Papers by SAJI T H A Z H U N G A L GOVINDAN NAIR
Price extremes and asymmetric dependence structures in stock returns: the emerging market evidence
Journal of Economic Studies, Dec 7, 2021
PurposeEquity research in experimental psychology reveals investors' overreactions to bad new... more PurposeEquity research in experimental psychology reveals investors' overreactions to bad news events. This study of asymmetric price structures in equity markets investigates whether such behavior predicts stock returns in an emerging market of India.Design/methodology/approachThe research decomposes Bombay Stock Exchange (BSE) Sensex returns into Extremely Positive Returns (EPR) and Extremely Negative Returns (ENR) based on extreme values at first and then tests their lead–lag relations.FindingsThe empirical finding is consistent with the existing evidence of asymmetric news effects on stock returns in India. In precise, ENR robustly predicts one-month-ahead EPR for the sample period from January 1991 to March 2020. This predictive power persists even in the presence of popular valuation ratios and business cycle variables.Practical implicationsThe paper explains the rationale of extreme value modeling in price forecasting. Investors can find additional utility gains from market cycle information while predicting extreme returns in Indian stock market.Originality/valueThe paper is unique to understand business cycle effects in extreme return reversals in emerging markets.
On extreme value theory in the presence of technical trend: pre and post Covid-19 analysis of cryptocurrency markets
Journal of Financial Economic Policy, Dec 14, 2021
Purpose Research on price extremes and overreactions as potential violations of market efficiency... more Purpose Research on price extremes and overreactions as potential violations of market efficiency has a long tradition in investment literature. Arguably, very few studies to date have addressed this issue in cryptocurrencies trading. The purpose of this paper is to consider the extreme value modelling for forecasting COVID-19 effects on cryptocoin markets. Additionally, this paper examines the importance of technical trading indicators in predicting the extreme price behaviour of cryptocurrencies. Design/methodology/approach This paper decomposes the daily-time series returns of four cryptocurrency returns into potential maximum gains (PMGs) and potential maximum losses (PMLs) at first and then tests their lead–lag relations under an econometric framework. This paper also investigates the non-random properties of cryptocoins by computing the incremental explanatory power of PML–PMG modelling with technical trading indicators controlled. Besides, this paper executes an event study to identify significant changes caused by COVID-19-related events, which is capable of analysing the cryptocoin market overreactions. Findings The findings of this paper produce the evidence of both market overreactions and trend persistence in the potential gains and losses from coins trading. Extreme price behaviour explains volatility and price trends in crypto markets before and after the outbreak of a pandemic that substantiate the non-random walk behaviour of crypto returns. The presence of technical trading indicators as control variables in the extreme value regressions significantly improves the predictive power of models. COVID-19 crisis affects the market efficiency of cryptocurrencies that improves the usefulness of extreme value predictions with technical analysis. Research limitations/implications This paper strongly supports for the robustness of technical trading strategies in cryptocurrency markets. However, the “beast is moving quick” and uncertainty as to the new normalcy about the post-COVID-19 world puts constraint on making best predictions. Practical implications The paper contributes substantially to our understanding of the pricing efficiency of cryptocurrency markets after the COVID-19 outbreak. The findings of continuing return predictability and price volatility during COVID-19 show that profitable investment opportunities for cryptocoin traders are prevailing in pandemic times. Originality/value The paper is unique to understand extreme return reversals behaviour of cryptocurrency markets regarding events related to COVID-19 breakout.
Journal of agribusiness in developing and emerging economies, Oct 14, 2019
Purpose-The purpose of this paper is to investigate the recession effects in market efficiency of... more Purpose-The purpose of this paper is to investigate the recession effects in market efficiency of natural rubber futures contracts traded in India. Design/methodology/approach-The research draws inferences from Granger causality and Engle-Granger cointegration tests, which are administered separately on 14 year daily price data spanning into two distinct, non-overlapping time series of 2004-2008 and 2009-2017. Findings-Analysis shows that rubber futures market is informationally efficient in price discovery. The results of cointegartion tests indicate that a long-term relationship does exist between futures and spot prices of the natural rubber in India. The recession effects in the market efficiency of rubber futures contracts are evident from the increase in optimal hedge ratios estimated with the cointegration methodology. Research limitations/implications-The study pursues a simple cointegration methodology to assess the causal relations between spot and futures market prices in the Indian context. Future studies investigating the long-run causal relations, with error correction framework, between spot and future prices of rubber from other leading rubber producing countries can validate the findings more on this issue. Practical implications-The research expects to pass on vital information inputs on the implications of future contracts to rubber traders for managing their portfolios. The study of this kind definitely will be a great help to farmers and exporters who are potentially interested in gaining access to a hedging vehicle. Originality/value-The paper is unique in terms of understanding the effects of economic recession in information efficiency of futures market. Moreover, a limited number of studies have explored the functional utilities of rubber futures in emerging market context.
Price discovery and pairs trading potentials: the case of metals markets
Journal of Financial Economic Policy, Mar 8, 2021
Purpose This study aims to validate the “expectancy theory” of asset pricing and explores the pri... more Purpose This study aims to validate the “expectancy theory” of asset pricing and explores the price discovery process in metals futures markets. Design/methodology/approach This paper adopts the Johansen cointegration and vector error correction model approach to investigate the potentials of Pairs trading in the metals market during the period 2008–2019. Findings The results find the price movements in metal markets are not random walk and the current “futures” prices are the reasonable estimate of the “spot” metal prices in future. This study does not notice any significant differences in the price efficiency across metals markets, which signal the effects of limited idiosyncratic forces in price transmission. Practical implications The research suggests the covert use of metal futures to make gains from arbitrage trading. Originality/value The study emphasizes the potential of “pair trading” in commodity market context that is seldom discussed in academic papers.
Measuring volatility spillovers and asymmetric responses of Agri commodity prices: evidence from spices and rubber futures in India
Indian Growth and Development Review, Jun 2, 2021
Purpose This paper aims to investigate price responses and volatility spillovers between commodit... more Purpose This paper aims to investigate price responses and volatility spillovers between commodity spot and futures markets. The study ultimately seeks the evidence-based claims on the efficiency of the long run and short run horizontal price transmissions from futures markets to spot markets. Design/methodology/approach This study used the most recent daily price series of pepper, cardamom and rubber, during the period 2004–2019, use “cointegration-ECM-GARCH framework” and verify the persisting validity of the “expectancy theory” of commodity futures pricing. Findings The results offer overwhelming evidence of futures market dominance in the price discoveries and volatility spillovers in spot markets. However, this paper finds asymmetric responses between cash and futures prices across markets. The hedging efficiency of futures contracts is commodities specific’ where spices futures are more efficient than the rubber futures. Practical implications The study passes on vital information to the producers and traders of spices and rubber who have a potential interest in the use of futures contracts to make profits from arbitrage between futures and cash markets. Originality/value The paper is unique in terms of understanding asymmetric price linkages in markets for plantation crops.
Competitiveness review, Jan 2, 2020
Purpose-This paper aims to identify the impact of economic integration on trade competitiveness a... more Purpose-This paper aims to identify the impact of economic integration on trade competitiveness and demonstrate its effects on trade and investment performance of member nations. Design/methodology/approach-The study compiles some price indices to provide a systematic assessment of competitiveness in the BRICS region. The panel regression framework estimates the impact of integration on trade competitiveness and the external sector performance of BRICS nations. Findings-The findings of the research highlight the prospects for strong, closer and sustained integration in BRICS and, more importantly, the contribution of competitiveness to FDI receipts and export growth. Research limitations/implications-The assessment of exports and investment experiences of BRICS nations, particularly China and India, provides further evidence in support of the logical design and strategic use of their foreign trade policies. Originality/value-The economic partnership that wants to sustain this high road to global economic space needs strategic orientations to promote their partnership in other interest areas to make the cooperation more competitive in price terms.
Business adversity during the COVID-19 crisis and beyond: the way forward for small and medium enterprises in India
Foresight, Sep 22, 2021
Purpose The novel coronavirus (COVID-19) leaves Indian business teetering on the edge of survival... more Purpose The novel coronavirus (COVID-19) leaves Indian business teetering on the edge of survival. This paper aims to set out to assess the impact of the pandemic shocks on the small and medium business segments in India. The research also explores the strategies that potentially take the segments back to recovery and growth. Design/methodology/approach The findings draw on the perspectives of academic and business people, and the authors use linear and nonlinear regression modelling under three recovery scenarios to support our arguments. Findings Evidence suggests that the shocks to business are manifold and the severity of most of the issues will aggravate as the recovery prolongs. Practical implications The paper explains the rationale of realistic strategies and compares its effects across potent recoveries. The findings are useful for both academics and business and relates to the strategic decisions that would be taken by small and medium enterprises to expedite recovery from the crisis. Originality/value The research is unique in surveying the academics and entrepreneurs about the impact of COVID-19 on Indian business.
Investment Management and Financial Innovations, 2021
Pairs trading that is built on ’Relative-Value Arbitrage Rule’ is a popular short-term speculatio... more Pairs trading that is built on ’Relative-Value Arbitrage Rule’ is a popular short-term speculation strategy enabling traders to make profits from temporary mispricing of close substitutes. This paper aims at investigating the profit potentials of pairs trading in a new finance area – on cryptocurrencies market. The empirical design builds upon four well-known approaches to implement pairs trading, namely: correlation analysis, distance approach, stochastic return differential approach, and cointegration analysis, that use monthly closing prices of leading cryptocoins over the period January 1, 2018, – December 31, 2019. Additionally, the paper executes a simulation exercise that compares long-short strategy with long-only portfolio strategy in terms of payoffs and risks. The study finds an inverse relationship between the correlation coefficient and distance between different pairs of cryptocurrencies, which is a prerequisite to determine the potentially market-neutral profits throu...
Journal of Financial Economic Policy, 2019
Purpose This paper, using the model suggested by Cantor and Pecker (1996), aims to explore the re... more Purpose This paper, using the model suggested by Cantor and Pecker (1996), aims to explore the relations between sovereign ratings and bond yield spreads in emerging markets. Design/methodology/approach The ordinary least square regression procedure administered on the most recent sovereign ratings of 46 countries demonstrates how the macroeconomic information embody in the sovereign rating scores predict their bond yield spreads relative to the yield on US Treasury bond. Findings The research finds that the assigned rating scores do not herald the complete elites of the macroeconomic conditions in emerging markets, and there is more incremental information in the publicly available macroeconomic variables, which is much useful in predicting bond yield spreads than that embedded into the sovereign ratings. Practical implications The outcomes of the research have strategic implications for global investors and policymakers. The use of credit rating scores along with the macroeconomic...
CAMELS and Bank Performance Measurement: A Case Study of Bank of Baroda
International Journal of Banking, Risk and Insurance, 2015
Banking sector constitutes the backbone of the Indian economy and contributes significantly to he... more Banking sector constitutes the backbone of the Indian economy and contributes significantly to her growth and development. Indias prudent banking system helps the country to survive various national and global economic shocks and meltdowns. Bank of Baroda (BOB) is the second largest and one of the leading profit-making Public Sector Banks in India. This study looks at the financial soundness of BOB under globally accepted CAMELS framework. The study observes the behavior of various parameters of CAMELS rating model and their consistency over the study period. The financial analysis finds the fundamental soundness of BOB with some minor flaws in certain areas. This research ultimately rates the performance of BOB with second grade.
Financial statistical journal, Sep 5, 2018
This research, under Engle-Granger Co-integration framework, examines the hedging efficiency of I... more This research, under Engle-Granger Co-integration framework, examines the hedging efficiency of Indian rubber future markets during the period 2004-2017. The essence of this study is to seek evidence for the effects of global financial crisis of 2008 on the efficiency of rubber futures in hedging price risks of spot rubber in India. The study proved the hedging efficiency of rubber futures during both pre and post recession periods. However, increased price volatility of Indian rubber after recession heightened risk exposure to market participants that eventually lead to unexpected changes in the hedging efficiency of rubber futures. The research concludes with a suggestion that writing of rubber futures in India allows traders to hedge risk exposures in spot market along with the potentials of arbitrage gains.
Investment Management and Financial Innovations, 2021
Pairs trading that is built on 'Relative-Value Arbitrage Rule' is a popular short-term speculatio... more Pairs trading that is built on 'Relative-Value Arbitrage Rule' is a popular short-term speculation strategy enabling traders to make profits from temporary mispricing of close substitutes. This paper aims at investigating the profit potentials of pairs trading in a new finance area-on cryptocurrencies market. The empirical design builds upon four well-known approaches to implement pairs trading, namely: correlation analysis, distance approach, stochastic return differential approach, and cointegration analysis, that use monthly closing prices of leading cryptocoins over the period January 1, 2018,-December 31, 2019. Additionally, the paper executes a simulation exercise that compares long-short strategy with long-only portfolio strategy in terms of payoffs and risks. The study finds an inverse relationship between the correlation coefficient and distance between different pairs of cryptocurrencies, which is a prerequisite to determine the potentially market-neutral profits through pairs trading. In addition, pairs trading simulations produce quite substantive evidence on the continuing profitability of pairs trading. In other words, long-short portfolio strategies, producing positive cumulative returns in most subsample periods, consistently outperform conservative long-only portfolio strategies in the cryptocurrency market. The profitability of pairs trading thus adds empirical challenge to the market efficiency of the cryptocurrency market. However, other aspects like spectral correlations and implied volatility might also be significant in determining the profit potentials of pairs trading.
Global Business Review, 2019
The article applies Markov Regime-Switching Model (MRSM) to explore the prospects of forming curr... more The article applies Markov Regime-Switching Model (MRSM) to explore the prospects of forming currency union among BRICS countries. Our data span the period before and after the formation of the group, and the study compares the regime-switching behaviour of their real exchange rate markets accordingly. The analysis found divergent real exchange market behaviour of the member countries before the formation of the group. However, after the integration of economies, the convergences in central bank's direct intervention behaviours are evident especially among India, China and South Africa. The study concludes that the inclusion of the stronger policy interaction in the region now and future, especially in monetary management, unveils the chance of a strong currency union among BRICS members.
Vikalpa
Valuation Factor includes research articles that focus on the analysis and resolution of manageri... more Valuation Factor includes research articles that focus on the analysis and resolution of managerial and academic issues based on analytical and empirical or case research This article addresses two main questions: Does a value premium exist in emerging market like India? If so, how pervasive is it in different market conditions? Value premium is assumed to be the difference in stock returns of undervalued and overvalued firms with a unique industry profile.
Asian Journal of Finance Accounting, Dec 10, 2013
This paper searches further evidence for the relation between the time varying macroeconomic cond... more This paper searches further evidence for the relation between the time varying macroeconomic conditions and stock returns in India using monthly data during the post 2000 period. Unlike other research in the area, the study uses industry level stock price data on six sectors namely Banking, Energy, FMCG, Information Technology, Pharmaceuticals and Automobiles. Data availability and diverging business cycle sensitivity constitute the rationale behind the selection of industry groupings. Empirical methodology involves a multi-factor modeling using Generalized Auto Regressive conditional Heteroskedasticity (GARCH) model. The results of the study proved that the expected premium on stock market investments in India was time varying and has been affected by the time varying conditional volatilities of macroeconomic factors. The impact of economic changes found different across the industries and the sectoral variations in stock returns confirm the potentials of industry allocation for the diversification of investment risks.
Your article is protected by copyright and all rights are held exclusively by Indian Institute of... more Your article is protected by copyright and all rights are held exclusively by Indian Institute of Management Calcutta. This e-offprint is for personal use only and shall not be selfarchived in electronic repositories. If you wish to self-archive your article, please use the accepted manuscript version for posting on your own website. You may further deposit the accepted manuscript version in any repository, provided it is only made publicly available 12 months after official publication or later and provided acknowledgement is given to the original source of publication and a link is inserted to the published article on Springer's website. The link must be accompanied by the following text: "The final publication is available at link.springer.com".
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Papers by SAJI T H A Z H U N G A L GOVINDAN NAIR