• The Journal of Asian Finance, Economics and Business
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• 제7권10호
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• pp.543-553
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• 2020

This paper examines the effect of COVID-19 pandemic on the Philippine stock exchange, peso-dollar rate and retail price of diesel using robust least squares regression and vector autoregression (VAR). The robust least squares regression using MM-estimation method concluded that COVID-19 daily infection has negative and statistically significant effect on the Philippine stock exchange index, peso-dollar exchange rate and retail pump price of diesel. This is consistent with the results of correlation diagnostics. As for the VAR model, the lag values of the independent variable disclose significance in explaining the Philippine stock exchange index, peso-dollar exchange rate and retail pump price of diesel. Moreover, in the short run, the impulse response function confirmed relative effect of COVID-19 daily infections and the variance decomposition divulge that COVID-19 daily infections have accounted for only minor portion in explaining fluctuations of the Philippine stock exchange index, peso-dollar exchange and retail pump price of diesel. In the long term, the influence levels off. The Granger causality test suggests that COVID-19 daily infections cause changes in the Philippine stock exchange index and peso-dollar exchange rate in the short run. However, COVID-19 infection has no causal link with retail pump price of diesel.

• The Journal of Asian Finance, Economics and Business
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• 제7권8호
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• pp.41-49
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• 2020

This study investigates the short-run and long-run causal behavior of the Philippine stock market index volatility under vector error correction environment. The variables were tested first for stationarity and then long-run equilibrium relationship. Moreover, an impulse response function was estimated to examine the extent of innovations in the independent variables in explaining the Philippine stock market index volatility. The results reveal that the volatility of the Philippine stock market index exhibit long-run equilibrium relationship with Peso-Dollar exchange rate, London Interbank Offered Rate, and crude oil prices. The short-run dynamics-based VECM estimates indicate that in the short-run, increases (i.e., depreciation) in Peso-Dollar exchange rate cause PSEI volatility to increase. As for the London Interbank Offered Rate, it causes increases in PSEI volatility in the short-run. The adjustment coefficients used with the long-run dynamics validates the presence of unidirectional causal long-run relationship from Peso-Dollar exchange rate, London Interbank Offered Rate, and crude oil prices to PSEI volatility, and bidirectional causal long-run relationship between PSEI volatility and London Interbank Offered Rate. The impulse response functions developed within the VECM framework demonstrate the positive and negative reactions of PSEI volatility to unanticipated Peso-Dollar exchange rate, London Interbank Offered Rate, and crude oil price shocks.

• The Journal of Asian Finance, Economics and Business
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• 제7권10호
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• pp.523-530
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• 2020

The efficient market hypothesis explains the random walk hypothesis suggesting that stock prices are independent of each other, hence, it is impossible to earn abnormal profits. The positive effect of a well-functioning and highly efficient stock market on the performance of an economy motivated the Philippine Stock Exchange to pursue massive modernization initiatives. This research provides evidence of the existence of random walk in the Philippine stock market employing the Augmented Dickey-Fuller (1981) and Phillips-Perron (1988) unit root tests, the Lo-MacKinlay's (1988) conventional variance ratio test, and Chow-Denning's (1993) simple multiple variance ratio test. Results of the ADF and PP unit root tests confirm the necessary condition for a random walk. The Chow-Denning (1993) maximum /z/ statistic and the Wald test statistic as in Richardson and Smith (1991) for the joint hypotheses and the Lo and MacKinlay (1988) individual statistics variance ratio test generally accepted the null hypothesis of a random walk. That is, the unit root and variance ratio tests consistently indicate that the null hypothesis of random walk cannot be rejected. The existence of a random walk in weak-form efficiency can be attributed to market liquidity as a result of continuous development and modernization of the Philippine equity market.