On Steady Dividend Payment under Functional Mean Reversion Speed

Mtunya, Adeline Peter; Ngare, Philip; Nkansah-Gyekye, Yaw

doi:10.4236/jmf.2016.63030

Cited by 5 publications

(6 citation statements)

References 14 publications

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“…The econometricians and financial experts questioned the whole foundation of the efficient market hypothesis assumptions (Mtunya, Ngare, & Nkansah-Gyekye, 2016;Trypsteen, 2017). Thus, it is important to examine the alternative theories that can predict the market performance in an efficient manner.…”

Section: Substantiation From the Literaturementioning

confidence: 99%

Mean reversion in international markets: evidence from G.A.R.C.H. and half-life volatility models

Ahmed

Vveinhardt

Štreimikienė

et al. 2018

Economic Research-Ekonomska Istraživanja

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The objective of this research is to examine and compare the mean reversion phenomenon in developed and emerging stock markets. An important aim is to measure and compare the speed of mean reversion and half-life of volatility shocks of emerging and developed markets. For this purpose, we have selected five developed and seven emerging markets, and used daily market indices for the period of 1 January 2000 to 30 June 2016. We employed autoregressive conditional heteroskedasticity -Lagrange multiplier (A.R.C.H.-L.M.), generalised autoregressive conditional heteroskedasticity (G.A.R.C.H.) (1, 1), and half-life volatility shock techniques to carry out this research. The results of the study confirmed the mean-reverting process in developed and emerging markets. The South Korean market has the slowest mean reversion, and thus has the highest comparative volatility over a longer period of time. However, the Pakistan stock exchange exhibited the fastest mean reverting process. It is also concluded that the relative volatilities are higher in emerging markets, whereas the comparative volatilities are higher in developed markets. Therefore, it is further concluded that the mean reversion process is much faster in emerging indices except the South Korean and Chinese markets. The study recommends that if investors want higher returns in a shorter period of time then they should invest in emerging markets.

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Section: Substantiation From the Literaturementioning

confidence: 99%

Mean reversion in international markets: evidence from G.A.R.C.H. and half-life volatility models

Ahmed

Vveinhardt

Štreimikienė

et al. 2018

Economic Research-Ekonomska Istraživanja

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“…Further, after careful analysis the blame for drastic crises was put on the policies that were created by the financial system (e.g., İzgi, Duran 2016;Neaime 2015;Shaffer 2010;etc.). Making different econometricians, and financial practitioners from all around the world to question that is the foundation of the whole system based on a false assumption of efficient market hypothesis (e.g., Mtunya et al 2016;García et al 2015;Malkiel 2003;etc.). Thus, the growth of discontentment with this theory causes researchers to work on other theories that could help them to explain the market phenomenon.…”

Section: Literature Reviewmentioning

confidence: 99%

“…However, when prices fall back to their fundamental values, their return was only 4%. This showed that if their returns that are greater than the average then they will be followed by returns that are lower than the average (e.g., Mtunya et al 2016;Oikarinen, Schindler 2015;Engle, Morris 1991;etc. ).…”

Section: Literature Reviewmentioning

confidence: 99%

Speed of Mean Reversion: An Empirical Analysis of Kse, Lse and Ise Indices

Palwasha

Ahmad

Ahmed

et al. 2018

Technological and Economic Development of Economy

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Abstract. The purpose of this study is to determine the presence of mean reversion in the stock markets indices of Pakistan, moreover, to measure, and compare the speed of mean reversion of the stock markets indices across Pakistan. In order to carry out the research study, the daily data of three stock indices of Pakistan such as: KSE-100, LSE-25 and ISE-10 are collected from 2003 to 2014. After the application of tests such as ARCH and GARCH, it was found that returns series of KSE-100, LSE-25 and ISE-10 indices exhibit mean reversion, indicating that the returns revert back to their historical value after reaching an extreme value. Further, the mean reversion rate shows that KSE-100 index has the slowest mean reversion, however, the ISE-10 index has the fastest mean reversion among the three indices. Therefore, the results of the study concluded that KSE-100 index, due to the slowest mean reversion rate has higher volatility over a longer period of time. On the contrary, since, ISE-10 index has exhibited the fastest mean reversion with the lowest volatility as compared to others. But due to fast mean reversion rate, it will help investors to gain profits over a shorter period of time. Thus, it can be recommended that the investor willing to bear the risk of time and looking for long-term investment should invest in KSE-100 index. However, investors looking for higher profits in a shorter period can invest in the ISE-10 index but with higher risk-returns trade-off.

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“…This developed in a family of Hamilton-Jacobi-Bellman variational inequalities whose solutions were approximated numerically. Mtunya A.P et al [29] showed how the firms financial management should safeguard a stable dividend payout growth for the shareholders as well as optimizing the dividend policy.…”

Section: Lin He and Zongxia Liangmentioning

confidence: 99%

“…c are given by(29).The general solution to the differential equation is given by are constants and ( ) p x and ( ) for the values of z, ( ) p x and ( ) q x in (32).…”

mentioning

confidence: 99%

Optimal Dividend and Issuance of Equity Policies in the Presence of Interest

Mandiudza¹,

Chikodza²,

Mwareya³

2018

JMF

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We investigate the dividend and equity issuance problem in the presence of interest rate. The evolution of the financial reserves of an insurance company, where management payout dividends and issue new equity, is described by a stochastic differential equation. The work of Lokka and Zervos [1] is extended by including the interest rate component into the model in order to make the model more realistic. The aim is to maximise the expected discounted dividends pay-out until the time of bankruptcy. In order to investigate this problem, the stochastic control theory for diffusion processes will be used. In order to handle the problem, the Hamilton-Jacobi-Bellman equation (HJB) is derived and solved. The second order ordinary differential equation associated with the problem turns out to belong to the class of Kummer's confluent hyper-geometric differential equations. This category of equations is not easy to solve. The equation is non-dimensionalised and change of variables is effected in two different stages. The results show that interest rate affected the rate at which the value function and threshold level change.

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On Steady Dividend Payment under Functional Mean Reversion Speed

Cited by 5 publications

References 14 publications

Mean reversion in international markets: evidence from G.A.R.C.H. and half-life volatility models

Mean reversion in international markets: evidence from G.A.R.C.H. and half-life volatility models

Speed of Mean Reversion: An Empirical Analysis of Kse, Lse and Ise Indices

Optimal Dividend and Issuance of Equity Policies in the Presence of Interest

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