Journal Articles

Permanent URI for this collectionhttps://mro.massey.ac.nz/handle/10179/7915

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    Tail risk connectedness between DeFi and Islamic assets and their determinants
    (Elsevier B.V., 2024-12-18) Billah M; Hoque ME; Hadhri S; Do HX
    This study explores tail risk spillover between DeFi and Islamic assets using a time-frequency domain approach. We also conduct sub-sample analyses to account for the diverse impacts of COVID-19 and the Russian-Ukrainian conflict on financial markets. Recognizing the importance of global factors in financial market interdependencies, this research also assesses their impacts on tail risk connections. Empirical findings reveal varying levels of total connectedness among DeFi assets, sukuk markets, and Islamic equity indexes across different time spans, indicating a moderate but fluctuating degree of integration. DeFi assets generally appear disconnected from sukuk and Islamic stock markets over various periods, with the notable exception of a strong and consistent link between SNX in the DeFi sector and sukuk markets (excluding the Indonesian market) over medium- and long-term durations, suggesting that both DeFi and Islamic assets have hedging capabilities. Additionally, the integration between DeFi and Islamic assets is weaker during the COVID-19 era compared to the Russian-Ukrainian conflict period, with changes in the transmission mechanism. Further analysis identifies several potential predictors of tail risk connectedness between DeFi and Islamic assets. Our findings have significant risk management implications for investors and DeFi companies.
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    Tail risk connectedness in the Australian National Electricity Markets: The impact of rare events
    (Elsevier B.V., 2024-12-25) Pham SD; Do HX; Nepal R; Jamasb T
    The tail risks can exhibit different and important features than average measures of risk in interconnected electricity markets. This paper examines the interconnectedness of tail risks within the regionally interconnected Australian National Electricity Market. We use the Conditional Autoregressive Value-at-Risk (CAViaR) and time-varying parameter vector autoregression (TVP-VAR) connectedness approach. Analysing historical data between 01 January 2006 and 04 February 2024. The results show significant levels of connectedness for both negative and positive tail risks, highlighting the dynamic and interdependent nature of these markets. Notably, we identify asymmetries in the transmission of tail risks and their key drivers, including oil market volatility and global geopolitical risks. Our findings show that some regions play a pivotal role in the risk dynamics across the regions of the network and the influence of energy source diversity on risk profiles. The study underscores the complexity of managing the expected increase in tail risks in interconnected electricity markets, emphasizing the need for adaptive, forward-thinking strategies tailored to evolving global and local conditions.
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    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.
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    Technical trading rules, loss avoidance, and the business cycle
    (Elsevier B V, 2023-12) Ergun L; Molchanov A; Stork P
    We show that simple technical trading rule (TTR) strategies substantially reduce investment left tail risk. An investor following a TTR strategy can also avoid a high percentage of extremely negative returns. This percentage increases substantially during recessions. Interestingly, tail risk reduction does not come at a cost of lower performance – risk adjusted returns of TTR strategies are in fact higher than those of a buy-and-hold strategy. Our findings are robust to changes in trading strategy specifications. They hold in 38 international equity markets, as well as in a large sample of individual US stocks, and survive a reality check bootstrap.