Weather effects on stock returns and volatility in South Asian markets

We study the effect of mood-proxy variables on index returns and volatility in six South Asian markets. Our mood-proxy variables include six weather (temperature, humidity, cloud cover, air pressure, visibility, and wind speed), three weather indicator variables (fog, thunder storm and rain or drizzle) and two biorhythmic variables (SAD and lunar phases). We adopt a robust approach and attempt to select the best parsimonious econometric model for each market. Our findings suggest that mood-proxy variables have some convincing influences in South Asian capital markets. In some instances, these variables are influencing returns while in other instances they are influencing volatility

Combined Effects of Psychological Capital and Psychological Contract on Employees’ Job Level Outcomes

This study examined the direct effect of psychological capital on employees’ job level outcomes. In addition, the study also examined the moderating role of psychological contract types (relational and transactional contract) on the direct relationship between PsyCap and job level outcomes. Longitudinal research design was adopted for this study and data were collected from employees working at different organizations in telecom sector. After deleting incomplete and invalid survey instruments the remaining sample size left with 411 respondents. Findings of the study revealed that PsyCap was positively related with employees’ behaviors and in-role- performance. The results also showed that psychological contract types (Relational and Transactional contract) moderated the direct relationship between PsyCap and counterproductive work behavior; however, psychological contract types (Relational Contract and Transactional contract) did not moderate the direct relationship of PsyCap with OCB, and in-role performance.Future research directions and implications of the study are also discussed. Keywords: PsyCap, relational contract, transactional contract, OCB, CWB, in-role-performance

Microfinance and Growth of MSMEs: The Moderating Role of Entrepreneurial Thrust

The main objective of the study is to investigate the role of entrepreneurial thrust in the relationship between growth in microfinance and growth of micro, small and medium enterprises (MSMEs). A panel of 15 countries from 2004 to 2013 is investigated in the analysis. Microfinance index is developed by using PCA and impact of microfinance index is examined on growth of MSMEs along with other dimensions of microfinance. The study documented that in isolation microfinance may not increase growth of MSMEs but if a borrower possess entrepreneurial thrust then growth in MSMEs is evident. Entrepreneurial thrust plays a role of catalyst in the relationship. Furthermore role of entrepreneurial thrust in growth of MSMEs is found to be more important than role of growth in microfinance itself. It is also established that in the presence of entrepreneurial thrust if even small loans are given to the borrowers then it leads to increase in business activities. It is concluded that microfinance may be a better tool to alleviate poverty but for creating new enterprises entrepreneurial thrust is found to be a prerequisite. In absence of entrepreneurial thrust microfinance may not be workable. Keywords: Microfinance, Entrepreneurial Thrust, MSMEs Growth

Negative Relationship between Risk and Return: A Contrary View

According to standard finance, risk and return are positively correlated, but many studies conducted in the behavioral finance and prospect theory context have revealed that risk and return are not positively correlated, but are negatively correlated. In this study, effort has been made to examine the nature of relationship between these two variables. Data used in this study is of secondary nature and its span is from 1995-2011. Spearman rank order correlation has been used to test this relationship between risk and return. Results indicated that when correlation test has been applied on the whole data set, risk and return are found to be negatively correlated in below target return companies, while these two are positively correlated in above target return companies. These findings exhibit that implications of prospect theory with respect to risk-return relationship are found true when the whole data sample is tested as one unit. But, when the same sample is subdivided into five segments or sections, results change and show a mixed pattern. Implications of prospect theory with regard to risk return relationship in such a situation are partially proved in few sectors

Quantitative Assessment of Pakistan and China Free Trade Agreement

The purpose of this paper is to assess the economic impact of tariff eliminations under free trade agreement (FTA) of Pakistan and China on various macroeconomic and trade variables. The objective is to scrutinize the pre and post effect of Pakistan and China FTA on macroeconomic factors like real gross domestic product (GDP), trade balance, output and trade in different sectors, welfare in context of Pakistan. In this regard, the computable general equilibrium (CGE) modeling structure of the global trade analysis project (GTAP) model and database is use to analyze the aggregate effect as well as sectorial implications. The GTAP database version 9 has data of 140 countries. Nevertheless, 2 main countries such as Pakistan and China are aggregated separately. Moreover, the database also embedded with data of 57 sectors, which have been aggregated into 43 sectors. The simulation results reveal that under tariff eliminations of Pakistan and China FTA, Pakistan faces negative impact on its economy whereas China gets benefit from the same. China gains in terms of welfare, real GDP and trade balances, while Pakistan losses in terms of welfare, real GDP and trade balances. However, the results identify the potential exports sectors of Pakistan such as textile, wearing apparel, leather products, plant-based fibers, chemical products, vegetable oil and fats, and metal products. Therefore, Pakistan can exploit this opportunity by increasing exports from these sectors to China. This study is useful for policy makers to design appropriate trade policy of Pakistan

Institutional Ownership and Discretionary Accruals: Empirical Evidences from Pakistani Listed Non-Financial Companies

Current study empirically investigates the impact of institutional ownership on discretionary accruals; we took a sample size of 68 listed non -financial companies from a population of 652 companies listed on Karachi Stock Exchange (KSE). This data was gathered for the period of 5 years, starting from 2006 up to 2010. Modified Jones Model was employed for this study to quantify discretionary accruals while institutional ownership measured by dividing number of shares kept by institutions from total number of shares outstanding. The fix effect model showed that the magnitude of discretionary accruals in Pakistani listed firms tends to significantly decrease for the firms where institutions hold a decent amount of share of that particular firm. Thus the findings of this study are in consensus with our hypothesis, which proposes that institutional ownership is quite an effective tool in aligning insider management and administration to take the right decision for value maximizing of the companies, and thus shareholders

Do Behavioural Biases Impact Corporate Entrepreneurship, Agency Cost and Firm Performance: Evidence from Developed and Developing Economies?

The study aims to extend the relationship of corporate entrepreneurship and agency cost to firm performance, in the presence of behavioral biases to address the behavioral finance approach and validate it in developed (USA) and developing (Pakistan) economies, in order to generalize the study. Behavioral biases might be different across economies, particularly infers the diverse cultures. The validated construct has been adopted to measure the corporate entrepreneurship, behavioral biases and risk perception of USA and Pakistani non-financial sector companies listed on the New York Stock Exchange (NYSE) and the Karachi Stock Exchange (KSE), respectively. The data for firm performance and agency cost has been taken from Balance Sheets Analyses (SBP Report) for Pakistani companies and from annual reports of the USA companies on three yearly average bases (2009, 2010 and 2011). Data has been collected from 257 USA companies and 175 Pakistani Companies listed at NYSE and KSE respectively. The finding shows that behavioral biases don’t impact the entrepreneurial orientation. The executives perform entrepreneurial activities differently, varies from individual to individual

Structural Breaks and Volatility Spillover in South Asian Economies

Purpose - This study examines the volatility spillovers in the presence of structural breaks with specific reference to South Asian Capital markets. The global financial crisis of 2007-2009 has compelled policymakers to realize that financial instability has the potential to threaten economic stability and growth; therefore, managing the financial crisis is inevitable. To manage the impact of financial crises, understanding the dynamics of volatility spillover across various markets is imperative. This study has investigated the possible emergence of structural breaks in risk patterns after global financial crises in south Asian markets. Methodology - Using the data from July 2002 to June 2016, employing the Exponential GARCH methodology. Findings - This study finds a significant volatility spillover after the financial crisis of 2007-09. Therefore, the existence of a structural break in the risk pattern of south Asian capital markets cannot be fully rejected. Policy Implications - This conclusion is of prime importance to policymakers in devising policy guidelines concerning financial crises

Economic Integration and Stock Market Comovement: An Empirical Study Pairing Pakistan's Stock Exchange with 21 other Markets

Using daily stock returns from 2004 to 2014 for 21 countries paired with Pakistan, and using the Geweke methodology, the paper investigates the degree to which these stock markets are integrated with the Pakistani stock market. The paper also explores the factors that have an effect on the level of economic integration by applying fixed effect model. The result demonstrates statistically significant and high percentage of contemporaneous association between the 21 economies of the world and Pakistan. Greater comovement was observed between the equity markets during the period when Pakistani capital market and economy experience performance but less comovement was noted when Pakistan Stock Markets were under crises