of director ownership, family ownership, foreign ownership, and firms dividend and debt policy. The generalised methods of moments (GMM) method is used to estimated the models for 80 CI components companies listed on Main Board of Malaysia observed from 1999 to 2002. The findings reveal strong evidence of positive impact of firms dividend and debt policy on firm performance. However, ownership structure seems to be less important for market based performance of Malaysian firms: These results are expected to provide guidelines to the investors regarding the significance of firm dividend policy, leverage policy and market to book value ratio as some of the key sources of value creation for Malaysian listed firms.

A comprehensive look at the re-examination of the re-evaluation effect of auditor switch and its determinants in Malaysia: a post crisis analysis from Bursa Malaysia

This study examines economic rational for auditor switch and its impact on share revaluation of 51 switched firms main board of Bursa Malaysia for the post crisis period (1997-2002). This study adopted both logistic regression model and event study methodology to examine the determinants of auditor switches and its impact to share price. Findings show that the auditor switch decision of Malaysian listed firms for post crisis period has been partly explained by audit report, turnover growth and firms performance. While, findings suggest no significant evidence of wealth effect from auditor switch announcements once switches were divided along the line of auditor switch type, different findings emerged.