The COVID-19 pandemic drastically damaged business activities that not only affected conventional... more The COVID-19 pandemic drastically damaged business activities that not only affected conventional financial markets but also upset Islamic securities. Given the severity of the recent pandemic, this study looked at the returns of the investor attention index, Islamic bonds, and stock indexes in the occurrence of the ADS business condition index. Bivariate and multivariate wavelet analysis was employed on the daily data from January 2, 2020, to July 27, 2020. The study results indicate that before April 2020, there was a negative coherence between the investor attention index and the ADS, Islamic bonds, and stock returns. After that date, however, there is a positive relationship between the attention index and Islamic bonds. In addition, the relationship between investors’ attention and the ADS index shows both short-term and long-term correlations, but the long-term correlations are clearer. It has implications for household investors by empirically revealing the significance of Go...
Various empirical studies have examined the nexus between financial markets, but this study focus... more Various empirical studies have examined the nexus between financial markets, but this study focused on the comovement among prominent markets. Our study examines the interrelationship among main financial markets, i.e., stock, oil, and commodity during the recent pandemic. The interconnections among the selected markets are investigated using a battery of wavelet coherence tools and the Granger causality test. From the wavelet coherence analysis, our findings indicate strong co-movements among the VIX, oil volatility, and commodity prices during pandemic and localized in all scales and over the sample period. The dependency strength among the considered economies is noted to increase in pandemic, which implies increased short-and long-term benefits for the investors. Moreover, Our result exhibits a feedback causality between OVIX and crude oil, VIX and S&P 500, and gasoline and VIX. Interestingly, a unidirectional causality exists between VIX and crude oil, S&P 500 and crude oil, Brent and crude oil, gasoline, crude oil, and VIX and OVIX. We advocate that the findings will be helpful for portfolio managers, investors, and officials around the world.
In this paper, wavelet coherences and quantile autoregressive distributed lag (QARDL) approaches ... more In this paper, wavelet coherences and quantile autoregressive distributed lag (QARDL) approaches are used to study the effect of economic policy uncertainty (EPU), infectious disease EMV tracker (IDEMV), and implied volatility (VIX) on illiquidity during the tranquil and COVID-19 epidemic periods in the US financial market. Our results show that lagged EPU, current VIX, and lagged VIX positively affect illiquidity during the calm period, while the lagged EPU and current VIX decrease illiquidity during the pandemic period. Furthermore, infectious diseases in the financial market during the pandemic crisis play a significant role in instantaneously improving liquidity, while it was not significant during the tranquil period. Similarly, we suggest that with the combined effect of the EPU and the VIX, the uncertainty caused by implied volatility decreases liquidity in a lagged and contemporaneous manner, while an improvement in liquidity is revealed in the case of the EPU.
This study attempts to investigate the nexus between investor sentiment and cryptocurrencies pric... more This study attempts to investigate the nexus between investor sentiment and cryptocurrencies prices. Our empirical investigation merges bivariate and multivariate wavelet tools to examine the investor sentiment nexus to inter-cryptocurrencies prices. The study outcomes show that the Sentix Investor Confidence index provides significant information in explaining long-term changes in Bitcoin and Litecoin prices. Moreover, the findings generated from the multiple wavelet coherence illustrate the simultaneous contribution of cryptocurrencies and the Sentix Investor Confidence index in explaining the Bitcoin index movement across frequencies and over horizons, especially during bubble burst periods. The study also suggests a time-dependent relationship of Bitcoin prices with alternative cryptocurrencies and the Sentix Investor Confidence index, mostly pronounced during the Bitcoin bubble. We discuss our results using GSV-based investor sentiment. Our findings remain robust and confirm th...
When the plaintiff and defendant are asymmetrically informed about their firms’ characteristics, ... more When the plaintiff and defendant are asymmetrically informed about their firms’ characteristics, the judicial process time and the court decisions will not effortlessly be predicted. This paper examine if the follow in lawsuit can implicitly hide behind a predatory or prey parties’ behaviors and what factors can explain. We assume that an inter-firm legal case is a predation attempt to oust a competitor in the same sector. This behavior can be explained by some economic characteristics such as the size, the leverage level and the opportunities growth. The defendant will inevitably be a prey that suffers of eviction caused by litigation costs and bad reputation signals. Our sample is composed by 287 firms listed in the Canadian stock market during the period from 1999 to 2006. In the empirical investigation is conducted using a binary pooled probit dichotomy model. Our results reveal the that plaintiff is “an innocent predator” where its objectives are to maximize its profits when the rival cannot pay the litigation costs set and have not possibility to run into debts. Thus, litigation announcement is a signal to win new market share. Mutually, the defendant is a prey in the sense that it is a victim of bad signals and bad reputation disclosed by the plaintiff. Key Words—Information asymmetry, economic predation,
This article assesses the effect of the political risk and economic instability on the tourist ar... more This article assesses the effect of the political risk and economic instability on the tourist arrivals in Tunisia using various wavelet methods. Our findings reveal a substantial effect of political risk over the short and medium terms, while the risk of economic effect is more perceptible over the long run. These outcomes are robust when using standard time series modeling. Terrorist incidents and political uneasiness increase the perception of risk and affect the tourism inflows over the short run. Governments are invited to indorse security and tourism safety because if not, the tourism demand will impede the economic growth over the long run.
The long-run impact of export growth on the growth of the entire economy is a key issue for polic... more The long-run impact of export growth on the growth of the entire economy is a key issue for policymakers in emerging countries. There is a vast body of empirical research with respect to this issue, especially addressing the case of India, in which cointegration techniques as well as long-run Granger causality analysis are applied to exports and GDP series. However, results are inconclusive which can be attributed to differences in the choice of econometric approaches, the considered sample period and omitted variable biases. To address these issues, we apply both linear as well as non-parametric cointegration techniques for non-linear functional forms, we apply an innovative bootstrapping procedure to examine the robustness of results with respect to the selection of sample periods, and we include imports as third variable as imports may be the relevant variable with a causal link towards GDP instead of exports. We show that there is linear cointegration between exports and GDP whi...
In this paper, we analyze time-varying causality between the dollar-pound exchange rate and S&P 5... more In this paper, we analyze time-varying causality between the dollar-pound exchange rate and S&P 500 returns over the monthly period of September, 1791 to September, 2019. Based on a Dynamic Conditional Correlation-Multivariate Generalised Autoregressive Conditional Heteroskedasticity (DCC-MGARCH) framework, we find that evidence of unidirectional causality between the two returns is in general weak, and primarily restricted to the period following the breakdown of the Bretton Woods agreement. However, instantaneous spillover across the returns of these two markets is quite strong, which in turn tends to suggest the existence of nonsynchronous trading and also high-frequency causal dependency, with the latter confirmed based on daily data covering January 3rd, 1900 to October 4th, 2019. Moreover, the underlying DCC reveals that there is actually portfolio diversification opportunities for investors. Finally, an analysis of the second moments reveal much stronger evidence of volatilit...
This paper analyzes the time-varying relationship between risk aversion and both conventional and... more This paper analyzes the time-varying relationship between risk aversion and both conventional and unconventional monetary policy, using Shadow Short Rates, in an international context and at different frequencies during the daily period of 1986-2016, based on a wavelet coherency analysis. Our main results suggest the existence of a dynamic relationship between the two variables depending on timescales and on the periods. Thus, a short-run negative relationship leading from the risk aversion variable to the monetary policy measure is found for most of the period, suggesting that monetary policy reacts more aggressively in period of high risk aversion. Furthermore, during the financial crisis, we find a long-run negative relationship leading from the monetary policy to the risk aversion index, suggesting that a lax monetary policy could lead to financial instability. US monetary policy has also significant effects on the risk aversion rates in the Euro Area, Japan and the UK.
The North American Journal of Economics and Finance, 2021
In this paper, we assess the impacts of the COVID-19 counts (infected cases, deaths and recovered... more In this paper, we assess the impacts of the COVID-19 counts (infected cases, deaths and recovered) and related announcements on the Islamic and conventional stocks interplays in the Chinese market. We test whether Islamic stocks are perceived as assets providing diversification benefits in time of COVID-19 pandemic. Doing so, we implement a multivariate GJR-GARCH model under dynamic conditional correlation (DCC) as well as multiple and partial wavelet coherence methods to recent Chinese daily data ranging from 2 December 2019 to 8 May 2020 and COVID-19 related announcement for the period. Our results from multivariate GJR-GARCH models reveal that COVID-19 infected cases and deaths do impact mean DCCs between Islamic and conventional stocks, number of recovered do not have such impact, while none of the above have any significant impact on the DCCs fluctuations. However, when we analyze the impact of COVID-19 related announcement on the variation of conditional correlation between two stocks (i.e. DCC volatility) our findings show that 7 out of 10 such announcements (mainly those with serious health treats or economic implications) do effect those volatilities in Chinese equity market. The empirical findings from partial and multiple wavelet coherences provide robust evidence of instability in the co-movement between Islamic and conventional indexes for different scales and over dissimilar sub-periods. Indeed, the weakening of co-movements is especially notable in the very short and short-run where operating the short-term investors. Our empirical findings offer several key propositions for policy makers and portfolio managers in China with broad implications applicable to other markets.
The North American Journal of Economics and Finance, 2021
Abstract The aim of this paper is to examine the explanatory power of realized volatility on the ... more Abstract The aim of this paper is to examine the explanatory power of realized volatility on the illiquidity in Saudi stock market during the COVID-19 outbreak. To achieve this objective, we consider the Wavelet Coherence approaches as empirical tools to investigate the combined effect of realized volatility and COVID-19 counts on the market illiquidity across frequencies and over time space by taking in account the number of infected cases in Saudi Arabia and over the World, and the number of death cases in Saudi Arabia as well as over the World. Our study reaches two main findings. First, the preliminary results reported by the ARDL bound test as a benchmark model showed significant long-run and short-run effects of the market volatility on illiquidity in contemporaneous and lagged manner. Second, the wavelet coherence analysis tools exhibited important results: (i) the wavelet coherency between illiquidity ratio and realized volatility in Saudi Arabia appear highly pronounced over all time horizons. (ii) PWC plots showed a significant mutual effect between liquidity risk and realized volatility when eliminating the effect of local COVID-19 cases. (iii) MWC plots highlighted that the response of the market illiquidity index to both the amplification in confirmed local cases (resp. international confirmed cases) and the stock market volatility appear significant in the short and middle horizons.
In this paper, we attempt to investigate the efficiency of emerging stock markets by considering ... more In this paper, we attempt to investigate the efficiency of emerging stock markets by considering the advent of dramatic country-specific events. In other words, we analyze and rank the weak-form efficiency levels of emerging stock markets based on a multi-step approach. Our findings support evidence of multifractality and anti-persistent movements of returns, implying a departure from the weak-form efficiency hypothesis. We also show that the political events adversely affect the efficiency degree of most markets. The empirical results clearly display the dynamic behavior of market efficiency. These findings are in line with the implications of the Adaptive Market Hypothesis.
Abstract In this paper, we examine the relevance of investor sentiment to Islamic stock-bond inte... more Abstract In this paper, we examine the relevance of investor sentiment to Islamic stock-bond interplay in the time-frequency domain. Using various wavelet methods including multiple and partial wavelet coherence and bivariate and multivariate nonlinear causality tests, our results reveal that the connectedness between Islamic stocks and bonds is affected by investor sentiment over short- and long-run investment horizons. Strong multivariate nonlinear causalities are evidenced between the three variables. Static and rolling-window estimates of the percentage of total volume and percentage of significant area from wavelet coherence indicate the relevance of investor sentiment in explaining the link between Islamic stocks and bonds over time-scales and investment horizons. From a portfolio management and financial stability perspective, our results provide prominent implications and operational recommendations.
In this paper, we analyze time-varying causality between the dollar-pound exchange rate and S&... more In this paper, we analyze time-varying causality between the dollar-pound exchange rate and S&P 500 returns over the monthly period of September, 1791 to September, 2019. Based on a Dynamic Conditional Correlation-Multivariate Generalised Autoregressive Conditional Heterosckedasticity (DCC-MGARCH) framework, we find that evidence of unidirectional causality between the two returns is in general weak, and primarily restricted to the period following the breakdown of the Bretton Woods agreement. However, instantaneous spillovers across the returns of these two markets is quite strong, which in turn tends to suggest the existence of nonsynchronous trading and also high-frequency causal dependency, with the latter confirmed based on daily data covering 3 January 1900 – 4 October 2019. Moreover, the underlying DCC reveals that there is actually portfolio diversification opportunities for investors. Finally, an analysis of the second moments reveal much stronger evidence of volatility spillovers between these two assets, when compared to the return linkages. This result has important implications from the perspective of policy making aiming to reduce the impact of uncertainty on the real economy.
The Quarterly Review of Economics and Finance, 2020
In this work we offer new insight into the relationship between interest rates and uncertainty fo... more In this work we offer new insight into the relationship between interest rates and uncertainty for several advanced economies (Canada, EU, Japan, UK, US) for the period 2003-2018. For this purpose, we utilize the wavelets methodology, which allows us to analyze how the relationship changes over time and across different frequencies and to make inference about causality. To analyze a wide range of frequencies, and because our analysis contains the post-2008 period as well, we use the daily shadow interest rate measure of Krippner (2012, 2013) to capture the stance of monetary policy making at the zero lower bound. We also use the daily uncertainty measure by Scotti (2016), which measures uncertainty related to the real economy. Our findings suggest that there is significant comovement across time and across different frequencies in all the countries we analyze. Corresponding to the similar, yet different conduct of monetary policy, we also find that the relationship exhibits different characteristics and causality in all the economies we analyze, implying that one must be careful not to draw generalized conclusions.
This paper investigates the dynamics of the lead-lag relationships between aggregate and sectoral... more This paper investigates the dynamics of the lead-lag relationships between aggregate and sectoral energy consumption by source and output in the U.S. economy within a time-frequency framework. To do that, we implement three variants of the continuous wavelet methodology, namely the wavelet power spectrum, the cross wavelet, and the wavelet coherence, to aggregate and disaggregate quarterly data between 2005Q1 and 2015Q3. The wavelet analysis unveils that the relationship between the U.S. output and the aggregate energy use by source varies across frequencies and evolves over time. Our results specifically show that the consumption of all energy sources display significant interactive linkages with the U.S. output. At the disaggregate level, while we perceive the presence of co-movements and causality between pairs through frequency bands and over time in almost all sectors, the industrial sector exhibits the highest intensity of wavelet coherence with the added value. Our findings highlight the need of accounting for the various energy sources and economic sectors when studying the output-energy nexus and designing economic policies.
ABSTRACT This article provides a fresh insight into the dynamic nexus between oil prices, the Sau... more ABSTRACT This article provides a fresh insight into the dynamic nexus between oil prices, the Saudi/US dollar exchange rate, inflation, and output growth rate in Saudi Arabia’ economy, using novel Morlet’ wavelet methods. Specifically, it implements various tools of methodology: the continuous wavelet power spectrum, the cross-wavelet power spectrum, the wavelet coherency, the multiple and the partial wavelet coherence to the annual sample period 1969–2014. Our results unveil that the relationships among the variables evolve through time and frequency. From the time-domain view, we show strong but non-homogenous linkages between the four variables. From the frequency-domain view, we uncover significant wavelet coherences and strong lead-lag relationships. From an economic view, the wavelet analysis shows that Saudi economy is still exposed to several global risk factors, which are mainly related to the oil market volatility, and the pegging of the local currency to the US dollar. Such risk factors strongly and negatively affect the real economic growth, exert more pressure on inflation, and substantially limit the freedom to pursue an independent monetary policy.
The COVID-19 pandemic drastically damaged business activities that not only affected conventional... more The COVID-19 pandemic drastically damaged business activities that not only affected conventional financial markets but also upset Islamic securities. Given the severity of the recent pandemic, this study looked at the returns of the investor attention index, Islamic bonds, and stock indexes in the occurrence of the ADS business condition index. Bivariate and multivariate wavelet analysis was employed on the daily data from January 2, 2020, to July 27, 2020. The study results indicate that before April 2020, there was a negative coherence between the investor attention index and the ADS, Islamic bonds, and stock returns. After that date, however, there is a positive relationship between the attention index and Islamic bonds. In addition, the relationship between investors’ attention and the ADS index shows both short-term and long-term correlations, but the long-term correlations are clearer. It has implications for household investors by empirically revealing the significance of Go...
Various empirical studies have examined the nexus between financial markets, but this study focus... more Various empirical studies have examined the nexus between financial markets, but this study focused on the comovement among prominent markets. Our study examines the interrelationship among main financial markets, i.e., stock, oil, and commodity during the recent pandemic. The interconnections among the selected markets are investigated using a battery of wavelet coherence tools and the Granger causality test. From the wavelet coherence analysis, our findings indicate strong co-movements among the VIX, oil volatility, and commodity prices during pandemic and localized in all scales and over the sample period. The dependency strength among the considered economies is noted to increase in pandemic, which implies increased short-and long-term benefits for the investors. Moreover, Our result exhibits a feedback causality between OVIX and crude oil, VIX and S&P 500, and gasoline and VIX. Interestingly, a unidirectional causality exists between VIX and crude oil, S&P 500 and crude oil, Brent and crude oil, gasoline, crude oil, and VIX and OVIX. We advocate that the findings will be helpful for portfolio managers, investors, and officials around the world.
In this paper, wavelet coherences and quantile autoregressive distributed lag (QARDL) approaches ... more In this paper, wavelet coherences and quantile autoregressive distributed lag (QARDL) approaches are used to study the effect of economic policy uncertainty (EPU), infectious disease EMV tracker (IDEMV), and implied volatility (VIX) on illiquidity during the tranquil and COVID-19 epidemic periods in the US financial market. Our results show that lagged EPU, current VIX, and lagged VIX positively affect illiquidity during the calm period, while the lagged EPU and current VIX decrease illiquidity during the pandemic period. Furthermore, infectious diseases in the financial market during the pandemic crisis play a significant role in instantaneously improving liquidity, while it was not significant during the tranquil period. Similarly, we suggest that with the combined effect of the EPU and the VIX, the uncertainty caused by implied volatility decreases liquidity in a lagged and contemporaneous manner, while an improvement in liquidity is revealed in the case of the EPU.
This study attempts to investigate the nexus between investor sentiment and cryptocurrencies pric... more This study attempts to investigate the nexus between investor sentiment and cryptocurrencies prices. Our empirical investigation merges bivariate and multivariate wavelet tools to examine the investor sentiment nexus to inter-cryptocurrencies prices. The study outcomes show that the Sentix Investor Confidence index provides significant information in explaining long-term changes in Bitcoin and Litecoin prices. Moreover, the findings generated from the multiple wavelet coherence illustrate the simultaneous contribution of cryptocurrencies and the Sentix Investor Confidence index in explaining the Bitcoin index movement across frequencies and over horizons, especially during bubble burst periods. The study also suggests a time-dependent relationship of Bitcoin prices with alternative cryptocurrencies and the Sentix Investor Confidence index, mostly pronounced during the Bitcoin bubble. We discuss our results using GSV-based investor sentiment. Our findings remain robust and confirm th...
When the plaintiff and defendant are asymmetrically informed about their firms’ characteristics, ... more When the plaintiff and defendant are asymmetrically informed about their firms’ characteristics, the judicial process time and the court decisions will not effortlessly be predicted. This paper examine if the follow in lawsuit can implicitly hide behind a predatory or prey parties’ behaviors and what factors can explain. We assume that an inter-firm legal case is a predation attempt to oust a competitor in the same sector. This behavior can be explained by some economic characteristics such as the size, the leverage level and the opportunities growth. The defendant will inevitably be a prey that suffers of eviction caused by litigation costs and bad reputation signals. Our sample is composed by 287 firms listed in the Canadian stock market during the period from 1999 to 2006. In the empirical investigation is conducted using a binary pooled probit dichotomy model. Our results reveal the that plaintiff is “an innocent predator” where its objectives are to maximize its profits when the rival cannot pay the litigation costs set and have not possibility to run into debts. Thus, litigation announcement is a signal to win new market share. Mutually, the defendant is a prey in the sense that it is a victim of bad signals and bad reputation disclosed by the plaintiff. Key Words—Information asymmetry, economic predation,
This article assesses the effect of the political risk and economic instability on the tourist ar... more This article assesses the effect of the political risk and economic instability on the tourist arrivals in Tunisia using various wavelet methods. Our findings reveal a substantial effect of political risk over the short and medium terms, while the risk of economic effect is more perceptible over the long run. These outcomes are robust when using standard time series modeling. Terrorist incidents and political uneasiness increase the perception of risk and affect the tourism inflows over the short run. Governments are invited to indorse security and tourism safety because if not, the tourism demand will impede the economic growth over the long run.
The long-run impact of export growth on the growth of the entire economy is a key issue for polic... more The long-run impact of export growth on the growth of the entire economy is a key issue for policymakers in emerging countries. There is a vast body of empirical research with respect to this issue, especially addressing the case of India, in which cointegration techniques as well as long-run Granger causality analysis are applied to exports and GDP series. However, results are inconclusive which can be attributed to differences in the choice of econometric approaches, the considered sample period and omitted variable biases. To address these issues, we apply both linear as well as non-parametric cointegration techniques for non-linear functional forms, we apply an innovative bootstrapping procedure to examine the robustness of results with respect to the selection of sample periods, and we include imports as third variable as imports may be the relevant variable with a causal link towards GDP instead of exports. We show that there is linear cointegration between exports and GDP whi...
In this paper, we analyze time-varying causality between the dollar-pound exchange rate and S&P 5... more In this paper, we analyze time-varying causality between the dollar-pound exchange rate and S&P 500 returns over the monthly period of September, 1791 to September, 2019. Based on a Dynamic Conditional Correlation-Multivariate Generalised Autoregressive Conditional Heteroskedasticity (DCC-MGARCH) framework, we find that evidence of unidirectional causality between the two returns is in general weak, and primarily restricted to the period following the breakdown of the Bretton Woods agreement. However, instantaneous spillover across the returns of these two markets is quite strong, which in turn tends to suggest the existence of nonsynchronous trading and also high-frequency causal dependency, with the latter confirmed based on daily data covering January 3rd, 1900 to October 4th, 2019. Moreover, the underlying DCC reveals that there is actually portfolio diversification opportunities for investors. Finally, an analysis of the second moments reveal much stronger evidence of volatilit...
This paper analyzes the time-varying relationship between risk aversion and both conventional and... more This paper analyzes the time-varying relationship between risk aversion and both conventional and unconventional monetary policy, using Shadow Short Rates, in an international context and at different frequencies during the daily period of 1986-2016, based on a wavelet coherency analysis. Our main results suggest the existence of a dynamic relationship between the two variables depending on timescales and on the periods. Thus, a short-run negative relationship leading from the risk aversion variable to the monetary policy measure is found for most of the period, suggesting that monetary policy reacts more aggressively in period of high risk aversion. Furthermore, during the financial crisis, we find a long-run negative relationship leading from the monetary policy to the risk aversion index, suggesting that a lax monetary policy could lead to financial instability. US monetary policy has also significant effects on the risk aversion rates in the Euro Area, Japan and the UK.
The North American Journal of Economics and Finance, 2021
In this paper, we assess the impacts of the COVID-19 counts (infected cases, deaths and recovered... more In this paper, we assess the impacts of the COVID-19 counts (infected cases, deaths and recovered) and related announcements on the Islamic and conventional stocks interplays in the Chinese market. We test whether Islamic stocks are perceived as assets providing diversification benefits in time of COVID-19 pandemic. Doing so, we implement a multivariate GJR-GARCH model under dynamic conditional correlation (DCC) as well as multiple and partial wavelet coherence methods to recent Chinese daily data ranging from 2 December 2019 to 8 May 2020 and COVID-19 related announcement for the period. Our results from multivariate GJR-GARCH models reveal that COVID-19 infected cases and deaths do impact mean DCCs between Islamic and conventional stocks, number of recovered do not have such impact, while none of the above have any significant impact on the DCCs fluctuations. However, when we analyze the impact of COVID-19 related announcement on the variation of conditional correlation between two stocks (i.e. DCC volatility) our findings show that 7 out of 10 such announcements (mainly those with serious health treats or economic implications) do effect those volatilities in Chinese equity market. The empirical findings from partial and multiple wavelet coherences provide robust evidence of instability in the co-movement between Islamic and conventional indexes for different scales and over dissimilar sub-periods. Indeed, the weakening of co-movements is especially notable in the very short and short-run where operating the short-term investors. Our empirical findings offer several key propositions for policy makers and portfolio managers in China with broad implications applicable to other markets.
The North American Journal of Economics and Finance, 2021
Abstract The aim of this paper is to examine the explanatory power of realized volatility on the ... more Abstract The aim of this paper is to examine the explanatory power of realized volatility on the illiquidity in Saudi stock market during the COVID-19 outbreak. To achieve this objective, we consider the Wavelet Coherence approaches as empirical tools to investigate the combined effect of realized volatility and COVID-19 counts on the market illiquidity across frequencies and over time space by taking in account the number of infected cases in Saudi Arabia and over the World, and the number of death cases in Saudi Arabia as well as over the World. Our study reaches two main findings. First, the preliminary results reported by the ARDL bound test as a benchmark model showed significant long-run and short-run effects of the market volatility on illiquidity in contemporaneous and lagged manner. Second, the wavelet coherence analysis tools exhibited important results: (i) the wavelet coherency between illiquidity ratio and realized volatility in Saudi Arabia appear highly pronounced over all time horizons. (ii) PWC plots showed a significant mutual effect between liquidity risk and realized volatility when eliminating the effect of local COVID-19 cases. (iii) MWC plots highlighted that the response of the market illiquidity index to both the amplification in confirmed local cases (resp. international confirmed cases) and the stock market volatility appear significant in the short and middle horizons.
In this paper, we attempt to investigate the efficiency of emerging stock markets by considering ... more In this paper, we attempt to investigate the efficiency of emerging stock markets by considering the advent of dramatic country-specific events. In other words, we analyze and rank the weak-form efficiency levels of emerging stock markets based on a multi-step approach. Our findings support evidence of multifractality and anti-persistent movements of returns, implying a departure from the weak-form efficiency hypothesis. We also show that the political events adversely affect the efficiency degree of most markets. The empirical results clearly display the dynamic behavior of market efficiency. These findings are in line with the implications of the Adaptive Market Hypothesis.
Abstract In this paper, we examine the relevance of investor sentiment to Islamic stock-bond inte... more Abstract In this paper, we examine the relevance of investor sentiment to Islamic stock-bond interplay in the time-frequency domain. Using various wavelet methods including multiple and partial wavelet coherence and bivariate and multivariate nonlinear causality tests, our results reveal that the connectedness between Islamic stocks and bonds is affected by investor sentiment over short- and long-run investment horizons. Strong multivariate nonlinear causalities are evidenced between the three variables. Static and rolling-window estimates of the percentage of total volume and percentage of significant area from wavelet coherence indicate the relevance of investor sentiment in explaining the link between Islamic stocks and bonds over time-scales and investment horizons. From a portfolio management and financial stability perspective, our results provide prominent implications and operational recommendations.
In this paper, we analyze time-varying causality between the dollar-pound exchange rate and S&... more In this paper, we analyze time-varying causality between the dollar-pound exchange rate and S&P 500 returns over the monthly period of September, 1791 to September, 2019. Based on a Dynamic Conditional Correlation-Multivariate Generalised Autoregressive Conditional Heterosckedasticity (DCC-MGARCH) framework, we find that evidence of unidirectional causality between the two returns is in general weak, and primarily restricted to the period following the breakdown of the Bretton Woods agreement. However, instantaneous spillovers across the returns of these two markets is quite strong, which in turn tends to suggest the existence of nonsynchronous trading and also high-frequency causal dependency, with the latter confirmed based on daily data covering 3 January 1900 – 4 October 2019. Moreover, the underlying DCC reveals that there is actually portfolio diversification opportunities for investors. Finally, an analysis of the second moments reveal much stronger evidence of volatility spillovers between these two assets, when compared to the return linkages. This result has important implications from the perspective of policy making aiming to reduce the impact of uncertainty on the real economy.
The Quarterly Review of Economics and Finance, 2020
In this work we offer new insight into the relationship between interest rates and uncertainty fo... more In this work we offer new insight into the relationship between interest rates and uncertainty for several advanced economies (Canada, EU, Japan, UK, US) for the period 2003-2018. For this purpose, we utilize the wavelets methodology, which allows us to analyze how the relationship changes over time and across different frequencies and to make inference about causality. To analyze a wide range of frequencies, and because our analysis contains the post-2008 period as well, we use the daily shadow interest rate measure of Krippner (2012, 2013) to capture the stance of monetary policy making at the zero lower bound. We also use the daily uncertainty measure by Scotti (2016), which measures uncertainty related to the real economy. Our findings suggest that there is significant comovement across time and across different frequencies in all the countries we analyze. Corresponding to the similar, yet different conduct of monetary policy, we also find that the relationship exhibits different characteristics and causality in all the economies we analyze, implying that one must be careful not to draw generalized conclusions.
This paper investigates the dynamics of the lead-lag relationships between aggregate and sectoral... more This paper investigates the dynamics of the lead-lag relationships between aggregate and sectoral energy consumption by source and output in the U.S. economy within a time-frequency framework. To do that, we implement three variants of the continuous wavelet methodology, namely the wavelet power spectrum, the cross wavelet, and the wavelet coherence, to aggregate and disaggregate quarterly data between 2005Q1 and 2015Q3. The wavelet analysis unveils that the relationship between the U.S. output and the aggregate energy use by source varies across frequencies and evolves over time. Our results specifically show that the consumption of all energy sources display significant interactive linkages with the U.S. output. At the disaggregate level, while we perceive the presence of co-movements and causality between pairs through frequency bands and over time in almost all sectors, the industrial sector exhibits the highest intensity of wavelet coherence with the added value. Our findings highlight the need of accounting for the various energy sources and economic sectors when studying the output-energy nexus and designing economic policies.
ABSTRACT This article provides a fresh insight into the dynamic nexus between oil prices, the Sau... more ABSTRACT This article provides a fresh insight into the dynamic nexus between oil prices, the Saudi/US dollar exchange rate, inflation, and output growth rate in Saudi Arabia’ economy, using novel Morlet’ wavelet methods. Specifically, it implements various tools of methodology: the continuous wavelet power spectrum, the cross-wavelet power spectrum, the wavelet coherency, the multiple and the partial wavelet coherence to the annual sample period 1969–2014. Our results unveil that the relationships among the variables evolve through time and frequency. From the time-domain view, we show strong but non-homogenous linkages between the four variables. From the frequency-domain view, we uncover significant wavelet coherences and strong lead-lag relationships. From an economic view, the wavelet analysis shows that Saudi economy is still exposed to several global risk factors, which are mainly related to the oil market volatility, and the pegging of the local currency to the US dollar. Such risk factors strongly and negatively affect the real economic growth, exert more pressure on inflation, and substantially limit the freedom to pursue an independent monetary policy.
Uploads
Papers by besma hkiri