We provide an analysis of frontier market equities with respect to world market integration and diversification. Principal component results reveal that frontier markets exhibit low levels of ...integration. In contrast with developed and emerging markets, frontier markets offer no indication of increasing integration through time. Furthermore, individual frontier market countries do not exhibit consistent rates of changing integration. Structural break tests identify breakpoints in integration, as well as integration dynamics across countries. We show that frontier markets have low integration with the world market and thereby offer significant diversification benefits.
The structure of return spillovers is examined by constructing Granger causality networks using daily closing prices of 20 developed markets from 2nd January 2006 to 31st December 2013. The data is ...properly aligned to take into account non-synchronous trading effects. The study of the resulting networks of over 94 sub-samples revealed three significant findings. First, after the recent financial crisis the impact of the US stock market has declined. Second, spatial probit models confirmed the role of the temporal proximity between market closing times for return spillovers, i.e. the time distance between national stock markets matters. Third, a preferential attachment between stock markets exists, i.e. the probability of the presence of spillover effects between any given two markets increases with their degree of connectedness to others.
•Granger causality networks are constructed among 20 developed stock markets.•A detailed procedure of handling the non-synchronicity of daily data is proposed.•The spatial probit model is used to study the structure of the created networks.•Relationships between markets depend on a temporal proximity of closing times.
This paper investigates international monetary spillovers to stock prices in Bangladesh, a frontier market that has been excluded from prior studies in the literature. Using daily stock price data ...for over 300 publicly traded firms in a high‐frequency event study framework, we find that contractionary monetary shocks originating from the US, euro area, and China lower stock prices, with Chinese monetary shocks having the largest impact. Contractionary shocks originating from India, on the other hand, lead to a statistically significant increase in stock returns. The positive response is driven by a small number of policy decisions. When these outlier decisions are removed from the sample, contractionary Indian monetary shocks lead to a decline in stock prices in line with spillovers from the other countries.
This study assesses the effects of the US financial and the Eurozone debt crises on a large set of frontier stock markets. Detrended Cross Correlation Analysis (DCCA) and Detrended Moving Cross ...Correlation Analysis (DMCA) are employed to investigate whether correlations between the crises-originating countries’ stock markets (US and Greece) and frontier stock markets increased from the calm to each crisis periods. Our results indicate that this was indeed the case and frontier markets were affected by both crises. DCCA and DMCA coefficients increased significantly for countries in Europe and also, although not so strongly, for Middle Eastern ones with the subprime crisis. In the case of the Eurozone debt crisis, the most affected countries were Slovenia, Romania, Nigeria, Kuwait, Oman and Vietnam. Evidence of contagion, using the test proposed by Guedes et al. (2018a, 2018b), is thus weaker in the case of the European debt crisis, leading to the conclusion that frontier stock markets were more affected by the US financial turmoil.
•DCCA is used to test contagion in frontier markets.•US subprime and Eurozone financial crises are assessed.•Contagion from the subprime crisis was stronger.•European countries were more affected by the American crisis.
It is generally acknowledged that geopolitical events have a substantial effect on the different aspects of the global economy, especially financial markets. Considering the extent of the impacts ...caused by the Russo-Ukrainian conflict in 2022 and the lack of studies on its effect on frontier markets, our research aims to study the effect of the outbreak of the conflict between Russia and Ukraine on frontier stock markets. Our study employs an event study approach on the daily returns of the benchmarks of the main frontier markets, namely Vietnam, Morocco, Island, Kazakhstan, and Romania. The results of our research show that the main studied frontier markets reacted negatively to the Russo-Ukrainian conflict, and the shock did not subside even during later periods.
The study investigates the impact of investor attention on stock trading by modeling the relationship between Google Search intensity and stock return with stocks listed in frontier markets in ...Vietnam from October 2016 to October 2021. The study has three findings. First, the study confirms the price pressure hypothesis and attention theory that Google Search intensity positively affects stock returns. Second, this study indicates that the impact of Google Search intensity on stock price is short-term. The positive effect is within the week of searching and reverses the following week, although the reverse force is not strong. Third, the relationship is more robust during COVID-19 than in the pre-pandemic period, suggesting that after a shock, more new individual investors enter the market, the impact of GSVI on stock return is more substantial.
We study the impact of shocks (news flow) on stock market volatility in different economic regions, namely the developed, emerging, frontier, and BRIC stock markets during the COVID-19 pandemic, ...which was a‘Black Swan Event’. The daily returns of relevant MSCI indices from January 30, 2020 to October 30, 2020 are examined using the EGARCH model’s News Impact Curve to gain a perspective on the volatility behaviour in stock markets in the developed, emerging, frontier, and BRIC countries' stock markets. Evidence suggests that the developed markets in the Pacific and Europe, the BRIC countries, the emerging markets in Asia, Europe, and Latin America and the frontier markets in Asia were associated with asymmetric volatility response to shocks. Further, the developed markets in North America, and the frontier markets in Africa were associated with a symmetric volatility response. We observe that the volatility response to shocks in different regions is not uniform and varies according to the size and sign of the shock. The findings of the study provide insights to the investors and the academics in understanding the behaviour of volatility globally during a Black Swan Event, and provides critical inputs in global portfolio decisions.
Despite the vast amount of research on business model innovation, little is known about what decision-makers must consider while innovating access-based business models in the context of frontier ...markets. To address this research gap, we develop a comprehensive framework for access-based business model innovation in frontier markets. A participative observation approach is adopted to collect the data on the case study of Microlets, a shared mobility service in Timor-Leste, for validating the framework. We successfully demonstrate the application of the proposed framework to show how access-based business model innovations can minimize issues such as accessibility and affordability, and spur economic growth by giving importance to the factors of contextual intelligence. Three different business model innovation options were compared across the differentiating factors surrounding the contextual requirements of the frontier market to validate the relevance of our framework. By examining factors such as the institutional environment, industry dynamics and infrastructural development, the proposed framework will guide decision-makers to cope up with the inherent uncertainty of frontier markets while developing access-based business models.
•Contextual intelligence is key to business model innovation in frontier markets.•Framework developed captures information needs of decision makers in frontier markets.•Access-based business model innovation minimizes frontier market constraints.•Access-based mobility services in Timor-Leste will benefit from digitization.
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