Analyzing the Impact of Terrorist Attacks on Stock Index Dynamics
Importance The article considers the features of terrorist attacks, which have an impact on stock indices.It analyzes 117 terrorist attacks committed in different countries within 1988–2016.
Objectives The research assesses how terrorist attacks influence stock index trends. It will enable market agents make better decisions and avoid excessive losses, reduce negative reaction of the market in general, and helpthe national financial system minimize the adverse consequences of terrorist attacks.
Methods We employ historical-logical, graphical, statistical methods and a comparative analysis to describean impact of different aspects of terrorist attacks on the dynamics of stock indices. We also systematize analytical information in this area.
Results The findings show that the impact of terrorist attacks on stock index dynamics depends on various factors, i.e. the number of victims, level of country’s economic development, day of terrorist attack, etc. We found out that the market trend before a terrorist attack had a significant influence on stock index movement after the attack.Terrorist attacks influence industries in a different way.
Conclusions and Relevance Terrorist attacks mostly have a dramatic impact on the dynamics of stock indices. However, the influence is often insignificant and impermanent. Therefore, investors should refrain from ill-judged financial decisions to avoid losses. The findings may be useful for investors, market makers and other market participants.
The article describes proposed by the authors methodology of analysis of the Russian mutual funds. The aim of this methodology is to find out how attractive they are to investors and if they are able to provide the possibility of obtaining higher returns with less risk than the market in general. The study determines what type of fund management (active or passive) is more optimal. It also explains the effectiveness of focusing on past performance of the funds for making future investments. In addition, the ability of the management companies to repeat their past results is analyzed. Moreover, it is shown if it makes sense to focus on management companies that achieved the best results in the past while making decisions about future investments. These and other results achieved in this article reveal the features of the Russian market of collective investments and allow investors to form more competent policy of mutual funds’ investments. The methodology proposed by the authors is universal. Its application for the analysis of the other markets of collective investments will allow revealing their features.
The present article is devoted to consideration of investment strategy in stock market. The questions connected with designing of such strategy are systemically considered in it. The emphasis is thus placed on adaptation of the general (managerial) theory of engineering to engineering of investment strategy. Engineering of investment strategy is considered in indissoluble interrelation with the analysis of their typology. The most actual types and directions of engineering of investment strategy are characterized in the conclusion of article.
Random matrix theory (RMT) is applied to investigate the cross-correlation matrix of a financial time series in four different stock markets: Russian, American, German, and Chinese. The deviations of distribution of eigenvalues of market correlation matrix from RMT global regime are investigated. Specific properties of each market are observed and discussed.
Hedging is one of the most popular strategies for market risk management. Hedging is aimed at decreasing the volatility, or variability, of portfolio returns. The portfolio usually consists of the spot assets and hedging instruments. The latter can be represented by futures, options and over-the-counter assets such as forwards and swaps. While futures’ hedging is rather simple it’s quite widespread in practice. This paper is aimed at comparison of four hedging strategies, where the spot asset is stock and hedging instrument is futures. For this purpose five Russian stocks from Moscow Exchange are selected and analyzed for the period from the 1st of December 2015 till the 29th of February 2016.
The key element of the hedging strategy is the calculation of the hedging coefficient. The latter shows what part of the stocks’ value in the portfolio should be covered by futures. In this paper the hedging coefficient is computed through internal rate of return, ordinary least squares (OLS) and maximum likelihood. The latter is able to estimate hedging coefficient taking into account heteroskedasticity, because the regression errors follow GARCH model. Further hedging strategies are compared by such criteria as standard deviation of portfolio returns, portfolio Value-at-Risk and hedging efficiency.
According to the results the most efficient strategy is one based on internal rate of returns. The other criteria show that the same strategy together with OLS demonstrates better results. Correction for heteroskedasticity made through maximum likelihood did not allow improving hedging efficiency.
The research can be extended in the several directions, namely considering options’ hedging; adding to the portfolio other spot assets, for example, commodities and currencies; taking into account investors’ risk aversion in the calculations of hedging coefficients; introducing transaction costs in the model.
Development of raw-material companies is regarded from the point of view of value of the business and its fundamental factors. The impact of geopolitical situation on stock market is stressed. Factors of oil prices are analyzed. The mineral resources base is evaluated by international standards.
Smoking is a problem, bringing signifi cant social and economic costs to Russiansociety. However, ratifi cation of the World health organization Framework conventionon tobacco control makes it possible to improve Russian legislation accordingto the international standards. So, I describe some measures that should be taken bythe Russian authorities in the nearest future, and I examine their effi ciency. By studyingthe international evidence I analyze the impact of the smoke-free areas, advertisementand sponsorship bans, tax increases, etc. on the prevalence of smoking, cigaretteconsumption and some other indicators. I also investigate the obstacles confrontingthe Russian authorities when they introduce new policy measures and the public attitudetowards these measures. I conclude that there is a number of easy-to-implementanti-smoking activities that need no fi nancial resources but only a political will.
One of the most important indicators of company's success is the increase of its value. The article investigates traditional methods of company's value assessment and the evidence that the application of these methods is incorrect in the new stage of economy. So it is necessary to create a new method of valuation based on the new main sources of company's success that is its intellectual capital.