Do demand curves for stocks slope down? - new evidence from a unique event in India
Srikanth Parthasarathy
Afro-Asian J. of Finance and Accounting, Vol. 11, No. 4 (2021) pp. 561 - 582
The objective of this study is to examine the price and non-price effects of the constituent stocks following the change of the computation methodology of S&P CNX Nifty index from full market capitalisation weighted methodology to the free float market capitalisation weighted methodology in June 2009 in order to resolve whether the demand curves for stocks slope down. This study has followed methodology similar to that of Kaul et al. (2000). The event methodology is used along with cross sectional regressions associating abnormal returns and demand shift. Overall, the empirical evidence in this study supports the downward sloping demand curves for the stocks. The results have implications for one of the basic assumptions in the finance theory, regulators, investors, index providers and managers. To the best of the author's knowledge, this is the first study to examine the slope of demand curves, in such a unique setting without information content.
Author: Augustine C. Arize
Asymmetric nonlinear analyses of banking sector behaviour, markets and interest rate risks in Africa’s frontier economy
Asymmetric nonlinear analyses of banking sector behaviour, markets and interest rate risks in Africa's frontier economy
Augustine C. Arize; Ebere Ume Kalu; John Malindretos; Asli Ogunc
Afro-Asian J. of Finance and Accounting, Vol. 11, No. 4 (2021) pp. 537 - 560
With the possibility of a change in the narrative from the long-held linearity assumption to a nonlinearity and asymmetric discovery in the bank, market and the interest rate risk relationship, this paper explores the banks, stock market development and interest rate risk connection in the context of the Nigerian financial system. Empirical evidence arising from the study indicates that bank development exhibits interest rate sensitivity and changes in inverse direction with the interest rate. Moreover, the results strongly support asymmetry and nonlinearity in the relationship between bank development and stock market development. It is therefore recommended that policy efforts directed towards the development of the financial system should strike a balance between the linear/symmetric assumption and the nonlinear/asymmetric assumption.