Current Issue

Capital Markets Review Vol. 25, No. 2, pp. 01-14 (2017)

Investigation of Herding Behaviour in Developed and Developing Countries: Does Country Governance Factor Matters?

Ahmad Fawwaz Mohd Nasarudin1, Bany Ariffin Amin Noordin2, Siong Hook Law 2 & Mohd Hisham Yahya2
1Faculty of Economics and Management Sciences, International Islamic University Malaysia, Malaysia.
2Faculty of Economics and Management, Universiti Putra Malaysia, Malaysia.

Abstract: Although numerous studies have been conducted on herding behaviours, only a limited number has focused on the governance factor that may influence herding activity. This paper examines whether countries’ governance influences herding decisions among investors. Applying the cross-sectional absolute deviation (CSAD) method on data from 60 countries, the results on herding estimation based on the country level segmented into three panels reveal that the strict governance would help to minimize herding activity. Among countries with strict governance, only six report herding activity. However, the results show that herding activity is reported more often in countries with moderate or weak governance. Our results also suggest that herding activity will be practiced more in the country where the information dissemination is less efficient due to its less-strict governance level.

Capital Markets Review Vol. 25, No. 2, pp. 15-31 (2017)

Macroeconomic Drivers of Singapore Private Residential Prices: A Markov-Switching Approach

Gary John Rangel1 & Jason Wei Jian Ng2
1School of Management, Universiti Sains Malaysia, Malaysia.
2School of Business, Monash University Malaysia, Malaysia.

Abstract: This paper attempts to address the relationship between various macroeconomic variables affecting Singapore private residential prices using a Markov-Switching approach rather than a single state linear regression framework. We adopt the 3-regime approach used by Nneji et al. (2013). The dataset encompasses a period from 1978Q1 to 2012Q1. Based on the extant literature, various macroeconomic variables that affect house prices were chosen. They are inflation rates, exchange rate changes, real interest rate changes, population growth, changes in public housing supply, and growth in real disposable income. The results indicate that in the steady and boom state, inflation rates, population growth, disposable income growth, and public housing supply changes are significant in explaining growth in private residential prices. Several abnormal results are also documented namely the non-significance of interest rate changes. Using a Markov-switching approach provides added information in identifying significant variables in each state allowing government policymakers to be more specific in using proper policy measures when addressing private residential price growth.

 

Capital Markets Review Vol. 25, No. 2, pp. 32-48 (2017)

The Determinants of Financial Development in the Republic of Yemen: Evidence from the Principal Components Approach

Ramez Abubakr Badeeb1 & Hooi Hooi Lean2
1Faculty of Business, Curtin University, Malaysia.
2School of Social Sciences, Universiti Sains Malaysia, Malaysia.

Abstract: This paper provides new evidence that sheds light on the main determinants of financial development in the Republic of Yemen. The result demonstrates that economic growth, natural resource dependence, trade openness and inflation are the main determinants of financial development in Yemen. While economic growth and trade openness have a positive impact on the pace of financial development, the natural resource dependence has a negative impact. However, the effect of inflation is sensitive to the choice of proxy for financial development. Hence, whether a factor is good or bad for financial development depends on the indicator used as a proxy for financial development. Moreover, constructing a new proxy by Principal Components Analysis that summarizes the most information of all the available proxies is an efficient way to reflect the characteristics of financial development.

 

Capital Markets Review Vol. 25, No. 2, pp. 49-64 (2017)

Dynamic Linkages between Newly Developed Islamic Equity Style Indices: Is Growth Style More Influential Than Value Style?

Shahrin Saaid Shaharuddin1, Wee-Yeap Lau2 & Tien-Ming Yip2
1Faculty of Business and Accountancy, University of Malaya, Malaysia.
2Faculty of Economics and Administration, University of Malaya, Malaysia.

Abstract: This study investigates the dynamic linkages between the newly developed Islamic equity style indices from stocks listed in FTSE EMAS Shariah Index from May 2006 to May 2017. Based on the Vector Autoregressive model (VAR), the results indicate: Firstly, there are short-run dynamics between Islamic equity style indices. Notably, growth style indices are more influential than value style; Secondly, the Large Growth index is the most influential, followed by Medium and Small Growth; Thirdly, Large Growth index precedes Large Value index. These results reaffirm that growth style is more receptive than value style with respect to new information due to institutional investors who prefer growth stocks from blue-chip companies, GLCs and GLICs. This study also proposes the effect of retail investors to explain information flow from small-cap to medium, and medium to large-cap. Robustness check with Toda-Yamamoto procedure yields similar result with VAR model except for one short-run relationship from Large Growth to Large Value. Our results redefine the importance of growth style and support new product differentiation in the quest to develop the Islamic fund management industry.

 

Updated on 27 December 2017