Khalil Jebran

Examining anomalies in Islamic equity market of Pakistan

ABSTRACT The purpose of this study is to investigate the presence of anomalies named; January effect, Islamic calendar effect, Day of the week effect, Time of the month effect, Turn of the month effect and Half of the month effect in an Islamic equity market of Pakistan. This study considered daily data from 30 September 2008 to 30th June 2015. The behavior of the data is tested by using the descriptive statistics method. The Generalized Auto Regressive Conditional Heteroskedasticity Model (GARCH) model is applied to capture the seasonality in returns and volatility in the Islamic equity market. The results of this study highlight certain interesting key findings. The notable findings indicates the absence of prominent January effect and the Ramadan effect. However, this study finds significant Day of the week effect, Turn of the month effect, Time of the month effect and Half of the month effect in the Islamic index. This study suggests that investors would be able to gain abnormal returns, if they would formulate their investment strategies accordingly to the seasonal return patterns observed in this study.

Income and Price Elasticities of Crude Oil Demand in Pakistan

This study is an attempt to examine the income and price elasticities of crude oil demand in Pakistan using annual data from 1981 to 2013. The short-and long-run relationship was analysed by autoregressive distributed lag (ARDL) bounds testing approach. The results reveal that income and exchange rate show significant positive relationship with crude oil demand in short run as well as in long run. The analyses also show that crude oil price and domestic production have negative effect in both short and long run on crude oil demand. The income is found to be a strong determinant of crude oil demand in both short and long run. This study suggests that strategies would be formulated and adopted which may control the demand of crude oil without affecting the economic growth of Pakistan.

Volatility spillover between stock and foreign exchange market of China: Evidence from subprime Asian financial crises.

This paper aims to examine the volatility spillover dynamics between stock and foreign exchange market of China considering subprime 2007 financial crisis period.,This study considered daily data from January 2, 2002, to December 31, 2013. The sample period has been further divided into three periods; full sample period (January 2002-December 2013), pre-crisis period (January 2002-October 2007) and post-crisis period (October 2007-December 2013). This study opted Exponential Generalized Autoregressive Heteroskedasticity (EGARCH) model for the purpose of investigating asymmetric volatility spillover.,The results obtained using the EGARCH model imply that volatility spillover dynamics varies from period to period. In full sample period, the results show evidence of significant unidirectional volatility spillover from foreign exchange market to stock market. In pre-crisis period, the results indicate unidirectional volatility spillover from stock market to foreign exchange market. However, in post-crisis period, the results reveal significant bidirectional volatility spillover between stock and foreign exchange market.,The results of the study are important for policy makers because understanding the behavior of the financial markets, i.e. stock and foreign exchange market, would increase the success of policies implemented in a crisis situation. The results would help investors to formulate efficient portfolios.,This study is an important contribution to the existing literature in terms of analyzing volatility spillover between stock and foreign exchange market in an emerging economy, China. Furthermore, this study explored the volatility spillover dynamics between the two markets by considering the pre and post subprime Asian crisis period.

Effect of Terms of Trade on Economic Growth of China

Abstract This study investigates the effect of terms of trade (TOT) on the economic growth of China over the period 1980–2013. Autoregressive distributed lag (ARDL) model proposed by Pesaran, Shin, and Smith (2001, Journal of Applied Econometrics, 16(3), pp. 289–326) is applied for examining the short-run and long-run associations. The causality analysis between variables is analyzed by using Granger causality test and variance decomposition test. The ARDL model reveals that TOT significantly and adversely affect economic growth in the short run as well as in the long run. The results also imply positive short-run and long-run effect of labor and capital on the economic growth of China. The Granger causality results reveal significant bidirectional causal relationship between economic growth and capital, and between capital and labor force. The results show unidirectional causality from TOT to labor force. The variance decomposition results show that most of the innovation in economic growth is explained by its own innovation, while other variables have very small contributions to its innovations. The notable findings of the study suggest that TOT deterioration is relatively important for enhancing the economic growth of China.

Corporate governance and firm value: a comparative analysis of state and non-state owned companies in the context of Pakistan

The purpose of this paper is to examine how corporate governance instruments impact firm value in the context of Pakistan. This paper considers state- and non-state-owned enterprises and examines whether the influence of corporate governance on firm value varies across firms having different nature of ownership.,This study opts for an unbalanced sample of state- and non-state-owned enterprises for the period 2010-2014. Panel data regression is adopted for estimation of main results. The suitable model, i.e. fixed and random effect model, is selected using Hausman specification test.,The notable findings show that board independence has a significant and positive relationship with firm value only for state-owned companies. Furthermore, the results show that market capitalization and return on assets have a significant and positive association with firm value for both state- and non-state-owned enterprises. All other variables are found insignificant for both state- and non-state-owned companies, but the results are consistent with those reported in previous studies.,The findings of the study suggest that fair induction of independent directors, appropriate board size and cost-benefit analysis to conduct frequent meetings can help corporations to improve their performance.,This study is adding to the current literature by providing new insights and shows that the impact of corporate governance on firm value varies across firms of different types of ownership, i.e. state- and non-state-owned enterprises.

Financing behavior of firms in tranquil and crisis period: Evidence from China

Abstract This study investigates the financing behavior of Chinese firms in tranquil and crisis situation over the period 2002–2014. We divide the sample into three sub-periods; pre-crisis, during-crisis, and post-crisis. The results indicate some noteworthy findings as this study incorporates firm and country-level factors. We find that the firms’ financing choice depends on the market conditions. The results show that Chinese firms have significantly decreased their dependence on leverage after the eruption of global financial crisis. Furthermore, we find that financial crisis of 2007–2008 has significantly affected the explanatory power of all factors. Moreover, profitability, size, and liquidity are important factors determining capital structure of the firm in financial crisis period.

Do investor’s Big Five personality traits influence the association between information acquisition and stock trading behavior?

Purpose - The purpose of this paper is to investigate the impact of the frequency of information acquisition on the frequency of stock trading. The authors also examined if the Big Five personality traits of investor influence the association between information acquisition and stock trading behavior. Design/methodology/approach - The authors adopted NEO Five-Factor Inventory (Costa and McCrae, 1989) inventory to measure the Big Five personality traits of investors and examined the data collected from 541 individual investors of the Chinese stock market. To overcome the potential endogeneity bias, the authors followed two-stage least square method for estimating endogenous covariate by employing instrumental variable analysis. The authors performed probit regression to evaluate the moderating influence of investor personality traits on the association between information acquisition and stock trading behavior. The authors also performed several other tests to check the robustness of the key findings. Findings - This research confirmed the previous findings that the more frequently investors acquire information, the more often they trade in stocks. Moreover, the authors added to the existing literature by providing empirical evidence that the Big Five personality traits moderate the relationship of information acquisition with stock trading behavior. Information acquisition tends to increase stock trading frequency in investors with conscientiousness, extraversion and agreeableness traits. On the other hand, it also has the tendency to decrease the intensity of stock trading in investors with openness and neuroticism traits. Research limitations/implications - The theoretical model in this study seeks to explain that the psychological factor, namely, investor personality, influences the way an investor interprets signals from information which in turn influences the investor decision to trade in securities. This research suggests that psychological characteristics of investors can be of relevance for policy makers in their attempts to improve their business in the financial services industry. Originality/value - This study combines both information search literature and behavioral finance literature to investigate whether or not the information acquisition that relates to investors’ asset allocation decisions is influenced by investor personality. The study offers new theoretical insights into investors’ behavior due to the characteristics of the Chinese stock market which are uniquely different from other stock markets in the world. No previous study has been conducted so far in the Chinese stock market to explore variations in the impact of investors’ information acquisition on their stock trading by the Big Five personality and this paper strives to fill this research gap.