Massey Research Online - Browsing by Author "Balli F"

Browsing by Author "Balli F"

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A multi-dimensional connectedness and spillover between green bond and Islamic banking equity: Evidence from country level analysis
(Elsevier B V, 2024-02) Billah M; Hadhri S; Hoque ME; Balli F
The paper delves into the multidimensional connections and spillover between green bonds and Islamic banking stocks from eleven countries. Throughout this study, we further explored optimal hedging mechanisms, as well as optimal portfolio weighting mechanisms, with Islamic banking equities and green bonds. Our empirical results show that there is a moderate level of interrelation between green bonds and Islamic banking indices, with low connectedness throughout the long-term and medium-term. The time-varying spillover effects become higher, albeit low, in the early periods of both SOR and COVID-19 at short-, medium-, and long-term scales, which suggests some diversification and hedging benefits from holding portfolios of the two assets. Country-based Islamic bank markets are not largely affected by disturbances that emerged in some other markets in the short-, medium-, or long-term timescales. The Chinese green bond market has a tendency to be the greatest net risk transceiver for both the green bond and Islamic bank markets over the medium and long term, whilst the global green bond index has been the leading net risk transmitter during the short term. Only the UAE and Saudi Islamic Banking indices act as net risk transmitters in the short and medium term. The empirical findings further suggest that global risk variables are dependable drivers of the extent of spillover between Islamic banking indices and green bonds. Our research shows that owning Islamic bank stocks during COVID-19 and SOR minimizes the significant risk linked to holding green bonds, which has profound implications for risk management and portfolio creation. Thus, our study offers important implications for economic agents.
An investigation of the frequency dynamics of spillovers and connectedness among GCC sectoral indices
(Elsevier Inc, 2024-01) Kapar B; Billah SM; Rana F; Balli F
We examine intra-regional patterns of return and volatility spillovers between economic sectors of GCC over the period from 2007 to 2021 at different frequencies. First, we investigate the connectedness of sectoral equity returns and volatilities by applying TVP-VAR frequency connectedness method and explore the different patterns and magnitudes. Second, we explore possible determinants of sectoral equity return and volatility spillovers. We identify that spillovers are regime dependent increasing their intensity during turmoil periods such as 2007–2008 crisis, 2014 oil price crash and 2020 COVID-19 pandemic. The level of contagion is the highest in the financial sector and the lowest in the energy sector. In general, while Bahrain stock market is segmented from other markets in many sectors, Saudi Arabia is losing its dominance position to UAE and Qatar to transmit shocks to other countries. In line with the literature, the liquidity and profitability positions significantly affect the extent of the spillovers which are highly dispersed across sectors. Particularly, the sectors that have high leverage tend to transmit the shock rather than absorb. Our findings confirm the heterogeneity of sectoral spillover returns and volatilities, thereby suggesting that portfolio managers can monitor the magnitude of the spillovers by controlling the financial performance of the firms and guide their investment decisions accordingly at different time horizon.
Asymmetric connectedness and investment strategies between commodities and Islamic banks: Evidence from gulf cooperative council (GCC) markets
(Elsevier B V, 2024-09) Billah M; Hadhri S; Shaik M; Balli F
The study uses the data of thirteen Islamic Banks (IB) in the GCC region and sixteen commodities that include soft agriculture, energy, industry, and precious metal commodities. Murabaha transactions makes up most of the revenues of the Islamic banks, whereas commodities set up the biggest portion of the assets among Murabaha transactions, therefore commodities and IB revenues are expected to comove. Interestingly, empirical findings suggest that most of the Islamic banks and commodities are not significantly affected by the shocks from other markets. We further observe that negative shocks have a higher impact on market connectedness among used assets compared to the positive returns and find a significant role of risk variables in explaining the magnitude of spillover between used assets. We perform robustness of our results in sub-samples periods during Shale Oil Revolution, Global Financial Crisis, and the COVID-19. Additionally, the multivariate portfolio analysis shows some risk reduction properties of the majority of the used assets. The performance evaluation measures demonstrate that weights selected based on dynamic connectedness network presents diversification opportunities. These findings help investors and portfolio managers to remain alert to the movements of the risk factors and calibrate there hedging and portfolio management strategies by taking long and short positions as incorporation of Islamic banks and commodities in the GCC region in a portfolio could yield risk reduction benefits and profitability.
Contemporaneous and lagged 𝑅2 decomposed connectedness approach: New evidence from the energy futures market
(Elsevier Inc, 2023-11) Balli F; Balli HO; Dang THN; Gabauer D
In this study, we investigate the return propagation mechanism across six energy futures, namely, Crude Oil, Heating Oil, Gasoline, Natural Gas, Kerosene, and Propane ranging from November 21st, 2014 until April 6th, 2023 by using a novel R2 decomposed connectedness approach. This framework allows to efficiently decompose connectedness measures into contemporaneous and lagged components. We find that the dynamic total connectedness is heterogeneous over time and economic-event dependent. Furthermore, the empirical results highlight that the contemporaneous effects are more pronounced on average while a significant amount of lagged spillovers occur in the case of Kerosene and Propane. We find that Heating Oil is the main net transmitter of shocks followed by Gasoline and Crude Oil while the main net receiver of shocks is Kerosene followed by Propane and Natural Gas. Finally, robust R2 connectedness measures are provided.
Cross-listing flows under uncertainty: an international perspective
(Taylor and Francis Group, 2024) Agyemang A; Balli F; Gregory-Allen R; Balli HO
The impact of policy uncertainty on corporate decisions and strategies continues to receive significant interest in recent discussions. As a contribution, this study examines how economic policy uncertainty (EPU) in the domestic and global markets impacts corporate cross-listing decisions. To this end, we employ firm and country-level data from 1990 to 2016 from 13 countries. We implement a Granger Causality, Quantile on Quantile Regression (QQR), and Wavelet Coherence approaches and show that monthly local and global EPU influence the cross-listing decisions of firms, with stronger influence for firms from smaller domestic markets. We suggest that firms from smaller domestic markets seek more cross-listing in the face of high local EPU and reduce or avoid cross-listing during high global EPU periods. Our findings suggest that policy transparency could have important implications for current and future corporate decisions.
Downside risk connectedness between Islamic sectors and green bond markets: implications for hedging and investment strategies
(Taylor and Francis Group, 2024-01-02) Billah M; Hoque ME; Balli F; Kaur J; Kumar S
This study explores the relationship between the green bond and Islamic sectoral markets in terms of downside risk. A new framework was developed using CAViaR and QVAR techniques to construct hedging and portfolio strategies. Results show higher levels of downside risk connectedness and spillover across different risk environments, with short-run connectedness outperforming long-run. The downside risk connectedness and spillover are time-varying, influenced by major events like the Shale Oil Revolution, US–China trade war, COVID-19 pandemic, and Russo-Ukrainian conflict. Green bond market indices of China, the European Union, the US, and the global market receive net shocks in moderate and higher downside risk environments across various frequencies. US and global green bonds exhibit net transmitter roles in a downside-risk environment. Islamic Sectors BM, OG, FIN, CG, and HC are shock transmitters, while TELE and UTL are shock receivers across different downside risk environments and frequencies. Net roles are CS, INDUS, and TECH, subject to the downside risk environment and frequencies.
Dynamic connectedness between crude oil and equity markets: What about the effects of firm's solvency and profitability positions?
(Elsevier B V, 2023-09) Balli F; O Balli H; Nguyen TTH
The paper aims to explore the presence of connectedness between oil price changes and stock returns of oil & gas sector. The analysis, adopting the connectedness approach developed by and the frequency connectedness developed by demonstrates a high level of connectedness, especially during the extreme economic meltdown. The short-term (1–5 days) level of total connectedness is substantially higher than the medium-term (5–30 days) and long-term levels (30–262 days). In addition, when examining the impact of the sectors' financial characteristics on the extent of the connectedness, we found that sectors with greater solvency position (lower debt to asset ratio and higher interest coverage) are less connected with the oil price changes. The impact of sector's solvency position on connectedness (between stock return and oil prices) is even more obvious for financially more open markets. Also, change in oil prices have a less impact on the returns of sectors with higher profitability ratios. The paper, therefore, brings several implications to both policy makers and investors.
Exploring the dynamic links, implications for hedging and investment strategies between Sukuk and commodity market volatility: Evidence from country level analysis
(Elsevier Inc, 2024-06) Billah M; Hadhri S; Balli F; Sahabuddin M
This research paper examines the influence of spillovers between volatility of commodities (including soft commodities, precious metals, industrial metals, along with energy) and returns of sukuk. Using a notable sample of fifteen sukuk country indices and sixteen products, we examine the time-varying criterion vector autoregression (TVP-VAR) based extended joint connectedness method and contribute to the correlation analysis literature by supplying a comprehensive as well as policy-oriented analysis of the connection between sukuks and also commodities. Our results disclose that the system-wide dynamic connectedness is slowly heterogeneous and driven by financial occasions. Next, we look at the potential determinants of connectivity between sukuk and commodity markets, we find that global risk factors significantly impact the degree of spillovers between markets. In particular, the negative impacts of risk factors on spillovers suggest that some risk-mitigating properties may be related to market leverage in the composite portfolio in bear market conditions. In addition, our results, using hedging efficiency and the Sharpe ratio, confirm the hypothesis of diversification opportunities between markets that leverage dynamic connectivity networks.
Firm productivity in the Energy-electricity sector over the last two decades with crisis: The role of cross-listing
(Elsevier B V, 2024-02) Dang TH-N; Balli F; Balli HO; Nguyen H
Novel to the literature, this study examines how cross-listing impacts firms’ productivity in Energy sector. Annual data of firm cross-listing over the last two decades with crisis (2002-2022) is employed for our analyses. We find evidence of significant drop in productivity after Energy firms (including electricity firms) cross-list in the US market. Meanwhile, we do not find strong evidence of significant decreases in firm productivity from other sectors in our sample. We note one possible explanation for this finding is that after cross-listing, Energy firms appear to utilize their increased capital to heavily invest in infrastructure, equipment, and plants for expansion, which might eventually damage their productivity. To seek for more thorough explanations for such decreases in Energy firms' productivity after cross-listing, we identify the determinants of firm productivity in Energy sector. Our results provide strong evidence that the increases in capital expenditures after Energy firms cross-list appear to be associated with the decreases in firm productivity. Notably, we note that negative impacts of capital expenditures (after cross-listing) and state ownership on firm productivity become much stronger and more statistically significant in developed countries than in emerging countries. Last, corporate governance and firm liquidity are found to be two determinants that help improve firm productivity in both electricity firms and other energy firms.
Interconnectivity and investment strategies among commodity prices, cryptocurrencies, and G-20 capital markets: A comparative analysis during COVID-19 and Russian-Ukraine war
(Elsevier Inc, 2023-11) Kumar S; Jain R; Narain; Balli F; Billah M
Economic and political disorders have multidimensional impacts on all economies around the world. The global world has faced out COVID-19 pandemic in 2020, and now the Russian-Ukraine geopolitical crisis. This study investigates the nexus among commodities, crypto, and G20 capital markets along with risk and returns implications. To examine the impact, we applied the TVP-VAR technique suggested by Koop and Korobilis (2014), and Antonakakis, Chatziantoniou, and Gabauer (2020) by adjusting the framework of Diebold and Yilmaz (2012). The research findings reveal that a high level of connectedness was observed during Covid-19, which was persistent for a long period and has multidimensional impacts. More particularly, EU, Canada, France Germany, and the UK were the principal supplier of spillovers to other commodities, Bitcoin, and the remaining markets. During Geopolitical Crisis (here after GPC), conclusively it is observed that of USA, Brazil, Saudi Arabia, Canada, Mexico, China, Indonesia, and Japan are the net receivers of the volatility spillovers and Russia, Germany, France, European Union, Italy, UK, Argentina, India, Australia, Turkey, Korea, and South Africa are the net transmitters of volatility spillovers. Interestingly, among net transmitters Argentina, South Africa and Turkey are suffered from high inflation and substantial budget deficits, considered as weak economies of G20. Portfolio weights has been increased dramatically during COVID-19 and Russian-Ukraine war. This research could be utilized to take investment, hedging, and diversification decisions about commodities, cryptocurrencies, and stocks, particularly in such turmoil situations with the help of connectedness and various hedging techniques.
Investment styles of islamic equity funds
(Elsevier Inc, 2024-01) Chowdhury MIH; Balli F; de Bruin A
We investigate the dynamics of investment styles of Islamic equity funds (IEFs), mainly through portfolio holdings. We rely on an unbiased survivorship sample of 224 active portfolios domiciled in 22 countries from 2004 to 2018 to shed new light on style concentration. IEFs are overwhelmingly skewed initially to value stocks in Islamic countries and growth stocks in non-Islamic countries. We find a subsequent shift from these styles to a more blended approach. Investments in Islamic countries shift from mid-cap to large-cap stocks, while those in non-Islamic countries remain in extremely large-cap stocks. The propensity of style shift is larger in asset type than in asset size. The style drift analyses show that most IEFs drift in style, with a more aggressive drift in Islamic countries than in their non-Islamic counterparts. They are more likely to alter their portfolio exposure in the sight of adverse outcomes. Implications of our results for faith-based investors and regulators are identified in the study.
Measuring economic country-specific uncertainty in Türkiye
(Springer Nature, 2024-06-12) Kilic I; Balli F
In this paper, a new measure for uncertainty that affects the economy is proposed, constructed, and applied to an emerging economy, Türkiye. We have constructed an index of economic country-specific uncertainty (ECSU) that is in line with the methodology used in constructing economic policy uncertainty indexes. As the economic uncertainty is of the Knightian type, the essence of measuring it lies in counting the frequency of joint appearances of words related to economics and uncertainty in Turkish-language newspapers. The uncertainty index constructed using local language sources- Turkish performs significantly better in measuring country-specific uncertainty in Türkiye. However, some indexes use English language sources to measure uncertainty in Türkiye- did not make them country-specific. The ECSU was tested by evaluating the dynamic real effects of the uncertainty. This evaluation was performed by the analysis of impulse responses from uncertainty to some economic variables in a vector autoregressive model describing the economy of Türkiye. We find that an unexpected increase in uncertainty in the Turkish-language press is related to decreases in industrial production, employment, and trade. If the uncertainty measure is based on the articles from the English-language press only, no such relationship can be confirmed. We also find that an increase in uncertainty leads to increase in inflation and stock and oil prices.
Sectoral uncertainty spillovers in emerging markets: A quantile time–frequency connectedness approach
(Elsevier Inc, 2024-06) Dang THN; Balli F; Balli HO; Gabauer D; Nguyen TTH
This study investigates the sectoral expected uncertainty connectedness in emerging markets across different frequencies and quantiles using the novel quantile time–frequency connectedness approach of Chatziantoniou et al. (2022a). The employed dataset spans from January 1st, 2003 to October 4th, 2022, encompassing 10 key sectors. The findings reveal a robust and notable interconnection among these sectors, with a substantial total connectedness index of 91.01%. We also note that the largest proportion of the sectoral total connectedness is associated with long-term spillovers. Consumer Cyclicals emerges as the primary source of net risk transmission. Conversely, the Communications & Networking and Healthcare appear to be the greatest net receivers of shocks at the median level. Furthermore, we find that the degree of interconnectedness substantially varies over time, frequency, and quantile, and by economic events. In addition, we find suggestive evidence of asymmetric sectoral uncertainty connectedness effects as the uncertainty spillovers are higher during turbulent market conditions than normal market conditions. A positive relationship between uncertainty measures and sectoral connectedness is also observed during periods of smooth and normal market conditions. Besides, we also conduct different portfolio analyses illustrating the importance of risk diversification to reduce investment uncertainty. This has important implications for international investors and policymakers in forming optimal investment portfolios reducing adverse risk spillovers.
Tail risk spillovers between Islamic sectoral equities and bond markets: a time-frequency domain approach
(Taylor and Francis Group, 2024-06-28) Billah M; Alam MR; Balli F
This study examines the tail risk spillover between Islamic sectoral stock indices and country specific investable Islamic bonds in time and frequency domain and provides useful implications for portfolio management. For the analyses, Conditional Autoregressive ValueatRisk (CAViaR), Quantile Connectedness, and DCCGARCH t-Copula models are estimated utilizing daily data from 15 countries. The findings show that the connectedness and spillover of risks are much stronger at tails than at median, and in the short-term than in long-term. Whereas median risk connectedness surges during COVID-19 pandemic, the connectedness between tail risks is usually elevated even before the COVID-19 pandemic with industrial sector being consistently a significant net transmitter of shocks. Moreover, all the sectoral stock market indices are significant and consistent transmitter of left tail shocks indicating a much stronger role of sectoral stock markets in transmitting large negative shocks. A heightened connectedness is also observed during Russia-Ukraine war mainly in the short-term frequency. The portfolio analysis shows that long positions in sectoral stocks can usually be hedged by taking short positions in Islamic bonds. Hedging effectiveness and optimal portfolio weights are also calculated to provide market participants with further information.
The decomposition of tourism demand and tourism receipts
(SAGE Publications, 2023-09-19) Balli F; Do X; Uqaili H
We examine the effect of the decomposition of tourist demand on tourism receipts. We find that tourists from OECD economies or from countries that have strong trade connections with the host economy tend to spend more money in emerging economies. However, tourists from countries that have sociocultural or geographic linkages, such as sharing the same border, having the same religion or language, or have the same ethnicity as those in the host country, tend to spend less money.

Browsing by Author "Balli F"

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