Showing papers on "Market capitalization published in 2016"
TL;DR: In this paper, the authors created nine indices that summarize how developed financial institutions and financial markets are in terms of their depth, access, and efficiency, aggregated into an overall index of financial development.
Abstract: There is a vast body of literature estimating the impact of financial development on economic growth, inequality, and economic stability. A typical empirical study approximates financial development with either one of two measures of financial depth – the ratio of private credit to GDP or stock market capitalization to GDP. However, these indicators do not take into account the complex multidimensional nature of financial development. The contribution of this paper is to create nine indices that summarize how developed financial institutions and financial markets are in terms of their depth, access, and efficiency. These indices are then aggregated into an overall index of financial development. With the coverage of 183 countries on annual frequency between 1980 and 2013, the database should offer a useful analytical tool for researchers and policy makers.
434 citations
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TL;DR: In this paper, the authors created nine indices that summarize how developed financial institutions and financial markets are in terms of their depth, access, and efficiency, aggregated into an overall index of financial development.
Abstract: There is a vast body of literature estimating the impact of financial development on economic growth, inequality, and economic stability. A typical empirical study approximates financial development with either one of two measures of financial depth – the ratio of private credit to GDP or stock market capitalization to GDP. However, these indicators do not take into account the complex multidimensional nature of financial development. The contribution of this paper is to create nine indices that summarize how developed financial institutions and financial markets are in terms of their depth, access, and efficiency. These indices are then aggregated into an overall index of financial development. With the coverage of 183 countries on annual frequency between 1980 and 2013, the database should offer a useful analytical tool for researchers and policy makers.
393 citations
TL;DR: In this article, the authors used the data leak of the Panama Papers on April 3, 2016 to study whether and how the use of secret offshore vehicles affects firm value around the world.
Abstract: We use the data leak of the Panama Papers on April 3, 2016 to study whether and how the use of secret offshore vehicles affects firm value around the world. The data provide insights into the operations of more than 214,000 shell companies incorporated in tax havens by Panama-based law firm Mossack Fonseca. Using event study techniques, we find that the data leak erases US$135 billion in market capitalization among 397 public firms with direct exposure to the revelations of the Panama Papers, reflecting 0.7 percent of their market value. Tax aggressive firms and firms with exposure to perceptively corrupt countries are more adversely affected. This is consistent with the leak (i) reducing firms’ ability to avoid taxes and finance corruption, or (ii) increasing regulatory fines for past tax evasion and violations of anti-corruption regulations. Taken together, secret offshore vehicles are used for value-enhancing but potentially illegal activities that go beyond tax avoidance. Offshore intermediaries facilitate such activities.
78 citations
TL;DR: In this paper, the authors examined stock market integration among five selected emerging stock markets (Brazil, China, Mexico, Russia and Turkey) and developed markets of the US, UK and Germany.
66 citations
TL;DR: The authors investigated whether financial statement characteristics and other variables that predict equity returns also predict corporate bond returns and found that the evidence indicates that corporate bond return conforms with the risk-reward paradigm.
Abstract: A significant fraction of firms' financing occurs via public debt markets. Accordingly, we investigate whether financial statement characteristics and other variables that predict equity returns also predict corporate bond returns. Profitability, asset growth, and equity market capitalization negatively predict corporate bond returns, but other predictors, like accruals and earnings surprises, do not. Since smaller, unprofitable firms should be more risky, and firms with high asset growth (or high real investment) should have lower required returns, the evidence indicates that corporate bond returns accord with the risk-reward paradigm. Stock markets lead bond markets, consistent with equities aggregating diverse information and transmitting it to bonds. Overall, we find that accounting for transaction costs, bonds are efficiently priced.
63 citations
TL;DR: In this paper, the authors use asset price data to quantify the contribution of shale oil to the U.S. economy and use returns on an index of shale producers orthogonalized with respect to oil prices and industry-wide return controls to extract an empirical measure of shale-specic productivity innovations.
Abstract: We use evidence from asset price data to quantify the contribution of shale oil to the U.S. economy. Equity market valuations of rms engaged in shale oil extraction reect the market’s expectations about the future growth in shale oil supply and its potential for raising aggregate productivity in the U.S. economy. We use returns on an index of shale oil producers orthogonalized with respect to oil prices and industry-wide return controls to extract an empirical measure of shale-specic productivity innovations. This hedged strategy explains roughly 10% of the increase in aggregate U.S. equity market capitalization since 2010.
39 citations
TL;DR: In this article, the authors empirically analyzed the market risk profiles of Islamic banks with two sets of conventional banks taken from the same geographical locations as Islamic banks and from a random global sample respectively for the period 2000-2013.
Abstract: We empirically analyze the market risk profiles of Islamic banks with two sets of conventional banks taken from the same geographical locations as Islamic banks and from a random global sample respectively for the period 2000–2013. Moreover, we divided our sample period into pre-financial crisis, during financial and post financial crisis. Estimates of Value-at-Risk (VaR) and Expected Shortfall (ES) which incorporates losses beyond VaR are used as market risk measures for both univariate and multivariate portfolios. Our key input is the share price by market capitalization of publicly traded banks of similar size in Islamic and non-Islamic countries. Univariate analysis finds no discernible differences between Islamic and conventional banks. However, dynamic correlations obtained via a multivariate setting shows Islamic banks to be less riskier for both sets of conventional banks; and especially so during the recent global financial crisis. The policy implications are: (i) that the inclusion of Islamic banks within asset portfolios may mitigate potential risk; (ii) that the Basel committee should consider the ES measure of risk for Islamic banks in preference to the current VaR methodology, which over-estimates the market risk of Islamic banks.
39 citations
TL;DR: In this article, the authors examined the extent and quality of voluntary intellectual disclosures by information technology (IT) companies of China and India and found that Indian IT companies tend to perform better than Chinese IT companies in extent and QoE of disclosures.
Abstract: Purpose – The purpose of this paper is to examine the extent and quality of voluntary intellectual disclosures by information technology (IT) companies of China and India. Design/methodology/approach – The research method adopted for this study is content analysis. The research is limited to the intellectual capital information disclosed in companies’ annual report. The sample for this research is based on 20 IT companies listed by market capitalization listed on Shenzhen or Shanghai stock exchange market, and the largest 20 companies listed on Indian stock market. Findings – Indian IT companies tends to perform better than Chinese IT companies in extent and quality of disclosures. The extent of disclosure of both countries is at a relatively high level. The most frequently reported disclosure category in India is external capital, while the least one is human capital. In China, external capital is the most frequently disclosed category, while the internal capital is the least one. Research limitations/im...
38 citations
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TL;DR: In this paper, the authors investigated the effect of diversity at board level on the firm value and found that demographic diversity at the board level has a positive, negative, or neutral effect on firm value.
Abstract: Many governments seek to impose diversity in the boardroom, but the consequences of doing so are inconsistent and
could decrease firm performance and economies This paper shed light on this diversity at board level topic by
conceptualizing the relationships as firm value and diverse board Reasonable theoretical arguments drawn from
Upper-echelon theory and agency theory suggest that board characteristics (gender, ethnic and age diversity) may have
either a positive, negative, or neutral effect on the firm value To investigate this phenomenon relevant hypotheses are
developed to test diversity at board level and its impact on firm value with the use of appropriate variables and
measures A total sample of large 60 top Malaysian non-financial companies is selected on the basis of their market
capitalization from the population of 938 listed companies of Bursa, Malaysia To investigate this empirical study, data
were collected from the Datastream (Thomson Reuters) database and manually, over the period 2009 to 2013 (5
years) This study incorporates econometrics methodology on panel data analysis, which is used rigorously for
hypothesis testing The age profile of Directors has a significant positive impact on firm value However, gender and
ethnic diversity have no significant impact on firm value The results indicate that demographic diversity at board level
does have a relationship with market value
35 citations
TL;DR: The authors empirically compare the contributions of VC and private equity backed firms, including those backed by government subsidized innovation investment funds (IIFs), in the Australian economy by analyzing employment, R&D, patents, time to IPO, and market capitalization from market inception to August 2012.
Abstract: We empirically compare the contributions of venture capital (VC) and private equity backed firms, including those backed by government subsidized innovation investment funds (IIFs), in the Australian economy by analyzing employment, R&D, patents, time to IPO, and market capitalization from market inception to August 2012. Overall, the data highlight a central role for VC and IIF investment in facilitating R&D, innovation, and economic growth. Our IIF findings highlight the success of government sponsorship of VC under the Australian program design, which is sharply in contrast with the lack of success of government venture programs in other countries.
35 citations
12 Mar 2016
TL;DR: Experimental results show that by using social media mining combined with other information, the stock prices prediction model can forecast more accurate.
Abstract: Price prediction in stock market is considered to be one of the most difficult tasks, because of the price dynamic. Previous study found that stock price volatility in a short term is closely related to the market sentiment; especially for small-cap stocks. This paper used the social media mining technology to quantitative evaluation market segment, and in combination with other factors to predict the stock price trend in short term. Experiment results show that by using social media mining combined with other information, the stock prices prediction model can forecast more accurate.
TL;DR: This work investigates crypto-currencies as alternative investment assets, studying their returns and the co-movements of altcoin prices with bitcoin and against each other, and evaluates their addition to investors' portfolios and document they are indeed able to enhance the diversi cation of portfolios.
Abstract: Crypto-currencies have developed a vibrant market since bitcoin, the rst crypto-currency, was created in 2009. We look at the properties of cryptocurrencies as nancial assets in a broad cross-section. We discuss approaches of altcoins to generate value and their trading and information platforms. Then we investigate crypto-currencies as alternative investment assets, studying their returns and the co-movements of altcoin prices with bitcoin and against each other. We evaluate their addition to investors' portfolios and document they are indeed able to enhance the diversi cation of portfolios due to their little co-movements with established assets, as well as with each other. Furthermore, we evaluate pure portfolios of crypto-currencies: an equallyweighted one, a value-weighted one, and one based on the CRypto-currency IndeX (CRIX). The CRIX portfolio displays lower risk than any individual of the liquid crypto-currencies. We also document the changing characteristics of the crypto-currency market. Deepening liquidity is accompanied by a rise in market value, and a growing number of altcoins is contributing larger amounts to aggregate crypto-currency market capitalization.
TL;DR: For example, the authors pointed out that long-only commodity futures returns have been very disappointing over the last decade, leading some to wonder whether investing in commodities was a mistake, and that the poor performance is largely the result of poor income returns, a return building block similar to a stock's dividend yield or a bond's yield.
Abstract: Long-only commodity futures returns have been very disappointing over the last decade, leading some to wonder whether investing in commodities was a mistake. The poor performance is largely the result of poor “income returns,” a return building block similar to a stock’s dividend yield or a bond’s yield. Three misperceptions have contributed to this disappointment: (1) Commodities are a play on commodity prices, (2) commodity prices provide an inflation hedge, and (3) commodity markets, which are smaller than Facebook’s market capitalization, can absorb abundant capital. Learning from mistakes and conquering misperceptions are key to becoming a better investor.
TL;DR: In this paper, the authors investigated the nature of the momentum-reversal phenomenon exhibited by U.S. stock returns from 1962 to 2013 and showed that size (market capitalization) eventually dominates momentum's initial effect, causing stock prices and hence returns to move in the opposite direction.
TL;DR: Wang et al. as discussed by the authors performed an empirical study on the applicability of the three-factor model to China's stock market and found that the model generally fits the Shanghai Stock Exchange (SSE) A-share market well.
Abstract: Using monthly data from China’s Shanghai Stock Exchange (SSE) A-share market between 2005 and 2012, this article performs an empirical study on the applicability of the three-factor model to China’s stock market. After testing twenty-five size-BE/ME stock portfolios and four stock sector portfolios, we found that the three-factor model, adjusted for the unique features of China’s stock market, generally fits the SSE A-share market well. The results show that size and value premiums are significant in China’s stock market, although there exist modest differences among industrial sectors. In addition, our empirical results are robust to factor sorting and construction methods.
TL;DR: The scandal of the Volkswagen (VW) scandal highlights the devastating consequences of corporate misconduct, once publicly disclosed, and the media storm that generally follows the discovery of such significant misbehaviour by a major corporation as discussed by the authors.
Abstract: Like some other crises and scandals that periodically occur in the business community, the Volkswagen (“VW”) scandal once again highlights the devastating consequences of corporate misconduct, once publicly disclosed, and the media storm that generally follows the discovery of such significant misbehaviour by a major corporation. Since the crisis broke in September 2015, the media have relayed endless details about the substantial negative impacts on VW, on various stakeholder groups such as employees, directors, investors, suppliers and consumers, and on the automobile industry as a whole.1 The multiple and negative repercussions at the economic, organizational and legal levels have quickly become apparent, in particular in the form of resignations, changes in VW's senior management, layoffs, a hiring freeze, the end to the marketing of diesel-engined vehicles, vehicle recalls, a decline in car sales, a drop in market capitalization, and the launching of internal investigations by VW and external investigations by the public authorities.
TL;DR: In this paper, the authors used data for BSE 500 companies from October 2003 to January 2015 to confirm the presence of strong size effect in Indian stock market and found that returns decrease almost monotonically with firm size.
Abstract: Using data for BSE 500 companies from October 2003 to January 2015, we confirm the presence of strong size effect in Indian stock market. Controlling for penny stocks, we find that returns decrease almost monotonically with firm size. The findings are robust for alternative size measures, i.e. market capitalization, total assets, net fixed assets, net working capital, net sales and enterprise value. We find the presence of non-synchronous trading bias and reverse seasonality effect. It is observed that market, size, value and business cycle factors explain size effect while liquidity and momentum factors have little role in this process. Thus, rational sources explain the size anomaly in the Indian context.
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TL;DR: The authors found that while ETFs enhance price discovery, they also inject non-fundamental volatility to market prices and affect the correlation structure of returns, especially during events of market stress.
Abstract: Over nearly a quarter of a century, ETFs have become one of the most popular passive investment vehicles among retail and professional investors due to their low transaction costs and high liquidity. By the end of 2016, the market share of ETFs topped over 10% of the total market capitalization traded on US exchanges, while representing more than 30% of the overall trading volume. ETFs revolutionized the asset management industry by taking market share from traditional investment vehicles such as mutual funds and index futures. Because ETFs rely on arbitrage activity to synchronize their prices with the prices of the underlying portfolio, trading activity at the ETF level translates to trading of the underlying securities. Researchers found that while ETFs enhance price discovery, they also inject non-fundamental volatility to market prices and affect the correlation structure of returns. Furthermore, ETFs impact the liquidity of the underlying portfolios, especially during events of market stress.
TL;DR: In this paper, the authors examined the role proved reserves and production play in the market capitalization of publicly traded oil and gas companies engaged in the exploration and production of hydrocarbons.
TL;DR: In this paper, a spatiotemporal model was proposed for forecasting stock returns. But the model was not applied to the Shanghai Stock Exchange 50 Index and the out-of-sample forecasting performance of Value-at-Risk (VaR) estimated by different models.
Abstract: This paper generalizes a recently proposed spatial autoregressive model and introduces a spatiotemporal model for forecasting stock returns. We support the view that stock returns are affected not only by the absolute values of factors such as firm size, book-to-market ratio and momentum but also by the relative values of factors like trading volume ranking and market capitalization ranking in each period. This article studies a new method for constructing stocks’ reference groups; the method is called quartile method. Applying the method empirically to the Shanghai Stock Exchange 50 Index, we compare the daily volatility forecasting performance and the out-of-sample forecasting performance of Value-at-Risk (VaR) estimated by different models. The empirical results show that the spatiotemporal model performs surprisingly well in terms of capturing spatial dependences among individual stocks, and it produces more accurate VaR forecasts than the other three models introduced in the previous literature. Moreover, the findings indicate that both allowing for serial correlation in the disturbances and using time-varying spatial weight matrices can greatly improve the predictive accuracy of a spatial autoregressive model.
TL;DR: In this paper, the authors investigated the market liquidity and efficiency of the merger between the Surabaya Stock Exchange and the Jakarta Stock Exchange into the Indonesia Stock Exchange (IDX).
01 Aug 2016
TL;DR: In this article, the authors examined the macroeconomic determinants of stock market development in Ghana for the period 1992 to 2012 using annual secondary data from Bank of Ghana Quarterly Economic Bulletins, Ghana Statistical Service, Ghana Stock Exchange Market Statistics, the World Bank and IMF’s International Financial Statistics.
Abstract: Financial systems have been found to have a positive influence on the economic development of most countries. The stock market, which is also a component of the financial system is said to play an integral role in economic growth. This paper examines the macroeconomic determinants of stock market development in Ghana for the period 1992 to 2012 using annual secondary data from Bank of Ghana Quarterly Economic Bulletins, Ghana Statistical Service, Ghana Stock Exchange Market Statistics, the World Bank and IMF’s International Financial Statistics. The macroeconomic indicators such as the real income (GDP per capita income), domestic saving, stock market liquidity, financial intermediary growth, macroeconomic stability (inflation) and private capital flows with stock market capitalization used as a proxy for the study were collected and used for the analysis. These variables were examined to establish a relationship with stock market developments based on a linear regression model. The regression analysis found stock market liquidity to be statistically significant to stock market developments as opposed to the other determinants (such as macroeconomic stability (inflation) real income and domestic savings and private capital flows) which were found to be non-significant. This result suggests that macroeconomic stability (inflation), real income, domestic savings and private capital flows proved not to have any significant impact on stock market development, since their regression coefficients were not statically significant at the 5% level of significance.
TL;DR: In this paper, the authors investigated the impact of corruption on stock market development focusing exclusively on Gulf Cooperation Council (GCC) countries with its special characteristics of combining richness with relatively high level of corruption.
Abstract: The theoretical relationship between corruption and stock market development has been debated quite extensively in the literature, yet the evidence on the impact of corruption on stock market development remains contradictory and ambiguous. This paper investigates the impact of corruption, as measured by Corruption Perception Index (CPI) published by Transparency International, on stock market development focusing exclusively on Gulf Cooperation Council (GCC) countries with its special characteristics of combining richness with relatively high level of corruption. Results from an estimation of alternative regression models on a panel of six GCC countries over the period 2003–2011, through which CPI is legitimately comparable, confirms a positive impact of corruption on stock market development, where the latter is measured by market capitalization. This is consistent with the view that corruption greases the wheels of economy by expediting transactions and allowing private firms to overcome governmentally imposed inefficiencies.
TL;DR: Evidence is found suggesting that small cap stocks exhibit a high degree of non-randomness in price movements, however to a much lesser extent, with large cap stocks exhibiting higher levels of efficiency.
Abstract: It has been suggested that stock exchanges may be tested for market efficiency by using tests for assessing random number generators. This paper uses such a test to assess the efficiency of small, mid and large cap indices on the Johannesburg Stock Exchange, while making adjustments for thin trading which occurs during the sample period. The efficiency of these indices is examined using individual share level data as well as index level data over a stable period and a period containing the 2008 financial crisis. This study finds evidence suggesting that small cap stocks exhibit a high degree of non-randomness in price movements. Some inefficiencies also appear to be present in mid and large cap stocks, however to a much lesser extent, with large cap stocks exhibiting higher levels of efficiency. Many of the stocks investigated appear to exhibit lower levels of efficiency during the crisis period. This may be a result of increased irrationality during periods of uncertainty.
TL;DR: In this article, the authors empirically investigate how differences in the development of legal and financial institutions across Chinese provinces and municipalities affect the financing decisions of Chinese listed firms and find that a stronger regional enforcement of property rights reduces firms' reliance on bank loans.
Abstract: In this paper, we empirically investigate how differences in the development of legal and financial institutions across Chinese provinces and municipalities affect the financing decisions of Chinese listed firms. Our results indicate that a stronger regional enforcement of property rights reduces firms’ reliance on bank loans. Conversely, in regions with a larger government expropriation risk, firms raise more and shorter-term bank debt. Active regional bank lending positively impacts the debt ratio and the fraction of bank loans, but shortens loan maturities. The size of the local banking sector, the market capitalization as well as the liquidity of local stocks bear no relation with the capital structure. Overall, these relations do not depend upon the identity of the firm's controlling shareholder. Nonetheless, our results do suggest that state-controlled firms benefit from easier stock market access.
01 Jan 2016
TL;DR: The relationship between investment and stock market supports the neo-classical model of cost of capital, which suggests that Pakistani firms first determine the stock of real capital they desire and then determine the rate of investment as discussed by the authors.
Abstract: This paper attempts to analyse and measure the link between stock market and ag gregate economic activity in Pakistan through two components of aggregate demand i.e. consumption expenditure and investment during 1964 1987. The results provide evidence of wealth effect from stock prices changes to consumption expenditure. The relationship between investment and stock market supports the neo-classical model of cost of capital, which suggests that Pakistani firms first determine the stock of real capital they desire and then determine the rate of investment. The causality relation ship between stock prices and industrial production (proxy for real economic activity) using monthly data establishes a feedback relationship which suggests that stock mar ket in Pakistan appears to be informationally efficient with respect to real economic ac tivity.
TL;DR: In this article, the impact of foreign capital inflow; foreign direct investment (FDI) and foreign portfolio investment (FPI)) on economic growth in developed and emerging economies was investigated.
Abstract: This paper attempts to test the impact of foreign capital inflow; foreign direct investment (FDI) and foreign portfolio investment (FPI)) on economic growth in developed and emerging economies. It also explores whether this inflow generate synergies in boosting economic growth. A cross-sectional time series growth regression was used for 21 developed and 19 emerging economies sample from 1980 to 2012. The Generalized-Method of Moments (GMM) estimators developed for dynamic models of panel data were used to avoid spurious conclusions and to add robustness and inferences correction to our results, and to deal with the econometric problem of heteroskedastic error of unknown functional form. Analysis revealed mixed results for the sample. For the initial FDI and FPI impact on growth, FDI poses a positive and significant influence, while FPI reveals a negative and significant influence in both samples. In addition, the results on the population proxy support the classical model where higher growth rate of population would initiates economic progress, while the results for the saving growth proxy support the saving-led growth phenomenon; where higher saving rate would accelerate economic growth. It was also found that the Market Capitalization (MC) proxy was positively correlated with economic growth in both samples, while the results of the stock trading proxy indicate that private capital inflows had a positive effect on growth only for the developed economies. The FPI results indicated that the presence of FPI inflows may not be a precondition to produce a positive spillover effect in both sample economies. Interestingly, we observed that the interactions between FPI and the Market Capitalization (MC), Stock Trading, and growth have provided evidence that equity markets advancements do have positive contributions toward attracting more capital inwards to the host country. Analysis also showed that FDI inflows augment domestic resources of most economies, and hence boosting economic growth. As policy implication, governments should be aware that market liberalization polices would have a different influence on inward net capital based on the composition of the capital inflows desired and the level of economic development, reflecting the necessity of capturing a targeted financial market threshold in order to stimulate capital control to attract FDI and FPI. In emerging economies, the interaction term (FPI*MC) implies that catching a threshold of equity market development would have a positive impact on higher levels of capital inflows, hence countries with advanced equity markets tend to gain more welfare from FPI capital inflows.
TL;DR: In this article, the impact of the stock market measures and economic growth in Tanzania was examined based on the time series data from 2000 to 2011, and the findings suggest that Dar-es Salam Stock Exchange (DSE) has no effect on economic growth of Tanzania.
Abstract: The objective of the study was to establish relationship between the stock market measures and economic growth in Tanzania. In order to achieve the objective, we need to examine the impact of stock market capitalization, total value of share traded and turnover on Tanzanian economy based on the time series data from 2000 - 2011. The unit root test and wnteestq (Portmanteau) tests were carried out. The findings suggest that Dar-es Salam Stock Exchange (DSE) has no effect on economic growth of Tanzania. We recommended that Tanzania government should establish financial policies, in order to encourage companies develop financial stock market culture, and enhance to push companies to initiate Initial Public Offering (IPO) instead of bank loans when money is needed to increase their investment.
TL;DR: In this article, the authors show that the digital economy is expanding rapidly in Pakistan and that emerging companies could be a major source of investment and growth over the next decade and identify the constraints to its growth may persuade policymakers and other stakeholders to take measures to mitigate these constraints.
Abstract: 1IntroductionThe digital economy has grown rapidly since the 1990s and, today, is a dominant force in the world economy. According to the European Commission (n.d.), "the digital economy now contributes up to eight percent of the GDP of G-20 major economies [and is] the single most important driver of innovation, competitiveness and growth." In a recent report, McKinsey estimates that, in 2015, the value of world trade in digital services surpassed that of goods (Manyika et al., 2016). This dominance is also evident from the fact that, in 2016, five of the ten largest companies in the world by market capitalization were technology companies: Apple, Alphabet, Microsoft, Facebook and Amazon (PricewaterhouseCoopers, 2016).India's higher economic growth since the 1990s owes a great deal to the rapid expansion of information technology (IT) and IT-enabled service exports (which, in 2015, exceeded $80 billion) and more recently to the rapid growth of digital businesses catering to the domestic economy in areas such as e-commerce, on-demand services, finance and media. IT companies such as Tata Consultancy Services and Infosys are among the top five companies by market valuation in India.In most developing countries, the vast majority of first-time Internet users go online using their mobile phones rather than computers. Digital businesses catering to the domestic market in India, therefore, took off only with the availability of fast mobile Internet services, following the launch of 3G/4G services in 2009. Since then, its digital economy has expanded rapidly. A number of companies, such as Flipkart, Snapdeal, Shopclues (e-commerce marketplaces), Olacabs (on-demand transportation), Paytm (fintech), Hike and Zomato (social), are now counted as global "unicorns" - private companies with a market valuation of over $1 billion (CB Insights, n.d.).Pakistan has a number of well-established IT companies such as Systems Ltd and NetSol, but digital business startups catering to the domestic market are a more recent phenomenon. The growth of digital businesses and new startups has accelerated since the launch of 3G/4G services in Pakistan in mid-2014. The Fletcher School at Tufts has developed a digital evolution index (DEI) that analyses the key underlying drivers and barriers governing a country's evolution into a digital economy. Its report states that "each emerging e-commerce market will chart its own path ... but neighborhoods matter ... [that is] countries in close geographic proximity seem to display similar trajectories" (Chakravorti, Tunnard & Chaturvedi, 2014).Thus, in a sense, Pakistan could be about five years behind India in this area. In 2013, a year before 3G/4G services were launched, Pakistan was not among the top 50 countries based on its DEI, while India was ranked at 42, having shown among the highest rates of improvement in its DEI in the period 2008-13. One can expect a similar improvement in Pakistan's DEI score by 2018.In this paper, we look at digital businesses and startups in Pakistan in terms of the entrepreneurial environment, the growth trajectories of selected successful businesses and startups and the constraints to growth in this sector.1 The aim of the paper is threefold. First, we show that the digital economy is expanding rapidly in Pakistan and that emerging companies could be a major source of investment and growth over the next decade. Second, highlighting the immense potential of the digital economy and identifying the constraints to its growth may persuade policymakers and other stakeholders to take measures to mitigate these constraints. Third, since the process from startup to established company in the technology sector is very rapid,2 this allows us to clearly gauge which factors either hinder or promote entrepreneurship in Pakistan. This could provide useful insights for developing policies to promote entrepreneurship in the rest of the economy as well. …
TL;DR: For example, this paper pointed out that long-only commodity futures returns have been very disappointing over the last decade, leading some to wonder if it was a mistake to invest in commodities and that the poor performance is the result of poor "income returns" and not of falling commodity prices.
Abstract: Long-only commodity futures returns have been very disappointing over the last decade, leading some to wonder if it was a mistake to invest in commodities. The poor performance is the result of poor “income returns” and not of falling commodity prices. This observation may be surprising for many commodity investors who were not aware, who misperceived, they were making a bet on income returns, a return building block similar to a stock’s dividend yield or a bond’s yield. For investors seeking an inflation hedge, it may be surprising that the historical linkage of commodity returns with inflation seems to be the result of a connection between commodity income returns and inflation, not, as commonly misperceived, commodity price returns and inflation. It may be surprising that the value of commodity investments is smaller than the market capitalization of Facebook, a potentially striking misperception for investors seeking a portfolio diversifier with abundant capacity. There has been no change in the way that price returns and income returns drive the total returns of stocks, bond and commodities. What has changed is that maybe a good number of commodity investors now realize that they were operating outside of their “circle of competence” and did not have a sense of what future price and income returns could be and would be.See our earlier papers on commodity investing:The Strategic and Tactical Value of Commodity Futures - http://ssrn.com/abstract=650923.The Golden Dilemma - http://ssrn.com/abstract=2078535.The Golden Constant - http://ssrn.com/abstract=2639284.An Impressionistic View of the ‘Real’ Price of Gold Around the World - http://ssrn.com/abstract=2148691.