Articles
STACKELBERG LEADERSHIP BY A PRICE FOLLOWER

C. Saratchand and Nidhi Bagaria

1st April 2017

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The Cournot-Bertrand model of oligopoly was introduced in the 1970s. It involved some firms being price setters while other firms were output setters. However there remained a question about the identity of the entity which changed the prices of the output setting firms. An alternative formulation of this problem is set out where in an industry there is a price leader and a price follower. But the price follower is a Stackelberg leader. The price follower tries to estimate the reaction function of the price leader through an iterative learning process and incorporate the former into its profit maximisation exercise. Thereby the price follower tries to factor in the consequences of changes in its output on the price it receives. The equilibrium, local stability and analogy of the model with respect to the Cournot-Bertrand model of oligopoly are examined. Such a set-up is compatible with constant returns to scale of the production process of the price follower.

MACROECONOMIC POLICIES AND STOCK MARKET PERFORMANCE IN NIGERIA

Ndubuisi Jamani and Kennedy Prince Modugu

1st April 2017

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This study investigates the impact of fiscal and monetary policies on stock market performance in Nigeria using the Structural Vector Autoregressive (VAR) techniques. Using Yearly data covering the period 1981-2013, the VAR procedure was employed to empirically show the impact of fiscal and monetary policies on stock market performance. Results from the empirical analysis show that monetary policy has the capacity to influence stock market performance in Nigeria. Also, monetary policy shocks are not unstable in their effects on stock market. The results also show that fiscal policy impacts on stock market performance. In comparative terms, monetary policy appears to have a stronger effect on stock market performance than fiscal policy. However, there appears not to be any unsystematic response of stock market performance to shocks in both policies. It is therefore recommended that attention should be given to stock market reaction to monetary and fiscal policy moves. Consequently, the policy direction in this regard should be such that is able to stimulate the performance of the stock market.

BACKTESTING VAR MODELS: THE CASE OF COMMODITIES

Devesh Shankar, Prateek Bedi, Shalini Agnihotri and Jappanjyot Kaur Kalra

1st April 2017

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One of the most widely used methods to quantify risk is ‘Value at Risk’. VaR models are useful only if they predict future risks accurately. This paper focuses on a comparative evaluation of three broad approaches to calculate VaR for nine commodities traded on Multi Commodity Exchange of India. The primary objective of the study is to identify the most accurate VaR model for each commodity in particular and commodity asset class in general. VaR is calculated using five different methods (two methods each of parametric & non-parametric approaches and one method of semi-parametric approach) for all nine commodities for a period of nine years starting October 2006 till October 2015. To identify the better performing VaR methods accurately, the analysis is performed in two phases, Pre-Crisis (October 2006 to December 2009) and Post Crisis (January 2010 to October 2015). Results suggest Volatility Weighted Historical Simulation (VWHS) VaR method has outperformed other methods in both parts of the analysis exhibiting a success ratio of 100% each time. We also conclude that the selection of similar or contrasting data periods in terms of market conditions for VaR calculation and VaR backtesting affects the performance of VaR methods in general. These findings are relevant for retail and institutional investors who hold commodities in their portfolios and traders who need to calculate VaR for their commodity portfolios.

INFRASTRUCTURE DEVELOPMENT AND SPILLOVERS IN THE INDIAN ECONOMY

Aasheerwad Dwivedi

1st April 2017

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Being one of the fastest growing economies, India has not only withstood the recent crisis and recovered fast, but also has emerged with brighter prospects amidst the global uncertainties. The growth in Indian economy has been fueled predominantly by the service sector. With recent initiatives by the Government, the manufacturing sector is expected to play a vital role in the growth story of India in coming years. One of the impediments for industrial growth in India has been considered to be lack of world-class infrastructure. To maintain high growth and take other diversified stakeholders of an emerging economy like India, it is indispensable to invest more for infrastructure development. In this paper, we have created a physical infrastructure index for the economy, to track the infrastructure status and pace of improvement in the infrastructure. We analyze whether infrastructure has a role in increasing GDP and manufacturing sector output, using data for the period 1981-2011. Using Vector Error Correction Model (VECM), we delineate that infrastructure has both long term and short term positive impacts on output of Indian economy. On the other hand, infrastructure has no short run impact on manufacturing output but has a significant long term positive impact on manufacturing output. This affirms that infrastructure plays significant role in stimulating growth in the economy.

RATES OF EQUITY RETURN - A DISAGGREGATIVE ANALYSIS: EMPIRICAL EVIDENCE FROM INDIA

Shveta Singh, P. K. Jain, and Surendra S. Yadav

1st April 2017

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Flexibility in investments helps an investor optimize his investment portfolio to suit his return-risk profile, which keeps changing with time. The motivation for this study arose from a significant research gap. There have been scant studies on the dis-aggregative aspects affecting investments. This paper assesses Indian equity returns (from the investors’ point of view) factoring both sources of income – viz., dividends and capital gains. Further, the objective of this paper was to enrich the flexibility of the reader/investor, on equity investments, by analyzing dis-aggregative parameters like age, size, ownership structure and underlying sector/industry affiliation and their impact (if any) on returns. This would provide the investor with the much desired flexibility in designing his/her portfolio. The sample for the study comprises of the NSE 500 companies and the period, under study, is spread over the past 15 years (2001-2014). The chosen sample (NSE 500 companies) represent 96.76 per cent of the free-float market capitalization and 97.01 per cent of the traded value of the stocks listed on the NSE as on December 31, 2013. According to the findings, the returns vary along with the various segregates, providing the investors diversification opportunities, based on the same. A negative correlation appears between the age of companies and returns. Further, small and medium sized companies yield higher returns compared to their large counterparts. The apparent ‘age’ and ‘size’ anomalies are also indicative of the status of market efficiency.

STAKEHOLDERS INFLUENCE ON SUSTAINABILITY DISCLOSURES: AN EMPIRICAL INVESTIGATION

Geetanjali Batra, R.K. Singh and Jai Prakash Sharma

1st April 2017

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Sustainability of a business may be expressed as the capacity of an organisation to continue its operations over a long period of time and depends to a large extent on stakeholder relationships. Sustainability reporting is being used as a communication tool to highlight organisation commitment towards sustainability and enhance relationships with stakeholders. With some stakeholder groups being in a position to influence the quality of sustainability disclosures, the objective of this paper is to find if the quality of disclosures in sustainability reports is influenced by pressure from key stakeholders groups like customers, investors, employees and NGOs or environmental organisations. To achieve the objectives a dimension of quality of sustainability disclosures is extracted using Principal Component analysis (PCA) technique of factor analysis. Industrial sector, listing status and size of the organisation are used as proxy for stakeholder salience. Using step wise multiple linear regression, the study finds causal relationship between quality of disclosures and stakeholder salience. The results show that organisations operating in environmentally sensitive sector, consumer contiguous sector, financial sector, in areas where sustainability reporting is regulated, large size and listed organisations and provide high quality disclosures.

CALENDAR ANOMALIES: EVIDENCES FROM EAST ASIAN STOCK MARKETS

Sandeep Vodwal

1st April 2017

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This paper attempts to investigate various calendar anomalies like Day of the week effect, Turn of the month effect, Holiday effect and January effect in the seven East Asian stock markets (China, Japan, India, Hong Kong, Taiwan, Mongolia and Korea) by using index returns and time varying econometric modelling methods. This study further investigates the presence of volatility clustering, symmetric information and leverage effect in these markets. The research paper has applied GARCH-M (1, 1), GJR-GARCH-M (1, 1) and E-GARCH-M (1, 1) models to investigate the aforesaid objectives. The study did not observe sign of Day of the week effect, and January effect but noticed the strong evidence of positive returns during the first four and last two trading days of the month in Indian, Taiwanese and Mongolian Stock Market. It is further observed that the Mongolian stock market shows significant negative returns during the month of August. The presence of Turn of the month for six days does not confirm that which day would give the excess returns in the stock market so, it would be highly difficult to generate excessive returns in these markets. This research also searched out that volatility in clustering, returns are highly volatile, and negative shocks transmits more volatility in the market than the positive shocks. The study also finds the strong evidence for the presence of “leverage effect” in all markets considered for the study. It may be inferred from the study that the absence of calendar anomalies indicates operational efficiency of East Asian Stock Market.

CORPORATE GOVERNANCE DISCLOSURE INDEX AND FIRM PERFORMANCE: EVIDENCE FROM NSE COMPANIES

Shikha Mittal Shrivastav and Anjala Kalsie

1st April 2017

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The paper analyses the relationship between Corporate Governance Disclosure Index (CGDI) and Firm Performance of 38 non-financial NSE listed companies in India for a period of five years from 2008-2012. The objective of the paper is to examine the level of disclosure and the impact of such disclosure on the firm performance of NSE Nifty companies.The firm performance measures include Tobin’s Q, Market to Book Value Ratio, Market Value Added, Return on Assets, Return on Capital Employed and Return on Equity. Econometric analysis is performed using Year-wise OLS Regression, Pooled OLS and Panel Data Models. The results of year-wise OLS regression analysis provided a strong evidence of strengthening of the relationship between CGDI and firm performance measures over the years. In brief, the research findings reveal that CGDI has a positive impact on firm performance based on market based measures as well as accounting based measures. The paper concludes firms that disclose more are likely to result in higher performance. The results also imply that firms are more willing to disclose more information leading to enhanced corporate governance mechanisms but there is still scope for the improvement.

INCIDENCE OF FINANCIAL LITERACY IN INDIAN HIGHER EDUCATION INSTITUTIONS: A STUDY OF UNIVERSITY OF DELHI’S STUDENTS

Narander Kumar Nigam and Saumya Jain

1st April 2017

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In the increasingly complex financial markets of today, financial literacy is being regarded as a crucial life skill. Financial literacy plays a vital role in generating demand for financial inclusion initiatives of government and contributes to the broader goal of social inclusion and sustained development. The present study is designed to measure the financial literacy level of higher education institutions in India and identify the sociodemographic factors affecting the level of financial literacy. The study was a survey based study conducted on 1064 students belonging to India's premier Central University, University of Delhi. The survey instrument was uniquely designed to measure financial literacy of youth through questions based on financial knowledge and financial awareness. The results revealed medium levels of financial literacy. The results showed that male students have higher levels of financial literacy. Commerce students display a higher level of financial literacy in comparison to arts and science students. A significant positive correlation is observed between financial literacy and financial behaviour. The present study identifies key areas such as banking sector, interest rates, inflation and investment where students lag behind and policy makers need to focus.

GLOBALISATION OF CONSUMER CULTURE: AN EMPIRICAL SURVEY OF CONSUMERS IN DELHI

Dipika Bansal

1st April 2017

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Increasing globalisation, worldwide investment and production strategies, growth of global transport and, media and, advances in information and communication technologies have all accelerated global market integration. As against a multi-domestic strategy, a natural form of international segmentation for marketers, the homogeneity among consumers has reduced within countries whereas increasing across countries. Thus, the decision as to standardize or customize marketing strategy requires analysis of the behaviourial positions undertaken by consumers in marketplace. The study attempts to explore the various positions of homogenisation, localisation, hybridisation or marginalisation acquired by consumers in the globalised world. Study results support the co-existence of the multiple marketplace positions among Indian consumers, thereby providing important managerial implications and directions for future research.