Annals of Financial Economics

This paper presents a new explanation of why the growth effect of inflation reported in the literature is an inverted-U relationship with considerations of lower bound on bank lending rates. We integrate a non-zero lower bound on the lending rate in the discussion and show the effect of inflation on optimal bank loan contracts. This paper believes that informational friction is a source of the negative relationship between inflation and growth when the loan rate constraint is non-binding. Besides, it finds out that once this loan rate constraint is binding, increasing inflation can reduce the real cost of financing capital investment and then contribute to growth. This paper also proves that the non-zero lower limit can only be reached at the low rate of inflation. It implies developing countries that are more likely to have low capital conversion efficiency and high transaction cost would hold a higher inflation-growth nexus than developed countries.

The onset of the novel coronavirus pandemic (COVID-19) and previous financial and currency crises have heightened interest in understanding the nature of the interaction of stock market and exchange rate volatility. This paper aims to investigate the interdependence and volatility transmissions between the stock and foreign exchange markets for South Africa over the period of 1979:01–2021:08, including the effect the COVID-19 pandemic has had on the interdependence and volatility transmissions. Through the use of bivariate Exponential Generalized Autoregressive Conditional Heteroscedasticity (EGARCH) modeling, the empirical outcomes from this study provide strong evidence in support of the “stock-orientated” approach, where significant price and volatility spillovers propagate from the stock market into the foreign exchange market, whilst evidence of the “flow-orientated” approach is seen in the second moment and significant shock and asymmetric spillovers from the exchange to stock market are found. The results support the asymmetric and long-range persistence volatility spillover effect and show strong evidence of contagion between stock and foreign exchange markets. These spillovers became more pronounced during the COVID-19 pandemic, confirming heightened contagion in these markets during the periods of crisis. The results heed important implications for not only policymakers who are concerned by the contagion across financial markets and better regulations of these markets to promote economic growth, but also investors and fund managers who seek to hedge investment risks in South Africa.

Nowadays, with the rapid growth of information spread, investors involve news and sentiments in their financial decision more than before. This paper investigates the effect of technical and fundamental analysis in the form of technical indicators and sentiments of news on Iranian stocks. Several packages and technologies are developed for English semantic; in this regard, most previous works are done on English, especially Twitter. On the other hand, there are rare attempts about the effect of Persian semantics on Iranian stocks due to the lack of uniform packages and technologies. This study collects news articles in Iran that are related to stocks. After data preprocessing, the polarity of news is discerned by the HESNEGAR lexicon. It is the first to consider a semantic Persian lexicon on Iranian stocks. Three models are proposed based on the deep learning approach-convolutional neural networks; price only, news sentiments and hybrid models. Experimental results showed that hybrid model considering both technical indicators and news sentiments using the HESNEGAR lexicon could significantly improve the prediction accuracy compared to price only and news sentiments models. This study can be the reference model to plan a trading strategy.

This study contributes to the COVID-19 related literature in finance by examining asymmetric volatility spillover across stock, Bitcoin, gold and oil markets before and during the COVID-19 pandemic. Based on multivariate VAR asymmetric BEKK GARCH model, findings show that the interdependency across the examined markets intensified during the recent health crisis. Moreover, we find that oil market appears as major receivers of volatility spillovers, particularly from gold and stock market which is mostly the results of dramatic collapse of oil prices during the COVID-19 outbreak. We also document that gold exhibits a strong resilience during COVID-19 crisis, suggesting its potential hedging ability during uncertainty. As for asymmetric volatility spillover, findings show the highest sensitivity of oil and Bitcoin markets to gold and US stock markets. Our findings have important implications for investors, portfolio managers and policymakers.

The paper examines the determinants of profitability of real estate companies by using panel data of Vietnamese listed companies on the Hanoi stock exchange (HNX) and Ho Chi Minh City stock exchange (HOSE) from 2007 to 2020. Profitability ratios are measured by return on assets (ROA) and return on equity (ROE). The results indicate that the cost on revenue ratio, debt-to-equity ratio and the crisis and COVID-19 pandemic are negatively correlated with firm profitability. Meanwhile, the sales to current assets ratio, money supply growth rate and economic growth rate (GDPG) provide a positive correlation with profitability. We find that firm size and equity to total assets have positive effects on ROA, while there is a negative relationship between equity to total assets and ROE, and not enough evidence to conclude how firm size affects ROE. The study thereby provides suggestions and recommendations for the administrators of the government, real estate companies and investors in Vietnam.

In this research, we assess the influence of geopolitical risk (GPR), exchange rate (EXCH) and economic policy uncertainty (EPU) on South Korea stock market. Using monthly dataset covering the period from 1997 to 2021, we utilized the novel non-parametric causality-in-quantiles test initiated by Balcilar et al. (2017) to assess these associations. This study discovered that the effect of macroeconomic shocks in South Korea is diverse across the stock market, implying that the influence of these shocks is not consistent across the stock market in South Korea. Furthermore, this study revealed that the causal influence of EPU, GPR on the stock market is visible in mean and variance. Nonetheless, the causal influence of EXCH on the stock market can only be seen in the mean, with no indication of causation in the variance. We consider that these results are significant to South Korean stock market investors for the purposes of foreign portfolio diversification and establishing investing strategies during times of economic uncertainty.