A Treatise on Oil Price Shocks and their Implications for the UK Financial Sector: Analysis Based on Time‐Varying Structural VAR Model

Nasir, Muhammad; Rizvi, Sabih Abass; Rossi, Matteo

doi:10.1111/manc.12206

Cited by 43 publications

(7 citation statements)

References 104 publications

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“…The novelty of SOR unit root test is that it is nonlinear-unit root test, which accounts for sharp and smooth structural breaks in the time series. It is very important to account for the structural break as a unit root test ignores the structural break can yield the biased estimates (Nasir et al 2017). For instance, classical unit root tests such as Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) overlook the presence of nonlinearity and structural breaks in the series which may be potential cause of unit root problem.…”

Section: Sor Unit Root Test With Sharp and Smooth Breaksmentioning

confidence: 99%

Environmental degradation in France: The effects of FDI, financial development, and energy innovations

2018

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This paper explores the determinants of carbon emissions in France by accounting for the significant role played by foreign direct investment (FDI), financial development, economic growth, energy consumption and energy research innovations in influencing CO2 emissions function. In this endeavour, we employ the novel SOR ) unit root test on French time series data over the period 1955-2016 to examine the order of integration in the presence of sharp and smooth structural breaks in the variables. We also apply the bootstrapping bounds testing approach, recently developed by McNown et al. (2018), to investigate the presence of cointegration and the empirical findings underscore the presence of cointegration among the time series. Moreover, we find that FDI has a positive impact, while energy research innovations have a negative impact, on French carbon emissions. Financial development lowers carbon emissions, thereby improving the French environmental quality. FDI degrades the environment, and thus supports the pollution-haven hypothesis in France. Similarly, financial development suggests that financial stability is a required condition for improving environmental quality, so are energy research innovations. Contrarily, energy consumption is positively linked with carbon emissions. However, the relationship between economic growth and CO2 emissions is an inverted-U, which is a validation of the environmental Kuznets curve (EKC).

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Section: Sor Unit Root Test With Sharp and Smooth Breaksmentioning

confidence: 99%

Environmental degradation in France: The effects of FDI, financial development, and energy innovations

2018

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“…Nasir et al [40] aimed to investigate the relationship between the energy sector stock, oil prices, and the stock market using a time-varying vector autoregressive model. Their findings reveal that oil price shocks have negatively affected the stock market.…”

Section: Literature Overviewmentioning

confidence: 99%

Analysis of Wavelet Coherence: Service Sector Index and Economic Growth in an Emerging Market

2019

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The present study aims to shed some light on the causal link between the Service Sector Index in the Turkish stock market and economic growth using a wavelet coherence approach. Thus, the present study determines whether the Service Sector Index leads to economic growth in Turkey and/or vice versa. Based on our aim, we use the wavelet coherence approach, which allows us to capture long-run and short-run causal linkages between the Service Sector Index and economic growth in Turkey, since the approach combines both time domain causality and frequency domain causality tests. The findings from wavelet coherence reveal that there is one-way causality running from the Service Sector Index to economic growth in Turkey at different frequencies and different periods between 1997 and 2017.

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“…Second, the irrational factors increased their importance by explaining ETF portfolios during the European debt crisis. Our work is substantially different from that of Nasir et al (2018, 2021) and Thampanya et al (2020) in that it focuses on explaining rational and irrational factors that affect the two prominent strategies: value and momentum, similar to Asness et al (2013). Asness et al (2013) show that value and momentum anomalies work in different asset classes and financial markets worldwide.…”

Section: Introductionmentioning

confidence: 93%

“…Second, it studies the goodness-of-fit of rational and irrational factors before, during and after a financial crisis. As Nasir et al (2018Nasir et al ( , 2021 reported, they analyze the influence of the domestic economic environment such as inflation, the exchange rate, interest rates and economic growth. They find that the global financial crisis is a gamechanger, and there is an intensive response during the period of financial turmoil.…”

Section: Introductionmentioning

confidence: 99%

Stock return drivers: a mix of reasons and emotions

Pornpikul

Nettayanun

2021

RBF

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PurposeThe authors study the explanatory power of investor rationality and irrationality for value and momentum portfolios. We also examine the relationships during financial crisis events, namely, the US subprime mortgage crisis (2007–2009) and the European debt crisis (2011–2013).Design/methodology/approachThis study examines the influence of investors’ rationality and irrationality on the US stock market, using the multiple linear regression model and the stepwise regression model. Technically, the stepwise regression uses the machine-learning technique, with specific testing methods — forward selection, backward selection and stepwise selection — to find the best-fit model, according to Akaike’s Information Criterion (AIC). Thus, in this study, we will show the best model, as tested by the stepwise regression model.FindingsOur empirical results contribute to the importance of reasons and emotions for stock-market returns and conclude that rationality and irrationality simultaneously explain the value and momentum portfolios, as well as the ETF portfolios. Also, the rational and irrational explanatory powers differ, depending on portfolios and different periods. Rational factors usually explain the volatility of the return to a greater extent than irrational factors. Moreover, during a financial crisis, the irrational factors remarkably increase their importance in explaining returns, especially for the ETF portfolios.Originality/valueWe expect this study’s contribution will show not only academic contribution but also benefit many stakeholders in the financial market. Investors and traders can identify various irrational factors of trading — for example, taking a long position during the panic in the market following the indicators in the models. Managers also reconsider the cost of the company by adding irrational factors when computing the equity’s expected return. Similarly, stock exchanges can adequately adjust their circuit breaker during a pessimistic-investor period. Finally, regulators can evaluate a complete picture of the stock market by adding irrational factors into their considerations.

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A Treatise on Oil Price Shocks and their Implications for the UK Financial Sector: Analysis Based on Time‐Varying Structural VAR Model

Cited by 43 publications

References 104 publications

Environmental degradation in France: The effects of FDI, financial development, and energy innovations

Environmental degradation in France: The effects of FDI, financial development, and energy innovations

Analysis of Wavelet Coherence: Service Sector Index and Economic Growth in an Emerging Market

Stock return drivers: a mix of reasons and emotions

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